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Week in Review

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06/10/2017

For the week 6/5-6/9

[Posted 12:30 AM ET, Saturday]

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Edition 948

This was another chaotic week and I’ve left some issues on the cutting-room floor just to get a column out on time. 

It was not a good week for the White House, as the president keeps stepping on his message, or undermining his cabinet, as was the case with Qatar at week’s end.

I’ll just say for now that I don’t see any obstruction of justice or collusion, yet.  We were told that the Mueller investigation would last no more than three months, but I doubt this timeline.

I’ll tie up the loose ends next WIR.

The Comey Testimony....

During 2 ½ hours of testimony before the Senate Intelligence Committee, former FBI director James Comey accused President Trump multiple time of lying and that the president’s shifting explanations for dismissing him were “lies, plain and simple.” Comey said he wrote detailed memos of their conversations because he feared the president would paint a false picture of their encounters.

According to Comey, at a White House meeting in February one day after Flynn was fired, Trump pressed him to ease up on an inquiry into the former national security adviser, Michael Flynn.

“I hope you can see your way clear to letting this go, to letting Flynn go,” Trump said, according to Comey.  “He is a good guy. I hope you can let this go.”

Comey said he interpreted the request on Flynn to be “direction” on what he should do.

“This is the president of the United States with me alone,” Comey said.

Comey told the committee that he began the practice of documenting his meetings with Trump immediately after their first encounter on Jan. 6 in New York, two weeks before the inauguration because of “the nature of the person.”

“I was honestly concerned that he might lie about the nature of our meeting so I thought it was important to document it,” Comey said.  [While the hearing was still under way, spokeswoman Sarah Sanders told reporters, “The president is not a liar.”]

Comey added he had asked a friend at Columbia Law School, who we soon learned was Daniel Richman, a professor there, to share details of his private conversations with the president with the New York Times.  [Richman went into hiding, with the world suddenly after him.]

So lawmakers are left to determine whether Comey’s testimony shows that Trump obstructed justice, with Comey telling senators, “I don’t think it’s for me to say whether the conversation I had with the president was an effort to obstruct,” later adding, “that’s (Special Counsel) Bob Mueller’s job to sort that out.”

Comey also told lawmakers that Trump’s firing of the FBI director angered him because Trump commented to NBC’s Lester Holt that “the FBI was in turmoil.”

“He had repeatedly told me I was doing a great job and hoped I would stay,” Comey said.  But after he was fired, he said “the administration chose to defame me” as well as the bureau.

Trump’s personal lawyer, Marc Kasowitz, fired back hours later, disputing Comey’s claim that Trump demanded loyalty from the FBI chief or directed him to back off a probe of former National Security Adviser Michael Flynn.

Kasowitz said the president “never, in form or substance” directed Comey to stop an investigation into Flynn or anyone else.

Kasowitz slammed Comey for leaking the memo to the Times.

“Today, Mr. Comey admitted that he unilaterally and surreptitiously made unauthorized disclosures to the press of privileged communications with the President,” Kasowitz said in a statement.

“We will leave it [to] the appropriate authorities to determine whether this leak should be investigated along with all those others being investigated,” he said.

Kasowitz did admit that Trump requested that Comey stay loyal to him, but not in the way Comey described.

“The Office of the President is entitled to expect loyalty from those who are serving in an administration, and, from before this President took office to this day, it is overwhelmingly clear that there have been and continue to be those in government who are actively attempting to undermine this administration with selective and illegal leaks of classified information and privileged communications,” he added.

And Kasowitz repeated that Comey had told Trump he was not under investigation in the Russia probe.

House Speaker Paul Ryan defended the president, telling reporters Thursday that Trump was “new at this.”  “He’s new to government, so he probably wasn’t steeped in the long-running protocols that establish the relationships between DOJ, the FBI and the White House.”

Trump didn’t tweet all Thursday.

While there was no smoking gun, questions remain, among them, the former director said there were a “variety of reasons” why Attorney General Jeff Sessions’ involvement in the investigation of Russia’s alleged interference in the 2016 election campaign would be problematic.  But Comey said he was unable to speak about them in an open session.

Sessions recused himself from the investigation in March following revelations he had had conversations with Russian Ambassador Sergei Kislyak during the election campaign; conversations he failed to reveal at his confirmation hearings.

So what couldn’t Comey disclose?

Are there tapes of Comey’s conversations with President Trump? We still don’t know, following that cryptic tweet of his saying Comey should hope there are no tapes.

Why were the senior officials, including Sessions, Jared Kushner and senior intelligence officers asked to leave the Oval Office during a meeting on counter-intelligence with Trump and Comey on February 14?  Comey didn’t explain why Trump wanted to speak to him with no one else present.

Is Trump under investigation?  Comey said in his statement released on Wednesday that he had assured the president on three occasions that he was not personally under investigation, but then in explaining why he hadn’t gone public with this information at the time, Comey said that if anything changed and an investigation into the president was started, he would have felt obliged to go public with that as well.  It certainly seemed from Comey’s testimony that Special Counsel Mueller is investigating the president.

Speaking of Wednesday, Director of National Intelligence Dan Coats and National Security Administration head Mike Rogers both told the Senate Intel Committee that they didn’t feel pressured by President Trump to intervene in the handling of intelligence in any inappropriate way, this after the Washington Post’s Adam Entous, in an extensive report, said Coats, for one, was asked by Trump following a briefing at the White House to intervene with Comey’s investigation into Flynn, the CIA Director Mike Pompeo also being there.

But then when Intel co-chair Democrat Mark Warner asked them to comment on the specifics, both Coats and Rogers declined to do so, calling a public hearing an “inappropriate forum” for the discussion.  So put this on the ‘to do’ list.

Opinion...all sides....

Peter Baker / New York Times

“Upset about the investigation into Russian interference in last year’s election, President Trump sought relief from James B. Comey, then the FBI director.  By Mr. Comey’s account, Mr. Trump asked him to help ‘lift the cloud.’

“But thanks to Mr. Trump’s own actions, the cloud darkened considerably on Thursday and now seems likely to hover over his presidency for months, if not years, to come.

“Rather than relieve the pressure, Mr. Trump’s decision to fire Mr. Comey has generated an even bigger political and legal threat.  In his anger at Mr. Comey for refusing to publicly disclose that the president was not personally under investigation, legal experts said, Mr. Trump may have actually made himself the target of an investigation.

“While delivered in calm, deliberate and unemotional terms, Mr. Comey’s testimony on Thursday was almost certainly the most damning j’accuse moment by a senior law enforcement official against a president in a generation.  In a Capitol Hill hearing room, the astonishing tableau unfolded of a former FBI director accusing the White House of ‘lies, plain and simple’ and asserting that when the president suggested dropping an investigation into his former national security adviser, ‘I took it as a direction.’

“Mr. Comey gave ammunition to the president’s side, too, particularly by admitting that he had orchestrated the leak of his account of his most critical meeting with Mr. Trump with the express purpose of spurring the appointment of a special counsel, which he accomplished.  The president’s defenders said Mr. Comey had proved Mr. Trump was right when he called the former FBI director a ‘showboat’ and a ‘grandstander,’ a conclusion Democrats once shared when he was investigating Hillary Clinton last year.”

John Podhoretz / New York Post

“James Comey thinks, but did not say, that President Trump is going to be toast once the special counsel is done with him – and all because of three little words Trump might have sung in the manner of Elsa the Ice Queen: ‘Let this go.’

“Comey clearly intimated that Trump’s conduct toward him was an effort to obstruct justice when it came to the investigation of former National Security Adviser Michael Flynn – and that special counsel Robert Mueller would be just the guy to get to the bottom of what is clearly an impeachable offense.

“That was the key revelation of the former FBI director’s gripping Senate hearing Thursday. Comey said the president’s behavior at a February White House meeting – during which Trump cleared the room so he and Comey could have a private tete-a-tete about Flynn – had ‘stunned’ him.

“That was when, according to the document he released Wednesday, Trump said to him, ‘I hope you can see your way clear to letting this go, to letting Flynn go.’

“Comey said he believed this was intended as ‘direction’ and he found it ‘a very disturbing thing, very concerning’ the president would say such a thing....

“Comey said that, ‘as an investigator’ himself, ‘of significant fact to me is so why did he kick everybody out of the Oval Office?  Why would you kick the attorney general, the vice president, the chief of staff out to talk to me?’ This was a clear suggestion that Mueller, his fellow investigator, would likely see the same significance he did....

“That ‘disturbing, concerning’ thing is now Mueller’s bailiwick.  Mueller, also a former director of the FBI, is, in Comey’s words, ‘a dogged, tough person and you can have high confidence when he’s done, he’s turned over all of the rocks.’

“Translation for Trump: Uh-oh.

“Now, Comey could be wrong. He’s been wrong before. He was wrong to give a press conference on July 5 last year that effectively indicted Hillary Clinton before announcing she wouldn’t be charged for mishandling classified information – a colossally unfair thing to do.

“And he was wrong to go public on October 28 about reopening the Hillary investigation, an irresponsible declaration that may have had a material effect on the presidential election.

“But in suggesting what a fellow investigator might find problematic in Trump’s behavior, Comey can probably be trusted....

“The problem for Trump is that he’s under investigation now.

“And this investigation, as the Washington Free Beacon’s Matthew Continetti pointed out, arose due to a strange tweet Trump issued right after Comey’s firing about how ‘Comey better hope there are no ‘tapes’ of our conversations before he starts leaking to the press!’

“This triggered Comey’s decision to release, through a friend to the New York Times, his own contemporaneous memo about the president’s effort to pressure him. As Continetti writes, ‘By firing Comey and then tweeting recklessly about it, Trump elevated a long-running but manageable problem – the so-called ‘Russia thing’ – into an independent investigation that seriously endangers his presidency.’

