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11/12/2016

For the week 11/7-11/11

[Posted 11:30 PM ET, Friday]

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Edition 918

The Election...and Washington

Donald Trump won.  So what happened?

FBI Director James B. Comey had roiled the campaign 11 days before the election when he announced that a fresh trove of emails had been discovered on the computer of Hillary Clinton’s longtime aide Huma Abedin and her estranged husband, former congressman Anthony Weiner.  It was a big blow to the Clinton campaign, for anyone still on the fence, and she lost momentum.

But then on Sunday, Comey suddenly said his rush investigation found no cause for the FBI to reverse its July decision against an indictment.  So with two days to go, the Clinton team could exhale and pray their voters would turn out.  They didn’t...at least in sufficient numbers...while Donald Trump’s did.

Personally, I never picked a winner in the contest.  I was consistent throughout.  I didn’t vote for Trump, but kept saying I hoped Republicans retained the Senate.

So after Comey’s announcement on Sunday, Wall Street rallied big on Monday, and added to the gains Tuesday as Americans went to the polls on the belief the FBI director had given the Clinton campaign a final shot in the arm.  Victory was secured.  Divided government (Republicans retaining the House) and more gridlock, which the market seemingly liked.  I sent out a tweet on Monday, though, saying Wall Street had “misinterpreted” Comey’s statement, implying that I thought now Trump had his reason for prolonging the vote by contesting one or two key states were the vote to be close.  I hardly saw certainty.  I repeated the tweet on Tuesday.

But watching CNN on Tuesday as the first exit polls were coming out at 5:00 p.m. ET, having been told all day about the heavy Hispanic turnout, I picked up on something Gloria Borger said as she looked at the data...the Hispanic vote overall, across the country, only seemed to be up 1% in terms of the total electorate. I, and she, couldn’t help but muse, ‘Just what will the impact be then?’

And so we all watched together, as the polls in the East began to close and the results rolled in, that the likes of Florida, North Carolina, Ohio and Pennsylvania were ‘red.’

My opinion is that Hillary was done in by two issues, since we are talking very small percentages in the big states that she lost by...the Comey announcement of Friday, Oct. 28, and Trump’s focus (belatedly) on ObamaCare and skyrocketing premiums for many Americans.  We’ll never really know what caused the final undecideds to choose Trump or Clinton, but it’s as good a theory as any.

Some details....

Electoral College [270 needed]...as of Friday p.m.

Trump 290 Clinton 228  [Michigan and New Hampshire still not officially called]

Popular Vote (as of late Friday)

Clinton 60,588,000
Trump 60,131,000

[But...as of late Thurs., from my own calculations, if you took out California and New York, Trump had 54,359,000 to Clinton’s 50,647,000.]

Key States

Arizona: 50-45 Trump
Florida: 49-48 Trump
Iowa: 52-42 Trump
Michigan: 48-47 Trump
Nevada: 48-46 Clinton
New Hampshire: 48-47 Clinton
North Carolina: 51-47 Trump
Ohio: 52-44 Trump
Pennsylvania: 49-48 Trump
Wisconsin: 48-47 Trump

Senate [projected with Jan. runoff in Louisiana]

Republicans 52  Democrats 48

House [projected]

Republicans 240  Democrats 195

Exit Poll data....

Male 48% of electorate
Female 52%  [53% in 2012]

Whites 70% of electorate [72% in 2012, 86% in 1984]
Blacks 12%
Latinos 11%  [10% in 2012...whoopty-damn-do]
Asians 4%

Dems 37%
Republicans 32%
Independents 31%

Male: Trump 53-41
Female: Clinton 54-42  [Obama took this segment by 11 in 2012]
Whites: Trump 58-37  [Reagan and Romney, 20-point margins for each]
White women: Trump 53-43
White men: Trump 63-31
Blacks: Clinton 88-8  [Obama 93-6 in 2012]
Hispanics/Latinos: Clinton 65-29 [Romney received 27% in 2012]
Asians: Clinton 65-29
18-29 year olds: Clinton 55-37
High school or less: Trump 51-45
College grads: Clinton 49-45
Whites without college: Trump 67-28  [Romney won this segment by 26 points]
White college grads: Trump 49-45

Here in my home state of New Jersey, it was 55-42 Clinton, while neighboring New York was 59-38, thus the reason why the mood in the area isn’t quite as good as, say, Wyoming, 70-22 Trump.

Among Chris Cillizza’s findings in the Washington Post:

“ObamaCare was a wind beneath Trump’s wings....

“Almost half of the electorate (47 percent) said they thought ObamaCare ‘went too far.’  Trump beat Clinton 83 percent to 13 percent among that group.

“Clinton’s emails hurt her....

“Almost two-thirds of Americans (63 percent) said that Clinton’s ‘use of private email’ bothered them ‘a lot’ or ‘some.’  Among that group, Trump won 70 percent to 24 percent.

“People didn’t think Trump lost the debates as badly as I did....

“Of the 82 percent of people who said the debates were a ‘factor’ in their decision for president, Trump took 50 percent to 47 percent for Clinton.”

---

Early Wednesday morning, Donald Trump said in his victory speech:

“To all Democrats, Republicans, Independents across this nation, I say it is time for us to come together as one united people.  For those who chose not to support me in the past, of which there are a few people, I’m reaching out to you for your guidance and your help so we can reach out and unify our great country.”

Trump praised his opponent: “Hillary has worked very hard over a long period of time and we owe her a major debt for her service to our country.”

Then Trump sought to show he would be willing to work with others in his administration.

“While we will put Americans’ interests first, we will deal fairly with everyone. We will seek common ground, not hostility.”

Hillary Clinton, having blown off her ‘victory party’ crowd at the Javits Center, finally conceded at 11:30 a.m. on Wednesday.

“Donald Trump is going to be our president,” she said.  “We owe him an open mind and chance to lead.”

“Last night, I congratulated Donald Trump and offered to work with him on behalf of our country.  I hope that he will be a successful president for all Americans.”

Clinton said, “This is painful, and it will be for a very long time.”

She encouraged Democrats to respect the outcome of the election and the “constitutional democracy that enshrines the peaceful transfer of power.”

But she acknowledged Democrats will need to fight to protect their values.

The Constitution, she said, “also enshrines other things – the rule of law, the principle we are all equal in rights and dignity, freedom of worship and expression.  We respect and cherish these values too, and we must defend them.”

But Clinton had to note she will not be the first woman to serve as president.

“We still haven’t shattered that highest glass ceiling, but someday someone will, and hopefully sooner than we might think right now.”

President Obama followed, speaking with Vice President Joe Biden alongside.

“The presidency and the vice presidency is bigger than any us.  We are all rooting for (Trump’s) success in uniting and leading the country.

The president congratulated Clinton on her campaign, calling her a role model to daughters across the country, with Obama saying he was heartened by Trump’s remarks in which he called for the country to come together.

“It is no secret that the president-elect and I have some pretty significant differences,” Obama said.

But then he reminded Americans that it was the same situation in 2008, when then-President George W. Bush did all he could to make Obama’s transition a smooth one.

“So I have instructed my team to set the example that President Bush’s team set eight years ago, and work as hard as we can to make sure this is a successful transition for the president-elect.”

Obama added: “I think of this job as being a relay runner.  You take the baton, you run your best race and, hopefully, by the time you hand it off, you are a little further ahead, you made a little progress. I can say that we’ve done that.”

But Trump’s win was an amazing repudiation of Obama’s entire presidency, as Trump is in a position to repeal large parts of Obama’s legislative agenda, repeal his executive orders with the stroke of his pen, and nominate conservative justices to the Supreme Court.

Obama has a lot to do in his final weeks, but it’s unlikely he’ll accomplish little more than commute more sentences and pardon a few folks, especially after late Friday, with the White House deciding it was fruitless to try to pass the Trans-Pacific Partnership trade accord in the lame-duck session of Congress, a bitter loss for the president.

Most importantly, President Obama leaves a world in chaos and our nation far less secure.  His position as one of our nation’s five worst occupants of the White House is now a certainty, regardless of the political persuasions of the historians who will be ruling on this.

---

As for the Trump Rally in the stock market, yes, Tuesday night, at first world markets were convulsed by the thought of a Trump presidency, but then the switch went off.

‘Holy [Toledo]! Republicans retained control of the Senate!  Republicans handily held the House!  And there’s going to be a Republican in the White House!  Why that’s the trifecta!  And Trump does have a growth agenda!  Buy buy buy!!!’

By the end of the week, the Dow Jones was at new all-time highs, having had its best week since 2011, while the S&P 500 had its best week in two years. Bonds took it on the chin, however, big time, with the 30-year bond having its worst week since January 2009.  Remember how I’ve been warning of an inflation scare?  I was looking for a single data point to trigger a mini-disaster in the bond pits.  Little did I know it would come as a result of the election.

Yes, now there are no excuses for Republicans.  They have their opportunity to fully enact their agenda.  Will they?

House Speaker Paul Ryan (Wis.) and Senate Majority Leader Mitch McConnell (Ky.) were very upbeat on Wednesday in their news conferences, saying their major goals were to repeal ObamaCare, to cut taxes, and roll back regulations, especially those dealing with the environment.

Ryan said: “The opportunity is to go big, to go bold, to get things done for the people of this country.”

But the party has had major disagreements with Trump over items like trade and immigration, and Trump’s early foreign policy pronouncements.  Deficit hawks are also against raising the debt ceiling, which could be a market-moving issue next year.

McConnell said: “We’re going to be enthusiastically supportive almost all the time, and where we have differences we will talk about them privately.”

So far, Trump in return is sending the right signals, recognizing the need to work with those Republicans that may not have supported him.  And there you had Paul Ryan, who fell into that category, saying on Wednesday that Trump’s victory was “the most incredible political feat I have seen in my lifetime.”  The meeting between the two on Thursday at the Capitol was positive.

But here’s the bottom line.  Most legislation in the Senate still requires 60 votes (including for Supreme Court nominees) to clear procedural hurdles and Republicans will only have 52 after the Louisiana runoff.

For their part, Democrats, led by House Minority Leader Nancy Pelosi (Calif.), are eager to work with Trump initially on an infrastructure jobs bill. Pelosi said in a statement Wednesday: “We have a responsibility to come together and find common ground.”

And just a note on incoming Senate Minority Leader Charles Schumer (N.Y.).  He will be a major improvement over Harry Reid.  I’ve followed Schumer his entire career and while he no doubt loves the cameras, he can be a pragmatist.  From a national security standpoint, it’s also good he’s from New York.  Fellow New Yorker, Trump, and Schumer will work together to ensure the area gets the assets it needs to fight terror.

And this...late Friday we learned that Trump wants to leave certain portions of ObamaCare in place, as he told the Wall Street Journal in an interview, following his chat with the president in the Oval Office on Thursday.

Specifically, Trump wants to keep the prohibition against insurers denying coverage because of preexisting conditions, and he wants to keep the provision that allows parents to provide years of additional coverage for children on their insurance policies.

Trump also said he wanted to deregulate the financial sector to allow “banks to lend again.”

World Reaction....

Israeli Prime Minister Benjamin Netanyahu called Trump “a true friend” of Israel, saying he hoped to reach “new heights” in bilateral ties under Trump.

British Prime Minister Theresa May said the “enduring and special relationship” between Britain and the United States would remain intact.  [Trump reciprocated by inviting May to come to the White House “as soon as possible.”  He wants a Thatcher-Reagan relationship with her.]

Russian President Vladimir Putin said, “It is not an easy path but we are ready to do our part and do everything to return Russian and American relations to a stable path of development....This would serve the interests of the Russian and American peoples, as well as positively impacting the general climate in international affairs.”

But the mood in the Baltic states was gloomy.  Lithuania’s foreign minister told the Financial Times he was worried about Moscow’s ability to exploit the next two months before the new president takes office.  “This vacuum of leadership, there is always the temptation or opportunity to fill that with something that is not always the best intentions,” Linas Linkevicius said.

Jens Stoltenberg, NATO’s general secretary, stressed that the security guarantees of all NATO allies were treaty commitments.

“All allies have made...a solemn commitment to defend each other. This is something which is absolute and is unconditional.  This is important for Europe but also important for the U.S.,” he told reporters.

German Chancellor Angela Merkel, whose immigration policies Trump has dismissed as “insane,” coldly offered her cooperation but emphasized the importance of human rights.  “The U.S. is an old and venerable democracy....For us Germans, other than with the European Union, we have no deeper connection than with the United States of America.”  Her vice chancellor, Sigmar Gabriel, said in an interview with the Funke newspaper group: “Trump is the pioneer of a new authoritarian and chauvinist international movement. He is also a warning for us.”

French President Francois Hollande, who is frankly irrelevant at this point as he has zero chance of re-election, if he even decides to run, said some of Trump’s views might test “the values and the interests that we share with the United States.”

Viktor Orban, Hungary’s nationalist prime minister and the only EU leader to give Trump qualified backing before Tuesday’s vote, described his win as “great news,” posting on his Facebook page that “democracy is still alive.”

Iran’s Foreign Minister Javad Zarif urged Trump to stay committed to the Iran deal.

The South Korean government was concerned Trump may make unpredictable proposals to North Korea over its nuclear and missile tests.

A Japanese official said, “We are certainly concerned about (Trump’s) comments about the alliance and the U.S. role in the Pacific, particularly Japan.”  Prime Minister Shinzo Abe said, “Japan and the United States are unshakeable allies connected by common values.”

In Beijing, a foreign ministry spokesperson did not congratulate Trump but said China would “work with the new U.S. president to ensure steady and sound development of bilateral relations.”  President Xi Jinping congratulated Trump in a telegram, according to state TV.

Philippine President Rodrigo Duterte offered his “warm congratulations,” with his communications secretary saying Duterte “looks forward to working with the incoming administration for enhanced Philippines-U.S. relations anchored on mutual respect, mutual benefit and shared commitment to democratic ideals and the rule of law.”

But right-wing populist parties are hoping to make election inroads like Trump’s in 2017, with big votes in Germany, France and the Netherlands, for starters.

A senior figure in France’s far-right National Front, Florian Philippot, tweeted, “There world is falling apart.  Ours is being built.”

Marine Le Pen, leader of the National Front and presidential candidate, rushed to congratulate Trump and the “free” people of the U.S., while her father, National Front party founder Jean-Marie Le Pen, tweeted: “Today the United States, tomorrow – France.”

Nicolas Sarkozy, the former French president and conservative, said Trump’s victory showed what happened when political elites ignored people’s concerns about immigration, border control an terrorism. “The American people’s message must be heard,” he said.

Beppe Grillo, leader of Italy’s Five Star party, said Trump had “sent an f-u to everyone: Freemasons, big banking groups, the Chinese,” adding that there were “similarities between this American story and our movement.”

Nigel Farage, the leader of the UK Independence Party who played a key role in the Brexit referendum, and was seen at a Trump rally or two, tweeted: “I hand over the mantle to @RealDonaldTrump!  Many congratulations.  You have fought a brave campaign.”

Mexican officials said they would not pay for Trump’s proposed border wall.

Opinion....

Gerald F. Seib / Wall Street Journal

“The deplorables rose up and shook the world.

“ ‘Deplorables’ was, of course, the disparaging term Hillary Clinton at one point applied to some supporters of Donald Trump.  Many of his loyal followers proudly embraced the insult and used it as a motivating tool.

“Wearing such establishment disdain as a badge of honor, the Trump army cut a deep swath through the American electoral system Tuesday, propelling the Republican nominee to the most stunning victory in modern American history.

“In winning, Mr. Trump didn’t merely vanquish Mrs. Clinton. He instantly remade the Republican party in his own image. He rewrote some of the GOP’s most dearly held policy and philosophical positions.  He shredded the conventional wisdom in both parties, which held that there simply weren’t enough of the white, working-class voters who flocked to his side to win a national election.  Whole sets of comfortable assumptions in both political parties now will be swept aside....

“Mr. Trump now will become the most unconventional president in modern American history. He is estranged from much of his own party, including the next-most-powerful elected Republican official, House Speaker Paul Ryan. He has virtually no relationship with any Democrats in Congress....

“Many saw either subtle or overt racism in his views of Hispanic and Muslim immigrants.  Many women saw clear sexism in his attitudes and comments about them. Even within families, the Trump candidacy set off angry arguments and opened emotional divides.

“Those divides may have only deepened in the latter stages of the campaign, when Mr. Trump appeared to drop most efforts to significantly broaden his base of support to include more categories of voters.  Instead, he appeared to double down on a strategy of trying to win by energizing those who were devoted to his angry antiestablishment message.

“That strategy energized millions of supporters Tuesday. Whether Mr. Trump now has the ability to win over the millions who dislike him with equal passion will be his first big test as president.”

Editorial / Wall Street Journal

“Donald J. Trump’s unlikely defeat of Hillary Clinton is a political earthquake of a kind that rarely disturbs American politics.  Not since Andrew Jackson has a winning candidate so defied the settled order, for better or worse. The political and media establishments are bewildered, and markets are unsettled, and no doubt many voters are too.

“But Mr. Trump winning was always an outside possibility, and the political analysts and Wall Street forecasters who wrote the Republican off as doomed ignored the multiple surprises of this disruptive year. Hillary Clinton called Mr. Trump in the wee hours Wednesday morning to concede after Mr. Trump crossed the 270 Electoral College majority by winning convincingly in the Southeast through the Upper Midwest to the Mountain West.

“If Mr. Trump’s election is nonetheless a moment of intense uncertainty, voters understood the choice, and their judgment can’t be dismissed as merely a fluke of an unconventional and bitter election year.  Mr. Trump can congratulate himself for seeing around corners to spot political opportunities where very few did.

“Mr. Trump’s support is a testament to the democratic power of discontented voters. It turns out that many of them live in states like Florida, Ohio and Wisconsin that Mitt Romney didn’t carry but Mr. Trump did.  President Obama has too often governed as if their needs and preferences are illegitimate, and this contempt was bound to generate a political challenge....

“The businessman likely didn’t win on his program, to the extent he has one. Voters decided he was an agent of change and rejected the progressive agenda and the third Obama term that Mrs. Clinton represented....

“The question now is whether the President-elect will recognize the awesome responsibilities he is assuming.  Millions of Americans have invested him with their hopes for a better future. Adversaries like China and Russia will soon test the mettle of the new Commander in Chief....

“Populism like Mr. Trump’s is not unusual in American history, but rarely do such tendencies obtain actual power.  The next weeks and months are not merely a test of Mr. Trump as a manager and a leader but also of the  strength of the federalist separation of powers and the American tradition of the peaceful transition between the Administrations of fiercely divided parties.

“In Lincoln’s Second Inaugural, in 1865, he appealed to his ‘fellow-countrymen’ to work toward reconciliation and domestic peace, ‘with malice toward none, with charity for all.’  The 16th President always repays attention, but his words seem particularly rewarding after a long night like Tuesday.”

Editorial / USA Today

“When Donald Trump announced his candidacy for the Republican nomination, few pundits or political operatives gave him much of a chance.  His bluster was sure to turn off mainstream voters, and his incendiary language on immigrants would surely be seen as a death wish in a country with a rapidly changing face.

“But Trump managed to pull it off. In a nation deeply disillusioned by Washington, contemptuous of elites and alienated by the decline in manufacturing jobs, he took his outsider label all the way to the White House in Tuesday’s election.

“One key to the New York businessman’s win over Hillary Clinton was his staunchly anti-trade views, which resonated in Rust Belt states.  In Ohio, for instance, a state won by a Republican for the first time since 2004, 47% of voters said they viewed trade as bad for jobs.  And people with that view supported Trump 2-to-1.

“Trump was not this Editorial Board’s choice to be president. In fact, we considered him unfit for the presidency and expressed grave reservations about his ability to effectively manage the nation’s affairs at home and abroad....

“His election, after a divisive and mean-spirited campaign, will greatly complicate the United States’ relations with its key allies.  Most dangerously, as commander in chief a president has few restraints on his power. Giving an angry, combative man with a quick temper and an inability to ignore slights access to the nuclear codes is a frightening thought.  So is Trump’s puzzling admiration for Russian dictator Vladimir Putin.

“But Trump is the person chosen by the American people. And, in a democracy, that is reason enough to accept the result without violence. Those who opposed him should assume the role of loyal and constructive opposition.  In his victory speech early Wednesday, Trump struck an encouraging tone, congratulating Clinton for a hard-fought campaign and promising to be ‘president for all Americans.’....

“The nation is, furthermore, blessed by its Founding Fathers with a system of checks and balances. It has an independent court system and a Congress to restrain the more destructive, unconstitutional initiatives of a temperamental, ill-prepared president.”

Kathleen Parker / Washington Post

“As regular readers of this column know, I rejected Donald Trump on Day One and have spent the past year – in columns, on TV and in speeches across the country – highlighting the many reasons I found him unacceptable for the job of president.

“My opinion hasn’t changed, but as Hillary Clinton said in her concession speech, ‘Donald Trump is going to be our president. We owe him an open mind and a chance to lead.’  And Trump, in his victory speech, said without irony that now it’s time to heal the wounds of division....

“To begin, there needs to be an honest assessment of what just happened. It isn’t really that complicated or mysterious, if you’ve spent any time in the America where Trump voters live.  As one who ventured inside the Beltway only 12 or so years ago – as a ‘spy for Bubba,’ I traduced myself – I’ve spent most of my life among the indigenous peoples.

“Two weeks ago, I began saying that Trump would win, whether I liked it or not.  Today, I offer a clarification: He didn’t win the election. Clinton lost it.

“For voters who couldn’t stand Trump, she was a terrible alternative.  Never a great candidate, she was also, tragically, a Clinton when people were ready to move on.  She received several million fewer votes than President Obama did in 2012.

“And speaking of Obama, he also lost this election to Trump, despite exit polling that showed the president’s approval rating at 50 percent-plus.

“The 2016 election was as much a referendum on Obama’s legacy as it was on the candidates themselves.  When people want the country to change course, they don’t typically vote for a third term of the current president.

“Thus, a vote for Trump was really a vote against ObamaCare and the rising costs of health insurance.  It was a vote against the doubling of the national debt to nearly $20 trillion under Obama.  It was a vote against a foreign policy that saw the Islamic State’s expansion rather than its defeat.

“Clinton’s promise to continue Obama’s policies was a suicide agenda to a majority of Americans, especially those whose lives haven’t improved during the economic recovery of the past eight years.  Clinton also embraced much of Bernie Sanders’ socialist platform, which no conservative-leaning voter could support.

“And, yes, some Trump voters probably resented the exacerbation of racial discord under Obama’s watch when Americans had hoped for the opposite.  Race as a factor in Republican opposition to Obama can’t be ignored or minimized. Nor can Trump’s role in nurturing hostility toward Muslims and Mexicans – or his antipathy toward women, people with disabilities and even a war hero’s parents – be dismissed in victory.

“Minorities have reason to feel threatened in a Trump-inspired environment of hostility toward ‘the other.’