“Twitter giveth – and may taketh away.  And all because Trump couldn’t let it go.”

Andrew C. McCarthy / Washington Post

“James B. Comey’s testimony Thursday...will no doubt embolden those who believe we already know enough to conclude that President Trump obstructed justice by leaning on the then-FBI director to halt a criminal investigation of Michael Flynn.  But nothing that Comey said alters the fact that this claim remains fatally flawed in two critical respects: It overlooks both a requirement for corrupt intent and the principle of executive discretion.

“It is true that federal statutes criminalizing obstruction of the administration of law – including by agencies such as the FBI – cite not only actual interference with an investigation but attempts to do so as well. That is, the fact that the investigation of Flynn, a close Trump campaign adviser who would briefly serve as his national security adviser, was never actually shut down cuts against the case for obstruction, but it is not dispositive.

“But the arguments for presidential obstruction here tend to omit the statute’s most important word: ‘corruptly.’  Not every form of interfering with an investigation, or even the closing down of an investigation, is felony obstruction.  Only corrupt ones. Prosecutors must prove beyond a reasonable doubt that the accused not only acted intentionally but also with an awareness that the actions violated the law.

“The usual examples are straightforward: A public official is paid off to lean on the police to drop a case.  Or an official acts to halt an investigation out of fear that a suspect will reveal wrongdoing by the official.

“So, what would be a legitimate interference with an investigation?

“This brings us to executive discretion. Every day, in FBI and U.S. attorney’s offices throughout the nation, agents and prosecutors decide to close investigations and decline prosecutions.  Many of these cases are viable, but these executive-branch officials judge that the equities weigh against continuing the seriousness of the offense and balance that against personal factors related to the suspect – criminal history, contributions to society, whether alternatives to criminal prosecution would be more appropriate, whether a criminal charge would be overkill because of other consequences the suspect has suffered, etc.

“This is important because the president is the chief executive.  We like to think of law enforcement as insulated from politics, and we certainly aspire to a politics that does not undermine the rule of law.  In our system, however, it is simply not the case that law enforcement is independent of political leadership.  The FBI and Justice Department are not a separate branch of government.   They are subordinate to the president. In fact, they do not exercise their own power; the Constitution vests all executive power in the president.  Prosecutors and FBI agents are delegates.

“That means that when they exercise prosecutorial discretion, they are exercising the president’s power.  Obviously, the president cannot have less authority to exercise his power than his subordinates do....

“Comey, we must note, took pains to say that Trump did not ask him to halt the broader investigation of Russian meddling in the election.  Indeed, he said the president observed in a March 30 phone call that it would be a benefit if potential wrongdoing by any of his ‘satellite’ associates were uncovered. This strongly suggests that he was not lobbying for Flynn out of fear that the investigation would uncover misconduct by Trump and his circle.

“One can certainly disagree with Trump’s marshaling of the equities involved in proceeding against Flynn. But to weigh them and recommend against proceeding was a legitimate exercise of executive discretion. The president has every bit as much authority to engage in that exercise as his subordinates.  And it bears repeating that he did not order a halt to the investigation – though he could have.

“This was clearly not corruption. And without corruption, there cannot be obstruction.

“This is not to suggest the president’s executive discretion is absolute. A president who abuses his power in a manner that undermines our system of justice can and should be impeached. Indeed, the Nixon articles of impeachment alleged obstruction of law-enforcement investigations.  Trump, by contrast, has not obstructed the administration of law, much less done so systematically.”

David Ignatius / Washington Post

“Comey was a compelling witness to the bullying behavior of this president.  But Trump supporters can argue that the president’s hand was strengthened by Thursday’s ‘Super Bowl’ hearing.  Even as Comey chronicled his disturbing encounters with Trump, he also affirmed some important strands of the White House narrative.

“Comey said that as of May, when he was fired, Trump was not personally under FBI investigation – offering, finally, the public acknowledgment Trump had been requesting so assiduously.  Comey also said Trump had never ordered him to halt the overall BI investigation of Russian interference in the 2016 election.

“And on the sensitive subject of leaks, Comey revealed that to ‘prompt the appointment of a special counsel,’ he had used a cut-out to share with the New York Times details of a memo recounting Trump’s Feb. 14 request, ‘I hope you can let this go,’ referring to the FBI investigation of former national security adviser Michael Flynn.

“Thursday’s hearing offered a haunting portrait of a moralist confronting a dealmaker...

“It was ‘Pilgrim’s Progress’ meets ‘House of Cards’ when Comey arrived for a one-on-one dinner at the White House on Jan. 27. ...As Trump stressed so baldly, in Comey’s telling, he wanted loyalty – much as a feudal lord might seek allegiance from his barons....

“The most poignant moments in Thursday’s hearing were Comey’s reflections on what he might have done differently. When Sen. Dianne Feinstein (D-Calif.) asked why he hadn’t rejected outright Trump’s ‘hope’ that he close the Flynn investigation, Comey answered: ‘Maybe other people would be stronger in that circumstance....Maybe if I did it again, I would do it better.’

“Later Comey was pressed about why he accommodatingly told Trump in the March 30 call that he ‘would see what we could do’ to lift the ‘cloud’ of the Russia investigation. He conceded that his response was ‘a slightly cowardly way...of getting off the phone, frankly.’

“What is it about being FBI director that makes people so concerned about image, yet unable to be entirely independent of the politicians they serve?  That’s been part of the bureau’s history ever since J. Edgar Hoover.  Comey couldn’t escape it.

“Comey’s personal ethical dilemmas are now interwoven with the nation’s political history. It’s the stuff of high drama – the temporizing ethicist meets the amoral bulldozer. The story didn’t have a happy ending for Comey – or, it seems, for the country.”

Kimberley A. Strassel / Wall Street Journal

“What if all the painful drama over Donald Trump and Mike Flynn and Hillary Clinton and Russians wasn’t really due to Donald Trump or Mike Flynn or Hillary Clinton or Russians? What if the national spectacle the country has endured comes down to one man, James Comey?

“It was certainly all about the former FBI director on Thursday...Mr. Comey didn’t disappoint. He already had submitted pages of testimony detailing his every second with President Trump, complete with recollections of moments he felt ‘strange’ or ‘uneasy’ or ‘awkward.’  But on Thursday he went further, wowing the media with bold pronouncements: President Trump was a liar; the president fired him to undermine the Russia investigation; the president had directed him to back off Mr. Flynn.

“Mostly he pronounced on what is – and is not – proper in any given situation: when handling investigations, interacting with the president, or releasing information.  By the end, something had become clear.  Mr. Comey was not merely a player in the past year’s palaver. He was the player.

“It was Mr. Comey who botched the investigation of Mrs. Clinton by appropriating the authority to exonerate and excoriate her publicly in an inappropriate press event, and then by reopening the probe right before the election.  This gave Mrs. Clinton’s supporters a reason to claim they’d been robbed, which in turn stoked the ’resistance’ that has overrun U.S. politics.

“We now know it didn’t have to be this way. Mr. Comey explained that he had lost faith in then-Attorney General Loretta Lynch’s ability to handle the affair, in part because she had directed him to describe the probe in public as a ‘matter’ rather than an ‘investigation.’  That one of President Obama’s political appointees outright directed the head of the FBI to play down an investigation is far more scandalous than any accusation aired about Mr. Trump. Mr. Comey said it gave him a ‘queasy’ feeling.  But did he call on Ms. Lynch to recuse herself? Did he demand a special counsel?  No, Mr. Comey instead complied with the request.  Then he judged that the only proper way to clean up the mess was to flout all the normal FBI protocols.  Vive la resistance....

“If Mr. Comey truly had believed the president was interfering, he had a duty to report it or to resign.  Instead he maintained Thursday it wasn’t his role to pronounce whether Mr. Trump had obstructed justice.  Really?  This may count as the only time Mr. Comey suddenly didn’t have an opinion on whether to render justice or to take things into his own hands. 

“And why did he agree to dinner with Mr. Trump in the first place? Why keep accepting the president’s phone calls? Asked whether he, in those early meetings, ever told the president how things ought to go, he said no. Mr. Comey did nothing to establish a relationship he felt was correct.

“Instead, he kept secret memos, something he’d never done before. He wrote them in an unclassified manner, the better to make them public later. He allowed Mr. Trump to continue, while building up this dossier.

“When he was fired, he leaked to the media, through a ‘close friend,’ highly selective bits of his privileged communications with the president. And then he stayed silent and let the speculation rage. Thus, for the past month the nation has been mired in a new scandal, fueled by half-leaks. Thank you, yet again, Mr. Comey.

“Yes, Russia interfered.  Yes, Mr. Trump damages himself with reckless words and tweets. Yes, the Hillary situation was tricky. Yet you have to ask: How remarkably different would the world look had Mr. Comey chosen to retire in, say, 2015 to focus on his golf game?  If only.”

David Brooks / New York Times

“The first important part of James Comey’s testimony was that he cast some doubt on reports that there was widespread communication between the Russians and the Trump campaign. That was the suspicion that set off this whole chain of events and the possibility that could have quickly brought about impeachment proceedings.

“The second important implication of the hearings is that as far as we know, Donald Trump has not performed any criminal act that would merit removing him from office.

“Sure, he cleared the room so he could lean on Comey to go easy on Michael Flynn.  But he didn’t order Comey to shut down the investigation as a whole or do any of the things (like following up on the request) that would constitute real obstruction.

“And sure, Trump did later fire Comey.  But it’s likely that the Comey firing had little or nothing to do with the Flynn investigation.

“Trump was, as always, thinking about himself.  Comey had told Trump three times that he was not under investigation.  Trump wanted Comey to repeat that fact publicly. When Comey didn’t, Trump took it as a sign that Comey was disloyal, an unforgivable sin. So he fired him, believing, insanely, that the move would be popular.