“But leaning primarily on racism, bigotry or sexism to explain what happened Tuesday is too facile by half....

“The giant X-factor about which I have written – the however many who would never admit to voting for Trump but did – was enormous, indeed.

“Trump captured a moment and promised to make America great again.  He also said that he’ll be the president for everybody.  Let’s hope he wasn’t just reading from a teleprompter – and that the word trickles down.”

Kimberley A. Strassel / Wall Street Journal

“President-elect Donald Trump paid a visit to the White House Thursday, and by all accounts he was pleasant toward the current occupant. He should be, since Mr. Trump owes his victory to Barack Obama.

“Hillary Clinton’s defeat has left the Democratic Party a smoldering heap, its leaders pointing fingers over who or what to blame: James Comey.  Robby Mook.  Voter suppression.  WikiLeaks.  Sexism. Barely a mention has been made of the man who presided over one of the most epic party meltdowns in the country’s history: Mr. Obama.

“Deep Democratic fissures have been on display for years, with Mrs. Clinton’s rancorous primary against Bernie Sanders only the most recent example.  But the media chose to ignore this and instead to obsess about largely superficial GOP divisions. All along this election has been portrayed as a referendum on Mr. Trump.  Tuesday’s results are far better viewed as a thundering repudiation, at every level, of Mr. Obama’s governing and policies.

“In 2009, the president’s first year in office, the Democrats held 257 House seats, a majority that was geographically and politically diverse. After Tuesday the figure stands at 193, and fully one-third of these Democrats hail from three blue states: New York, California and Massachusetts.

“The story is equally grim for Democrats in the Senate. In 2009 they held the first filibuster-proof majority since the 1970s, which evaporated in the wake of ObamaCare.  Tuesday’s vote was the best chance Democrats will have in years to retake the chamber, but they lost nearly every close race.

“When Mr. Obama took office, Democrats owned 29 governorships.  After Tuesday it is 15, with ballots in North Carolina’s tight race still being counted.  Democrats controlled 60 of the 99 state legislative chambers in 2010. Today it is 30.  Now that Republicans have won the Kentucky state House for the first time in 95 years, Democrats no longer control a single legislative chamber in the South. The party of the left will hold the governorship and both chambers in precisely five states.

“This isn’t to take away from Mr. Trump’s supporters, or his message.   But the numbers above are a reaction to Democratic failure – to a president who rammed through unpopular legislation and governed via executive order and extralegal regulation.  Tuesday’s results are a response to a government that targeted conservative nonprofits, left veterans on waiting lists, botched a health website and left the world to burn.  ‘My legacy is on the ballot,’ Mr. Obama said in September, in what was the truest statement of the campaign....

“This is an utter abandonment of the Democratic Party that Mr. Obama and Mrs. Clinton led.

“It’s also an extraordinary grant of power to Republicans.  They’d be wise to immediately understand that they now own the results. Voters are giving the GOP one chance to deliver on the change it has promised, and the party can’t afford easy mistakes....

“The other obvious risk is that Mr. Trump might try to fix all of the Obama mess, all at once.  That’s a recipe for a muddle.  Republicans could do nothing smarter in the coming weeks than agree to prioritize a few sweeping, key initiatives – say, health care and tax reform – that would immediately boost the economy. Earning public trust with big, early victories will buy time for more reform down the road.

“Republicans have been elected as the anti-Obamas. Which means they’ve been elected to make things better.  If they can remember that, they have a shot.”

George Will / Washington Post

“At dawn Tuesday in West Quoddy Head, Maine, the easternmost point of the United States, it was certain that by midnight in Cape Wrangell, Alaska, the westernmost fringe, there would be a loser who deserved to lose and a winner who did not deserve to win.  The surprise is that Barack Obama must have immediately seen his legacy, a compound of stylistic and substantive arrogance, disappearing, as though written on water in ink of vapor.

“His health-care reform has contributed to three Democratic drubbings. The 2010 and 2014 wave elections, like scythes in a wheat field, decapitated a rising generation of potential party leaders.  Then came Tuesday’s earthquake, which followed shocking increases of ObamaCare’s prices.  This law has been as historic as Obama thinks, but not as he thinks:  It might be the last gasp of progressivism’s hubris expressed in continent-wide social engineering imposed from the continent’s eastern edge.  Hillary Clinton’s proposed solution to ObamaCare’s accelerating unraveling was  a ‘public option’: intensified government manipulation to correct the consequences of government manipulation of health care’s 18 percent of the economy.  Her campaign’s other defining proposal, ‘free’ tuition in public higher education, insulted the intelligence of voters aware that ‘free’ means ‘paid for by others, including you.’

“Obama’s foreign policy legacy, aside from mounting chaos worldwide, was the Iran nuclear agreement. By precedent and constitutional norms, this should have been a treaty submitted to the Senate.  Instead, disdainfully and characteristically, he produced it as an executive agreement.  Because the agreement lacks legitimizing ratification by senators, the president-elect will feel uninhibited concerning his promise to repudiate it....

“(Separately), demography need not dictate for Republicans a grim destiny but it soon will, unless they act to counter adverse trends.  Republicans should absorb Tim Alberta’s data in National Review: Arizona whites have gone from 74 percent to 54 percent of the population in 25 years; minorities will be a majority there by 2022. Texas minorities became a majority in 2004; whites are now 43 percent of the population. Nevada is 52 percent white and projected to be majority-minority in 2020.  Georgia is 54 percent white, heading for majority-minority in 2026.  Because of inexorably rising minorities, Clinton, an epically untalented candidate, did better than Obama did in 2012 in Georgia, Texas, Arizona and where 1 in 8 Americans lives – California.  The moving finger writes, and having writ moves on, perhaps soon to inscribe this: In 2016, Republicans won a ruinous triumph that convinced them that they can forever prosper by capturing an ever-larger portion of an ever-smaller portion of the electorate.

“This kamikaze arithmetic of white nationalism should prompt the president-elect to test his followers’ devotion to him by asking their permission to see the national tapestry as it is and should be.”

Editorial / The Economist

“The mainstream values of both the Democratic and Republican parties have lost touch with the times.  The media violated the principle of remaining a neutral and objective voice.  It misled the electorate with fraudulent polling practices.  As a result, the divide between the classes is larger than ever.

“No matter how Trump changes U.S. domestic and foreign policy, it won’t compare with the shock brought on by his victory. He probably will not make any drastic changes in the short-term, and it is highly likely that he will not live up to his campaign promises. He is not as bold enough to really change the country.

“In an elite-controlled U.S., most of those holding power don’t support Trump.  And U.S. allies across the world will pressure Washington to restrain Trump from isolationism.

“The election has divided U.S. society.  On an emotional level, many Americans will not accept Trump as their president. We are unlikely to see a socially unified U.S. post-election.

“But the most uncertainty lies in Trump’s foreign policy. The future of the China-U.S. relationship and Russia-U.S. ties will have a strong effect on the overall international community. Trump campaigned heavily for a focused return to U.S. economic interests, something that might turn Sino-U.S. relations from a geopolitical rivalry to an economic conflict....

“The new president lacks diplomatic experience.  His much touted business experience will in some form penetrate future U.S. foreign policy. In turn, Sino-U.S. relations may see dramatic renegotiations, including sharpened conflicts of interests....

“No problem comes to the president unless it is fiendishly complicated. Yet Mr. Trump has shown no evidence that he has the mastery of detail or sustained concentration that the Oval Office demands.  He could delegate (as Reagan famously did), but his campaign team depended to an unusual degree on his family and on political misfits.  He has thrived on the idea that his experience in business will make him a master negotiator in politics.  Yet if a deal falls apart there is always another skyscraper to buy or another golf course to build; by contrast, a failure to agree with Vladimir Putin about Russia’s actions leaves nobody to turn to.

“Nowhere will judgment and experience be more exposed than over the control of America’s nuclear arsenal – which, in a crisis, falls to him and him alone.

“The genius of America’s constitution is to limit the harm one president can do.  We hope Mr. Trump proves our doubts groundless or that, if he fails, a better president will be along in four years.  The danger with popular anger, though, is that disillusion with Mr. Trump will only add to the discontent that put him there in the first place.  If so, his failure would pave the way for someone even more bent on breaking the system....

“It is clear that popular support for the Western order depended more on rapid growth and the galvanizing effect of the Soviet threat than on intellectual conviction.  Recently Western democracies have done too little to spread the benefits of prosperity.  Politicians and pundits took the acquiescence of the disillusioned for granted.  As Mr. Trump prepares to enter the White House, the long, hard job of winning the argument for liberal internationalism begins anew.”

Daniel Henninger / Wall Street Journal

“Now what?

“Nothing will be more important to getting that answer right in the Trump victory period than separating fact from abundant fiction.

“The 2016 presidential campaign was a magic mushroom tour through the American psyche – its voters, its politicians and not least the exotic varieties of people who populate what we call ‘the media.’

“For all of them, the Trump candidacy seemed to be a national Rorschach inkblot.  Everyone looked at the same Trump events, Trump speeches and Trump polls and interpreted them as individual political biases and desires.

“There was one exception to this mania: the collective wisdom of the American valor.

“In normal times – and these are not normal times – it would have been impossible for a candidate outputting Donald Trump’s chamber of spoken and personal horrors to win.  (Sometime in the next year, John McCain deserves an apology.)

“What we learned on Nov. 8, 2016, was that voters looked past or through all the atmospheric debris of this campaign and focused on what mattered – the direction of their country.  Its economy, its politics and the state of the culture.

“One stunning example. White evangelical Christians voted by 81% for the nation’s leading proponent of the Playboy philosophy.  They blew past that because they knew that Mr. Trump’s personal life would not bring into the Oval Office the Democratic Party’s triumphant secularism. That is the philosophy that sued Hobby Lobby and the Little Sisters of the Poor into religious obeisance and elevated transgender bathrooms to a litmus test.  Thus, their vote.

“Another fable propagated everywhere during the campaign, and especially in the time since the Trump victory, is that he had unearthed some unknown catacomb of lower-middle-class anger...at everything.  Mr. Trump himself tagged ‘globalization’ with the blame.

“Let us be clear about the economic status of the American middle class, and indeed of the middle-class people in low-growth Europe responding to populist appeals there.  Economic life isn’t bad weather.  It is the result of politics.  Wrong political decisions have economic consequences.

“We didn’t have this sense of ennui or dissatisfaction during the growth years of the Reagan presidency in the 1980s or the Clinton presidency in the 1990s.

“Barack Obama has been in charge of the U.S. economy for eight years. After passing a useless $830-billion stimulus his first year, Mr. Obama outsourced the economy to the Federal Reserve for seven years. The media let him off the hook for two terms, as if the London fog had caused what for large swaths of the middle class has been 2,900 days of an economy that remains half alive....

“The Trump opportunity is at hand to quickly normalize unease about what his presidency represents by sitting down with Mitch McConnell, Paul Ryan and U.S. ambassador to Congress Mike Pence to chart a reform agenda on taxes, health care, energy and financial regulation.  Mr. Trump has it within his grasp to rapidly liberate the eight-year suppression of the private economy and then build out the more time-consuming pieces of his agenda atop that firm base.

“As to the post-Comey investigations of Hillary, drop it. She’s finished.  Move on.  Besides, half of the divided country will be watching the Trump presidency for any positive sign that he’s, well, normal.

“One would be to continue his campaign’s admirable outreach to black and Hispanic America.  A good omen: Mr. Trump increased his vote in both categories by 2% over Mitt Romney.  Nothing would help struggling Americans of any color more than a 2016 upgrade for a U.S. education system producing blue-collar children with skills appropriate to the economy of the 1970s, if that.    A presidential Inaugural speech restating Mr. Trump’s commitment to full school choice would be a start....

“New York magazine’s cover this week was Donald Trump’s contorted face with the word ‘Loser’ pasted on it.  Hmmm.  As America’s newest Nobel laureate in literature once put it, ‘The times they are a changin’.”

Edward Luce / Financial Times

“The American people have spoken – or perhaps shouted – and nothing is likely to be the same again.  Donald Trump’s stunning victory will put U.S. democracy to a test it has not faced since its civil war 150 years ago.  Never before has the U.S. elected a president who threatened to jail his opponent, investigate his rivals, sue his female accusers and smash the existing order.  Nor has any candidate taken office facing a multitude of civil law suits. The mere fact of Mr. Trump’s victory puts him halfway towards obliterating an establishment that was largely united in revulsion at his candidacy.

“Only elected Republicans –and non-partisan federal agencies – now stand between Mr. Trump and pursuit of his radical agenda, assuming he meant half of what he promised.  With both the Senate and the House of Representatives remaining in Republican hands, Mr. Trump will effectively control the first two branches of the U.S. government from next January. This will give him huge power to shape the composition of the third branch – the Supreme Court – which is the ultimate defender of the U.S. constitution.  America’s ominous military power will be at Mr. Trump’s undisputed beck and call....

“The larger implications of Mr. Trump’s election will take a while to sink in.  Every pollster in the land misread the U.S. public.  By electing a man whom voters knew to be disrespectful of U.S. constitutional niceties, America has dispatched the electoral equivalent of a suicide bomber to Washington.  Mr. Trump’s mandate is to blow up the system.  His forecast of ‘Brexit times ten’ was an understatement.  The UK may have cut itself adrift but the consequences of its decision are largely parochial.

“The U.S., on the other hand, is both creator and upholder of the postwar global order.  Mr. Trump ran on an explicit pledge to walk away from that order.  Precisely how he carries out his ‘America first’ agenda is secondary at this point. The U.S. public has sent an unmistakable signal.  The rest of the world will act accordingly.”

Gideon Rachman / Financial Times

“As far as America’s allies are concerned, the election of Donald Trump is a case of Apocalypse Now.  Whatever they say publicly, for the governments of countries such as Canada, Japan, Germany, Britain and the Baltic states of Estonia, Lithuania and Latvia, it is simply horrifying to have a man such as Mr. Trump as ‘leader of the free world.’

“The fear of Mr. Trump is linked both to his personality and to his policies.  For people around the world who have looked to the U.S. as the leading democracy, it is astonishing that the country has elected a president who has displayed such little respect for basic democratic norms, such as the legitimacy of political opposition, the rights of minorities and the independence of the judiciary.  Some even fear that the U.S. has just elected a quasi-fascist as its next leader.  The thought that Mr. Trump will soon be in charge of the world’s largest nuclear arsenal is also alarming to many American allies.

“Mr. Trump’s proposed policies threaten to take an axe to the liberal world order that the U.S. has supported and sustained since 1945.  In particular, he has challenged two of the main bipartisan principles that underpin America’s approach to the world. The first is support for an open, international trading system. The second is the commitment to the U.S.-led alliances that underpin global security.

“Mr. Trump is the first avowed protectionist to be elected U.S. president since before the second world war. He has promised to renegotiate America’s ‘terrible’ trade deals, such as the North American Free Trade Agreement and threatened to pull the U.S. out of the World Trade Organization.  He has also threatened tariffs as high as 45 percent on Chinese goods. If Mr. Trump were to follow through on these threats, he would spark a global trade war and could well plunge the world into a recession similar to the depression of the 1930s, which was greatly deepened by America’s adoption of protectionist policies.

“Mr. Trump’s effect on the global security system could be just as dramatic.  The president-elect has questioned whether the U.S. will honor its security commitments to NATO allies and to Japan and South Korea – unless these countries pay more for their own defense.  American annoyance at ‘freeriding’ by its allies is a bipartisan concern.  What is new is Mr. Trump’s overt questioning of the idea that the U.S. will defend its allies from a military attack come what may.  This equivocation – combined with Mr. Trump’s open admiration for Vladimir Putin, the Russian president – will raise fears that the U.S. will not oppose renewed Russian aggression in Ukraine or eastern Europe.  Asian allies – in particular, Japan and South Korea – fear that Mr. Trump’s ‘America First’ polices could extend to accepting a Chinese sphere of influence in East Asia.

“And yet, for all their undoubted horror at Mr. Trump’s election, America’s European and Asian allies cannot simply turn their back on the U.S.  That is even less of an option for the country’s neighbors, Mexico and Canada.  U.S. leadership is so deeply embedded in western institutions that alternative structures do not yet exist....Crucial international institutions such as the UN, the World Bank and the International Monetary Fund are based in the U.S.  The dollar is the world’s largest reserve currency and the U.S. is the largest economy, measured at real exchange rates. For that reason, allies will grit their teeth and attempt to humor Mr. Trump.  As one senior British diplomat puts it:  ‘We will get on with the president of the United States – we have to.’”

Christopher Caldwell / Financial Times

“At the time of Donald Trump’s upset victory, Hillary Clinton and her entourage were, as the American political expression has it, ‘measuring the drapes for the White House.’  Mrs. Clinton had assembled a ‘transition team’ as early as last August. The main debate among her dedicated journalistic backers concerned how ruthlessly her opponents ought to be dealt with.  (‘Donald Trump Can’t Merely Be Defeated,’ ran a typical headline in the Daily Beast.  ‘He and His Deplorables Must Be Crushed.’)  Mrs. Clinton misunderstood the electorate.

“Republicans risk forgetting, amid their celebrations, that they misunderstood it just as badly.  Mr. Trump’s rival, Ohio governor John Kasich, had scheduled a speech for today. He meant to chart the future of a Republican party that he clearly expected would be humiliated.  Mr. Kasich and his colleagues now have the practical task of assimilating Mr. Trump’s superior reading of the electorate, and making their peace with only the second Republican to win the White House since the end of the cold war.

“The Republican party is in good shape. The electorate is 37 percent Democrat, 32 percent Republican and 31 percent Independent – but these last are often ‘shy’ Republicans.  The party held its majority in the Senate on Tuesday night, against all expectations, and its majority in the House of Representatives was trimmed only slightly.

“Its presidential record, however, has been galling.  Three years ago, the best Republican minds launched a ‘growth and opportunity project’ to rebrand the party.  They concluded that women and growing ethnic minority populations were so loyal to the Democrats that Republican prospects were dim.  Their battle plan was to sound less ‘scary,’ to master social media and appeal to immigrants.  Eighteen months ago, the party’s leading establishment candidate (Florida senator Marco Rubio) and its leading anti-establishment candidate (Texas senator Ted Cruz) were both Hispanics.

“Mr. Trump had a better idea. He identified a split between the party’s donors, who tended to benefit from globalization, and its rank and file, who felt victimized by it.  And he took the side of the latter. He attacked free trade, mass immigration and military intervention....

“Here is the Republican party’s problem. Thanks to Mr. Trump it has received a mandate to speak on behalf of globalization’s losers.  But its personnel consists of the global-economy winners who ran the party before he arrived on the scene. It was thanks to Republican votes that Barack Obama secured the authority to negotiate new trade agreements.  Those are now dead in the water.

“Mr. Trump has not spelt out in any detail what kind of policies will replace them.”

Editorial / Financial Times

“Donald Trump’s victory marks a thunderous repudiation of the status quo.  The most powerful nation on Earth has elected a real estate mogul with no experience in government, a self-styled strongman, contemptuous of allies, civil discourse and democratic convention.  Barring a protean change of personality, Mr. Trump’s victory represents, at face value, a threat to the western democratic model.

“Mr. Trump has succeeded where Huey Long and George Wallace, American populists of the 20th century, fell well short.  In storming to the White House, he has rewritten the presidential campaign playbook. He ran against the Republican Party establishment and saw off all rivals, many with proven track records in office.  Finally, after a campaign long on invective and short on policy, he delivered a resounding victory against Hillary Clinton, the ultimate establishment candidate....

“Democrats will be tempted to blame their defeat on Mrs. Clinton’s soulless campaign, with a mortal blow delivered by the FBI’s late intervention in the saga of her use of a private email server....

“Mr. Trump’s sweeping rhetoric and compulsive tweeting resonated among millions of Americans who have felt marginalized by globalization.  In the U.S., as told by Mr. Trump, globalization and free trade have rewarded only a privileged few.  There is a kernel of truth in Mr. Trump’s generalizations, to which more centrist leaders have given too little notice.  Inequality has risen and median incomes have stagnated or fallen in recent years, especially among those without a college degree....

“(One) failure of the Trump worldview is the notion that the changes gripping the U.S. are uniformly bad.  No: the country’s changing cultural and racial mix, and the increasing role women play in running it, are sources of profound strength.

“What, then, are the prospects for a Trump presidency? The optimistic view is that the mean-spirited, Muslim-baiting candidate will transform once inside the White House. Such a change is possible, but may not be sustainable.  His temperament may not allow it.  Mr. Trump can also argue, justifiably, that his tactics, however outrageous, won him the presidency. He had a chance to pivot toward a more responsible middle ground after the Republican convention and he chose not to do so.

“Mr. Trump might nevertheless reflect that his victory does give him a second chance. He has to pick a team.  He must work with Congress, notably Paul Ryan, the House Speaker, whom he has regularly derided.  Mr. Trump prides himself on understanding ‘the art of the deal.’ He must realize that the business of government cannot be driven by personal feuds. Politics in a democracy is the art of compromise.

“The world waits nervously to see if Mr. Trump’s policies are as incendiary as his words.  The shift to a more positive tone since the election result is a first step.  But this remains a moment of great peril.  Mr. Trump’s victory, coming after the Brexit referendum vote in Britain, looks like another grievous blow to the liberal international order.  Mr. Trump must decide, by his actions and words, whether he intends to contribute to the great unravelling, at incalculable cost to the west.”

---

Wall Street...the Trump Agenda

Investors are betting on a big stimulus plan, centered around infrastructure (where there is bipartisan congressional support), reduced regulation, and tax reform.

Bank stocks soared with rising bond yields, while health-care shares surged, on the expectation a Trump administration will roll back regulatory scrutiny of both industries, including the potential rollback of Dodd-Frank, the 2010 law that hit the financial sector so hard (though maintaining strict capital requirements should remain in place, in return for relaxing regulations elsewhere).  Industrial shares rallied on the plans for infrastructure spending that seem to be a lock with a Republican president and control of both chambers of Congress.

Copper posted its biggest back-to-back surge in three years on Wednesday and Thursday, gaining alongside lead, zinc, tin and aluminum.

Gold had its worst week since 2013, as headline risks are seemingly alleviated and Trump policies risk friendly.

Government bonds extended their selloff as Trump’s win bolstered bets on faster inflation.  The yield on the 10-year Treasury soared from 1.78% a week ago to 2.15%, before settling at 2.13% - the sharpest rise since the 2013 “taper tantrum.”  Both growth and inflation are expected to accelerate further if Trump makes good on his vows to cut taxes and rapidly increase infrastructure.

Goldman Sachs said on Friday the intensity of the sell-off in Treasuries was “concerning” – in the bond market, speed kills – though in Goldman’s case because of the “pervasive” exposure of investors to the “lower for longer” theme that has dominated the markets with central banks holding rates at historic lows.