“All of this would constitute a significant scandal in a normal administration, but it would not be grounds for impeachment.

“The third important lesson of the hearing is that Donald Trump is characterologically at war with the norms and practices of good government. Comey emerged as a superb institutionalist, a man who believes we are a nation of laws.  Trump emerged as a tribalist and a clannist, who simply cannot understand the way modern government works.

“Trump is also plagued with a self-destructive form of selfishness. He is consumed by a hunger for affirmation, but, demented by his own obsessions, he can’t think more than one step ahead.

“In search of praise he is continually doing things that will end up bringing him condemnation.  He lies to people who have the power to publicly devastate him. He betrays people who have the power to damage him.  Trump is most dangerous to the people who are closest to him and are in the best position to take their revenge.

“The upshot is the Trump administration will probably not be brought down by outside forces. It will be incapacitated from within, by the bile, rage and back-stabbing that are already at record levels in the White House staff, by the dueling betrayals of the intimates Trump abuses so wretchedly.

“Although there may be no serious collusion with the Russians, there is now certain to be a wide-ranging independent investigation into all things Trump.

“These investigations will take a White House that is already acidic and turn it sulfuric....

“The good news is the civic institutions are weathering the storm. The Senate Intelligence Committee put on a very good hearing. The FBI is maintaining its integrity.  This has, by and large, been a golden age for the American press corps. The bad news is that these institutions had better be. The Trump death march will be slow, grinding and ugly.”

Peggy Noonan / Wall Street Journal

“In the end Mr. Comey appears to have done himself little or no harm, but he harmed the president by documenting, again and persuasively, that Mr. Trump does not understand the norms, rules and traditions of his job. As I watched, I wondered how many other appointees, officials and White House staffers are writing themselves memos.

“Will all this damage the president with his supporters?

“What consumes Blue America does not consume Red America.

“The photojournalist Chris Arnade reported on Twitter what he was seeing in Mountain Grove, Mo., Thursday morning as Mr. Comey testified. The conversation at the local McDonald’s: ‘1) Yard work/lawn mowers, 2) Danger of Bees, 3) Cardinals sucking, 4) Friend who died, 5) Church.’  He asked a middle aged man in a T-shirt if he planned to watch the hearings.  Kirk said no: ‘I got a lot of yards to mow.’

“Then again, a conservative intellectual with small-town roots wrote, during the testimony, that he thought this might be a break point, a moment when Mr. Trump’s supporters would listen close and think he’s not so much like them, and not so different from the swamp he means to drain.

“I myself don’t know.”

Editorial / Wall Street Journal

“Mr. Comey said that he was ‘so stunned’ that he lacked ‘the presence of mind’ even to tell Mr. Trump that his request (to let the Flynn investigation go) was improper. But he was able to gain enough composure to write up the experience in the car after the meeting, and to discuss the meeting, by his own testimony, with his chief of staff, the FBI deputy director, the associate deputy director, the general counsel, the deputy director’s chief counsel and the head of the FBI office of national security.  But he never informed Attorney General Jeff Sessions, the Deputy AG or any other supervisor.

“This abdication is especially remarkable for someone as experienced in the corridors of power as Mr. Comey. This is a government veteran who served three Presidents in senior positions and in 2004 pre-drafted a letter of resignation as Acting Attorney General to threaten President Bush over wiretapping.

“Quitting and going public after his meeting with Mr. Trump would have let the country know what was happening in Washington, as many other civil servants have done over the years. yet in an exchange with Senator Tom Cotton, Mr. Comey averred that ‘I didn’t find, encounter any circumstance that led me to intend to resign, consider to resign.  No, sir.’  In other words, Mr. Comey thought he was serving a corrupt President but wanted to keep that news a close hold.

“Mr. Comey’s admirers want everyone to take this at face value. But an alternative reading is that Mr. Comey didn’t resign or tell Mr. Sessions because he liked his job and wanted to keep it.  He also knew he could write that memo and share it with his FBI comrades as a form of political insurance. As the fictional President says to Jack Ryan (played by Harrison Ford) in ‘clear and Present Danger,’ ‘you’ve got yourself a chip in the big game now.’  Only after he was fired did Mr. Comey choose to share his moral outrage with the public, while setting up the President who dismissed him as a target for Mr. Mueller.

“Mr. Trump acted like a bullying naif who doesn’t understand the norms of presidential behavior, but Mr. Comey is no Jack Ryan.  He’s a government official motivated by political self-interest who should have resigned if he believed what he now says he did.  That he failed to act at the time suggests his motive now is more revenge than truth-telling.”

Friday afternoon in the Rose Garden, Trump said he is “100 percent” willing to testify under oath about his interactions with Comey, when queried by a reporter at a brief Q&A following his meeting with Romania’s president.

Asked if he would give a sworn statement to Robert Mueller, Trump said, “I would be glad to tell him exactly what I told you.”

Trump said that Comey’s claims the president may have colluded with Russia and obstructed justice were just not true.  Trump further indicated the tapes he tweeted about may not exist.

The president said he did not pressure the FBI chief to drop an investigation into Michael Flynn.

“I didn’t say that,” Trump said in response to a question about his alleged request of Comey to “let go” of the probe.

And the president denied that he demanded a loyalty pledge of personal loyalty from the former FBI director.

“No,” Trump said.  “I hardly know the man.  I’m gonna say, ‘I want you to pledge allegiance?’”

Trump then said, “No collusion, no obstruction. He’s a leaker.  But we want to get back to running our great country.”

As for the potential existence of tapes, Trump added, “I’ll tell you about that maybe sometime in the near future.”  But then he said reporters wondering about the existence of tapes would be “very disappointed.”

I’m biting my tongue.

---

Opinion on Trump’s tweeting habit....

Thomas G. Donlan / Barron’s

“Enough already.  There must be other contenders, but Trump should be close to receiving the world trophy for most influential tweeter.  People believe what he tweets, or he tweets what they already believe. Either way, he’s scripting an American tragedy.

“In many tweets, Trump has fixated on having some foreign country pay for something: Mexico should pay for his wall; European countries should pay for the North Atlantic Treaty Organization; China should ‘solve’ the North Korea problem in order to make a trade deal; Canada should not compete to take away customers from U.S. dairy products or U.S. lumber.

“When the president returned from his foreign trip a week ago, he reported, ‘We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for U.S. This will change.’

“Ignorance is not bliss. If Trump knew more than the single number for the balance of trade, he would be happier with the trade relationship between the U.S. and Germany.

“Our trade deficit – the amount that imports exceed exports – with Germany last year was about $65 billion, or some 13% of the U.S. total 2016 trade deficit. It’s big because Germany is a big country, a highly efficient producer of many high-value goods for export, and because Americans can use their strong dollar to buy cheaply from the eurozone.  Germany’s profits have built a country with high wages and strong unions. As a member of the European Union, it doesn’t even control its own trade and monetary policies.  The only unfair thing is that they are ‘massively’ good at minding their businesses.

“Partly to recycle the dollars they have earned, German companies have done the U.S. the very large favor of investing $255 billion in America over the years, including the construction of car factories by Daimler, Volkswagen, and BMW.  All three export vehicles from the U.S. to other markets, which reduces the goods trade imbalance.  And if jobs matter, U.S. affiliates of German firms employ more than 670,000 Americans....

“Make America Great Again is a slogan for loonies: There’s no ‘again’ about it.  No matter how many Americans have lost their jobs to foreign competition, and no matter how big the trade deficit may be, America is still the world capital of economic and military power, finance, advanced technology, job creation, and above all, wealth creation....

“We can lose our greatness, but only by turning our backs on the world.  Trump’s trade policies could be how America First turns into America Last.  Offensive tweeting looks to be a sadly effective first step.”

Charles Krauthammer / Washington Post

“(Trump’s) behavior over the past several weeks provided ample opportunity for shock  and dismay.

“It’s the tweets, of course. Trump sees them as a direct, ‘unfiltered’ conduit to the public. What he doesn’t quite understand is that for him – indeed, for anyone – they are a direct conduit from the unfiltered id.  They erase whatever membrane normally exists between one’s internal disturbances and their external manifestations.

“For most people, who cares?  For the president of the United States, there are consequences. When the president’s id speaks, the world listens.

“Consider his tweets mocking the mayor of London after the most recent terrorist attack.  They were appalling. This is a time when a president expresses sympathy and solidarity – and stops there.  Trump can’t stop, ever.  He used the atrocity to renew an old feud with a minor official of another country.  Petty in the extreme.

“As was his using London to support his misbegotten travel ban, to attack his own Justice Department for having ‘watered down’ the original executive order (ignoring the fact that Trump himself signed it) and to undermine the case for it just as it goes to the Supreme Court.

“As when he boasted by tweet that the administration was already doing ‘extreme vetting.’  But that explodes the whole rationale for the travel ban – that a 90-day moratorium on entry was needed while new vetting procedures were developed.  If the vetting is already in place, the ban has no purpose. The rationale evaporates.

“And if that wasn’t mischief enough, he then credited his own interventions in Saudi Arabia for the sudden squeeze that the Saudis, the UAE, Egypt and other Sunni-run states are putting on Qatar for its long-running dirty game of supporting and arming terrorists (such as the Muslim Brotherhood and Hamas) and playing footsie with Iran.  It’s good to see our Sunni allies confront Qatar and try to bring it into line. But why make it personal – other than to feed the presidential id?  [Ed. Trump repeated this today in the Rose Garden.]  Gratuitously injecting the U.S. into the crisis taints the endeavor by making it seem an American rather than an Arab initiative and turns our allies into instruments of American designs rather than defenders of their own region from a double agent in their midst....

“Trump was elected to do politically incorrect – and needed – things like withdrawing from Paris. He was not elected to do crazy things, starting with his tweets.  If he cannot distinguish between the two, Trump Derangement Syndrome will only become epidemic.”

Wall Street

Stocks shrugged off all the sideshows, from renewed terrorism in London, to the various congressional hearings, including the Comey tutorial, and hit new highs, until the Street woke up to the valuations on some of the high-flyers and took Nasdaq down big Friday, 1.6% for the week.

It’s just that investors are way too optimistic about the Trump agenda vs. reality, including the congressional timetable, and the fact repeal of ObamaCare has to get done first, so the Republicans can recognize the deficit savings on whatever plan they come up with jointly between the House and Senate, and then apply that to any tax reform effort and these things just don’t happen overnight.

As for Trump’s initiative on infrastructure this week, as with repealing ObamaCare and a tax cut proposal, Democrats have zero incentive to cooperate with the White House and their Republican colleagues at this point.  They already smell blood in the water re 2018.

Meanwhile, this coming week the Federal Reserve’s Open Market Committee convenes and another rate hike appears to be in the cards.  But with all the uncertainty on the Republicans’ growth agenda, I just believe the Fed should wait.

Europe and Asia

First some economic news in euroland.  GDP was 0.6% in the first quarter, up 1.9% year-over-year, with Germany at 0.6% (1.7% yoy), France 0.4% (1.0%), Spain 0.8% (3.0%), Italy 0.4% (1.2%) and Greece 0.4% (0.4%).  [Source: Eurostat]

So the last four quarters in the eurozone look like this.

Q2 2016...0.3%
Q3 2016...0.4%
Q4 2016...0.5%
Q1 2017...0.6% 

The eurozone final composite PMI reading for May came in at a strong 56.8 (50 being the dividing line between growth and contraction), unchanged from April.  The services reading for the EA19 was 56.3 vs. 56.4. [Markit]

The services PMI in Germany was 55.4, France 57.2, Spain 57.3, Italy 55.1, and Ireland 59.5.

The U.K. service sector reading fell to 53.8 from 55.8 in April, while new car registrations there declined 8.5% last month, according to the Society of Motor Manufacturers and Traders.

Then there was the European Central Bank, which decided to maintain its dovish policies despite an economy that is clearly improving broadly.

The ECB staff, in raising their growth outlook, cut its inflation forecasts to 1.5% in 2017, 1.3% in 2018 and 1.6% in 2019 – still some distance from the target of 2%.  ECB President Mario Draghi continued to warn that there is no sign inflation is picking up.

Draghi said that while there was “stronger momentum in the euro area economy,” a “very substantial degree” of stimulus was still needed to support stronger inflation.

[Growth forecasts were lifted for the EA19 slightly to 1.9% this year, with 1.8% in 2018.  The Organization for Economic Cooperation and Development, OECD, predicted growth in the eurozone would be 1.8% both this year and next.]

It does seem that the current level of bond buying, 60bn euro a month, will slow in 2018.  The next big meeting for the ECB will be in September, at which time it will decide whether to continue bond buying into next year or to start winding down.  Draghi said this week, though, that there was no talk of tapering at their confab.

But German Finance Minister Wolfgang Schauble told voters the ECB was now “on a path of gradually exiting from its ultra-loose monetary policy.”

Separately, Banco Popular, after burning through $4bn of emergency central bank funding in the first two days of this week amid a full-scale bank run, was sold for a symbolic 1 euro ($1.11) to its bigger rival Banco Santander. The ‘run’ occurred after persistent talk that Popular couldn’t survive without a viable merger partner.

But the way this unfolded was a strong test of the EU’s new template for dealing with other problem lenders in the region, including a handful of banks in Italy, the next flashpoint, and it worked. There is also the rising possibility of a snap election in Italy in the fall and this could prove quite chaotic.

The British Elections: The British people learned you don’t pick a “Remainer” politician to lead a Brexit party. What was once a 20-point lead for Prime Minister May’s Conservatives after she called a snap election, began to shrink rapidly. Early in the week an ICM poll had it at 12 points, 46-34 over Labour, but this would give May a majority of 96 seats in Parliament, much larger than the 17 she had prior to the vote.

But a YouGov survey, using a different methodology, said the Conservatives would fall 20 seats short of a majority, and then the first exit poll emerged Thursday and it had the Conservatives winning 314 seats, short of the 326 needed in a 650-seat parliament.

So much for the landslide.

With 649 of 650 seats decided....

318 Conservatives (Tories)
261 Labour
35 SNP (Scottish National Party)
12 LD (Liberal Democrats)
10 DUP (Northern Ireland’s Democratic Unionist Party...holds views similar to Conservatives)
0 UKIP (since Nigel Farage left the party, it’s been a disaster).

The people, in rejecting Prime Minister May’s vision of a hard Brexit, are perhaps hoping this paves the way for a ‘soft’ version.

Prime Minister May asked Queen Elizabeth for permission to form a government on Friday.  The DUP agreed to back May, giving the coalition 328 seats of 650, two above the level needed to have a majority.  To say it is a thin margin is an understatement, especially considering the Tories are far from united.

Mrs. May said Friday afternoon that Brexit negotiations with the EU would commence as planned on June 19, and with such an uncertain political situation in Britain, there is zero guarantee an agreement will be reached within the two-year period allotted and that would be disastrous.  [Extensions can be granted.]

A parliament in a state of flux, though, will lead to tremendous uncertainty in the business community and picture you’re the leader of your corporation, already not knowing how the trade relationship with the EU will work out in the end.  Are you going to be making any investments until you do?  So ‘business’ must be the first priority of the negotiators, but trade deals aren’t just drawn up overnight and implemented (let alone approved by every EU government and parliament).

This is just truly going to be a s---storm.

The main figures in Prime Minister May’s cabinet did agree to stay on, including finance minister Philip Hammond and foreign minister Boris Johnson, while David Davis will remain in charge of the government’s Brexit department, but even here, May probably preferred to shake a few positions up.

Mrs. May knows that for now there will be no new referendum on Brexit and she can’t overturn the vote of the people.

Labour leader Jeremy Corbyn, the big winner on Thursday, said May’s attempt to win a bigger mandate had backfired.

“The mandate she’s got is lost Conservative seats, lost votes, lost support and lost confidence,” he said.  “I would have thought that’s enough to go, actually, and make way for a government that will be truly representative of all of the people of this country.”

Asked whether Brexit negotiations should be delayed, Corbyn told Sky News: “They’re going to have to go ahead because Article 50 has been invoked....Our position is very clear, we want a jobs-first Brexit, therefore the most important thing is the trade deal with Europe,” he said.

What was clear is Corbyn energized the young vote, as Corbyn stressed Britain had had it with austerity and severe cuts to underfunded schools and the education service “and not giving our young people the chance they deserve in our society,” as he put it in his victory speech, taking a massive personal vote of 40,086 in his London constituency of Islington.

Meanwhile, the Scottish secessionist movement suffered a fatal blow when the SNP lost 21 of its 56 seats to parties that want to keep the United Kingdom intact.  Nicola Sturgeon’s bid for a second independence vote is history.

As for the importance of Northern Ireland now, Sinn Fein won a further three seats to bring their total to seven.  Much more on this topic in the coming weeks and months.  It’s complicated.  For example, this week, a massive amount of Semtex, as well as detonators, was discovered after a bomb plot was foiled in Dublin.  Two men were arrested at the scene, one with close links to the New IRA, the dissident republican terror group.

Editorial / The Economist

“Her political career has been defined by caution. So it is cruel for Theresa May, and delicious for her enemies, that it may have been ended by one big, disastrous gamble. Eight weeks ago she called a snap election, risking her government for the chance to bank a bigger majority against an apparently shambolic Labour opposition.  With the Conservatives 20 points ahead in the opinion polls, it looked like a one-way bet to a landslide and a renewed five-year term for her party. But there followed one of the most dramatic collapses in British political history. As we went to press in the early hours of June 9, the Tories were on course to lose seats, and perhaps their majority....

“Whoever becomes prime minister will very soon have to grapple with three crises. First is the chronic instability that has taken hold of Britain’s politics, and which will be hard to suppress. This week’s poll reveals a divided country – between outward- and inward-looking voters, young and old, the cosmopolitan cities and the rest, nationalists and unionists....

“Second, the economy is heading for the rocks in a way that few have yet registered. Whereas in 2016 the economy defied the Brexit referendum to grow at the fastest pace in the G7, in the first quarter of this year it was the slowest.  Unemployment is at its lowest in decades, but with inflation at a three-year high and rising, real wages are falling.  Tax revenues and growth will suffer as inward investment falls and net migration of skilled Europeans tails off. Voters are blissfully unaware of the coming crunch. Just when they have signaled at the ballot box that they have had enough of austerity, they are about to face even harder times.

“And this is the beginning, in just 11 days, of the most important negotiation Britain has attempted in peacetime. Brexit involves dismantling an economic and political arrangement that has been put together over half a century, linking Britain to the bloc to which it sends half its goods exports, from which come half its migrants, and which has helped to keep the peace in Europe and beyond.

“Brexit’s complexity is on a scale that Britain’s political class has willfully ignored. Quite apart from failing to spell out how to negotiate history’s trickiest-ever divorce, no politician has seriously answered the question of how the economic pain of Brexit will be shared.  Less trade, lower growth and fewer migrants will mean higher taxes and lower public spending.  Voters seem resigned to the fact that they were duped by promises of a Brexit dividend of more cash for the National Health Service.  No one has prepared them for the scale of the hardship they will endure in its name.