“The wealth exposure to rising rates is extremely high. And an increase in equity and credit volatility could follow, given the risk of an equity market correction down the line,” Goldman said.

Goldman added that the spill-over into eurozone bond markets is also a “troubling” development because inflation across the currency block has remained more subdued.

“This is undesirable as it may increase the credit risk premium on high debt countries such as Italy, Portugal and Spain, with potentially destabilizing effects beyond the region.”  [Financial Times]

Gee, where have you heard this theme before?  It’s what I’ve been crying wolf on for a long time, and I will finally be right, though investors, after all the false warnings, will stick around too long and get devoured.

This new era also doesn’t bode well for Latin American equities and debt as the appeal of riskier emerging-market assets fades with higher U.S. rates, let alone the potential for protectionist measures in a Trump administration.  Certainly Mexico is concerned, for obvious reasons, and it gets 80% of its overseas sales from the U.S.

Sectors that may struggle in a Trump presidency: Healthcare services, IT & business services, automakers heavily reliant on open trade with Mexico (including parts suppliers that shifted production there), and electric car makers, i.e., Tesla, which could see its federal subsidies slashed.

Some big tech names took it on the chin this week, heavyweights such as Apple, Amazon and Alphabet (Google), not only because investors poured into other sectors that could benefit from Trump’s victory, but also because Trump’s policies on trade and immigration could severely hurt Silicon Valley, in the case of the latter by impeding the ability to bring in the best talent from overseas.

As for the Federal Reserve and interest rates when it next convenes Dec. 13-14, a hike in the funds rate is a 100% certainty, with St. Louis Fed President James Bullard saying, “Our view has called for a single rate increase and I think December would be a reasonable time to implement that increase.” 

Fed Vice Chairman Stanley Fischer signaled his support for gradual interest-rate hikes as well.  “The case for removing accommodation gradually is quite strong,” Fischer said on Friday, though he added “the future is uncertain and that monetary policy is not on a preset course.”

Don’t worry...they are hiking in December.

Europe and Asia

I’ll give the Brexit talk a rest for a week. It will heat up in a big way with parliamentary debate in the U.K. looming.

In Germany, Chancellor Angela Merkel, expected to run for a fourth term next year, received a boost to rally support she’s lost in the refugee crisis, when Horst Seehofer, leader of the CSU, the Bavaria-based sister party to Ms. Merkel’s CDU, told his annual party conference they needed to stand with Merkel in a joint effort to defeat the left and center-left, namely the anti-immigrant Alternative for Germany (AfD) party.

The CDU’s party conference is in December, at which time Merkel will announce she is running again.

The latest poll has the CDU/CSU at 33%, with the AfD at 13%.  [There are a myriad number of parties in Germany, including the SPD (Socialists), the Left, and the Greens.]

Meanwhile, five people linked to ISIS were arrested in coordinated raids in Germany this week.  Information from a 22-year-old jihadist who had spent several months with IS in Syria before fleeing to Turkey led to the arrests.  The center of activity was a mosque in Hanover.

As noted above, the Euro bond market got crushed, with the Italian 10-year hitting a yield of 2.02% Friday, its highest level since September 2015.  Of particular concern in Italy is that Trump’s win could embolden the populist forces in the country, specifically Beppe Grillo’s Five Star movement, ahead of Prime Minister Matteo Renzi’s Dec. 4 referendum on constitutional reforms, Renzi saying he would resign if it doesn’t pass.  Currently, the ‘No’ side is ahead as Renzi battles with Brussels over deficit targets and demands leeway for higher spending after a series of major earthquakes in his nation; the timing of which could prove catastrophic to Renzi’s political future.

The European Central Bank’s unprecedented asset purchase program has kept a lid on rates across the eurozone the past 20 months, but now you have political risk not only in Italy, but in the Netherlands, France and Germany, all with their big elections next year.

But Italy stands out these days because its debt to GDP level exceeds 130 percent, while the economy continues to stagnate.  Once again, we have talk of the eurozone fragmenting.

Eurobits...

--Check out the move in some of the 10-year bond rates across Europe this week:

Germany... 0.13% to 0.31%
France... 0.46% to 0.74%
Italy... 1.75% to 2.02%
Spain... 1.26% to 1.47%

But since Sept. 30, in the last six weeks:

Germany... -0.12% to 0.31%
France... 0.18% to 0.74%
Italy... 1.18% to 2.02%
Spain... 0.88% to 1.47%

No doubt some investors are getting killed.

--In perhaps a sign Brexit is beginning to bite, Britain’s construction industry had its weakest performance in four years in the first three months after June’s vote to leave the EU, volumes falling 1.1%, though this was less than forecast.

British finance minister Philip Hammond is expected to announce an increase in public spending on infrastructure projects on Nov. 23 when he is due to give the country’s first budget statement since the referendum.

--Germany reported mixed economic data for September, with exports up 0.9% over August, up 2.3% year-over-year, so-so.  But industrial production was down 1.8% in September and factory orders fell 0.6%.

But the Economy Ministry said on Friday, “The global economic environment remains characterized by uncertainty following the Brexit decision and the U.S. election.  However, no negative impact is expected in the short term from today’s point of view.”  Ergo, modest growth.

--Finally, on the topic of migration, lawmakers in Hungary rejected a proposed national ban on refugees from the rest of the European Union, a blow to Prime Minister Orban.

Orban was trying to block an EU program that would resettle migrants from the Middle East and Africa who have gone to countries like Greece and Italy.  Hungary would have to accept about 1,300 of a total of about 160,000 migrants.

The amendment needed two-thirds of sitting members of Parliament to pass and fell two votes short.

What apparently killed the deal was a rule that allows foreigners who invest over 300,000 euros, or about $330,000, in Hungarian bonds to acquire residency.  I have to admit I wasn’t aware of this provision, as there are reports that Hungarian bonds could be bought in places like Erbil, Iraq, which critics say could allow migrants to settle in Hungary that would then open the door to terrorists, while the program could also lead to corruption.

Turning to Asia, China’s inflation data was positive.  Factory-gate / producer prices rose in October, year-over-year, 1.2% for a second straight rise after 53 months of contraction, the fastest pace since December 2011.  The consumer price index rose 2.1% yoy.

Exports in October, though, were worse than expected, down 7.3% year-over-year, while imports fell 1.4% (in dollar terms).

China’s October auto sales rose 20.3% from a year earlier, with total auto sales for the first 10 months of the year up 15.4% over the same period last year.

General Motors’ China sales rose 5.7% in October to 345,733 vehicles; the automaker now having sold just over 3 million in 2016, while Ford’s were up 14% from a year earlier to 107,618.  Year-to-date sales rose 10% to 966,000.

Nissan Motor’s rose 16.1% and Toyota’s were up 9.6%.

In Japan, a key measure of manufacturers’ confidence, the Reuters Tankan survey, rose for a third straight month to a 15-month high in November and the service sector rebounded from a 3 ½-year low the prior month, in a sign of gradual economic recovery.

But a reading on machine orders in Japan for September, always a key metric, had them down 3.3%, more than forecast, though up 7.3% in July-September. The Cabinet Office, however, forecast that core orders will fall 5.9% in the fourth quarter from the third.

Back to China, regarding the Trans-Pacific Partnership trade agreement that the Obama administration is now giving up on in the wake of Trump’s victory, China and Xi Jinping are already rushing to fill the void to promote a rival to TPP.

Remember, China was excluded from the original deal, which the Obama administration signed with Japan and 10 other countries and promoted as a strategic response to Beijing’s rise and its growing influence in the Asia-Pacific region.

So now Beijing can argue for a broader initiative that could be pulled together faster.  Li Baodong, vice-foreign minister, said in Peru earlier this month:

“Protectionism is rearing its head and the Asia-Pacific region faces insufficient growth momentum.  China believes we should set a new plan to respond to the expectations of industry and sustain momentum for the early establishment of a free trade area.”  [Tom Mitchell / Financial Times]

TPP as it currently stands cannot come into force without U.S. ratification (so who know what will happen now) and in the case of Japan, which was due to slash tariffs on food, Prime Minister Shinzo Abe hoped the deal would lead to greater reform and efficiency in Japanese agriculture. That’s just one example of how the other nations have been planning on TPP.  Among the nations that were part of the effort are Australia, Canada, Chile Mexico, New Zealand, Singapore and Vietnam, with South Korea, Taiwan and the Philippines interested in joining.

Separately, Xi Jinping replaced his finance minister, Lou Jiwei, this week.  Lou was regarded as one of the government’s most competent economic officials.  He tackled a number of difficult projects, and had earlier served as head of China Investment Corp., Beijing’s sovereign wealth fund.  In his place will be Xiao Jie, who has most recently been working under Premier Li Keqiang as vice-secretary at the State Council.  So this appointment probably puts to rest the rumors Li could be removed next year.

Street Bytes

--For the week, the Dow Jones gained 5.4% to a new record, 18847.  The S&P 500 surged 3.8% to 2164, 26 points shy of its record high of 2190, while Nasdaq, up 3.8%, has a ways to go.

Earnings in the third quarter are now anticipated to be up 3.5%-4.0% for the S&P 500, with revenues up 2.5%, better than expected at the start of earnings season.  Ex-the still struggling energy sector, earnings rose 7.5%, revenues 4.5%.

--U.S. Treasury Yields

6-mo. 0.58%  2-yr. 0.92%  10-yr. 2.15%  30-yr. 2.94%

Globally, bonds took it on the chin to the tune of $1 trillion (with a ‘t’) this week, according to Bank of American Merrill Lynch data.  Global stocks gained $1.3 trillion in the same period.  The yield on the 10-year Treasury rose 37 basis points and is nearing its 12/31/15 close of 2.27%.

Rising interest rates and Treasury yields will have a most negative impact on the deficit, with the budget deficit for fiscal 2016 coming in at $587 billion, or 3.2% of GDP, up from 2.5% last year, a sharp increase as these things go.  Outlays for Social Security, Medicare and Medicaid grew by $75 billion last year, or 4.2%, and now account for 10% of the entire U.S. economy, the highest level ever, and rising.

Consider this, though.  If interest rates are 100 basis points above the Congressional Budget Office’s projections from last January each year for the next decade, the Treasury will have to pay an average of more than $160 billion per year.  [Wall Street Journal]

I was writing heavily of this very cost years ago, but I was wrong in worrying about it then because rates were continuing to go down, not up.  But now we’ve turned the corner and while these figures, nor Trump’s assumed fiscal stimulus, are not cause for immediate concern, it will be down the road.

And the bottom line is both President Bush and President Obama did nothing on the entitlement front.

--The Mexican peso had its biggest drop in two decades in the wake of Trump’s victory, to 20.94 to the $1.  I feel for President Enrique Pena Nieto....a little. 

--Morgan Stanley analysts said an increase of 1 percentage point in interest rates would add to big banks’ per-share earnings by 5.5%.  Any rise in rates increases the spread between the 10-year and two-year notes, a proxy for profitability (the net-interest margin...the difference between what a bank can borrow at and the lending rate).  Short term, though, the banks are taking a hit on their investment portfolios, with banks snapping up Treasuries for years, in part because new rules have required them to keep a certain amount of liquid assets.

--The International Energy Agency warned that if OPEC fails to implement output cuts and if production from outside the cartel keeps rising, 2017 would be another year of “relentless” global supply growth.

OPEC pumped an unprecedented 33.8m barrels a day in October, well above the target range of 32.5-33.0 million.  Production has been recovering in Nigeria and Libya, while Iraq reached record levels.  Saudi Arabia and Kuwait are near their record  highs and Iran is at its pre-sanctions level of output.

At the same time, non-OPEC supply rose to 57m b/d in October, with production from Brazil, Canada and Kazakhstan set to rise by 500,000 b/d in 2017, an upward revision, compared to a 900,000 b/d fall this year.  [Financial Times]

Bottom line, with current trends, supply is expected to exceed demand next year, barring a cut at OPEC’s end of the month meeting. Oil finished the week at $43.12 on West Texas Intermediate.

--Major retailers reported earnings on Thursday that surprised the Street in terms of their optimism for the holiday shopping season and the shares rallied as investors, at least for now, are  believing the bottom is in for retailers.

Macy’s raised its sales outlook for the year after a solid showing in the third quarter.  The company reported earnings that fell short, as net sales slipped 4.2% for the quarter ended Oct. 29, with same-store sales down 3.3%, the seventh straight quarterly decline, but these were better than expected.

CEO Terry Lundgren said Macy’s “sales-driving initiatives continue to gain traction.”

Kohl’s reported same-store sales fell 1.7%, compared to an increase of 1% in the prior year period, but revenue declined ‘just’ 2.3% to $4.32bn and net income rose.

Kohl’s also remained optimistic on the future, as it sees continued improvement in sales trends, according to CEO Kevin Mansell.

Shares of Nordstrom spiked higher after the company raised its 2016 outlook.  The retailer’s third-quarter comp sales rose 2.4% after drops in the previous two quarters.

One retailer did disappoint this week, J.C. Penney, which posted an unexpected decline in third quarter sales and slashed its outlook for the year.  JCP said same-store sales would grow 1% to 2%, down from previous guidance of 3% to 4%, which calls into question the turnaround strategy of CEO Marvin Ellison, who joined last August.  Ellison said the company was “experiencing softness in apparel sales.”

Revenue declined 1.4% to $2.86bn.

--When it comes to finding help this holiday season, most retailers are cutting back on sales help, with Walmart, which hired an extra 60,000 last year, continuing to be silent on its plans for this season.  Toys R Us is also not disclosing its number of temporary workers, after it hired 40,000 last year.

According to Challenger, Gray & Christmas, retail employment in October fell 21% to 154,600 from a year ago, or the steepest decline in five years.

Nordstrom and Macy’s are trimming their ranks by 3% and 2%, respectively.

But, highlighting the growth of online sales, Amazon said it was hiring 120,000 extra workers – 20% more than last year.

--Alibaba, the world’s biggest commerce group, delivered a warning to Donald Trump that any upsets in China relations would be detrimental for the U.S. and ripple across the globe.

Joe Tsai, vice chairman of Alibaba, warned any disengagement by the U.S. would be harmful, particularly in the case of China, as reported by the Financial Times’ Louse Lucas.

“If Chinese investors cannot invest in the U.S. and create more jobs in the U.S., then [as president] you would be in trouble.  We think the relationship between China and the U.S. will define our century and will be crucial for both countries, as well as the rest of the world,” he said.  “That means China is going to be, and already is, the source of consumer demand and the source of capital for America.”

Tsai was speaking on the eve of Singles Day, the world’s biggest shopping bonanza, which last year pulled in $14.3bn.

But that figure was bested today...$15 billion...which dwarfs both America’s Cyber Monday and Black Friday.  [As noted before, however, the SEC questions Alibaba’s accounting for the event.]

Recently, Chinese takeovers of U.S. companies in the tech sector have been blocked by U.S. regulators and Tsai is addressing fears that a Trump presidency may quash even more prospective acquisitions.

He added: “When you are in the position of president you have a responsibility to look out for your country and the best solution for America is to engage with the rest of the world because we live in a global market place.”

I’m biting my tongue.

--The Walt Disney Co. reported fiscal fourth-quarter net income rose 10% as gains in its movie business offset falling revenue at its cable networks and consumer product units.

Net income for the quarter was $1.8bn, up from $1.6bn a year ago.  Earnings were short of expectations, with revenue down 3% to $13.1 billion.

Disney Chairman and CEO Robert Iger noted the opening of Shanghai Disney Resort, the success of Star Wars, and record-breaking box office of $7.5bn.

But problems at ESPN, ABC and Disney Channels persisted, with the media networks’ unit sales and content licensing fees falling 3% to $5.7bn.

Cable networks’ revenue fell 7% to $3.95 billion.  But Iger said he remains “bullish” about ESPN despite sluggish ratings, saying “The causes of the (subscriber) losses have abated.”

The broadcasting business, which includes ABC, reported an 8% revenue gain.

Revenue at Disney’s parks and resorts rose 1%, with attendance at Disneyland Paris and Hong Kong Disneyland Resort falling.

--General Motors is laying off 2,000 workers at two plants in the Midwest, in another sign that the auto industry is suffering from softening demand, especially for some smaller models.

Other carmakers, including Ford, have recently announced cutbacks as the auto market has hit a peak after seven years of terrific, post-recession growth.

But while GM announced the reductions at plants in Lordstown, Ohio and Lansing, Michigan, it said it would invest $900m in three of its plants, including Lansing Grand River, to prepare for future product programs.

--Berkshire Hathaway Inc. always reports earnings on Friday evenings and thus I never have the time to incorporate it into my WIR, so, for the record, last Friday, Warren Buffett’s holding company reported it had almost $85 billion in cash on its books as of Sept. 30, up from the previous record of $72.7bn on June 30.

Ergo, ammo for investments.  So what will the 86-year-old Buffett buy next?  [Buffett does like to keep a cushion of at least $20bn, so let’s say $60bn or so is available.]

Operating earnings rose 6.6% in the third quarter to $4.85bn, though this missed analysts’ estimates.  Net income fell 24% from a year earlier.  Berkshire’s insurance group, which includes GEICO, reported underwriting profit slipped 34%.  Income from the railroad, BNSF, fell 12% on reduced demand for coal and petroleum products.

Meanwhile, for now, the company was also keeping its reported $22bn stake in Wells Fargo & Co., which for shareholders’ sake I hope after this week’s rally is still true; Berkshire being Wells Fargo’s largest shareholder at 10%, according to the last regulatory filing.

Berkshire also holds stakes in the like of Apple Inc., Coca-Cola Co. and IBM.

--Wall Street bonuses are expected to decline for a third consecutive year, owing to limited trading activity, busted mergers (like Halliburton’s $35bn bid for Baker Hughes, as well as Anthem-Cigna, and Aetna-Humana), as well as muted hedge fund returns.

Pfizer and Allergan was another huge deal abandoned after the Treasury Department announced new tax rules, killing $200 million in fees that bankers would have collected.

--In Silicon Valley, investor Peter Thiel had the last laugh with Donald Trump’s win, as he was one of the few tech titans to endorse him openly. In a statement, Thiel said:

“He has an awesomely difficult task, since it is long past time for us to face up to our country’s problems.  We’re going to need all hands on deck.”

Thiel then agreed to join Trump’s presidential transition team.

Meanwhile, the rest of the Valley, is in panic mode.

--Shares in DR Horton, the country’s largest homebuilder, dropped more than 6 percent after the company reported disappointing fiscal fourth quarter results  Net sales orders, a closely watched indicator of future revenue, rose 3% in the three months ending September, down from the 19% pace a year ago, and also less than the 9% analysts were expecting.

So, is this a canary in the mine for the housing sector?

--News Corp. shares rose after the company reported revenue of $1.97 billion in its first fiscal quarter ended Sept. 30, slightly beating the Street’s expectations.  Last year, revenue was $2.01 billion.

Revenue from digital real estate services grew 18%, while the news unit, saw revenue decline 5%, as print advertising revenue continued to decline (11%, including 21% at the Wall Street Journal...though the Journal increased circulation in the quarter by 6%).  Digital revenue at the unit did rise 24%.

--Shares in Valeant fell more than 20% after the controversial drugmaker warned its profits and sales would tumble anew next year.  The CFO, Pal Herendeen, warned of a “growth hole” caused by the loss of patent protection on a host of expensive medicines which have caught the attention of politicians following a string of big price increases.

But then the CEO, Joseph Papa, on the same conference call with analysts, insisted: We’re not trying to give 2017 guidance at this time.

The company’s shares are down about 90% from their peak in Aug. 2015.

--German prosecutors said on Monday they are probing Volkswagen chairman Hans Dieter Poetsch over suspected market manipulation related to the emissions scandal at the carmaker.  The investigation focuses on whether VW in 2015 manipulated markets by delaying the release of information about the financial impact of its emissions test-cheating scandal.

Meanwhile, sales of VW vehicles in the U.S. and Europe continued to decline, but thanks to a 19.1% increase in China, the VW brand was able to record a 4.4% rise in sales, worldwide, in October vs. a year ago.

VW delivered 278,100 cars to China last month, accounting for 54% of global sales, easily overshadowing an 8,.5% decline in Western Europe, an 18.5% drop in the U.S., and a 36% decline in South America. 

In the first ten months of the year, deliveries have increased 1% to 4.886m.

--Hertz Global Holdings, the parent of the Hertz car rental franchises, lost up to half of its market value, before recovering some, after reporting third quarter earnings that badly missed Wall Street’s estimates, while slashing its profit guidance for the year.

The profit drop, from $237 million to $42 million during the third quarter was hard for investors to take, especially given that revenues fell only 1% to $2.5bn.  The company said there was a “substantial depreciation adjustment” for its fleet of compact and mid-sized vehicles, weaker rental demand and higher administrative expenses.  And the company said more adjustments were in the offing.

--Shares in travel website Priceline Group Inc. reported a 19% jump in quarterly revenue, driven by a 29.4% surge in hotel bookings.  Revenue at the company (which includes brands Booking.com and Kayak), rose to $3.69bn from $3.10bn.

--Allianz said PIMCO, its U.S. bond fund management business, saw its first quarterly inflows since 2013 in the third quarter, as clients added about $5.1bn.  Net profit at Allianz overall rose 36.5% to $2.1bn.

--CNN carried election night with 13.3 million viewers in prime time (8:00-11:00 p.m.) among the cable channels, followed by Fox News at 12.1 million – an election night record for both and higher than NBC (11.2 million), ABC (9.2m) and CBS (8.1m).  MSNBC scored 5.9 million, its fourth-largest prime time audience in its history.

If you are a Fox viewer and thought, hey, on Wednesday they were touting they were tops, that is probably from the metric that had more viewers gravitating to Fox when the electoral map tilted towards Trump, with 9.77 million tuning in versus 6.45 million for CNN from 2 to 3 a.m. Eastern time.  [Stephen Battaglio / Los Angeles Times]

And despite the turmoil at Fox News with the departure of Roger Ailes, with Trump’s win its future appears to be set with the likes of ardent supporter Sean Hannity in the fold.

--Trump’s election catapulted sales of his books to the top of the lists.  In the first 24 hours, the 1980s bestseller Trump: The Art of the Deal jumped from 8550 into Amazon’s top 20, and his recent Great Again: How to fix our crippled America leapt from 6700 to 94, with both books in Amazon’s top four of “movers and shakers” list that shows the biggest gainers in sales rank over the past 24 hours.

--Huge controversy this week as Toblerone chocolate bars changed the design to reduce the weight of what were 400g and 170g bars, with consumers saying the bigger spaces looked “stupid.”

Toblerone bars are made by U.S.-based Mondelez International, who said the decision to change the look of the bars was due to a rise in the cost of ingredients.

But Mondelez kept the package size the same and many consumers wondered why the company didn’t just keep the triangles the same size and reduce the length of the bars.

This controversy at one point threatened to take the presidential election results off the front page.  I just might riot.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: The battle for Mosul took a back seat to the election coverage, but the fact is, the Iraqi Army, as I write, is somewhat bogged down amid fierce ISIS resistance.

The atrocities also continue, as the United Nations reported ISIS shot dead 40 civilians in Mosul on Tuesday after accusing them of treason.  Their bodies were then hung from electricity poles in several districts, according to the office of the UN Human Rights Commissioner.  One man was shot dead in public for ignoring an IS ban on using mobile phones. Another 20 civilians were shot dead on Wednesday in the city.

The UN also reported large quantities of ammonia and sulfur, for possible use in chemical weapons, is being stockpiled by IS and stored near civilians.

The Mosul operation is in its fourth week.  At first, Iraqi security forces, along with Kurdish Peshmerga fighters, Sunni Arab tribesmen and Shia militiamen, were making steady progress, but we’re now in the wait-and-see phase.  Just how long can ISIS keep up the resistance, and to what lengths will they be willing to go?

At the same time, now government forces are being accused of atrocities themselves.

Meanwhile, in Syria, the airstrikes on Aleppo picked up again, with heavy fighting over a key district.  Rebel shelling of government-held western Aleppo killed dozens.

At the same time, a U.S.-backed Kurdish-Arab alliance pushed closer to the ISIS Syrian stronghold of Raqqa, but last I saw the SDF (Syrian Democratic Forces) were still about 30 miles away.  The U.S. has been anxious to launch the offensive while the battle raged in Mosul to prevent ISIS fighters from retreating from Iraq to Syria.

Separately, the U.S. military said in a statement that 64 civilians were killed in 24 U.S. air strikes against ISIS targets in Iraq and Syria between Nov. 20, 2015, and Sept. 10, 2016.

As for Turkey, they continue to become increasingly involved in both the Syrian and Iraqi theatres, while at home, President Recep Tayip Erdogan is quashing dissent, with the recent failed coup giving him an impetus to speed up what was already a crackdown.

Editorial / Wall Street Journal

“Now the president appears to be targeting parliamentary democracy.

“Police raids in Ankara and southeast Turkey (last weekend) saw a dozen parliamentarians from the pro-Kurdish People’s Democratic Party, or HDP, detained.  Those arrested include HDP co-leaders...who are charged with defying prosecutors’ orders to testify on terrorism charges and allegations that they are sympathetic to the militant Kurdistan Workers’ Party, or PKK....

“The real reason for the assault is that the HDP is one of the few remaining political obstacles to Mr. Erdogan’s efforts to impose an autocratic presidential system.  Those ambitions also predate this summer’s coup attempt.  In the June 2015 general election the HDP expanded its support beyond its ethnic-Kurdish base by appealing to secular-minded urbanites alarmed about Mr. Erdogan’s drive toward an Islamist dictatorship....

“For years leaders in the West have indulged Mr. Erdogan on grounds that Ankara is a member of NATO, a potential bulwark against Russian aggression and essential to blocking the flow of Middle East refugees into Europe. But there has to be a limit to that indulgence when Mr. Erdogan’s despotic behavior bears a closer resemblance to the regimes in Tehran or Moscow than it does with his erstwhile allies in the free world.”

Iran: Foreign Minister Mohammad Javad Zarif said that in light of Donald Trump’s victory that when it comes to the nuclear deal that Trump has threatened to rip up, “Of course Iran’s options are not limited but our hope and our desire and our preference is for the full implementation of the nuclear agreement, which is not bilateral for one side to be able to scrap.”

The July 2015 deal reached between Iran and six world powers was a way to pre-empt Tehran’s suspected drive for nuclear weapons by curbing its enrichment of uranium.  In return, the Obama administration agreed to a lifting of sanctions.

Trump called the nuclear pact a “disaster” and “the worst deal ever negotiated” during the election campaign.

Zarif said it would be unwise for the U.S. “to move away from its obligations under the agreement.”

If Trump picked Newt Gingrich as secretary of state, he will demand the deal be renegotiated.  But this is dishonest in that you have six parties (the P5+1) that are signatories to the deal with Iran.

Egypt: President Abdel Fattah al-Sisi was proud to say he was the first to congratulate President-elect Trump and now his nation has imposed a security clampdown on protests over austerity.  Egypt raised fuel prices and floated its currency – a move welcomed by bankers but condemned by ordinary Egyptians as the latest blow to their spending power in a country heavily dependent on imports. Sisi’s threats appear to have worked as protests at week’s end were minimal.

Sisi has been criticized for crushing dissent and the new laws against protest are such that few dare to come out, despite rising public anger.  He is also dealing with an ongoing Islamic State threat in Sinai.

But on Friday he was awarded by the International Monetary Fund with a $12 billion, three year loan as a show of support for the government’s reform efforts.

Russia: Wednesday, the Kremlin celebrated the election of Donald Trump. President Vladimir Putin sent Trump a telegram of congratulations, expressing the hope relations between the two would improve in a Trump administration.

But as the Moscow Times reports, by Thursday, the celebration was abating, “the honeymoon coming to a swift end.”

“We are not experiencing any euphoria,” Deputy Foreign Minister Sergei Ryabkov said on Nov. 10.  “[We’ve had] very diverse experiences doing business with U.S. administrations, both Republican and Democrat.”

Ryabkov admitted on Thursday that the Russian Foreign Ministry had been in contact with the Trump campaign during the race, but Americans shouldn’t read too much into this. The Kremlin is always in some contact with people in both parties.  [This is different from stealing emails, I hasten to add.]

But now the Kremlin is faced with the task of managing a relationship with the most unpredictable administration in U.S. history.

Stanislav Belkovsky, director of the National Strategy Institute, told the Moscow Times:

“Putin is, of course, a winner here. Not because Trump won, but because it proved the U.S. establishment does not control its own country.”  But the “defeat of Obama’s platform” is a fleeting victory for Putin: “No one knows what Trump’s real policies toward Russia will be.”

Dmitri Trenin, director of the Carnegie Moscow Center think tank, echoes these sentiments.  “We shouldn’t delude ourselves and expect Trump to make concessions [to Russia] on key issues.  At the same time, there is now a chance that Russo-American relations can leave the danger zone.  We must not miss this shot,” Trenin wrote in a recent op-ed.

Separately, Estonia’s prime minister lost a parliamentary no confidence vote, opening up the possibility of a pro-Russian party becoming part of a new government at a very sensitive time.  Russians make up about a quarter of the 1.3m-strong NATO and EU member.   It has long been felt Vladimir Putin will gin up a crisis involving the minority Russian population in one of the republics.

Neil Buckley / Financial Times

“As Donald Trump’s election victory was confirmed, Michael McFaul, former U.S. ambassador to Moscow, was quick to identify where the consequences would be felt.  ‘Biggest loser in the world tonight – Ukraine,’ he tweeted.

“Mr. Trump’s triumph in the presidential contest is a shock for much of former communist eastern Europe. From Tallinn to Tbilisi, leaders fear that under his presidency the U.S. will no longer play the role of supporter and protector against pressure from Moscow that it has for a quarter of a century.

“Concerns are most acute in Ukraine, where the Black Sea peninsula of Crimea was annexed by Russia in 2014 after Viktor Yanukovich, the Russian-leaning president, was ousted by street protests.  Its conflict with pro-Russian separatists and Russian forces in eastern Ukraine is still simmering.

“Kiev and some of its international supporters fear Mr. Trump will seek a ‘grand bargain’ with Vladimir Putin to improve U.S.-Russian relations, sacrificing Ukraine in the process.”

I totally agree with this thesis, though it might depend on who Trump surrounds himself with.

China: Beijing is taking a wait-and-see attitude with the election of Donald Trump. State media says it poses an economic challenge for China in areas such as trade and the currency, but the general pattern of Sino-U.S. ties will not be affected.

Trump has said he will introduce harsh measures such as tariffs, or even file a lawsuit with the World Trade Organization, if he believed China was dumping or subsidizing its products.

But at the same time, Beijing is expecting a Trump administration to focus more on economic opportunities, rather than security challenges.  China also expects to be branded a currency manipulator.

Separately...Editorial / Washington Post

“China’s Internet is a universe of contradictions.  It has brought hundreds of millions of people online and has become a vast marketplace for digital commerce, yet it is also heavily policed by censors to snuff out any challenge to the ruling Communist Party.  Under President Xi Jinping, the censors are working overtime to keep 721 million Internet users under control.

“The latest effort came Monday.  China’s national parliament approved a cybersecurity law that can be used to restrict free speech and force foreign Internet companies to heed the demands of China’s security services.  Censorship is not new in China; a huge phalanx of officials are devoted to it, harsh punishments are meted out, and the country is ringed by a content-blocking Great Firewall. But now censorship will be more fully enshrined in the legal code.

“Article 12 of the new law prohibits use of the Internet for ‘inciting subversion of the national regime’ or ‘the overthrow of the Socialist system.’  Also banned is inciting separatism or ethnic hatred, ‘endangering national unity,’ or ‘fabricating’ or disseminating false information about the economy.  These are all touchstones of Chinese authoritarianism, vague enough to be deployed in many circumstances to smother dissent.  Article 37 of the new law requires ‘critical information infrastructure operators’ to store users’ data, including that of foreign companies, on Chinese territory, making it easier for the security services to snoop.  Article 24 requires Internet providers to demand the real identity of those they provide services to – making it easier for security services to track down those who would like to speak their mind.  Many foreign businesses are also alarmed that the new law may give the Chinese authorities access to their  technology and data....

“In law and in practice, China is creating the world’s largest online thought prison.  It turns the idea of the Internet as a force for freedom on its head, and as China goes, so go other tyrants.  From Vietnam to Saudi Arabia, from Russia to Turkey, the age of Internet repression has blossomed.”

Then there is the continuing, and looming, issue of Hong Kong.  On Monday, Beijing banned legislators who advocate Hong Kong independence from serving on the territory’s council, an unprecedented move that exacerbates tensions amid fears for the rule of law in this key financial center.

The ruling from China’s National People’s Congress, the rubber-stamp parliament, came after a tense standoff and occasional clashes in Hong Kong last Sunday night between police and hundreds of protesters.

The two Hong Kong legislators, Baggio Leung and Yau Wai-Ching, were elected in September after record voter turnout, buoyed by opposition to Beijing’s increasing interference in Hong Kong’s affairs.

But the NPC ruled on Monday that “those who support Hong Kong independence do not qualify to run for and serve as members of the legislature” and should “be held legally responsible” for their actions.

This is outrageous.  Hong Kong will blow next year.

Finally, as reported by the Wall Street Journal, the Chinese government said it would raise coal power capacity by as much as 20% by 2020, “ensuring a continuing  strong role for the commodity in the country’s energy sector despite a pledge to bring down pollution levels.”

This is too much, in case you needed further evidence of what a sham the global climate change deal is.

“This is indeed a disappointing target,” said Lauri Myllyvirta, a campaigner at Greenpeace.  “Given that there is already severe overcapacity and demand for coal-fired power is going down, we would have expected a cap on coal power capacity much closer to the current capacity level.”

India: The nation has a serious currency situation.  As in three days after 500 ($7) and 1,000 rupee notes were withdrawn as part of anti-corruption measures, ATMs were running out of cash.

ATMs opened Friday after being shut for 48 hours and hundreds queued up early morning to make withdrawals after the surprise government move aimed at tackling both corruption and tax evasion.  If an ATM or bank has cash available, there are limits to what can be withdrawn.

The 500 and 1,000 rupee notes accounted for about 85% of the cash in circulation.  Airports, railway stations, hospitals and fuel stations will only accept them until the end of Friday.

People will be able to exchange their money at banks between Nov. 10 and Dec. 30.

The issue is “black money,” which the government is hoping to flush out, thus making money that is unaccounted for visible for tax purposes. Counterfeiting is also a big issue here, with Pakistan being accused of flooding India with fake currency to damage the economy.

New 500 and 2,000 rupee denomination notes will be issued to replace those removed from circulation.

Philippines: Update...President Rodrigo Duterte cancelled the order of some 26,000 assault rifles I wrote of last time after a key U.S. senator was planning on blocking the arms purchase over concerns about human rights violations.  Monday, Duterte said he would look for a “cheaper source.”

As for the impact of Duterte’s rhetoric, global funds have pulled more than $600 million from Philippine stocks since inflows peaked in August, while the American Chamber of Commerce in Manila warned his comments were creating unease.

Duterte is counting on greater investment from China to offset any fallout.

Random Musings

--Presidential Polls...the last ones right before Tuesday’s vote, for the record.

The final national polls from NBC News/Wall Street Journal, Bloomberg Politics, CBS News/New York Times, ABC News/Washington Post, and Fox News all had Clinton leading by either 3 or 4 points.

Among likely voters, the final Monmouth University national poll had Clinton up by 6 points.  [Clinton 50%, Trump 44%, 4% Gary Johnson and 1% Jill Stein.]

The USC/L.A. Times tracking poll received a lot of kudos for showing Trump had a 46.8% to 43.6% lead in its last survey, but this was 3% off just like the others above, in essence.  Since the popular vote was flat, I mean, c’mon.  Just be intellectually honest, the editor mused to no one in particular.

In final state polling before Tuesday, Quinnipiac University had Clinton defeating Trump in Florida, 46-45, Johnson 2.  Clinton was also projected to win in North Carolina, 47-45, Johnson 3.  [Quinnipiac did have Sen. Marco Rubio winning re-election in Florida by a 50-43 margin and it came in 52-44, so not bad.]

--Among the misses by the polls and others was Foreign Policy magazine, which published an article in July titled “The Republican Party Is On the Verge of Extinction.”

A month later, The Hill had a story with the headline, “Trump’s loss could make the GOP extinct.”

Nate Silver’s ‘esteemed’ FiveThirtyEight gave Clinton a 71.4% chance of winning 16 hours before it became apparent she would not.

University of Virginia Professor Larry Sabato’s final prediction was that Clinton would win 322-216 in the Electoral College.

--California voters elected Kamala Harris to the U.S. Senate, making her the first black from the state to be sent to the Senate, with Harris becoming just the second black woman in the nation’s history to serve in the upper chamber.

--Last Sunday’s “60 Minutes” had a terrific segment with pollster Frank Luntz and a focus group that showed the political divides in today’s America.  It was heartbreaking, as he himself put it.

Well I had my own little episode with Mr. Luntz when I attended the 2007 Iowa State Fair to gather some political intelligence ahead of 2008’s election.

From my Week in Review of 8/25/07:

“So I’m sitting in the hotel bar in Des Moines Saturday night when a bunch of photographers following the presidential candidates strolled in. They were sitting next to me and I couldn’t help but overhear their conversation which was pretty funny.  Their big issue was they have limited capacity in terms of footage to send back to the networks to use in their coverage of the various campaigns so what do they omit? I found one guy’s observations most amusing.  ‘If a candidate drops their pork sandwich and then picks it up and eats it, we’ve got to have that!’

“But the pollster Frank Luntz appeared and I introduced myself, saying how impressed I was by Senator Joe Biden’s speech at the State Fair; whereupon Luntz began riddling me with questions, such as ‘What exactly moved you?  I’m a word man, I need words!’  Funny guy and a real pro.”

All these years, Luntz hasn’t changed one bit and it’s why he is still the best at what he does.

--New Jersey Gov. Chris Christie said a jury’s verdict that three former allies were responsible for the lane closures at the George Washington Bridge confirmed his conclusion that the three, and nobody else, including the governor himself, were guilty.

But Christie is carrying around so much baggage these days that on Friday, he was demoted from his position of heading up Trump’s transition team, Vice President-elect Pence taking over the lead, with Christie becoming one of several vice chairs.

--Thank god the Republicans retained the Senate for one simple reason.  I couldn’t live with Mass. Dem. Sen. Elizabeth Warren having more of a position of power than she already does.

--What do you think Joe Biden is musing about these days?

--Editorial / New York Post

“Hordes of angry youths have taken to the streets across the country to protest the fact that Donald Trump was just elected America’s 45th president.  Few seem to realize that the protests confirm for reluctant Trump voters that they made the right choice.

“The failure to demonstrate peacefully certainly does the kids’ cause no good.

“Tens of thousands marched in 25 cities Wednesday night and again on Thursday. Beyond the ‘Not My President’ signs and the obscene anti-Trump chants, violence broke out repeatedly....

“A few idiots on social media are even calling for Trump’s assassination....

“Just a week ago, recall, many of the same pundits and political leaders who totally misread the national mood warned Trump fans to suck it up and accept the reality of Clinton’s victory.

“Yet now we’re told this willful rage is an expression of free speech and democracy.

“Sorry – what happened on Tuesday was democracy in action. Stubbornly refusing to accept the result and demanding Trump’s ‘impeachment’ even before he takes office is a flight from reality.

“As is the silliness on college campuses – the exams called off so students can ‘heal,’ the ‘cry-ins’ for hyper-sensitive snowflakes challenged by a lost election.

“Suck it up, kids.  Life is full of disappointments that you need to learn to accept.  Hillary Clinton has, and so should you.

“Fact is, the only way of stopping Trump from becoming president was at the polls. Save the marches for after his inauguration – when he actually does something.”

I agree with Rudy Giuliani, who said on Fox News Thursday: “If you’re looking at the real left-wing loonies on campus, it’s the professors not the students.”

Giuliani said he would encourage Trump to listen to the protesters and tell them to wait a year.

“Calm down, things are not as bad as you think.”

--We learned from the latest batch of emails from WikiLeaks that Chelsea Clinton used her family foundation’s cash to pay for her wedding, living expenses and taxes on gifts of cash from her parents.

Doug Band, formerly a top aide to President Clinton, complained about Chelsea’s spending in a Jan. 4, 2012, email.

“The investigation into her getting paid for campaigning, using foundation resources for her wedding and life for a decade, taxes on money from her parents...” Band wrote to John Podesta.  “I hope that you will speak to her and end this.”

In previous leaked emails, Band called Chelsea a “spoiled brat kid,” which is spot on.

But Friday, the New York Post reported she is being groomed to run for Congress.  Oh brother.  Just when we thought it was over....

--I just loved how all of Hillary’s star power...Beyonce, Jay Z, LeBron, Bon Jovi, Katy Perry and Bruce Springsteen didn’t help her one bit.

--The first woman to become attorney general of the United States, Janet Reno, died at the age of 78.  Reno’s eight-year tenure during the Clinton presidency was bracketed by two explosive events: the deadly raid on the compound of a religious cult in Waco, Tex., that killed nearly 80, and the seizure in 2000 by federal agents of Elian Gonzalez, a young Cuban refugee who was at the center of an international custody battle.

Reno’s relations with President Clinton became strained by her decision to allow an independent inquiry into a failed Clinton land deal in Arkansas (Whitewater) to be expanded to include his relationship with Monica Lewinsky.

--California voters on Tuesday defeated a ballot measure to repeal the state’s death penalty, and instead narrowly passed a proposition that aims to amend and expedite it.

Proposition 62, which would have replaced capital punishment for murder with life in prison without parole, garnered 46.1% of the vote.

Proposition 66, intended to speed up executions by designating trial courts to hear petitions challenging death row convictions, won the approval of 50.9%.

--Us New Jersey voters struck down a ballot proposal to allow casinos outside Atlantic City, failing 79% to 21%.  I voted for it. 

--Nearly a quarter of Americans will be living in areas where recreational marijuana use is legal, as voters approved the initiative in California and Massachusetts on Tuesday (plus Maine and Nevada), with others, such as Florida, expanding legal access to it.

--I was ticked off to see all the abuse Prince Harry’s new girlfriend, Meghan Markle, was taking on social media, forcing her to take time off from filming her TV show.  Tuesday, Prince Harry released an unprecedented statement, blasting “social-media trolls” for hassling Markle, with “racial undertones” in some of the coverage of the actress – who has one white parent and one African-American parent and describes herself as bi-racial.

“Prince Harry is worried about Ms. Markle’s safety and is deeply disappointed that he has not been able to protect her,” read the statement on the royal family’s Facebook page, “It is not right that a few months into a relationship with him that Ms. Markle should be subjected to such a storm.”

Harry, 32, said he had tried to develop a “thick skin” about the level of media interest in his personal life but that a line had been “crossed” this week.

--The Canadian military has been investigating a mysterious pinging sound coming from the sea floor in a remote region of the Arctic, as reported by BBC News.

“The strange noise is reported by local people to have frightened animals away over the past few months.

“A military aircraft conducted various multi-sensor searches in the area, officials said.

“But the military says it is so far unable to explain the cause of the ‘acoustic anomalies.’...

“ ‘The only thing the crew did observe were two pods of whales and six walruses in the area of interest.’”

Locals say the noise can be heard through the hulls of boats and is described as a “hum” or a “beep.”

So you’re probably thinking, of course, it’s Russian military activity, but this isn’t the case.  Nor is the noise from mining companies conducting surveys.  Nor it is being generated by Greenpeace to scare wildlife away from the rich hunting ground.  All these parties deny they have anything in the area.

I think it’s Godzilla.  If you can come up with a better explanation, tell the Canadians.

--I was shocked to hear on “60 Minutes” last week that in their segment on Zika, Dr. Anthony Fauci said the virus originated in the Yap Islands of Micronesia.  My Yap Islands!  Due to my connections with the Jesuits, I first went to Yap in 1996 and have been three other times since I started StocksandNews, the last being 2010.  I never heard a thing in my trips there...and, yes, I saw mosquitoes.

--Finally, today is Veterans Day and a few weeks ago, Richard Rescigno, writing in Barron’s, had a piece on the upkeep of the 25 military burial grounds maintained around the world by the American Battle Monuments Commission, such as the American Cemetery at Normandy.

The sites range from the United Kingdom, to France, Belgium, Italy...to the Philippines, Mexico, Tunisia, and Panama.  “Of the approximately 218,000 U.S. service members in them, 172,200 died in World War II, and the rest in World War I or other conflicts.”

The cemetery near Omaha Beach in Normandy draws a million visitors a year.  I was there in 1995. General George S. Patton lies in the U.S. cemetery at Luxembourg.

But here’s to the 400 employees worldwide who maintain these hallowed grounds.

“Many of us will be long forgotten seven decades after we die, but people still honor the fallen Americans buried in overseas military cemeteries, linked in eternity in a common cause and emblematic of what a united country can do.”

---

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

God bless America.

---

Gold $1227...lowest since May ‘16
Oil $43.12...lowest since Aug.

Returns for the week 11/7-11/11

Dow Jones  +5.4%  [18847]
S&P 500  +3.8%  [2164]
S&P MidCap  +5.7%
Russell 2000  +10.2%...staggering
Nasdaq  +3.8%  [5237]

Returns for the period 1/1/16-11/11/16

Dow Jones  +8.2%
S&P 500  +5.9%
S&P MidCap  +11.8%
Russell 2000  +12.9%
Nasdaq  +4.6%

Bulls 42.9
Bears 25.7 [Source: Investors Intelligence]

Have a great week.