“Mrs. May said that her reason for calling the election was to get a mandate to negotiate Brexit along the lines she set out in January: to leave the single market and to press ahead with cuts to immigration that no one considers feasible. During the campaign, she added nothing to her thin Brexit strategy beyond resurrecting the fatuous slogan that ‘no deal is better than a bad deal.’

“Let us be clear: after this vote there is no mandate for such an approach.  Only an enemy of the people would now try to ignore the election and press ahead regardless with the masochistic version of Brexit that Mrs. May put to voters.  There are no grounds to reverse the referendum result – though Nigel Farage, the former UKIP leader, warns that a new referendum may be coming.  But the hard Brexit that Mrs. May put at the center of her campaign has been rejected. It must be rethought.”

Therese Raphael / Bloomberg

“Theresa May, the U.K. prime minister, is known as a careful plodder, more technocrat and master-of-the-brief than glad-hander. But she took the biggest gamble possible in politics: She called an election she didn’t have to call in a bid to increase her governing majority. David Cameron did something similar in deciding to put Britain’s membership in the European Union up for a vote last year. Both thought victory was assured and both were punished for their hubris....

“Ultimately, May seemed to harbor the same twin conceits as Cameron, Clinton and even France’s mainstream parties: All underestimated the appeal of their opponent’s message, and all assumed that voter support was sticky – that once you have it, you get to hold it.  Like a fading brick-and-mortar retailer, they banked on loyalty that no longer exists.

“Today’s voters instead resemble online shoppers. They can move quickly and impulsively, but are also ruthless, inclined to deliver a scathing review, and quick to demand a refund if they aren’t happy. Misreading that was May’s biggest error: She looked at poll figures back in April and saw a stock instead of a flow.  With party loyalty at a low in the U.K., as elsewhere, there’s more onus on a leader’s personality, so each one of May’s missteps – and there were many – were magnified.

“There’s irony in how May got here.  Cameron sought to put an end to Tory divisions over Europe by holding a referendum that would settle the matter, unite the party and keep it in power. When his gamble failed, May inherited Brexit and the party, with its simmering divisions. She called a vote of her own to settle any remaining doubts and strengthen her hand.  Her party is still clinging to power – but only just.”

Lastly, the terror attack on London Bridge and nearby Borough Market late Saturday night that killed eight and wounded 48, some critically, was carried out by ISIS, and what emerged is that the three attackers, gunned down by police just eight minutes after the call went out, had been on various terrorism watch lists.

This attack, coupled with the Manchester bombing of an Ariana Grande concert the week before that killed 22, hurt Mrs. May at the polls because she had been Home Secretary for six years, the person most responsible for domestic security and counterterrorism, before taking over as prime minister.

Even her own foreign secretary, Boris Johnson, a former London mayor, said of the findings that the first identified was a known terrorist, “How on earth could we have let this guy or possibly more through the net – what happened?” 

The French Elections: The first round of parliamentary elections is Sunday, run-offs the following week, and the polls here have been consistent...President Emmanuel Macron and his one-year-old party are expected to gain a majority, which would be huge in promoting their reform agenda.  Macron’s Republic on the Move, LREM, is slated to get 350-380 of the seats in the 577-seat lower house by the evening of June 18.

We’ll see what happens with round one, but for the record an Ipsos Sopria-Steria poll had the LREM receiving 29.5% in the first round, vs. 23% for the Conservative Republicans.  Marine Le Pen’s National Front is not expected to fare well at all.

Lastly, Catalonia announced it would hold a referendum on splitting from Spain on October 1, the head of the regional government said on Friday, setting the stage for months of heightened confrontation with the central government, which has long said any such vote is illegal and will not take place.

Turning to Asia, China’s private Caixin services PMI registered 52.8 in May vs. 51.5 in April.

Exports grew more than expected last month, 8.7% year on year in May, while imports jumped 14.8%, also better than forecast.

China’s consumer inflation in May picked up to 1.5% from a year earlier, compared with April’s 1.2% gain. The producer price, or factory gate index rose 5.5% last month, after a 6.4% rise in April.

In Japan, the services PMI last month was 53.0 vs. 52.2. But real wages (adjusted for inflation) were flat in April year-over-year, which impacts household spending, which the government and central bank have been hoping would kick in but likely won’t without sustained pay hikes.

Street Bytes

--Stocks finished mixed, with the Nasdaq finishing down 1.6% after it took a 2% drubbing on Friday following a bearish assessment of the high-flyers by a Goldman Sachs analyst.

Specifically, the likes of Facebook, Amazon, Apple, Microsoft, Netflix and Google, as well as Tesla, Twitter and Snap, all lost 2% to 5% on Friday.

The Dow Jones, though, finished up 0.3% to 21271, a new all-time high, while the S&P 500 fell 0.3%.

--U.S. Treasury Yields

6-mo. 1.11%  2-yr. 1.33%  10-yr. 2.20%  30-yr. 2.86%

All about being on Fed watch this week.

--The House voted 233 to 186 on Thursday to rewrite the 2010 Dodd-Frank financial-overhaul law, the Obama-era response to the financial crisis.  But this isn’t worth spending any real time on because it won’t gain sufficient support in the Senate.  They are working on their own regulatory rollback, which they believe can gain some Democratic support.

That said, aspects of the House plan could be adopted, such as support for small banks and small business.

Editorial / Wall Street Journal

“Dodd-Frank is built on the conceit that the same regulators who missed the last crisis will somehow predict the next one as long as they have more power.  But there will inevitably be another mania and panic, and regulators always miss them. The definition of a financial mania is that everyone thinks the good times will last forever.

“Financial Services Chairman Jeb Hensarling’s Financial Choice Act addresses this tragic flaw by offering banks an option: Stay subject to Dodd-Frank’s costly regulations, or hold capital equal to 10% of assets in return for more lending freedom and less red tape.

“Banks lend with taxpayer-insured deposits, and high levels of capital are a guardrail for taxpayers and shareholders.  If the guardrails are high enough, banks can afford to take more risks without bank examiners second-guessing every loan.  We’d prefer even higher capital levels, but Mr. Hensarling is raising the bar while moving banks away from their Dodd-Frank status as de facto public utilities.

“Democrats call this a favor to Wall Street, but note that the biggest banks oppose the Hensarling bill. They’ve prospered under Dodd-Frank because they can more easily absorb compliance costs than can smaller competitors.  By one estimate the average capital ratio of the seven largest banks is around 7%, while most regional or community banks hold 10% or more in capital....

“The Federal Reserve Bank of Richmond reports that from 2010 through 2013 only four new banks were started in the U.S.  Before the panic the average was 100 a year.  All of this has cut lending for new small businesses essential for faster economic growth.”

We’ll see what the Senate does and what will warrant further reporting.

--“The U.S. exported 1 million barrels of oil a day during some months so far this year – double the pace of 2016 – and is on track to average that amount for all of 2017, according to a Wall Street Journal analysis of data from the U.S. Energy Department and the International Trade Commission.,” as reported by the Journal’s Lynn Cook.

“In another era, a domestic glut and low prices, currently hovering under $50 a barrel, might have caused companies to slow the pace of drilling.  But since Congress lifted a ban on oil exports at the end of 2015, shipments out of Texas and Louisiana have skyrocketed, taking the fruits of the U.S. fracking revolution to new markets....

“Exports represent a relief valve for U.S. drillers, who are ramping up production at a pace to surpass 10 million barrels a day, a new record, by next year if not sooner.”

The U.S. still imports 10 million barrels a day, but this figure has dropped sharply in recent years.

Crude prices continued to decline this week largely on the heels of inventory data that showed a far larger increase than expected.

--Robert Samuelson / Washington Post

“The coal-mining jobs that President Trump thinks were destroyed by government regulation – adopted to combat air pollution and global warming – were actually lost to old-fashioned competition from other American firms and workers.  Eastern coal mines lost market share to Western coal, which was cheaper.  And natural gas grew at coal’s expense because it had low costs and lower greenhouse-gas emissions.

“That’s the conclusion of a new study by economist Charles Kolstad of the Stanford Institute for Economic Policy Research, as reported on the Conversable Economist website.  Kolstad’s conclusion mirrors the findings of Glenn Kessler – The Washington Post’s Fact Checker columnist – who disputed the recent claim by Scott Pruitt, administrator of the Environmental Protection Agency, that Trump’s policies had increased coal employment by nearly 50,000 jobs.  Pruitt had wrongly attributed most increases in ‘mining’ jobs to coal when most occurred in oil and gas operations. The number of added coal jobs, Kessler estimated, was closer to 1,000.

“According to Kolstad, the combined effect of cheaper strip-mined Western coal and greater supplies of natural has devastated the coal industry.

“Consider:

“For years, coal was the dominant fuel for electricity production, accounting for 50 percent to 60 percent of generation. But the expansion of natural gas, made possible by ‘fracking’ (technically: ‘hydraulic fracturing’ – the opening of natural gas fields by injecting high-pressure water into gas reservoirs), has displaced coal in many parts of the country.  Since 2008, coal production has dropped nearly 40 percent, from almost 1.2 billion tons to about 728 million tons in 2016.  The share of electricity fueled by coal fell to 32 percent in 2016, slightly behind the 33 percent for natural gas, estimates the U.S. Energy Information Administration.

“Employment losses are even more dramatic. In its heyday, coal mining accounted for nearly 400,000 (to be precise: 388,000 in 1950). By 1979, that had already dropped to 227,000, and in 2015, the total was 75,000. Although natural gas explains most recent losses, the earlier declines reflected the inroads of cheaper Western coal into the markets long dependent on costlier Eastern coal.  Indeed, Western coal has provided all of the increase in total coal output since the mid-1970s....

“The point here is simple. Even if environmental regulation and climate change didn’t exist, the coal industry would have faced intense pressures to change and adapt.  Government isn’t killing the coal industry.  ‘Progress is the culprit,’ concludes Kolstad’s study.”