Brian Trumbore

 



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Week in Review

11/12/2016

For the week 11/7-11/11

[Posted 11:30 PM ET, Friday]

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

Edition 918

The Election...and Washington

Donald Trump won.  So what happened?

FBI Director James B. Comey had roiled the campaign 11 days before the election when he announced that a fresh trove of emails had been discovered on the computer of Hillary Clinton’s longtime aide Huma Abedin and her estranged husband, former congressman Anthony Weiner.  It was a big blow to the Clinton campaign, for anyone still on the fence, and she lost momentum.

But then on Sunday, Comey suddenly said his rush investigation found no cause for the FBI to reverse its July decision against an indictment.  So with two days to go, the Clinton team could exhale and pray their voters would turn out.  They didn’t...at least in sufficient numbers...while Donald Trump’s did.

Personally, I never picked a winner in the contest.  I was consistent throughout.  I didn’t vote for Trump, but kept saying I hoped Republicans retained the Senate.

So after Comey’s announcement on Sunday, Wall Street rallied big on Monday, and added to the gains Tuesday as Americans went to the polls on the belief the FBI director had given the Clinton campaign a final shot in the arm.  Victory was secured.  Divided government (Republicans retaining the House) and more gridlock, which the market seemingly liked.  I sent out a tweet on Monday, though, saying Wall Street had “misinterpreted” Comey’s statement, implying that I thought now Trump had his reason for prolonging the vote by contesting one or two key states were the vote to be close.  I hardly saw certainty.  I repeated the tweet on Tuesday.

But watching CNN on Tuesday as the first exit polls were coming out at 5:00 p.m. ET, having been told all day about the heavy Hispanic turnout, I picked up on something Gloria Borger said as she looked at the data...the Hispanic vote overall, across the country, only seemed to be up 1% in terms of the total electorate. I, and she, couldn’t help but muse, ‘Just what will the impact be then?’

And so we all watched together, as the polls in the East began to close and the results rolled in, that the likes of Florida, North Carolina, Ohio and Pennsylvania were ‘red.’

My opinion is that Hillary was done in by two issues, since we are talking very small percentages in the big states that she lost by...the Comey announcement of Friday, Oct. 28, and Trump’s focus (belatedly) on ObamaCare and skyrocketing premiums for many Americans.  We’ll never really know what caused the final undecideds to choose Trump or Clinton, but it’s as good a theory as any.

Some details....

Electoral College [270 needed]...as of Friday p.m.

Trump 290 Clinton 228  [Michigan and New Hampshire still not officially called]

Popular Vote (as of late Friday)

Clinton 60,588,000
Trump 60,131,000

[But...as of late Thurs., from my own calculations, if you took out California and New York, Trump had 54,359,000 to Clinton’s 50,647,000.]

Key States

Arizona: 50-45 Trump
Florida: 49-48 Trump
Iowa: 52-42 Trump
Michigan: 48-47 Trump
Nevada: 48-46 Clinton
New Hampshire: 48-47 Clinton
North Carolina: 51-47 Trump
Ohio: 52-44 Trump
Pennsylvania: 49-48 Trump
Wisconsin: 48-47 Trump

Senate [projected with Jan. runoff in Louisiana]

Republicans 52  Democrats 48

House [projected]

Republicans 240  Democrats 195

Exit Poll data....

Male 48% of electorate
Female 52%  [53% in 2012]

Whites 70% of electorate [72% in 2012, 86% in 1984]
Blacks 12%
Latinos 11%  [10% in 2012...whoopty-damn-do]
Asians 4%

Dems 37%
Republicans 32%
Independents 31%

Male: Trump 53-41
Female: Clinton 54-42  [Obama took this segment by 11 in 2012]
Whites: Trump 58-37  [Reagan and Romney, 20-point margins for each]
White women: Trump 53-43
White men: Trump 63-31
Blacks: Clinton 88-8  [Obama 93-6 in 2012]
Hispanics/Latinos: Clinton 65-29 [Romney received 27% in 2012]
Asians: Clinton 65-29
18-29 year olds: Clinton 55-37
High school or less: Trump 51-45
College grads: Clinton 49-45
Whites without college: Trump 67-28  [Romney won this segment by 26 points]
White college grads: Trump 49-45

Here in my home state of New Jersey, it was 55-42 Clinton, while neighboring New York was 59-38, thus the reason why the mood in the area isn’t quite as good as, say, Wyoming, 70-22 Trump.

Among Chris Cillizza’s findings in the Washington Post:

“ObamaCare was a wind beneath Trump’s wings....

“Almost half of the electorate (47 percent) said they thought ObamaCare ‘went too far.’  Trump beat Clinton 83 percent to 13 percent among that group.

“Clinton’s emails hurt her....

“Almost two-thirds of Americans (63 percent) said that Clinton’s ‘use of private email’ bothered them ‘a lot’ or ‘some.’  Among that group, Trump won 70 percent to 24 percent.

“People didn’t think Trump lost the debates as badly as I did....

“Of the 82 percent of people who said the debates were a ‘factor’ in their decision for president, Trump took 50 percent to 47 percent for Clinton.”

---

Early Wednesday morning, Donald Trump said in his victory speech:

“To all Democrats, Republicans, Independents across this nation, I say it is time for us to come together as one united people.  For those who chose not to support me in the past, of which there are a few people, I’m reaching out to you for your guidance and your help so we can reach out and unify our great country.”

Trump praised his opponent: “Hillary has worked very hard over a long period of time and we owe her a major debt for her service to our country.”

Then Trump sought to show he would be willing to work with others in his administration.

“While we will put Americans’ interests first, we will deal fairly with everyone. We will seek common ground, not hostility.”

Hillary Clinton, having blown off her ‘victory party’ crowd at the Javits Center, finally conceded at 11:30 a.m. on Wednesday.

“Donald Trump is going to be our president,” she said.  “We owe him an open mind and chance to lead.”

“Last night, I congratulated Donald Trump and offered to work with him on behalf of our country.  I hope that he will be a successful president for all Americans.”

Clinton said, “This is painful, and it will be for a very long time.”

She encouraged Democrats to respect the outcome of the election and the “constitutional democracy that enshrines the peaceful transfer of power.”

But she acknowledged Democrats will need to fight to protect their values.

The Constitution, she said, “also enshrines other things – the rule of law, the principle we are all equal in rights and dignity, freedom of worship and expression.  We respect and cherish these values too, and we must defend them.”

But Clinton had to note she will not be the first woman to serve as president.

“We still haven’t shattered that highest glass ceiling, but someday someone will, and hopefully sooner than we might think right now.”

President Obama followed, speaking with Vice President Joe Biden alongside.

“The presidency and the vice presidency is bigger than any us.  We are all rooting for (Trump’s) success in uniting and leading the country.

The president congratulated Clinton on her campaign, calling her a role model to daughters across the country, with Obama saying he was heartened by Trump’s remarks in which he called for the country to come together.

“It is no secret that the president-elect and I have some pretty significant differences,” Obama said.

But then he reminded Americans that it was the same situation in 2008, when then-President George W. Bush did all he could to make Obama’s transition a smooth one.

“So I have instructed my team to set the example that President Bush’s team set eight years ago, and work as hard as we can to make sure this is a successful transition for the president-elect.”

Obama added: “I think of this job as being a relay runner.  You take the baton, you run your best race and, hopefully, by the time you hand it off, you are a little further ahead, you made a little progress. I can say that we’ve done that.”

But Trump’s win was an amazing repudiation of Obama’s entire presidency, as Trump is in a position to repeal large parts of Obama’s legislative agenda, repeal his executive orders with the stroke of his pen, and nominate conservative justices to the Supreme Court.

Obama has a lot to do in his final weeks, but it’s unlikely he’ll accomplish little more than commute more sentences and pardon a few folks, especially after late Friday, with the White House deciding it was fruitless to try to pass the Trans-Pacific Partnership trade accord in the lame-duck session of Congress, a bitter loss for the president.

Most importantly, President Obama leaves a world in chaos and our nation far less secure.  His position as one of our nation’s five worst occupants of the White House is now a certainty, regardless of the political persuasions of the historians who will be ruling on this.

---

As for the Trump Rally in the stock market, yes, Tuesday night, at first world markets were convulsed by the thought of a Trump presidency, but then the switch went off.

‘Holy [Toledo]! Republicans retained control of the Senate!  Republicans handily held the House!  And there’s going to be a Republican in the White House!  Why that’s the trifecta!  And Trump does have a growth agenda!  Buy buy buy!!!’

By the end of the week, the Dow Jones was at new all-time highs, having had its best week since 2011, while the S&P 500 had its best week in two years. Bonds took it on the chin, however, big time, with the 30-year bond having its worst week since January 2009.  Remember how I’ve been warning of an inflation scare?  I was looking for a single data point to trigger a mini-disaster in the bond pits.  Little did I know it would come as a result of the election.

Yes, now there are no excuses for Republicans.  They have their opportunity to fully enact their agenda.  Will they?

House Speaker Paul Ryan (Wis.) and Senate Majority Leader Mitch McConnell (Ky.) were very upbeat on Wednesday in their news conferences, saying their major goals were to repeal ObamaCare, to cut taxes, and roll back regulations, especially those dealing with the environment.

Ryan said: “The opportunity is to go big, to go bold, to get things done for the people of this country.”

But the party has had major disagreements with Trump over items like trade and immigration, and Trump’s early foreign policy pronouncements.  Deficit hawks are also against raising the debt ceiling, which could be a market-moving issue next year.

McConnell said: “We’re going to be enthusiastically supportive almost all the time, and where we have differences we will talk about them privately.”

So far, Trump in return is sending the right signals, recognizing the need to work with those Republicans that may not have supported him.  And there you had Paul Ryan, who fell into that category, saying on Wednesday that Trump’s victory was “the most incredible political feat I have seen in my lifetime.”  The meeting between the two on Thursday at the Capitol was positive.

But here’s the bottom line.  Most legislation in the Senate still requires 60 votes (including for Supreme Court nominees) to clear procedural hurdles and Republicans will only have 52 after the Louisiana runoff.

For their part, Democrats, led by House Minority Leader Nancy Pelosi (Calif.), are eager to work with Trump initially on an infrastructure jobs bill. Pelosi said in a statement Wednesday: “We have a responsibility to come together and find common ground.”

And just a note on incoming Senate Minority Leader Charles Schumer (N.Y.).  He will be a major improvement over Harry Reid.  I’ve followed Schumer his entire career and while he no doubt loves the cameras, he can be a pragmatist.  From a national security standpoint, it’s also good he’s from New York.  Fellow New Yorker, Trump, and Schumer will work together to ensure the area gets the assets it needs to fight terror.

And this...late Friday we learned that Trump wants to leave certain portions of ObamaCare in place, as he told the Wall Street Journal in an interview, following his chat with the president in the Oval Office on Thursday.

Specifically, Trump wants to keep the prohibition against insurers denying coverage because of preexisting conditions, and he wants to keep the provision that allows parents to provide years of additional coverage for children on their insurance policies.

Trump also said he wanted to deregulate the financial sector to allow “banks to lend again.”

World Reaction....

Israeli Prime Minister Benjamin Netanyahu called Trump “a true friend” of Israel, saying he hoped to reach “new heights” in bilateral ties under Trump.

British Prime Minister Theresa May said the “enduring and special relationship” between Britain and the United States would remain intact.  [Trump reciprocated by inviting May to come to the White House “as soon as possible.”  He wants a Thatcher-Reagan relationship with her.]

Russian President Vladimir Putin said, “It is not an easy path but we are ready to do our part and do everything to return Russian and American relations to a stable path of development....This would serve the interests of the Russian and American peoples, as well as positively impacting the general climate in international affairs.”

But the mood in the Baltic states was gloomy.  Lithuania’s foreign minister told the Financial Times he was worried about Moscow’s ability to exploit the next two months before the new president takes office.  “This vacuum of leadership, there is always the temptation or opportunity to fill that with something that is not always the best intentions,” Linas Linkevicius said.

Jens Stoltenberg, NATO’s general secretary, stressed that the security guarantees of all NATO allies were treaty commitments.

“All allies have made...a solemn commitment to defend each other. This is something which is absolute and is unconditional.  This is important for Europe but also important for the U.S.,” he told reporters.

German Chancellor Angela Merkel, whose immigration policies Trump has dismissed as “insane,” coldly offered her cooperation but emphasized the importance of human rights.  “The U.S. is an old and venerable democracy....For us Germans, other than with the European Union, we have no deeper connection than with the United States of America.”  Her vice chancellor, Sigmar Gabriel, said in an interview with the Funke newspaper group: “Trump is the pioneer of a new authoritarian and chauvinist international movement. He is also a warning for us.”

French President Francois Hollande, who is frankly irrelevant at this point as he has zero chance of re-election, if he even decides to run, said some of Trump’s views might test “the values and the interests that we share with the United States.”

Viktor Orban, Hungary’s nationalist prime minister and the only EU leader to give Trump qualified backing before Tuesday’s vote, described his win as “great news,” posting on his Facebook page that “democracy is still alive.”

Iran’s Foreign Minister Javad Zarif urged Trump to stay committed to the Iran deal.

The South Korean government was concerned Trump may make unpredictable proposals to North Korea over its nuclear and missile tests.

A Japanese official said, “We are certainly concerned about (Trump’s) comments about the alliance and the U.S. role in the Pacific, particularly Japan.”  Prime Minister Shinzo Abe said, “Japan and the United States are unshakeable allies connected by common values.”

In Beijing, a foreign ministry spokesperson did not congratulate Trump but said China would “work with the new U.S. president to ensure steady and sound development of bilateral relations.”  President Xi Jinping congratulated Trump in a telegram, according to state TV.

Philippine President Rodrigo Duterte offered his “warm congratulations,” with his communications secretary saying Duterte “looks forward to working with the incoming administration for enhanced Philippines-U.S. relations anchored on mutual respect, mutual benefit and shared commitment to democratic ideals and the rule of law.”

But right-wing populist parties are hoping to make election inroads like Trump’s in 2017, with big votes in Germany, France and the Netherlands, for starters.

A senior figure in France’s far-right National Front, Florian Philippot, tweeted, “There world is falling apart.  Ours is being built.”

Marine Le Pen, leader of the National Front and presidential candidate, rushed to congratulate Trump and the “free” people of the U.S., while her father, National Front party founder Jean-Marie Le Pen, tweeted: “Today the United States, tomorrow – France.”

Nicolas Sarkozy, the former French president and conservative, said Trump’s victory showed what happened when political elites ignored people’s concerns about immigration, border control an terrorism. “The American people’s message must be heard,” he said.

Beppe Grillo, leader of Italy’s Five Star party, said Trump had “sent an f-u to everyone: Freemasons, big banking groups, the Chinese,” adding that there were “similarities between this American story and our movement.”

Nigel Farage, the leader of the UK Independence Party who played a key role in the Brexit referendum, and was seen at a Trump rally or two, tweeted: “I hand over the mantle to @RealDonaldTrump!  Many congratulations.  You have fought a brave campaign.”

Mexican officials said they would not pay for Trump’s proposed border wall.

Opinion....

Gerald F. Seib / Wall Street Journal

“The deplorables rose up and shook the world.

“ ‘Deplorables’ was, of course, the disparaging term Hillary Clinton at one point applied to some supporters of Donald Trump.  Many of his loyal followers proudly embraced the insult and used it as a motivating tool.

“Wearing such establishment disdain as a badge of honor, the Trump army cut a deep swath through the American electoral system Tuesday, propelling the Republican nominee to the most stunning victory in modern American history.

“In winning, Mr. Trump didn’t merely vanquish Mrs. Clinton. He instantly remade the Republican party in his own image. He rewrote some of the GOP’s most dearly held policy and philosophical positions.  He shredded the conventional wisdom in both parties, which held that there simply weren’t enough of the white, working-class voters who flocked to his side to win a national election.  Whole sets of comfortable assumptions in both political parties now will be swept aside....

“Mr. Trump now will become the most unconventional president in modern American history. He is estranged from much of his own party, including the next-most-powerful elected Republican official, House Speaker Paul Ryan. He has virtually no relationship with any Democrats in Congress....

“Many saw either subtle or overt racism in his views of Hispanic and Muslim immigrants.  Many women saw clear sexism in his attitudes and comments about them. Even within families, the Trump candidacy set off angry arguments and opened emotional divides.

“Those divides may have only deepened in the latter stages of the campaign, when Mr. Trump appeared to drop most efforts to significantly broaden his base of support to include more categories of voters.  Instead, he appeared to double down on a strategy of trying to win by energizing those who were devoted to his angry antiestablishment message.

“That strategy energized millions of supporters Tuesday. Whether Mr. Trump now has the ability to win over the millions who dislike him with equal passion will be his first big test as president.”

Editorial / Wall Street Journal

“Donald J. Trump’s unlikely defeat of Hillary Clinton is a political earthquake of a kind that rarely disturbs American politics.  Not since Andrew Jackson has a winning candidate so defied the settled order, for better or worse. The political and media establishments are bewildered, and markets are unsettled, and no doubt many voters are too.

“But Mr. Trump winning was always an outside possibility, and the political analysts and Wall Street forecasters who wrote the Republican off as doomed ignored the multiple surprises of this disruptive year. Hillary Clinton called Mr. Trump in the wee hours Wednesday morning to concede after Mr. Trump crossed the 270 Electoral College majority by winning convincingly in the Southeast through the Upper Midwest to the Mountain West.

“If Mr. Trump’s election is nonetheless a moment of intense uncertainty, voters understood the choice, and their judgment can’t be dismissed as merely a fluke of an unconventional and bitter election year.  Mr. Trump can congratulate himself for seeing around corners to spot political opportunities where very few did.

“Mr. Trump’s support is a testament to the democratic power of discontented voters. It turns out that many of them live in states like Florida, Ohio and Wisconsin that Mitt Romney didn’t carry but Mr. Trump did.  President Obama has too often governed as if their needs and preferences are illegitimate, and this contempt was bound to generate a political challenge....

“The businessman likely didn’t win on his program, to the extent he has one. Voters decided he was an agent of change and rejected the progressive agenda and the third Obama term that Mrs. Clinton represented....

“The question now is whether the President-elect will recognize the awesome responsibilities he is assuming.  Millions of Americans have invested him with their hopes for a better future. Adversaries like China and Russia will soon test the mettle of the new Commander in Chief....

“Populism like Mr. Trump’s is not unusual in American history, but rarely do such tendencies obtain actual power.  The next weeks and months are not merely a test of Mr. Trump as a manager and a leader but also of the  strength of the federalist separation of powers and the American tradition of the peaceful transition between the Administrations of fiercely divided parties.

“In Lincoln’s Second Inaugural, in 1865, he appealed to his ‘fellow-countrymen’ to work toward reconciliation and domestic peace, ‘with malice toward none, with charity for all.’  The 16th President always repays attention, but his words seem particularly rewarding after a long night like Tuesday.”

Editorial / USA Today

“When Donald Trump announced his candidacy for the Republican nomination, few pundits or political operatives gave him much of a chance.  His bluster was sure to turn off mainstream voters, and his incendiary language on immigrants would surely be seen as a death wish in a country with a rapidly changing face.

“But Trump managed to pull it off. In a nation deeply disillusioned by Washington, contemptuous of elites and alienated by the decline in manufacturing jobs, he took his outsider label all the way to the White House in Tuesday’s election.

“One key to the New York businessman’s win over Hillary Clinton was his staunchly anti-trade views, which resonated in Rust Belt states.  In Ohio, for instance, a state won by a Republican for the first time since 2004, 47% of voters said they viewed trade as bad for jobs.  And people with that view supported Trump 2-to-1.

“Trump was not this Editorial Board’s choice to be president. In fact, we considered him unfit for the presidency and expressed grave reservations about his ability to effectively manage the nation’s affairs at home and abroad....

“His election, after a divisive and mean-spirited campaign, will greatly complicate the United States’ relations with its key allies.  Most dangerously, as commander in chief a president has few restraints on his power. Giving an angry, combative man with a quick temper and an inability to ignore slights access to the nuclear codes is a frightening thought.  So is Trump’s puzzling admiration for Russian dictator Vladimir Putin.

“But Trump is the person chosen by the American people. And, in a democracy, that is reason enough to accept the result without violence. Those who opposed him should assume the role of loyal and constructive opposition.  In his victory speech early Wednesday, Trump struck an encouraging tone, congratulating Clinton for a hard-fought campaign and promising to be ‘president for all Americans.’....

“The nation is, furthermore, blessed by its Founding Fathers with a system of checks and balances. It has an independent court system and a Congress to restrain the more destructive, unconstitutional initiatives of a temperamental, ill-prepared president.”

Kathleen Parker / Washington Post

“As regular readers of this column know, I rejected Donald Trump on Day One and have spent the past year – in columns, on TV and in speeches across the country – highlighting the many reasons I found him unacceptable for the job of president.

“My opinion hasn’t changed, but as Hillary Clinton said in her concession speech, ‘Donald Trump is going to be our president. We owe him an open mind and a chance to lead.’  And Trump, in his victory speech, said without irony that now it’s time to heal the wounds of division....

“To begin, there needs to be an honest assessment of what just happened. It isn’t really that complicated or mysterious, if you’ve spent any time in the America where Trump voters live.  As one who ventured inside the Beltway only 12 or so years ago – as a ‘spy for Bubba,’ I traduced myself – I’ve spent most of my life among the indigenous peoples.

“Two weeks ago, I began saying that Trump would win, whether I liked it or not.  Today, I offer a clarification: He didn’t win the election. Clinton lost it.

“For voters who couldn’t stand Trump, she was a terrible alternative.  Never a great candidate, she was also, tragically, a Clinton when people were ready to move on.  She received several million fewer votes than President Obama did in 2012.

“And speaking of Obama, he also lost this election to Trump, despite exit polling that showed the president’s approval rating at 50 percent-plus.

“The 2016 election was as much a referendum on Obama’s legacy as it was on the candidates themselves.  When people want the country to change course, they don’t typically vote for a third term of the current president.

“Thus, a vote for Trump was really a vote against ObamaCare and the rising costs of health insurance.  It was a vote against the doubling of the national debt to nearly $20 trillion under Obama.  It was a vote against a foreign policy that saw the Islamic State’s expansion rather than its defeat.

“Clinton’s promise to continue Obama’s policies was a suicide agenda to a majority of Americans, especially those whose lives haven’t improved during the economic recovery of the past eight years.  Clinton also embraced much of Bernie Sanders’ socialist platform, which no conservative-leaning voter could support.

“And, yes, some Trump voters probably resented the exacerbation of racial discord under Obama’s watch when Americans had hoped for the opposite.  Race as a factor in Republican opposition to Obama can’t be ignored or minimized. Nor can Trump’s role in nurturing hostility toward Muslims and Mexicans – or his antipathy toward women, people with disabilities and even a war hero’s parents – be dismissed in victory.

“Minorities have reason to feel threatened in a Trump-inspired environment of hostility toward ‘the other.’

“But leaning primarily on racism, bigotry or sexism to explain what happened Tuesday is too facile by half....

“The giant X-factor about which I have written – the however many who would never admit to voting for Trump but did – was enormous, indeed.

“Trump captured a moment and promised to make America great again.  He also said that he’ll be the president for everybody.  Let’s hope he wasn’t just reading from a teleprompter – and that the word trickles down.”

Kimberley A. Strassel / Wall Street Journal

“President-elect Donald Trump paid a visit to the White House Thursday, and by all accounts he was pleasant toward the current occupant. He should be, since Mr. Trump owes his victory to Barack Obama.

“Hillary Clinton’s defeat has left the Democratic Party a smoldering heap, its leaders pointing fingers over who or what to blame: James Comey.  Robby Mook.  Voter suppression.  WikiLeaks.  Sexism. Barely a mention has been made of the man who presided over one of the most epic party meltdowns in the country’s history: Mr. Obama.

“Deep Democratic fissures have been on display for years, with Mrs. Clinton’s rancorous primary against Bernie Sanders only the most recent example.  But the media chose to ignore this and instead to obsess about largely superficial GOP divisions. All along this election has been portrayed as a referendum on Mr. Trump.  Tuesday’s results are far better viewed as a thundering repudiation, at every level, of Mr. Obama’s governing and policies.

“In 2009, the president’s first year in office, the Democrats held 257 House seats, a majority that was geographically and politically diverse. After Tuesday the figure stands at 193, and fully one-third of these Democrats hail from three blue states: New York, California and Massachusetts.

“The story is equally grim for Democrats in the Senate. In 2009 they held the first filibuster-proof majority since the 1970s, which evaporated in the wake of ObamaCare.  Tuesday’s vote was the best chance Democrats will have in years to retake the chamber, but they lost nearly every close race.

“When Mr. Obama took office, Democrats owned 29 governorships.  After Tuesday it is 15, with ballots in North Carolina’s tight race still being counted.  Democrats controlled 60 of the 99 state legislative chambers in 2010. Today it is 30.  Now that Republicans have won the Kentucky state House for the first time in 95 years, Democrats no longer control a single legislative chamber in the South. The party of the left will hold the governorship and both chambers in precisely five states.

“This isn’t to take away from Mr. Trump’s supporters, or his message.   But the numbers above are a reaction to Democratic failure – to a president who rammed through unpopular legislation and governed via executive order and extralegal regulation.  Tuesday’s results are a response to a government that targeted conservative nonprofits, left veterans on waiting lists, botched a health website and left the world to burn.  ‘My legacy is on the ballot,’ Mr. Obama said in September, in what was the truest statement of the campaign....

“This is an utter abandonment of the Democratic Party that Mr. Obama and Mrs. Clinton led.

“It’s also an extraordinary grant of power to Republicans.  They’d be wise to immediately understand that they now own the results. Voters are giving the GOP one chance to deliver on the change it has promised, and the party can’t afford easy mistakes....

“The other obvious risk is that Mr. Trump might try to fix all of the Obama mess, all at once.  That’s a recipe for a muddle.  Republicans could do nothing smarter in the coming weeks than agree to prioritize a few sweeping, key initiatives – say, health care and tax reform – that would immediately boost the economy. Earning public trust with big, early victories will buy time for more reform down the road.

“Republicans have been elected as the anti-Obamas. Which means they’ve been elected to make things better.  If they can remember that, they have a shot.”

George Will / Washington Post

“At dawn Tuesday in West Quoddy Head, Maine, the easternmost point of the United States, it was certain that by midnight in Cape Wrangell, Alaska, the westernmost fringe, there would be a loser who deserved to lose and a winner who did not deserve to win.  The surprise is that Barack Obama must have immediately seen his legacy, a compound of stylistic and substantive arrogance, disappearing, as though written on water in ink of vapor.

“His health-care reform has contributed to three Democratic drubbings. The 2010 and 2014 wave elections, like scythes in a wheat field, decapitated a rising generation of potential party leaders.  Then came Tuesday’s earthquake, which followed shocking increases of ObamaCare’s prices.  This law has been as historic as Obama thinks, but not as he thinks:  It might be the last gasp of progressivism’s hubris expressed in continent-wide social engineering imposed from the continent’s eastern edge.  Hillary Clinton’s proposed solution to ObamaCare’s accelerating unraveling was  a ‘public option’: intensified government manipulation to correct the consequences of government manipulation of health care’s 18 percent of the economy.  Her campaign’s other defining proposal, ‘free’ tuition in public higher education, insulted the intelligence of voters aware that ‘free’ means ‘paid for by others, including you.’

“Obama’s foreign policy legacy, aside from mounting chaos worldwide, was the Iran nuclear agreement. By precedent and constitutional norms, this should have been a treaty submitted to the Senate.  Instead, disdainfully and characteristically, he produced it as an executive agreement.  Because the agreement lacks legitimizing ratification by senators, the president-elect will feel uninhibited concerning his promise to repudiate it....

“(Separately), demography need not dictate for Republicans a grim destiny but it soon will, unless they act to counter adverse trends.  Republicans should absorb Tim Alberta’s data in National Review: Arizona whites have gone from 74 percent to 54 percent of the population in 25 years; minorities will be a majority there by 2022. Texas minorities became a majority in 2004; whites are now 43 percent of the population. Nevada is 52 percent white and projected to be majority-minority in 2020.  Georgia is 54 percent white, heading for majority-minority in 2026.  Because of inexorably rising minorities, Clinton, an epically untalented candidate, did better than Obama did in 2012 in Georgia, Texas, Arizona and where 1 in 8 Americans lives – California.  The moving finger writes, and having writ moves on, perhaps soon to inscribe this: In 2016, Republicans won a ruinous triumph that convinced them that they can forever prosper by capturing an ever-larger portion of an ever-smaller portion of the electorate.

“This kamikaze arithmetic of white nationalism should prompt the president-elect to test his followers’ devotion to him by asking their permission to see the national tapestry as it is and should be.”

Editorial / The Economist

“The mainstream values of both the Democratic and Republican parties have lost touch with the times.  The media violated the principle of remaining a neutral and objective voice.  It misled the electorate with fraudulent polling practices.  As a result, the divide between the classes is larger than ever.

“No matter how Trump changes U.S. domestic and foreign policy, it won’t compare with the shock brought on by his victory. He probably will not make any drastic changes in the short-term, and it is highly likely that he will not live up to his campaign promises. He is not as bold enough to really change the country.

“In an elite-controlled U.S., most of those holding power don’t support Trump.  And U.S. allies across the world will pressure Washington to restrain Trump from isolationism.

“The election has divided U.S. society.  On an emotional level, many Americans will not accept Trump as their president. We are unlikely to see a socially unified U.S. post-election.

“But the most uncertainty lies in Trump’s foreign policy. The future of the China-U.S. relationship and Russia-U.S. ties will have a strong effect on the overall international community. Trump campaigned heavily for a focused return to U.S. economic interests, something that might turn Sino-U.S. relations from a geopolitical rivalry to an economic conflict....

“The new president lacks diplomatic experience.  His much touted business experience will in some form penetrate future U.S. foreign policy. In turn, Sino-U.S. relations may see dramatic renegotiations, including sharpened conflicts of interests....

“No problem comes to the president unless it is fiendishly complicated. Yet Mr. Trump has shown no evidence that he has the mastery of detail or sustained concentration that the Oval Office demands.  He could delegate (as Reagan famously did), but his campaign team depended to an unusual degree on his family and on political misfits.  He has thrived on the idea that his experience in business will make him a master negotiator in politics.  Yet if a deal falls apart there is always another skyscraper to buy or another golf course to build; by contrast, a failure to agree with Vladimir Putin about Russia’s actions leaves nobody to turn to.

“Nowhere will judgment and experience be more exposed than over the control of America’s nuclear arsenal – which, in a crisis, falls to him and him alone.

“The genius of America’s constitution is to limit the harm one president can do.  We hope Mr. Trump proves our doubts groundless or that, if he fails, a better president will be along in four years.  The danger with popular anger, though, is that disillusion with Mr. Trump will only add to the discontent that put him there in the first place.  If so, his failure would pave the way for someone even more bent on breaking the system....

“It is clear that popular support for the Western order depended more on rapid growth and the galvanizing effect of the Soviet threat than on intellectual conviction.  Recently Western democracies have done too little to spread the benefits of prosperity.  Politicians and pundits took the acquiescence of the disillusioned for granted.  As Mr. Trump prepares to enter the White House, the long, hard job of winning the argument for liberal internationalism begins anew.”

Daniel Henninger / Wall Street Journal

“Now what?

“Nothing will be more important to getting that answer right in the Trump victory period than separating fact from abundant fiction.

“The 2016 presidential campaign was a magic mushroom tour through the American psyche – its voters, its politicians and not least the exotic varieties of people who populate what we call ‘the media.’

“For all of them, the Trump candidacy seemed to be a national Rorschach inkblot.  Everyone looked at the same Trump events, Trump speeches and Trump polls and interpreted them as individual political biases and desires.

“There was one exception to this mania: the collective wisdom of the American valor.

“In normal times – and these are not normal times – it would have been impossible for a candidate outputting Donald Trump’s chamber of spoken and personal horrors to win.  (Sometime in the next year, John McCain deserves an apology.)

“What we learned on Nov. 8, 2016, was that voters looked past or through all the atmospheric debris of this campaign and focused on what mattered – the direction of their country.  Its economy, its politics and the state of the culture.

“One stunning example. White evangelical Christians voted by 81% for the nation’s leading proponent of the Playboy philosophy.  They blew past that because they knew that Mr. Trump’s personal life would not bring into the Oval Office the Democratic Party’s triumphant secularism. That is the philosophy that sued Hobby Lobby and the Little Sisters of the Poor into religious obeisance and elevated transgender bathrooms to a litmus test.  Thus, their vote.

“Another fable propagated everywhere during the campaign, and especially in the time since the Trump victory, is that he had unearthed some unknown catacomb of lower-middle-class anger...at everything.  Mr. Trump himself tagged ‘globalization’ with the blame.

“Let us be clear about the economic status of the American middle class, and indeed of the middle-class people in low-growth Europe responding to populist appeals there.  Economic life isn’t bad weather.  It is the result of politics.  Wrong political decisions have economic consequences.

“We didn’t have this sense of ennui or dissatisfaction during the growth years of the Reagan presidency in the 1980s or the Clinton presidency in the 1990s.

“Barack Obama has been in charge of the U.S. economy for eight years. After passing a useless $830-billion stimulus his first year, Mr. Obama outsourced the economy to the Federal Reserve for seven years. The media let him off the hook for two terms, as if the London fog had caused what for large swaths of the middle class has been 2,900 days of an economy that remains half alive....

“The Trump opportunity is at hand to quickly normalize unease about what his presidency represents by sitting down with Mitch McConnell, Paul Ryan and U.S. ambassador to Congress Mike Pence to chart a reform agenda on taxes, health care, energy and financial regulation.  Mr. Trump has it within his grasp to rapidly liberate the eight-year suppression of the private economy and then build out the more time-consuming pieces of his agenda atop that firm base.

“As to the post-Comey investigations of Hillary, drop it. She’s finished.  Move on.  Besides, half of the divided country will be watching the Trump presidency for any positive sign that he’s, well, normal.

“One would be to continue his campaign’s admirable outreach to black and Hispanic America.  A good omen: Mr. Trump increased his vote in both categories by 2% over Mitt Romney.  Nothing would help struggling Americans of any color more than a 2016 upgrade for a U.S. education system producing blue-collar children with skills appropriate to the economy of the 1970s, if that.    A presidential Inaugural speech restating Mr. Trump’s commitment to full school choice would be a start....

“New York magazine’s cover this week was Donald Trump’s contorted face with the word ‘Loser’ pasted on it.  Hmmm.  As America’s newest Nobel laureate in literature once put it, ‘The times they are a changin’.”

Edward Luce / Financial Times

“The American people have spoken – or perhaps shouted – and nothing is likely to be the same again.  Donald Trump’s stunning victory will put U.S. democracy to a test it has not faced since its civil war 150 years ago.  Never before has the U.S. elected a president who threatened to jail his opponent, investigate his rivals, sue his female accusers and smash the existing order.  Nor has any candidate taken office facing a multitude of civil law suits. The mere fact of Mr. Trump’s victory puts him halfway towards obliterating an establishment that was largely united in revulsion at his candidacy.

“Only elected Republicans –and non-partisan federal agencies – now stand between Mr. Trump and pursuit of his radical agenda, assuming he meant half of what he promised.  With both the Senate and the House of Representatives remaining in Republican hands, Mr. Trump will effectively control the first two branches of the U.S. government from next January. This will give him huge power to shape the composition of the third branch – the Supreme Court – which is the ultimate defender of the U.S. constitution.  America’s ominous military power will be at Mr. Trump’s undisputed beck and call....

“The larger implications of Mr. Trump’s election will take a while to sink in.  Every pollster in the land misread the U.S. public.  By electing a man whom voters knew to be disrespectful of U.S. constitutional niceties, America has dispatched the electoral equivalent of a suicide bomber to Washington.  Mr. Trump’s mandate is to blow up the system.  His forecast of ‘Brexit times ten’ was an understatement.  The UK may have cut itself adrift but the consequences of its decision are largely parochial.

“The U.S., on the other hand, is both creator and upholder of the postwar global order.  Mr. Trump ran on an explicit pledge to walk away from that order.  Precisely how he carries out his ‘America first’ agenda is secondary at this point. The U.S. public has sent an unmistakable signal.  The rest of the world will act accordingly.”

Gideon Rachman / Financial Times

“As far as America’s allies are concerned, the election of Donald Trump is a case of Apocalypse Now.  Whatever they say publicly, for the governments of countries such as Canada, Japan, Germany, Britain and the Baltic states of Estonia, Lithuania and Latvia, it is simply horrifying to have a man such as Mr. Trump as ‘leader of the free world.’

“The fear of Mr. Trump is linked both to his personality and to his policies.  For people around the world who have looked to the U.S. as the leading democracy, it is astonishing that the country has elected a president who has displayed such little respect for basic democratic norms, such as the legitimacy of political opposition, the rights of minorities and the independence of the judiciary.  Some even fear that the U.S. has just elected a quasi-fascist as its next leader.  The thought that Mr. Trump will soon be in charge of the world’s largest nuclear arsenal is also alarming to many American allies.

“Mr. Trump’s proposed policies threaten to take an axe to the liberal world order that the U.S. has supported and sustained since 1945.  In particular, he has challenged two of the main bipartisan principles that underpin America’s approach to the world. The first is support for an open, international trading system. The second is the commitment to the U.S.-led alliances that underpin global security.

“Mr. Trump is the first avowed protectionist to be elected U.S. president since before the second world war. He has promised to renegotiate America’s ‘terrible’ trade deals, such as the North American Free Trade Agreement and threatened to pull the U.S. out of the World Trade Organization.  He has also threatened tariffs as high as 45 percent on Chinese goods. If Mr. Trump were to follow through on these threats, he would spark a global trade war and could well plunge the world into a recession similar to the depression of the 1930s, which was greatly deepened by America’s adoption of protectionist policies.

“Mr. Trump’s effect on the global security system could be just as dramatic.  The president-elect has questioned whether the U.S. will honor its security commitments to NATO allies and to Japan and South Korea – unless these countries pay more for their own defense.  American annoyance at ‘freeriding’ by its allies is a bipartisan concern.  What is new is Mr. Trump’s overt questioning of the idea that the U.S. will defend its allies from a military attack come what may.  This equivocation – combined with Mr. Trump’s open admiration for Vladimir Putin, the Russian president – will raise fears that the U.S. will not oppose renewed Russian aggression in Ukraine or eastern Europe.  Asian allies – in particular, Japan and South Korea – fear that Mr. Trump’s ‘America First’ polices could extend to accepting a Chinese sphere of influence in East Asia.

“And yet, for all their undoubted horror at Mr. Trump’s election, America’s European and Asian allies cannot simply turn their back on the U.S.  That is even less of an option for the country’s neighbors, Mexico and Canada.  U.S. leadership is so deeply embedded in western institutions that alternative structures do not yet exist....Crucial international institutions such as the UN, the World Bank and the International Monetary Fund are based in the U.S.  The dollar is the world’s largest reserve currency and the U.S. is the largest economy, measured at real exchange rates. For that reason, allies will grit their teeth and attempt to humor Mr. Trump.  As one senior British diplomat puts it:  ‘We will get on with the president of the United States – we have to.’”

Christopher Caldwell / Financial Times

“At the time of Donald Trump’s upset victory, Hillary Clinton and her entourage were, as the American political expression has it, ‘measuring the drapes for the White House.’  Mrs. Clinton had assembled a ‘transition team’ as early as last August. The main debate among her dedicated journalistic backers concerned how ruthlessly her opponents ought to be dealt with.  (‘Donald Trump Can’t Merely Be Defeated,’ ran a typical headline in the Daily Beast.  ‘He and His Deplorables Must Be Crushed.’)  Mrs. Clinton misunderstood the electorate.

“Republicans risk forgetting, amid their celebrations, that they misunderstood it just as badly.  Mr. Trump’s rival, Ohio governor John Kasich, had scheduled a speech for today. He meant to chart the future of a Republican party that he clearly expected would be humiliated.  Mr. Kasich and his colleagues now have the practical task of assimilating Mr. Trump’s superior reading of the electorate, and making their peace with only the second Republican to win the White House since the end of the cold war.

“The Republican party is in good shape. The electorate is 37 percent Democrat, 32 percent Republican and 31 percent Independent – but these last are often ‘shy’ Republicans.  The party held its majority in the Senate on Tuesday night, against all expectations, and its majority in the House of Representatives was trimmed only slightly.

“Its presidential record, however, has been galling.  Three years ago, the best Republican minds launched a ‘growth and opportunity project’ to rebrand the party.  They concluded that women and growing ethnic minority populations were so loyal to the Democrats that Republican prospects were dim.  Their battle plan was to sound less ‘scary,’ to master social media and appeal to immigrants.  Eighteen months ago, the party’s leading establishment candidate (Florida senator Marco Rubio) and its leading anti-establishment candidate (Texas senator Ted Cruz) were both Hispanics.

“Mr. Trump had a better idea. He identified a split between the party’s donors, who tended to benefit from globalization, and its rank and file, who felt victimized by it.  And he took the side of the latter. He attacked free trade, mass immigration and military intervention....

“Here is the Republican party’s problem. Thanks to Mr. Trump it has received a mandate to speak on behalf of globalization’s losers.  But its personnel consists of the global-economy winners who ran the party before he arrived on the scene. It was thanks to Republican votes that Barack Obama secured the authority to negotiate new trade agreements.  Those are now dead in the water.

“Mr. Trump has not spelt out in any detail what kind of policies will replace them.”

Editorial / Financial Times

“Donald Trump’s victory marks a thunderous repudiation of the status quo.  The most powerful nation on Earth has elected a real estate mogul with no experience in government, a self-styled strongman, contemptuous of allies, civil discourse and democratic convention.  Barring a protean change of personality, Mr. Trump’s victory represents, at face value, a threat to the western democratic model.

“Mr. Trump has succeeded where Huey Long and George Wallace, American populists of the 20th century, fell well short.  In storming to the White House, he has rewritten the presidential campaign playbook. He ran against the Republican Party establishment and saw off all rivals, many with proven track records in office.  Finally, after a campaign long on invective and short on policy, he delivered a resounding victory against Hillary Clinton, the ultimate establishment candidate....

“Democrats will be tempted to blame their defeat on Mrs. Clinton’s soulless campaign, with a mortal blow delivered by the FBI’s late intervention in the saga of her use of a private email server....

“Mr. Trump’s sweeping rhetoric and compulsive tweeting resonated among millions of Americans who have felt marginalized by globalization.  In the U.S., as told by Mr. Trump, globalization and free trade have rewarded only a privileged few.  There is a kernel of truth in Mr. Trump’s generalizations, to which more centrist leaders have given too little notice.  Inequality has risen and median incomes have stagnated or fallen in recent years, especially among those without a college degree....

“(One) failure of the Trump worldview is the notion that the changes gripping the U.S. are uniformly bad.  No: the country’s changing cultural and racial mix, and the increasing role women play in running it, are sources of profound strength.

“What, then, are the prospects for a Trump presidency? The optimistic view is that the mean-spirited, Muslim-baiting candidate will transform once inside the White House. Such a change is possible, but may not be sustainable.  His temperament may not allow it.  Mr. Trump can also argue, justifiably, that his tactics, however outrageous, won him the presidency. He had a chance to pivot toward a more responsible middle ground after the Republican convention and he chose not to do so.

“Mr. Trump might nevertheless reflect that his victory does give him a second chance. He has to pick a team.  He must work with Congress, notably Paul Ryan, the House Speaker, whom he has regularly derided.  Mr. Trump prides himself on understanding ‘the art of the deal.’ He must realize that the business of government cannot be driven by personal feuds. Politics in a democracy is the art of compromise.

“The world waits nervously to see if Mr. Trump’s policies are as incendiary as his words.  The shift to a more positive tone since the election result is a first step.  But this remains a moment of great peril.  Mr. Trump’s victory, coming after the Brexit referendum vote in Britain, looks like another grievous blow to the liberal international order.  Mr. Trump must decide, by his actions and words, whether he intends to contribute to the great unravelling, at incalculable cost to the west.”

---

Wall Street...the Trump Agenda

Investors are betting on a big stimulus plan, centered around infrastructure (where there is bipartisan congressional support), reduced regulation, and tax reform.

Bank stocks soared with rising bond yields, while health-care shares surged, on the expectation a Trump administration will roll back regulatory scrutiny of both industries, including the potential rollback of Dodd-Frank, the 2010 law that hit the financial sector so hard (though maintaining strict capital requirements should remain in place, in return for relaxing regulations elsewhere).  Industrial shares rallied on the plans for infrastructure spending that seem to be a lock with a Republican president and control of both chambers of Congress.

Copper posted its biggest back-to-back surge in three years on Wednesday and Thursday, gaining alongside lead, zinc, tin and aluminum.

Gold had its worst week since 2013, as headline risks are seemingly alleviated and Trump policies risk friendly.

Government bonds extended their selloff as Trump’s win bolstered bets on faster inflation.  The yield on the 10-year Treasury soared from 1.78% a week ago to 2.15%, before settling at 2.13% - the sharpest rise since the 2013 “taper tantrum.”  Both growth and inflation are expected to accelerate further if Trump makes good on his vows to cut taxes and rapidly increase infrastructure.

Goldman Sachs said on Friday the intensity of the sell-off in Treasuries was “concerning” – in the bond market, speed kills – though in Goldman’s case because of the “pervasive” exposure of investors to the “lower for longer” theme that has dominated the markets with central banks holding rates at historic lows.