--Canada said on Friday that the economy had added 54.500 jobs, well above expectations, with the unemployment rate rising to 6.6%, as forecast, with more people entering the labor force.

--China’s Alibaba issued revenue guidance for 2017 of 45-49%, which would equate to sales of about $34bn, while the Street was forecasting $31.4bn. Shares soared 13% Thursday in response.

Last year, revenue increased 56%, but this included a newly acquired ecommerce group, Lazada, that was incorporated into Alibaba’s results. Strip that out and growth would have been 44-45%.

--Uber fired 20 employees following an internal investigation into harassment and related claims by law firm Perkins Coie, which is investigating in parallel with a broader probe by former Attorney General Eric Holder...part of an investigation into 215 harassment complaints going back to 2012.  Uber told staff it took remedial action in 58 cases and decided no action was needed in 100+ more.  [I have no time to comment on CEO Travis Kalanick’s advice letter on sex ahead of a company celebration from 2013, just uncovered.  But he’ll be fired shortly.]

--Sears Holdings is closing 66 more stores in its Sears and Kmart chains as it strives to return to profitability.  49 Kmart and 17 Sears stores are involved, with most shutting down by September. So this is on top of a previously announced, and unannounced, 180 closures (126 Kmart, 54 Sears).

--J Crew announced that longtime CEO Mickey Drexler will be stepping down, replaced by James Brett, president of home-furnishing retailer West Elm (a subsidiary of Williams-Sonoma).

Drexler, who joined J Crew in 2003 from rival retailer Gap, will retain the chairman title.  The company has been struggling of late, reporting a 3% decline in total revenues last year, with a whopping 7% drop in same-store sales.

--It seems the members of the founding Nordstrom family have had enough of being a public company after 39 years, and the department store operator appears likely to go private again.

Any deal, though, would require the family to acquire 100 percent of Nordstrom’s outstanding shares.

--General Motors said its sales in China fell in May for a second consecutive month.  GM is the second-largest foreign automaker behind Volkswagen.

In the first five months of the year, GM’s sales in China fell 3.7% to 1.48 million vehicles.

Overall auto sales in China rose 4% for January to April, according to the China Association of Automobile Manufacturers.

--Bridgewater Associates chief Ray Dalio, who was initially high on the Trump presidency and his economic agenda, is having doubts today.

“When faced with the choices between what’s good for the whole and what’s good for the part, and between harmony and conflict, he has a strong tendency to choose the part and conflict,” Dalio said in a LinkedIn post.  “The more I see Donald Trump moving toward conflict rather than cooperation, the more I worry about him harming his presidency and its effects on most of us.”

Dalio, founder of the $160bn hedge fund, said Trump’s decision to exit the Paris climate accord was the latest example of his approach to conflict.

“Every week is telling in that regard,” he said Monday.

--Apple Inc. introduced a voice-activated speaker on Monday, the HomePod, which is designed to compete with Amazon.com’s Alexa and Alphabet’s Google Assistant, Apple having fallen behind with its virtual assistant Siri that it launched in 2011.

Amazon is estimated to have sold about $1 billion in speakers in about two years in the U.S. (the company doesn’t break it out individually in its earnings reports).

About 36 million Americans will use a voice-enabled speaker at least once a month this year – twice as many as last year, according to eMarketer, a market-research firm.

The HomePod is the third major piece of hardware that Apple has launched since CEO Tim Cook assumed leadership in 2011; the other two being Apple Watch, launched in 2015 and a bust, and AirPods, the wireless headphones introduced last September, which have had  production issues.

--Verizon Communications is expected to cut about 2,000 jobs when it completes its $4.48 billion acquisition of Yahoo Inc.’s core assets next week, with the cuts to come from the AOL and Yahoo units, about 15% of the staff at the two units.  Many of the jobs are in California and some outside the U.S., according to Reuters.

Yahoo shareholders on Thursday approved the company’s sale.  Verizon will now rebrand AOL and Yahoo as part of a new venture called Oath, led by AOL CEO Tim Armstrong.

--Matthew Zames, the chief operating officer at JPMorgan Chase, is leaving the firm.  Zames, 46, had once been thought to be a possible successor to CEO Jamie Dimon, but with Dimon apparently prepared to stick around for another five years, Zames wants to explore opportunities elsewhere.

--SpaceX launched its first recycled cargo ship to the International Space Station on Saturday. The unmanned Falcon rocket blasted off carrying a Dragon capsule that made a station delivery nearly three years ago.

The first-stage booster flown Saturday was brand new, and returned to Cape Canaveral following liftoff for a successful vertical touchdown. The plan is to use it again as well, instead of junking it in the ocean.

--The Centers for Disease Control and Prevention issued the first report on how the Zika virus affected U.S. territories and it showed that 5 percent of women with confirmed infections had babies with birth defects.  The study included official numbers from Puerto Rico, which on Monday declared the Zika epidemic had ended.  But the CDC continued to reiterate that Zika remains a risk for pregnant women there and anywhere else the mosquito-borne virus is active.

“Zika virus poses a serious threat to pregnant women and their babies, regardless of when the infection occurs during the pregnancy,” said CDC Acting Director Dr. Anne Schuchat.

--According to figures from International Wine and Spirits Research, a London-based industry group, the global market for alcoholic drinks fell 1.3% last year, steeper than the average 0.3% decline of the previous five years.

Beer sales fell 1.8% in 2016, versus a five-year average decline of 0.6%.  In the U.S., a Bernstein analysis concludes beer sales in the U.S. this year will decline 2%, which according to Trevor Stirling would be “the worst year for beer volumes” here “since 2009.”

According to the Beer Institute, volumes fell 5% in the three months February to April.

Don’t look at me.  I’m more than doing my part.

--After 17 years in the cellar, MSNBC was No. 1 in prime-time cable news last month, buoyed by a surge in interest in news and the success of Rachel Maddow.  MSNBC beat its rivals in the critical 25-to-54 age demographic, up a whopping 118% from a year earlier.

MSNBC’s morning and afternoon audience is growing fast as well, far outstripping the growth at CNN and Fox News. The network has also recently hired conservative commentators Hugh Hewitt and George Will, while assigning a former senior aide to President George W. Bush, Nicolle Wallace, an afternoon talk show; moves not appreciated by some liberals.

But ratings are fickle and last week Fox News was No. 1 again in weekday prime time.

--Meanwhile, CBS’ “60 Minutes” edged out the heavily promoted premiere of NBC’s “Sunday Night with Megyn Kelly” in the ratings, but it did beat CBS in the 25-to-54 demo.

I will comment on Kelly’s interview with Russian President Putin down below.

--The Comey hearings on Thursday drew 19.5 million viewers, according to Nielsen, which is a big number for a daytime event, but less than the 30.6 million who tuned in to President Trump’s inauguration.  Trump will be most pleased by this. Might even tweet about it.

Foreign Affairs

Saudi Arabia, Qatar et al: In a sudden move on Monday, Saudi Arabia, Egypt and a number of Gulf states, cut ties with Qatar, accusing it of supporting terrorism in the region and for its growing relations with Iran.  Qatari nationals in Bahrain, Saudi Arabia and the UAE were given two weeks to leave, while Egypt joined the others in closing its airspace to Qatari planes, with Qatar’s capital of Doha a major hub for international flight connections. Airlines affected include Qatar Airways, Etihad and Emirates. Qatari planes will now have to take longer routes to avoid Saudi airspace.

Yemen then expelled Qatar from its Saudi-led Arab coalition fighting Iranian-backed Houthi rebels in the country.

There were immediate concerns over food and water supplies as Qatar is reliant on imported food, much of it transported across the now closed border with Saudi Arabia.

Trump has offered to help mediate the crisis, and Qatar said it would welcome his participation.  Trump called Qatari Emir Sheikh al Thani and urged action against terrorism.  Saudi Foreign Minister Adel al-Jubeir said Gulf states could resolve a row with Qatar among themselves without outside help.  Saudi Arabia apparently has 10 demands of Qatar, including shutting down Al Jazeera.

Meanwhile, the UAW threatened anyone publishing expressions of sympathy towards Doha with up to 15 years in prison while barring entry to Qataris.

Qatar has backed Islamist movements but denies supporting terrorism. Turkey pledged to provide food and water to Qatar if needed.  Defense Secretary James Mattis spoke to his Qatari counterpart to express commitment to the Gulf region’s security.

Qatar said there was “no legitimate justification” for the countries’ decision to cut ties, though it vowed its citizens wouldn’t be affected by the “violation of its sovereignty.”

Qatar is to host the 2022 FIFA World Cup.

Editorial / Wall Street Journal

“The rift between Qatar and four of America’s Sunni-Arab allies led by Saudi Arabia broke into the open this week....President Trump seemed to signal support for the diplomatic blockade on – where else? – Twitter.  This is an overdue reckoning for Qatar, albeit with some risk to Western interests.

“On Monday, Bahrain, Egypt, the Saudis and the United Arab Emirates suspended diplomatic ties with the Qataris. The Saudis spoke for the other three when they accused Doha of ‘financing, adopting and sheltering extremists,’ and they are right.  For years the Qataris have maintained a two-faced policy toward the West, their Arab neighbors and the various Islamist movements that threaten Middle East stability.

“Qatar hosts a military base that is crucial to American operations against jihadists including Islamic State. The base is also a guarantor of the tiny country’s independence, against the Saudis as well as Iran, with which Doha shares a natural-gas field in the Gulf.

“At the same time the Qataris have supported the Islamist groups that seek to overthrow established regimes. Al Jazeera, the Qataris’ popular television network, provides a platform to Yusuf al-Qaradawi, a leading Islamist ideologue who has praised Hitler for carrying out ‘divine punishment’ against the Jews....