“The wealth exposure to rising rates is extremely high. And an increase in equity and credit volatility could follow, given the risk of an equity market correction down the line,” Goldman said.

Goldman added that the spill-over into eurozone bond markets is also a “troubling” development because inflation across the currency block has remained more subdued.

“This is undesirable as it may increase the credit risk premium on high debt countries such as Italy, Portugal and Spain, with potentially destabilizing effects beyond the region.”  [Financial Times]

Gee, where have you heard this theme before?  It’s what I’ve been crying wolf on for a long time, and I will finally be right, though investors, after all the false warnings, will stick around too long and get devoured.

This new era also doesn’t bode well for Latin American equities and debt as the appeal of riskier emerging-market assets fades with higher U.S. rates, let alone the potential for protectionist measures in a Trump administration.  Certainly Mexico is concerned, for obvious reasons, and it gets 80% of its overseas sales from the U.S.

Sectors that may struggle in a Trump presidency: Healthcare services, IT & business services, automakers heavily reliant on open trade with Mexico (including parts suppliers that shifted production there), and electric car makers, i.e., Tesla, which could see its federal subsidies slashed.

Some big tech names took it on the chin this week, heavyweights such as Apple, Amazon and Alphabet (Google), not only because investors poured into other sectors that could benefit from Trump’s victory, but also because Trump’s policies on trade and immigration could severely hurt Silicon Valley, in the case of the latter by impeding the ability to bring in the best talent from overseas.

As for the Federal Reserve and interest rates when it next convenes Dec. 13-14, a hike in the funds rate is a 100% certainty, with St. Louis Fed President James Bullard saying, “Our view has called for a single rate increase and I think December would be a reasonable time to implement that increase.” 

Fed Vice Chairman Stanley Fischer signaled his support for gradual interest-rate hikes as well.  “The case for removing accommodation gradually is quite strong,” Fischer said on Friday, though he added “the future is uncertain and that monetary policy is not on a preset course.”

Don’t worry...they are hiking in December.

Europe and Asia

I’ll give the Brexit talk a rest for a week. It will heat up in a big way with parliamentary debate in the U.K. looming.

In Germany, Chancellor Angela Merkel, expected to run for a fourth term next year, received a boost to rally support she’s lost in the refugee crisis, when Horst Seehofer, leader of the CSU, the Bavaria-based sister party to Ms. Merkel’s CDU, told his annual party conference they needed to stand with Merkel in a joint effort to defeat the left and center-left, namely the anti-immigrant Alternative for Germany (AfD) party.

The CDU’s party conference is in December, at which time Merkel will announce she is running again.

The latest poll has the CDU/CSU at 33%, with the AfD at 13%.  [There are a myriad number of parties in Germany, including the SPD (Socialists), the Left, and the Greens.]

Meanwhile, five people linked to ISIS were arrested in coordinated raids in Germany this week.  Information from a 22-year-old jihadist who had spent several months with IS in Syria before fleeing to Turkey led to the arrests.  The center of activity was a mosque in Hanover.

As noted above, the Euro bond market got crushed, with the Italian 10-year hitting a yield of 2.02% Friday, its highest level since September 2015.  Of particular concern in Italy is that Trump’s win could embolden the populist forces in the country, specifically Beppe Grillo’s Five Star movement, ahead of Prime Minister Matteo Renzi’s Dec. 4 referendum on constitutional reforms, Renzi saying he would resign if it doesn’t pass.  Currently, the ‘No’ side is ahead as Renzi battles with Brussels over deficit targets and demands leeway for higher spending after a series of major earthquakes in his nation; the timing of which could prove catastrophic to Renzi’s political future.

The European Central Bank’s unprecedented asset purchase program has kept a lid on rates across the eurozone the past 20 months, but now you have political risk not only in Italy, but in the Netherlands, France and Germany, all with their big elections next year.

But Italy stands out these days because its debt to GDP level exceeds 130 percent, while the economy continues to stagnate.  Once again, we have talk of the eurozone fragmenting.

Eurobits...

--Check out the move in some of the 10-year bond rates across Europe this week:

Germany... 0.13% to 0.31%
France... 0.46% to 0.74%
Italy... 1.75% to 2.02%
Spain... 1.26% to 1.47%

But since Sept. 30, in the last six weeks:

Germany... -0.12% to 0.31%
France... 0.18% to 0.74%
Italy... 1.18% to 2.02%
Spain... 0.88% to 1.47%

No doubt some investors are getting killed.

--In perhaps a sign Brexit is beginning to bite, Britain’s construction industry had its weakest performance in four years in the first three months after June’s vote to leave the EU, volumes falling 1.1%, though this was less than forecast.

British finance minister Philip Hammond is expected to announce an increase in public spending on infrastructure projects on Nov. 23 when he is due to give the country’s first budget statement since the referendum.

--Germany reported mixed economic data for September, with exports up 0.9% over August, up 2.3% year-over-year, so-so.  But industrial production was down 1.8% in September and factory orders fell 0.6%.

But the Economy Ministry said on Friday, “The global economic environment remains characterized by uncertainty following the Brexit decision and the U.S. election.  However, no negative impact is expected in the short term from today’s point of view.”  Ergo, modest growth.

--Finally, on the topic of migration, lawmakers in Hungary rejected a proposed national ban on refugees from the rest of the European Union, a blow to Prime Minister Orban.

Orban was trying to block an EU program that would resettle migrants from the Middle East and Africa who have gone to countries like Greece and Italy.  Hungary would have to accept about 1,300 of a total of about 160,000 migrants.

The amendment needed two-thirds of sitting members of Parliament to pass and fell two votes short.

What apparently killed the deal was a rule that allows foreigners who invest over 300,000 euros, or about $330,000, in Hungarian bonds to acquire residency.  I have to admit I wasn’t aware of this provision, as there are reports that Hungarian bonds could be bought in places like Erbil, Iraq, which critics say could allow migrants to settle in Hungary that would then open the door to terrorists, while the program could also lead to corruption.

Turning to Asia, China’s inflation data was positive.  Factory-gate / producer prices rose in October, year-over-year, 1.2% for a second straight rise after 53 months of contraction, the fastest pace since December 2011.  The consumer price index rose 2.1% yoy.

Exports in October, though, were worse than expected, down 7.3% year-over-year, while imports fell 1.4% (in dollar terms).

China’s October auto sales rose 20.3% from a year earlier, with total auto sales for the first 10 months of the year up 15.4% over the same period last year.

General Motors’ China sales rose 5.7% in October to 345,733 vehicles; the automaker now having sold just over 3 million in 2016, while Ford’s were up 14% from a year earlier to 107,618.  Year-to-date sales rose 10% to 966,000.

Nissan Motor’s rose 16.1% and Toyota’s were up 9.6%.

In Japan, a key measure of manufacturers’ confidence, the Reuters Tankan survey, rose for a third straight month to a 15-month high in November and the service sector rebounded from a 3 ½-year low the prior month, in a sign of gradual economic recovery.

But a reading on machine orders in Japan for September, always a key metric, had them down 3.3%, more than forecast, though up 7.3% in July-September. The Cabinet Office, however, forecast that core orders will fall 5.9% in the fourth quarter from the third.

Back to China, regarding the Trans-Pacific Partnership trade agreement that the Obama administration is now giving up on in the wake of Trump’s victory, China and Xi Jinping are already rushing to fill the void to promote a rival to TPP.

Remember, China was excluded from the original deal, which the Obama administration signed with Japan and 10 other countries and promoted as a strategic response to Beijing’s rise and its growing influence in the Asia-Pacific region.

So now Beijing can argue for a broader initiative that could be pulled together faster.  Li Baodong, vice-foreign minister, said in Peru earlier this month:

“Protectionism is rearing its head and the Asia-Pacific region faces insufficient growth momentum.  China believes we should set a new plan to respond to the expectations of industry and sustain momentum for the early establishment of a free trade area.”  [Tom Mitchell / Financial Times]

TPP as it currently stands cannot come into force without U.S. ratification (so who know what will happen now) and in the case of Japan, which was due to slash tariffs on food, Prime Minister Shinzo Abe hoped the deal would lead to greater reform and efficiency in Japanese agriculture. That’s just one example of how the other nations have been planning on TPP.  Among the nations that were part of the effort are Australia, Canada, Chile Mexico, New Zealand, Singapore and Vietnam, with South Korea, Taiwan and the Philippines interested in joining.

Separately, Xi Jinping replaced his finance minister, Lou Jiwei, this week.  Lou was regarded as one of the government’s most competent economic officials.  He tackled a number of difficult projects, and had earlier served as head of China Investment Corp., Beijing’s sovereign wealth fund.  In his place will be Xiao Jie, who has most recently been working under Premier Li Keqiang as vice-secretary at the State Council.  So this appointment probably puts to rest the rumors Li could be removed next year.

Street Bytes

--For the week, the Dow Jones gained 5.4% to a new record, 18847.  The S&P 500 surged 3.8% to 2164, 26 points shy of its record high of 2190, while Nasdaq, up 3.8%, has a ways to go.

Earnings in the third quarter are now anticipated to be up 3.5%-4.0% for the S&P 500, with revenues up 2.5%, better than expected at the start of earnings season.  Ex-the still struggling energy sector, earnings rose 7.5%, revenues 4.5%.

--U.S. Treasury Yields

6-mo. 0.58%  2-yr. 0.92%  10-yr. 2.15%  30-yr. 2.94%

Globally, bonds took it on the chin to the tune of $1 trillion (with a ‘t’) this week, according to Bank of American Merrill Lynch data.  Global stocks gained $1.3 trillion in the same period.  The yield on the 10-year Treasury rose 37 basis points and is nearing its 12/31/15 close of 2.27%.

Rising interest rates and Treasury yields will have a most negative impact on the deficit, with the budget deficit for fiscal 2016 coming in at $587 billion, or 3.2% of GDP, up from 2.5% last year, a sharp increase as these things go.  Outlays for Social Security, Medicare and Medicaid grew by $75 billion last year, or 4.2%, and now account for 10% of the entire U.S. economy, the highest level ever, and rising.

Consider this, though.  If interest rates are 100 basis points above the Congressional Budget Office’s projections from last January each year for the next decade, the Treasury will have to pay an average of more than $160 billion per year.  [Wall Street Journal]

I was writing heavily of this very cost years ago, but I was wrong in worrying about it then because rates were continuing to go down, not up.  But now we’ve turned the corner and while these figures, nor Trump’s assumed fiscal stimulus, are not cause for immediate concern, it will be down the road.

And the bottom line is both President Bush and President Obama did nothing on the entitlement front.

--The Mexican peso had its biggest drop in two decades in the wake of Trump’s victory, to 20.94 to the $1.  I feel for President Enrique Pena Nieto....a little. 

--Morgan Stanley analysts said an increase of 1 percentage point in interest rates would add to big banks’ per-share earnings by 5.5%.  Any rise in rates increases the spread between the 10-year and two-year notes, a proxy for profitability (the net-interest margin...the difference between what a bank can borrow at and the lending rate).  Short term, though, the banks are taking a hit on their investment portfolios, with banks snapping up Treasuries for years, in part because new rules have required them to keep a certain amount of liquid assets.

--The International Energy Agency warned that if OPEC fails to implement output cuts and if production from outside the cartel keeps rising, 2017 would be another year of “relentless” global supply growth.

OPEC pumped an unprecedented 33.8m barrels a day in October, well above the target range of 32.5-33.0 million.  Production has been recovering in Nigeria and Libya, while Iraq reached record levels.  Saudi Arabia and Kuwait are near their record  highs and Iran is at its pre-sanctions level of output.

At the same time, non-OPEC supply rose to 57m b/d in October, with production from Brazil, Canada and Kazakhstan set to rise by 500,000 b/d in 2017, an upward revision, compared to a 900,000 b/d fall this year.  [Financial Times]

Bottom line, with current trends, supply is expected to exceed demand next year, barring a cut at OPEC’s end of the month meeting. Oil finished the week at $43.12 on West Texas Intermediate.

--Major retailers reported earnings on Thursday that surprised the Street in terms of their optimism for the holiday shopping season and the shares rallied as investors, at least for now, are  believing the bottom is in for retailers.

Macy’s raised its sales outlook for the year after a solid showing in the third quarter.  The company reported earnings that fell short, as net sales slipped 4.2% for the quarter ended Oct. 29, with same-store sales down 3.3%, the seventh straight quarterly decline, but these were better than expected.

CEO Terry Lundgren said Macy’s “sales-driving initiatives continue to gain traction.”

Kohl’s reported same-store sales fell 1.7%, compared to an increase of 1% in the prior year period, but revenue declined ‘just’ 2.3% to $4.32bn and net income rose.

Kohl’s also remained optimistic on the future, as it sees continued improvement in sales trends, according to CEO Kevin Mansell.

Shares of Nordstrom spiked higher after the company raised its 2016 outlook.  The retailer’s third-quarter comp sales rose 2.4% after drops in the previous two quarters.

One retailer did disappoint this week, J.C. Penney, which posted an unexpected decline in third quarter sales and slashed its outlook for the year.  JCP said same-store sales would grow 1% to 2%, down from previous guidance of 3% to 4%, which calls into question the turnaround strategy of CEO Marvin Ellison, who joined last August.  Ellison said the company was “experiencing softness in apparel sales.”

Revenue declined 1.4% to $2.86bn.

--When it comes to finding help this holiday season, most retailers are cutting back on sales help, with Walmart, which hired an extra 60,000 last year, continuing to be silent on its plans for this season.  Toys R Us is also not disclosing its number of temporary workers, after it hired 40,000 last year.

According to Challenger, Gray & Christmas, retail employment in October fell 21% to 154,600 from a year ago, or the steepest decline in five years.

Nordstrom and Macy’s are trimming their ranks by 3% and 2%, respectively.

But, highlighting the growth of online sales, Amazon said it was hiring 120,000 extra workers – 20% more than last year.

--Alibaba, the world’s biggest commerce group, delivered a warning to Donald Trump that any upsets in China relations would be detrimental for the U.S. and ripple across the globe.

Joe Tsai, vice chairman of Alibaba, warned any disengagement by the U.S. would be harmful, particularly in the case of China, as reported by the Financial Times’ Louse Lucas.

“If Chinese investors cannot invest in the U.S. and create more jobs in the U.S., then [as president] you would be in trouble.  We think the relationship between China and the U.S. will define our century and will be crucial for both countries, as well as the rest of the world,” he said.  “That means China is going to be, and already is, the source of consumer demand and the source of capital for America.”

Tsai was speaking on the eve of Singles Day, the world’s biggest shopping bonanza, which last year pulled in $14.3bn.

But that figure was bested today...$15 billion...which dwarfs both America’s Cyber Monday and Black Friday.  [As noted before, however, the SEC questions Alibaba’s accounting for the event.]

Recently, Chinese takeovers of U.S. companies in the tech sector have been blocked by U.S. regulators and Tsai is addressing fears that a Trump presidency may quash even more prospective acquisitions.

He added: “When you are in the position of president you have a responsibility to look out for your country and the best solution for America is to engage with the rest of the world because we live in a global market place.”

I’m biting my tongue.

--The Walt Disney Co. reported fiscal fourth-quarter net income rose 10% as gains in its movie business offset falling revenue at its cable networks and consumer product units.

Net income for the quarter was $1.8bn, up from $1.6bn a year ago.  Earnings were short of expectations, with revenue down 3% to $13.1 billion.

Disney Chairman and CEO Robert Iger noted the opening of Shanghai Disney Resort, the success of Star Wars, and record-breaking box office of $7.5bn.

But problems at ESPN, ABC and Disney Channels persisted, with the media networks’ unit sales and content licensing fees falling 3% to $5.7bn.

Cable networks’ revenue fell 7% to $3.95 billion.  But Iger said he remains “bullish” about ESPN despite sluggish ratings, saying “The causes of the (subscriber) losses have abated.”

The broadcasting business, which includes ABC, reported an 8% revenue gain.

Revenue at Disney’s parks and resorts rose 1%, with attendance at Disneyland Paris and Hong Kong Disneyland Resort falling.

--General Motors is laying off 2,000 workers at two plants in the Midwest, in another sign that the auto industry is suffering from softening demand, especially for some smaller models.

Other carmakers, including Ford, have recently announced cutbacks as the auto market has hit a peak after seven years of terrific, post-recession growth.

But while GM announced the reductions at plants in Lordstown, Ohio and Lansing, Michigan, it said it would invest $900m in three of its plants, including Lansing Grand River, to prepare for future product programs.

--Berkshire Hathaway Inc. always reports earnings on Friday evenings and thus I never have the time to incorporate it into my WIR, so, for the record, last Friday, Warren Buffett’s holding company reported it had almost $85 billion in cash on its books as of Sept. 30, up from the previous record of $72.7bn on June 30.

Ergo, ammo for investments.  So what will the 86-year-old Buffett buy next?  [Buffett does like to keep a cushion of at least $20bn, so let’s say $60bn or so is available.]

Operating earnings rose 6.6% in the third quarter to $4.85bn, though this missed analysts’ estimates.  Net income fell 24% from a year earlier.  Berkshire’s insurance group, which includes GEICO, reported underwriting profit slipped 34%.  Income from the railroad, BNSF, fell 12% on reduced demand for coal and petroleum products.

Meanwhile, for now, the company was also keeping its reported $22bn stake in Wells Fargo & Co., which for shareholders’ sake I hope after this week’s rally is still true; Berkshire being Wells Fargo’s largest shareholder at 10%, according to the last regulatory filing.

Berkshire also holds stakes in the like of Apple Inc., Coca-Cola Co. and IBM.

--Wall Street bonuses are expected to decline for a third consecutive year, owing to limited trading activity, busted mergers (like Halliburton’s $35bn bid for Baker Hughes, as well as Anthem-Cigna, and Aetna-Humana), as well as muted hedge fund returns.

Pfizer and Allergan was another huge deal abandoned after the Treasury Department announced new tax rules, killing $200 million in fees that bankers would have collected.

--In Silicon Valley, investor Peter Thiel had the last laugh with Donald Trump’s win, as he was one of the few tech titans to endorse him openly. In a statement, Thiel said:

“He has an awesomely difficult task, since it is long past time for us to face up to our country’s problems.  We’re going to need all hands on deck.”

Thiel then agreed to join Trump’s presidential transition team.

Meanwhile, the rest of the Valley, is in panic mode.

--Shares in DR Horton, the country’s largest homebuilder, dropped more than 6 percent after the company reported disappointing fiscal fourth quarter results  Net sales orders, a closely watched indicator of future revenue, rose 3% in the three months ending September, down from the 19% pace a year ago, and also less than the 9% analysts were expecting.

So, is this a canary in the mine for the housing sector?

--News Corp. shares rose after the company reported revenue of $1.97 billion in its first fiscal quarter ended Sept. 30, slightly beating the Street’s expectations.  Last year, revenue was $2.01 billion.

Revenue from digital real estate services grew 18%, while the news unit, saw revenue decline 5%, as print advertising revenue continued to decline (11%, including 21% at the Wall Street Journal...though the Journal increased circulation in the quarter by 6%).  Digital revenue at the unit did rise 24%.

--Shares in Valeant fell more than 20% after the controversial drugmaker warned its profits and sales would tumble anew next year.  The CFO, Pal Herendeen, warned of a “growth hole” caused by the loss of patent protection on a host of expensive medicines which have caught the attention of politicians following a string of big price increases.

But then the CEO, Joseph Papa, on the same conference call with analysts, insisted: We’re not trying to give 2017 guidance at this time.

The company’s shares are down about 90% from their peak in Aug. 2015.

--German prosecutors said on Monday they are probing Volkswagen chairman Hans Dieter Poetsch over suspected market manipulation related to the emissions scandal at the carmaker.  The investigation focuses on whether VW in 2015 manipulated markets by delaying the release of information about the financial impact of its emissions test-cheating scandal.

Meanwhile, sales of VW vehicles in the U.S. and Europe continued to decline, but thanks to a 19.1% increase in China, the VW brand was able to record a 4.4% rise in sales, worldwide, in October vs. a year ago.

VW delivered 278,100 cars to China last month, accounting for 54% of global sales, easily overshadowing an 8,.5% decline in Western Europe, an 18.5% drop in the U.S., and a 36% decline in South America. 

In the first ten months of the year, deliveries have increased 1% to 4.886m.

--Hertz Global Holdings, the parent of the Hertz car rental franchises, lost up to half of its market value, before recovering some, after reporting third quarter earnings that badly missed Wall Street’s estimates, while slashing its profit guidance for the year.

The profit drop, from $237 million to $42 million during the third quarter was hard for investors to take, especially given that revenues fell only 1% to $2.5bn.  The company said there was a “substantial depreciation adjustment” for its fleet of compact and mid-sized vehicles, weaker rental demand and higher administrative expenses.  And the company said more adjustments were in the offing.

--Shares in travel website Priceline Group Inc. reported a 19% jump in quarterly revenue, driven by a 29.4% surge in hotel bookings.  Revenue at the company (which includes brands Booking.com and Kayak), rose to $3.69bn from $3.10bn.

--Allianz said PIMCO, its U.S. bond fund management business, saw its first quarterly inflows since 2013 in the third quarter, as clients added about $5.1bn.  Net profit at Allianz overall rose 36.5% to $2.1bn.

--CNN carried election night with 13.3 million viewers in prime time (8:00-11:00 p.m.) among the cable channels, followed by Fox News at 12.1 million – an election night record for both and higher than NBC (11.2 million), ABC (9.2m) and CBS (8.1m).  MSNBC scored 5.9 million, its fourth-largest prime time audience in its history.

If you are a Fox viewer and thought, hey, on Wednesday they were touting they were tops, that is probably from the metric that had more viewers gravitating to Fox when the electoral map tilted towards Trump, with 9.77 million tuning in versus 6.45 million for CNN from 2 to 3 a.m. Eastern time.  [Stephen Battaglio / Los Angeles Times]

And despite the turmoil at Fox News with the departure of Roger Ailes, with Trump’s win its future appears to be set with the likes of ardent supporter Sean Hannity in the fold.

--Trump’s election catapulted sales of his books to the top of the lists.  In the first 24 hours, the 1980s bestseller Trump: The Art of the Deal jumped from 8550 into Amazon’s top 20, and his recent Great Again: How to fix our crippled America leapt from 6700 to 94, with both books in Amazon’s top four of “movers and shakers” list that shows the biggest gainers in sales rank over the past 24 hours.

--Huge controversy this week as Toblerone chocolate bars changed the design to reduce the weight of what were 400g and 170g bars, with consumers saying the bigger spaces looked “stupid.”

Toblerone bars are made by U.S.-based Mondelez International, who said the decision to change the look of the bars was due to a rise in the cost of ingredients.

But Mondelez kept the package size the same and many consumers wondered why the company didn’t just keep the triangles the same size and reduce the length of the bars.

This controversy at one point threatened to take the presidential election results off the front page.  I just might riot.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: The battle for Mosul took a back seat to the election coverage, but the fact is, the Iraqi Army, as I write, is somewhat bogged down amid fierce ISIS resistance.

The atrocities also continue, as the United Nations reported ISIS shot dead 40 civilians in Mosul on Tuesday after accusing them of treason.  Their bodies were then hung from electricity poles in several districts, according to the office of the UN Human Rights Commissioner.  One man was shot dead in public for ignoring an IS ban on using mobile phones. Another 20 civilians were shot dead on Wednesday in the city.

The UN also reported large quantities of ammonia and sulfur, for possible use in chemical weapons, is being stockpiled by IS and stored near civilians.

The Mosul operation is in its fourth week.  At first, Iraqi security forces, along with Kurdish Peshmerga fighters, Sunni Arab tribesmen and Shia militiamen, were making steady progress, but we’re now in the wait-and-see phase.  Just how long can ISIS keep up the resistance, and to what lengths will they be willing to go?

At the same time, now government forces are being accused of atrocities themselves.

Meanwhile, in Syria, the airstrikes on Aleppo picked up again, with heavy fighting over a key district.  Rebel shelling of government-held western Aleppo killed dozens.

At the same time, a U.S.-backed Kurdish-Arab alliance pushed closer to the ISIS Syrian stronghold of Raqqa, but last I saw the SDF (Syrian Democratic Forces) were still about 30 miles away.  The U.S. has been anxious to launch the offensive while the battle raged in Mosul to prevent ISIS fighters from retreating from Iraq to Syria.

Separately, the U.S. military said in a statement that 64 civilians were killed in 24 U.S. air strikes against ISIS targets in Iraq and Syria between Nov. 20, 2015, and Sept. 10, 2016.

As for Turkey, they continue to become increasingly involved in both the Syrian and Iraqi theatres, while at home, President Recep Tayip Erdogan is quashing dissent, with the recent failed coup giving him an impetus to speed up what was already a crackdown.

Editorial / Wall Street Journal

“Now the president appears to be targeting parliamentary democracy.

“Police raids in Ankara and southeast Turkey (last weekend) saw a dozen parliamentarians from the pro-Kurdish People’s Democratic Party, or HDP, detained.  Those arrested include HDP co-leaders...who are charged with defying prosecutors’ orders to testify on terrorism charges and allegations that they are sympathetic to the militant Kurdistan Workers’ Party, or PKK....

“The real reason for the assault is that the HDP is one of the few remaining political obstacles to Mr. Erdogan’s efforts to impose an autocratic presidential system.  Those ambitions also predate this summer’s coup attempt.  In the June 2015 general election the HDP expanded its support beyond its ethnic-Kurdish base by appealing to secular-minded urbanites alarmed about Mr. Erdogan’s drive toward an Islamist dictatorship....

“For years leaders in the West have indulged Mr. Erdogan on grounds that Ankara is a member of NATO, a potential bulwark against Russian aggression and essential to blocking the flow of Middle East refugees into Europe. But there has to be a limit to that indulgence when Mr. Erdogan’s despotic behavior bears a closer resemblance to the regimes in Tehran or Moscow than it does with his erstwhile allies in the free world.”

Iran: Foreign Minister Mohammad Javad Zarif said that in light of Donald Trump’s victory that when it comes to the nuclear deal that Trump has threatened to rip up, “Of course Iran’s options are not limited but our hope and our desire and our preference is for the full implementation of the nuclear agreement, which is not bilateral for one side to be able to scrap.”

The July 2015 deal reached between Iran and six world powers was a way to pre-empt Tehran’s suspected drive for nuclear weapons by curbing its enrichment of uranium.  In return, the Obama administration agreed to a lifting of sanctions.

Trump called the nuclear pact a “disaster” and “the worst deal ever negotiated” during the election campaign.

Zarif said it would be unwise for the U.S. “to move away from its obligations under the agreement.”

If Trump picked Newt Gingrich as secretary of state, he will demand the deal be renegotiated.  But this is dishonest in that you have six parties (the P5+1) that are signatories to the deal with Iran.

Egypt: President Abdel Fattah al-Sisi was proud to say he was the first to congratulate President-elect Trump and now his nation has imposed a security clampdown on protests over austerity.  Egypt raised fuel prices and floated its currency – a move welcomed by bankers but condemned by ordinary Egyptians as the latest blow to their spending power in a country heavily dependent on imports. Sisi’s threats appear to have worked as protests at week’s end were minimal.

Sisi has been criticized for crushing dissent and the new laws against protest are such that few dare to come out, despite rising public anger.  He is also dealing with an ongoing Islamic State threat in Sinai.

But on Friday he was awarded by the International Monetary Fund with a $12 billion, three year loan as a show of support for the government’s reform efforts.

Russia: Wednesday, the Kremlin celebrated the election of Donald Trump. President Vladimir Putin sent Trump a telegram of congratulations, expressing the hope relations between the two would improve in a Trump administration.

But as the Moscow Times reports, by Thursday, the celebration was abating, “the honeymoon coming to a swift end.”

“We are not experiencing any euphoria,” Deputy Foreign Minister Sergei Ryabkov said on Nov. 10.  “[We’ve had] very diverse experiences doing business with U.S. administrations, both Republican and Democrat.”

Ryabkov admitted on Thursday that the Russian Foreign Ministry had been in contact with the Trump campaign during the race, but Americans shouldn’t read too much into this. The Kremlin is always in some contact with people in both parties.  [This is different from stealing emails, I hasten to add.]

But now the Kremlin is faced with the task of managing a relationship with the most unpredictable administration in U.S. history.

Stanislav Belkovsky, director of the National Strategy Institute, told the Moscow Times:

“Putin is, of course, a winner here. Not because Trump won, but because it proved the U.S. establishment does not control its own country.”  But the “defeat of Obama’s platform” is a fleeting victory for Putin: “No one knows what Trump’s real policies toward Russia will be.”

Dmitri Trenin, director of the Carnegie Moscow Center think tank, echoes these sentiments.  “We shouldn’t delude ourselves and expect Trump to make concessions [to Russia] on key issues.  At the same time, there is now a chance that Russo-American relations can leave the danger zone.  We must not miss this shot,” Trenin wrote in a recent op-ed.

Separately, Estonia’s prime minister lost a parliamentary no confidence vote, opening up the possibility of a pro-Russian party becoming part of a new government at a very sensitive time.  Russians make up about a quarter of the 1.3m-strong NATO and EU member.   It has long been felt Vladimir Putin will gin up a crisis involving the minority Russian population in one of the republics.

Neil Buckley / Financial Times

“As Donald Trump’s election victory was confirmed, Michael McFaul, former U.S. ambassador to Moscow, was quick to identify where the consequences would be felt.  ‘Biggest loser in the world tonight – Ukraine,’ he tweeted.

“Mr. Trump’s triumph in the presidential contest is a shock for much of former communist eastern Europe. From Tallinn to Tbilisi, leaders fear that under his presidency the U.S. will no longer play the role of supporter and protector against pressure from Moscow that it has for a quarter of a century.

“Concerns are most acute in Ukraine, where the Black Sea peninsula of Crimea was annexed by Russia in 2014 after Viktor Yanukovich, the Russian-leaning president, was ousted by street protests.  Its conflict with pro-Russian separatists and Russian forces in eastern Ukraine is still simmering.

“Kiev and some of its international supporters fear Mr. Trump will seek a ‘grand bargain’ with Vladimir Putin to improve U.S.-Russian relations, sacrificing Ukraine in the process.”

I totally agree with this thesis, though it might depend on who Trump surrounds himself with.

China: Beijing is taking a wait-and-see attitude with the election of Donald Trump. State media says it poses an economic challenge for China in areas such as trade and the currency, but the general pattern of Sino-U.S. ties will not be affected.

Trump has said he will introduce harsh measures such as tariffs, or even file a lawsuit with the World Trade Organization, if he believed China was dumping or subsidizing its products.

But at the same time, Beijing is expecting a Trump administration to focus more on economic opportunities, rather than security challenges.  China also expects to be branded a currency manipulator.

Separately...Editorial / Washington Post

“China’s Internet is a universe of contradictions.  It has brought hundreds of millions of people online and has become a vast marketplace for digital commerce, yet it is also heavily policed by censors to snuff out any challenge to the ruling Communist Party.  Under President Xi Jinping, the censors are working overtime to keep 721 million Internet users under control.

“The latest effort came Monday.  China’s national parliament approved a cybersecurity law that can be used to restrict free speech and force foreign Internet companies to heed the demands of China’s security services.  Censorship is not new in China; a huge phalanx of officials are devoted to it, harsh punishments are meted out, and the country is ringed by a content-blocking Great Firewall. But now censorship will be more fully enshrined in the legal code.

“Article 12 of the new law prohibits use of the Internet for ‘inciting subversion of the national regime’ or ‘the overthrow of the Socialist system.’  Also banned is inciting separatism or ethnic hatred, ‘endangering national unity,’ or ‘fabricating’ or disseminating false information about the economy.  These are all touchstones of Chinese authoritarianism, vague enough to be deployed in many circumstances to smother dissent.  Article 37 of the new law requires ‘critical information infrastructure operators’ to store users’ data, including that of foreign companies, on Chinese territory, making it easier for the security services to snoop.  Article 24 requires Internet providers to demand the real identity of those they provide services to – making it easier for security services to track down those who would like to speak their mind.  Many foreign businesses are also alarmed that the new law may give the Chinese authorities access to their  technology and data....

“In law and in practice, China is creating the world’s largest online thought prison.  It turns the idea of the Internet as a force for freedom on its head, and as China goes, so go other tyrants.  From Vietnam to Saudi Arabia, from Russia to Turkey, the age of Internet repression has blossomed.”

Then there is the continuing, and looming, issue of Hong Kong.  On Monday, Beijing banned legislators who advocate Hong Kong independence from serving on the territory’s council, an unprecedented move that exacerbates tensions amid fears for the rule of law in this key financial center.

The ruling from China’s National People’s Congress, the rubber-stamp parliament, came after a tense standoff and occasional clashes in Hong Kong last Sunday night between police and hundreds of protesters.

The two Hong Kong legislators, Baggio Leung and Yau Wai-Ching, were elected in September after record voter turnout, buoyed by opposition to Beijing’s increasing interference in Hong Kong’s affairs.

But the NPC ruled on Monday that “those who support Hong Kong independence do not qualify to run for and serve as members of the legislature” and should “be held legally responsible” for their actions.

This is outrageous.  Hong Kong will blow next year.

Finally, as reported by the Wall Street Journal, the Chinese government said it would raise coal power capacity by as much as 20% by 2020, “ensuring a continuing  strong role for the commodity in the country’s energy sector despite a pledge to bring down pollution levels.”

This is too much, in case you needed further evidence of what a sham the global climate change deal is.

“This is indeed a disappointing target,” said Lauri Myllyvirta, a campaigner at Greenpeace.  “Given that there is already severe overcapacity and demand for coal-fired power is going down, we would have expected a cap on coal power capacity much closer to the current capacity level.”

India: The nation has a serious currency situation.  As in three days after 500 ($7) and 1,000 rupee notes were withdrawn as part of anti-corruption measures, ATMs were running out of cash.

ATMs opened Friday after being shut for 48 hours and hundreds queued up early morning to make withdrawals after the surprise government move aimed at tackling both corruption and tax evasion.  If an ATM or bank has cash available, there are limits to what can be withdrawn.

The 500 and 1,000 rupee notes accounted for about 85% of the cash in circulation.  Airports, railway stations, hospitals and fuel stations will only accept them until the end of Friday.

People will be able to exchange their money at banks between Nov. 10 and Dec. 30.

The issue is “black money,” which the government is hoping to flush out, thus making money that is unaccounted for visible for tax purposes. Counterfeiting is also a big issue here, with Pakistan being accused of flooding India with fake currency to damage the economy.

New 500 and 2,000 rupee denomination notes will be issued to replace those removed from circulation.

Philippines: Update...President Rodrigo Duterte cancelled the order of some 26,000 assault rifles I wrote of last time after a key U.S. senator was planning on blocking the arms purchase over concerns about human rights violations.  Monday, Duterte said he would look for a “cheaper source.”

As for the impact of Duterte’s rhetoric, global funds have pulled more than $600 million from Philippine stocks since inflows peaked in August, while the American Chamber of Commerce in Manila warned his comments were creating unease.

Duterte is counting on greater investment from China to offset any fallout.

Random Musings

--Presidential Polls...the last ones right before Tuesday’s vote, for the record.

The final national polls from NBC News/Wall Street Journal, Bloomberg Politics, CBS News/New York Times, ABC News/Washington Post, and Fox News all had Clinton leading by either 3 or 4 points.

Among likely voters, the final Monmouth University national poll had Clinton up by 6 points.  [Clinton 50%, Trump 44%, 4% Gary Johnson and 1% Jill Stein.]

The USC/L.A. Times tracking poll received a lot of kudos for showing Trump had a 46.8% to 43.6% lead in its last survey, but this was 3% off just like the others above, in essence.  Since the popular vote was flat, I mean, c’mon.  Just be intellectually honest, the editor mused to no one in particular.

In final state polling before Tuesday, Quinnipiac University had Clinton defeating Trump in Florida, 46-45, Johnson 2.  Clinton was also projected to win in North Carolina, 47-45, Johnson 3.  [Quinnipiac did have Sen. Marco Rubio winning re-election in Florida by a 50-43 margin and it came in 52-44, so not bad.]

--Among the misses by the polls and others was Foreign Policy magazine, which published an article in July titled “The Republican Party Is On the Verge of Extinction.”

A month later, The Hill had a story with the headline, “Trump’s loss could make the GOP extinct.”

Nate Silver’s ‘esteemed’ FiveThirtyEight gave Clinton a 71.4% chance of winning 16 hours before it became apparent she would not.

University of Virginia Professor Larry Sabato’s final prediction was that Clinton would win 322-216 in the Electoral College.

--California voters elected Kamala Harris to the U.S. Senate, making her the first black from the state to be sent to the Senate, with Harris becoming just the second black woman in the nation’s history to serve in the upper chamber.

--Last Sunday’s “60 Minutes” had a terrific segment with pollster Frank Luntz and a focus group that showed the political divides in today’s America.  It was heartbreaking, as he himself put it.

Well I had my own little episode with Mr. Luntz when I attended the 2007 Iowa State Fair to gather some political intelligence ahead of 2008’s election.

From my Week in Review of 8/25/07:

“So I’m sitting in the hotel bar in Des Moines Saturday night when a bunch of photographers following the presidential candidates strolled in. They were sitting next to me and I couldn’t help but overhear their conversation which was pretty funny.  Their big issue was they have limited capacity in terms of footage to send back to the networks to use in their coverage of the various campaigns so what do they omit? I found one guy’s observations most amusing.  ‘If a candidate drops their pork sandwich and then picks it up and eats it, we’ve got to have that!’

“But the pollster Frank Luntz appeared and I introduced myself, saying how impressed I was by Senator Joe Biden’s speech at the State Fair; whereupon Luntz began riddling me with questions, such as ‘What exactly moved you?  I’m a word man, I need words!’  Funny guy and a real pro.”

All these years, Luntz hasn’t changed one bit and it’s why he is still the best at what he does.

--New Jersey Gov. Chris Christie said a jury’s verdict that three former allies were responsible for the lane closures at the George Washington Bridge confirmed his conclusion that the three, and nobody else, including the governor himself, were guilty.

But Christie is carrying around so much baggage these days that on Friday, he was demoted from his position of heading up Trump’s transition team, Vice President-elect Pence taking over the lead, with Christie becoming one of several vice chairs.

--Thank god the Republicans retained the Senate for one simple reason.  I couldn’t live with Mass. Dem. Sen. Elizabeth Warren having more of a position of power than she already does.

--What do you think Joe Biden is musing about these days?

--Editorial / New York Post

“Hordes of angry youths have taken to the streets across the country to protest the fact that Donald Trump was just elected America’s 45th president.  Few seem to realize that the protests confirm for reluctant Trump voters that they made the right choice.

“The failure to demonstrate peacefully certainly does the kids’ cause no good.

“Tens of thousands marched in 25 cities Wednesday night and again on Thursday. Beyond the ‘Not My President’ signs and the obscene anti-Trump chants, violence broke out repeatedly....

“A few idiots on social media are even calling for Trump’s assassination....

“Just a week ago, recall, many of the same pundits and political leaders who totally misread the national mood warned Trump fans to suck it up and accept the reality of Clinton’s victory.

“Yet now we’re told this willful rage is an expression of free speech and democracy.

“Sorry – what happened on Tuesday was democracy in action. Stubbornly refusing to accept the result and demanding Trump’s ‘impeachment’ even before he takes office is a flight from reality.

“As is the silliness on college campuses – the exams called off so students can ‘heal,’ the ‘cry-ins’ for hyper-sensitive snowflakes challenged by a lost election.

“Suck it up, kids.  Life is full of disappointments that you need to learn to accept.  Hillary Clinton has, and so should you.

“Fact is, the only way of stopping Trump from becoming president was at the polls. Save the marches for after his inauguration – when he actually does something.”

I agree with Rudy Giuliani, who said on Fox News Thursday: “If you’re looking at the real left-wing loonies on campus, it’s the professors not the students.”

Giuliani said he would encourage Trump to listen to the protesters and tell them to wait a year.

“Calm down, things are not as bad as you think.”

--We learned from the latest batch of emails from WikiLeaks that Chelsea Clinton used her family foundation’s cash to pay for her wedding, living expenses and taxes on gifts of cash from her parents.

Doug Band, formerly a top aide to President Clinton, complained about Chelsea’s spending in a Jan. 4, 2012, email.

“The investigation into her getting paid for campaigning, using foundation resources for her wedding and life for a decade, taxes on money from her parents...” Band wrote to John Podesta.  “I hope that you will speak to her and end this.”

In previous leaked emails, Band called Chelsea a “spoiled brat kid,” which is spot on.

But Friday, the New York Post reported she is being groomed to run for Congress.  Oh brother.  Just when we thought it was over....

--I just loved how all of Hillary’s star power...Beyonce, Jay Z, LeBron, Bon Jovi, Katy Perry and Bruce Springsteen didn’t help her one bit.

--The first woman to become attorney general of the United States, Janet Reno, died at the age of 78.  Reno’s eight-year tenure during the Clinton presidency was bracketed by two explosive events: the deadly raid on the compound of a religious cult in Waco, Tex., that killed nearly 80, and the seizure in 2000 by federal agents of Elian Gonzalez, a young Cuban refugee who was at the center of an international custody battle.

Reno’s relations with President Clinton became strained by her decision to allow an independent inquiry into a failed Clinton land deal in Arkansas (Whitewater) to be expanded to include his relationship with Monica Lewinsky.

--California voters on Tuesday defeated a ballot measure to repeal the state’s death penalty, and instead narrowly passed a proposition that aims to amend and expedite it.

Proposition 62, which would have replaced capital punishment for murder with life in prison without parole, garnered 46.1% of the vote.

Proposition 66, intended to speed up executions by designating trial courts to hear petitions challenging death row convictions, won the approval of 50.9%.

--Us New Jersey voters struck down a ballot proposal to allow casinos outside Atlantic City, failing 79% to 21%.  I voted for it. 

--Nearly a quarter of Americans will be living in areas where recreational marijuana use is legal, as voters approved the initiative in California and Massachusetts on Tuesday (plus Maine and Nevada), with others, such as Florida, expanding legal access to it.

--I was ticked off to see all the abuse Prince Harry’s new girlfriend, Meghan Markle, was taking on social media, forcing her to take time off from filming her TV show.  Tuesday, Prince Harry released an unprecedented statement, blasting “social-media trolls” for hassling Markle, with “racial undertones” in some of the coverage of the actress – who has one white parent and one African-American parent and describes herself as bi-racial.

“Prince Harry is worried about Ms. Markle’s safety and is deeply disappointed that he has not been able to protect her,” read the statement on the royal family’s Facebook page, “It is not right that a few months into a relationship with him that Ms. Markle should be subjected to such a storm.”

Harry, 32, said he had tried to develop a “thick skin” about the level of media interest in his personal life but that a line had been “crossed” this week.

--The Canadian military has been investigating a mysterious pinging sound coming from the sea floor in a remote region of the Arctic, as reported by BBC News.

“The strange noise is reported by local people to have frightened animals away over the past few months.

“A military aircraft conducted various multi-sensor searches in the area, officials said.

“But the military says it is so far unable to explain the cause of the ‘acoustic anomalies.’...

“ ‘The only thing the crew did observe were two pods of whales and six walruses in the area of interest.’”

Locals say the noise can be heard through the hulls of boats and is described as a “hum” or a “beep.”

So you’re probably thinking, of course, it’s Russian military activity, but this isn’t the case.  Nor is the noise from mining companies conducting surveys.  Nor it is being generated by Greenpeace to scare wildlife away from the rich hunting ground.  All these parties deny they have anything in the area.

I think it’s Godzilla.  If you can come up with a better explanation, tell the Canadians.

--I was shocked to hear on “60 Minutes” last week that in their segment on Zika, Dr. Anthony Fauci said the virus originated in the Yap Islands of Micronesia.  My Yap Islands!  Due to my connections with the Jesuits, I first went to Yap in 1996 and have been three other times since I started StocksandNews, the last being 2010.  I never heard a thing in my trips there...and, yes, I saw mosquitoes.

--Finally, today is Veterans Day and a few weeks ago, Richard Rescigno, writing in Barron’s, had a piece on the upkeep of the 25 military burial grounds maintained around the world by the American Battle Monuments Commission, such as the American Cemetery at Normandy.

The sites range from the United Kingdom, to France, Belgium, Italy...to the Philippines, Mexico, Tunisia, and Panama.  “Of the approximately 218,000 U.S. service members in them, 172,200 died in World War II, and the rest in World War I or other conflicts.”

The cemetery near Omaha Beach in Normandy draws a million visitors a year.  I was there in 1995. General George S. Patton lies in the U.S. cemetery at Luxembourg.

But here’s to the 400 employees worldwide who maintain these hallowed grounds.

“Many of us will be long forgotten seven decades after we die, but people still honor the fallen Americans buried in overseas military cemeteries, linked in eternity in a common cause and emblematic of what a united country can do.”

---

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

God bless America.

---

Gold $1227...lowest since May ‘16
Oil $43.12...lowest since Aug.

Returns for the week 11/7-11/11

Dow Jones  +5.4%  [18847]
S&P 500  +3.8%  [2164]
S&P MidCap  +5.7%
Russell 2000  +10.2%...staggering
Nasdaq  +3.8%  [5237]

Returns for the period 1/1/16-11/11/16

Dow Jones  +8.2%
S&P 500  +5.9%
S&P MidCap  +11.8%
Russell 2000  +12.9%
Nasdaq  +4.6%

Bulls 42.9
Bears 25.7 [Source: Investors Intelligence]

Have a great week.

Brian Trumbore