“It isn’t clear what triggered this week’s rupture, which some attribute to a recent ransom payment of $1 billion to an Iranian-backed militia that had kidnapped prominent Qataris in Iraq.  Others point to Mr. Trump’s tough anti-Islamist rhetoric during his visit to Riyadh last month. The Saudis may have interpreted Mr. Trump’s speech as a green light to confront Qatar after eight years during which his predecessor looked the other way.  Mr. Trump bolstered that conclusion with a tweet Tuesday: ‘During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology.  Leaders pointed to Qatar – look!’

“Mr. Trump can’t seem to resist giving himself credit for everything.  But the goal of U.S. policy now should be to restore Arab unity to forge a common front against Sunni radicals and Iranian imperialism.  The aim of the current pressure shouldn’t be to permanently isolate Doha but to bring its conduct into line with what is expected of a Western ally. The diplomatic brawl has put Qatar on notice that it must stop supporting radicals, but the country will be an even larger problem if it joins arms with Iran.”

Editorial / The Economist

The tribal feuding among the Al Thanis, Al Khalifas, Al Sabahs and Al Sauds has been the norm for centuries. From their beginnings in Nejd, the barren interior of the Arabian peninsula, they sparred for the best coastal spots from which to launch pirate raids into the Gulf. But even at the height of acrimony, they always observed unwritten rules of refuge and hospitality. When the tribes became states five decades ago, their people still traveled, lived and intermarried across lines in the sand.  Their sheikhs might withdraw their ambassadors when tempers flared, but even when King Salman of Saudi Arabia went to war in Yemen in 2015, he let more than a million Yemenis in his kingdom stay.

“For Gulf Arabs, the expulsion of Qataris by Bahrain, the United Arab Emirates (UAE) and Saudi Arabia ordered on June 5th is more shocking than a declaration of war.  It has torn up their code of conduct.  With two weeks’ notice to leave, Saudi husbands fear they might forfeit their livelihoods if they follow their Qatari wives. The queues at Qatar’s only land border, with Saudi Arabia, already tail back for miles. The dunes have become barriers, preventing the entry of people and goods, including much of Qatar’s food supply.  Short-haul tourism has collapsed. The UAE has criminalized any expression of sympathy for Qatar, tweets included. Diplomatic ties have been severed, and air, land and sea links closed by the three neighbors, as well as by Egypt and Yemen.

“Protruding like a sore thumb from the Arabian peninsula, tiny Qatar has long bugged its neighbors.  But the explanations offered for the sudden, unprecedented closure seem inadequate.  Only a fortnight beforehand, the Qatari emir had stood smiling alongside those who have now banished him.  In a show of unity, they feted Donald Trump, the American president, in Riyadh.  Saudi Arabia blames Qatar’s involvement in terrorism, which to those recalling the role of Saudi jihadists played on 9/11 sounds rich. Qatar’s ties to Iran, too, irk Saudi clerics and kings, particularly the joint and expanding development of South Paris, the world’s largest gas field. But Kuwait and Oman are on similarly good terms with the Islamic Republic, and Dubai, one of the UAE’s seven emirates, provided the biggest back door into Iran when the world imposed sanctions on it.

“The pretensions of Qatar’s ruling Al Thani family to global grandeur have also vexed other rulers. The statelet has sought significance by offering a sanctuary to the Muslim Brotherhood, the Arab world’s foremast movement.  Diplomats found in Qatar a place in which to talk to Islamists, including Yousef Qaradawi, the Brotherhood’s favorite preacher; Khaled Meshal, until recently the leader of Hamas, the militant Palestinian group; Abbassi Madani from Algeria; and several of the Taliban’s leaders.  A media empire led by Al Jazeera, a satellite TV channel, has for decades helped Qatar find a mass audience.  It offered a platform to dissidents from across the region (except Qatar), giving voice to popular anger which erupted in the Arab spring of 2011.  It then goaded revolutionaries to take up arms, and endorsed Islamists who stood in elections.  Qatar bankrolled their campaigns and filled their coffers when they took power....

“A generation ago the Gulf was led by consensus-builders... But petrodollars, vast arsenals and Mr. Trump’s blessing risk turning their descendants into vainglorious autocrats with talents for inflaming, not compromising....

“For now, the Al Thanis have the means to withstand the pressure....Mr. Trump might celebrate Qatar’s come-uppance in tweets, but he must still consider the roughly 10,000 soldiers stationed there at al-Udeid, America’s largest air base in the Middle East...Egypt, which has also severed ties, knows that Qatar may retaliate by expelling its workers if it hinders Qatari exports through the Suez canal.  Even the UAE worries that Qatar might shut off the gas pipeline supplying its domestic market.

“But things can get much nastier....Gulf officials warn that more ‘punitive, economic measures could follow.  An attack, claimed by Islamic State, on Tehran’s parliament on June 7th has heightened the tension: Iran is blaming Saudi Arabia, though without evidence.

“There will be few winners....Investors already unnerved by Yemen’s protracted war have further cause to fear Arabian instability.  Mr. Trump’s recent proposal for an Arab NATO looks aborted.  Plans for the Gulf Co-operation Council to forge a common foreign and economic policy lie in tatters.  If only the world had a superpower focused more on diplomacy and less on selling weapons.”

At Friday’s Rose Garden press conference, President Trump opened by chiding Qatar for funding terrorism, in remarks that further complicate the situation.

“The nation of Qatar has unfortunately been a funder of terrorism, and at a very high level,” the president said.

But this came just hours after Secretary of State Rex Tillerson called for all sides to de-escalate the conflict, and for other Arab nations to end their blockade against Qatar.  Yet there was Tillerson in the Rose Garden.  You can’t make this stuff up.  It’s beyond distressing.

Iran: Militants armed with AK-47s and hand grenades staged a rare and brazen attack on two targets in Tehran; Parliament and a mausoleum containing the tomb of Ayatollah Khomeini, a tourist destination, killing 13.

The speaker of Parliament, Ali Larijani, tried to play down the attacks as a “minor incident,” saying that “some cowardly terrorists” had infiltrated the legislative complex and vowing that “the security forces will definitely take serious measures against them.”

ISIS claimed responsibility, its first attack in Iran, but Iran’s Revolutionary Guards say Saudi Arabia was behind the twin attacks.

“This terrorist attack happened only a week after the meeting between the U.S. president (Donald Trump) and the (Saudi) backward leaders who support terrorists.  That Islamic State has claimed responsibility proves that they were involved in the brutal attack,” said the statement, published by Iranian media.

Iraq/Syria: U.S.-backed fighters have begun the assault on ISIS’ de-facto capital of Raqqa in Syria. The Syrian Democratic Forces alliance of Kurdish and Arab fighters began the battle for the city earlier this week after seven months of fighting to surround the stronghold. The Pentagon announced that “hundreds” of U.S. military personnel are taking part in the offensive, and said Thursday it believed up to 2.500 ISIS fighters were still holed up in Raqqa.

An estimated 300,000 civilians were believed to be living under ISIS rule, including 80,000 displaced from other parts of Syria.  But after thousands have fled, the UN estimates there are 160,000 left.

Meanwhile, in a potentially dangerous escalation, the U.S. launched an air strike on Tuesday against Iranian-backed fighters who it said posed a threat to U.S. and U.S.-backed forces in southern Syria.  The Syrian military command warned against such action. The U.S. said it issued several warnings before the strike, via a military hotline with Russia

In Iraq, the battle for Mosul continues, with the UN saying it had reports of a “significant escalation” of Iraqi civilians being killed by ISIS as they try to flee.

“Credible reports indicate that more than 231 civilians attempting to flee western Mosul have been killed since 26 May, including at least 204 over three days last week alone,” the UN human rights office said in a statement.

The UN also said it estimated 100,000 boys and girls are still in ISIS-held neighborhoods.  This isn’t good.

Afghanistan: At a funeral last weekend for the son of the deputy speaker of the Senate, who was shot in clashes with police at a protest against the government over its failure to prevent the massive attack on Kabul, May 31, at least seven more killed in a triple suicide bombing.

Meanwhile, the Afghan army is a shambles after the resignation of top officials following the devastating attack by the Taliban on a base in April that killed 170.

North Korea: Pyongyang fired another slew of missiles Thursday morning, as their relentless missile testing program continues.  The latest barrage featured short-range missiles that appeared to be anti-ship weapons rather than the ballistic missiles North Korea had been testing recently.

This latest salvo means that Kim Jong Un has now ordered as many missile launches this year, 16, as his father oversaw in 17 years in power.

The head of the U.S. Missile Defense Agency, Vice Admiral James Syring, said on Wednesday that Pyongyang’s technological advances have caused him “great concern.” Syring told a hearing of the House Armed Services Committee that it was incumbent on his agency to assume that North Korea today could “range” the U.S. with an intercontinental ballistic missile carrying a nuclear warhead.

Henry F. Cooper / Wall Street Journal

“Conventional wisdom holds that it will be years before North Korea can credibly threaten the United States with a nuclear attack.  Kim Jong Un’s scientists are still testing only low-yield nuclear weapons, the thinking goes, and have yet to place them on ballistic missiles capable of reaching America’s West Coast.

“While its technological shortcomings have been well documented, North Korea’s desire to provoke a nuclear conflict with the U.S. should not be minimized or ignored.  Pyongyang is surely close to getting it right.

“For South Korea the danger is more immediate. According to physicist David Albright, the founder and president of the Institute for Science and International Security, the North Koreans have between 13 and 30 nuclear weapons and can build as many as five more every year.  If Mr. Kim were to detonate one of these bombs in the atmosphere 40 miles above Seoul, it could inflict catastrophic damage on South Korea’s electric power grid, leading to a prolonged blackout that could have deadly consequences.

“The United States has 28,500 soldiers, sailors, airmen and Marines in South Korea stationed below the 38th parallel – and more at sea nearby. An electromagnetic pulse attack on South Korea could play havoc with America’s ability to mount an effective response to North Korean aggression.  One hopes the troops manning the two already-deployed batteries of the THAAD ballistic-missile defense system are prepared for such a scenario...

“According to Peter Vincent Pry, staff director of the congressional EMP commission, a recent North Korean medium-range missile test that was widely reported to have exploded midflight could in fact have been deliberately detonated at an altitude of 40 miles.  Was it a dry run for an EMP attack?  Detonation at that altitude of a nuclear warhead with a yield of 10 to 20 kilotons – similar to those tested by North Korea – would produce major EMP effects and inflict catastrophic damage to unhardened electronics across hundreds of miles of surface territory. It is a myth that large yield nuclear weapons of hundreds of kilotons are required to produce such effects.”

What is particularly scary is that Kim Jong Un may prefer an EMP attack because, “for one thing, accuracy is not a concern; the North Koreans simply need to get near their target to sow chaos.  Nor would they need to worry about developing a reliable re-entry vehicle for their ballistic missiles....

“The U.S. and South Korea should ensure their ballistic-missile defenses are effective and harden their electric power grids against EMP effects as soon as possible.  The day of reckoning could come sooner than anyone in either country thinks.”

Meanwhile, South Korea said the deployment of the U.S. missile defense system, THAAD, should be suspended until the government looks at the environmental impact.  Oh brother.

But, late Friday, Seoul announced it does not aim to change its agreement on the deployment of the system, per the national security adviser.  Chung Eui-yong said the environmental impact move was just to ensure the democratic process was adhered to and that the decision was now made.

China: A Pentagon report on Tuesday singled out Pakistan as a possible location for a future Chinese military base, as it forecast that China would likely build more bases overseas once it establishes a facility in Djibouti. 

Separately, speaking at a security conference in Singapore, Defense Secretary James Mattis said the U.S. will not accept China’s militarization of islands in the South China Sea.

Mattis said: “We oppose countries militarizing artificial islands and enforcing excessive maritime claims.

“We cannot and will not accept unilateral, coercive changes to the status quo.”

Mattis also appealed to China for help in dealing with the nuclear threat from North Korea.                   

Addressing the annual Shangri-La Dialogue, Euan Graham, an Asia expert at an Australian think-tank, said: “North Korea is a win-win for China this year, because if North Korea misbehaves we don’t talk about the South China Sea.  If North Korea behaves, China can say it has delivered on its part of the bargain.”

Meanwhile, China’s delegation to the summit in Singapore blasted the U.S. for including Taiwan in its regional strategic partnership with the Asian countries.

Mattis said the U.S. would abide by its commitment to Taiwan and other Asian nations, the first time Taiwan has been mentioned by a U.S. delegation to the regional security forum since its inception in 2002.

“The Department of Defense remains steadfastly committed to working with Taiwan and with its democratic government to provide it the defense articles necessary, consistent with the obligations set out in the Taiwan Relations Act, because we stand for the peaceful resolution of any issues in a manner acceptable to the people on both sides of the Taiwan strait,” said the defense secretary.  [South China Morning Post]

Russia: In the above-mentioned interview with NBC’s Megyn Kelly, President Putin said he was not the culprit behind the election hacks of 2016 and argued they could have been executed by anyone, even proud Russian patriots without his personal knowledge.

“Hackers are free people,” Putin told Kelly, “just like artists who wake up in the morning in a good mood and start painting...The hackers are the same. They would wake up, read about something going on in inter-state relations, and if they feel patriotic they may try to contribute to the fight against those who speak badly about Russia.”

This alibi harkens back to 2014 and Putin’s claim that masked soldiers armed with Russian weapons in eastern Ukraine were simply “local self-defense forces.” A year later, he then admitted Russian soldiers participated in an invasion of the country.

Former FBI director Comey, in his testimony this week, said there was no doubt Russia was involved in the hacks of the DNC and other operations.

But back to Megyn Kelly, if NBC is going to give her a high-profile gig on Sunday’s opposite “60 Minutes,” and she lands a big ‘get’ for her premiere in Putin, why the heck did the network cut the interview to less than 15 minutes?  Why wasn’t it the full hour?  In the edited portion, there was nothing on Ukraine or Syria, for example.

But I was startled that in a promo with the NBC local affiliate in New York prior to the show, Kelly said of the interview with Vlad the Impaler that he is “more complex than the media would portray. He is portrayed as some kind of devil.”

He’s a killer, Megyn.

Brazil: Andrew Purcell / Sydney Morning Herald

“The Rio Olympics were presented as a transformative project that would leave world-class sporting facilities and a modern public transport system as a legacy. Guanabara Bay would be cleaned up, violence brought under control.  An 8.5-billion-real program of investment, Morar Carioca, would urbanize Rio’s favelas by 2020, installing running water, drainage systems, paved roads and street lights.

“Nine months after the Games, violent crime is surging, the bay is as polluted as ever, and the arenas are padlocked and deteriorating. New transport networks are poorly integrated and under-used, and favelas remain neglected by the state, lacking the most basic modern conveniences.  At best, the Olympics represent a criminal waste of a prosperous decade. The gulf between promises made and change delivered is galling.

“ ‘What was the true legacy?  Lots of money for developers and construction companies, and for their colonels, the politicians,’ says Roberto Marinho, a community leader in Morro da Providencia, Rio’s oldest favela.  ‘Where are the basic services in this city? Security is in chaos, the idea of social development has been abandoned... The only legacy is the millions that were pocketed.”

Random Musings

--A 25-year-old Federal contractor was charged Monday with leaking a top secret NSA report – detailing how Russian hackers targeted U.S. voting systems.

The document was published Monday by the Intercept and describes how the Russians infiltrated the voting infrastructure through a spear-phishing scheme targeting local government officials and employees.

Reality Leigh Winner was the dirtball, and NBC was reporting Friday night the girl may have been planning to disclose far more damaging material.

Reality’s mother has expressed concerns over whether the government will make an example of her daughter.  I hope it does, Mrs. Winner.  I hope, if found guilty, the rest of Reality’s life is beyond miserable.

--In the latest job approval ratings for President Trump, Rasmussen has him at 46% approval, Gallup 37%.

--Fox News host Neil Cavuto criticized President Trump’s use of social media and accused him of alienating members of his own party.  On Tuesday Cavuto said on his program:

“Mr. President, it is not the fake news media that’s your problem.  It’s you.  It’s not just your tweeting, it’s your scapegoating.  It’s your refusal to see that sometimes you’re the one who’s feeding your own beast.”

Cavuto tried to give Trump a little “common sense” saying, “Mr. President, they didn’t tweet disparaging comments about a London mayor in the middle of a murder spree – you did.  They didn’t turn on a travel ban that you signed – you did.  You’re right to say a lot of people are out to get you...but...the buck stops with you, Mr. President.”

Cavuto urged Trump to treat the critique coming from “usually friendly and supportive allies as sort of like an intervention...because firing off these angry missives and tweets risk your political destruction.”

Kellyanne Conway’s husband, George, a prominent attorney and Republican supporter, also called out the president for his tweeting habits.

--Sen. John McCain (R-Ariz.) was the side story of the Comey hearings Thursday. The last senator to question the former director, McCain focused his line of questioning on two FBI probes: the 2016 investigation into Hillary Clinton’s use of a private email server and the 2017 investigation into Russian interference in the election.

But McCain seemed confused, Comey was confused by McCain’s questions, and McCain appeared incoherent.  It became the most-tweeted moment of the hearing.

“In the case of Hillary Clinton, you made the statement that there wasn’t sufficient evidence to bring a suit against her, although it had been very careless in their behavior, but you did reach a conclusion in that case that it was not necessary to further pursue her,” McCain’s line of questioning began.  “Yet at the same time, in the case of Mr. (Trump), you said that there was not enough information to make a conclusion.  Tell me the difference between your conclusion as far as former Secretary Clinton is concerned, and Mr. Trump.”

McCain didn’t accept Comey’s answer that the Clinton email investigation was a completed, closed one at the time he announced that “no reasonable prosecutor” would bring a case against her last July, while the Russia investigation is still underway and could be for some time.

McCain then went on and on, refusing to accept one investigation was closed and the other open and viewers were as confused as Comey over what McCain’s point was.

So after Twitter lit up (and I had two family members ask me about McCain’s performance), the senator released a statement that read in part: “What I was trying to get at was whether Mr. Comey believes that any of his interactions with the President rise to the level of obstruction of justice.  In the case of Secretary Clinton’s emails, Mr. Comey was willing to step beyond his role as an investigator and state his belief about what ‘no reasonable prosecutor’ would conclude about the evidence.  I wanted Mr. Comey to apply the same approach to the key question surrounding his interactions with President Trump – whether or not the President’s conduct constitutes obstruction of justice.”

--President Trump nominated Christopher Wray to be the new FBI director.

A former assistant attorney general who led the Justice Department’s criminal division, Wray was appointed by former President George W. Bush.

I agree with President Trump that it seems Wray is “a man of impeccable credentials,” but Wray will be questioned vigorously, you can be sure, over his representation of Gov. Chris Christie in the Bridgegate scandal.

--U.S. Secretary of State Rex Tillerson arrived in Wellington, New Zealand on Tuesday and his motorcade was met by a large number of people greeting his motorcade by flipping him the bird, leaving reporters traveling with Tillerson stunned, a number of them saying they hadn’t seen anything like it.

Granted, a majority of New Zealanders have generally been anti-American, but we’ll let them slide.  Very good beer there...and at the end of the day....

--Democrats are increasingly upset at Hillary Clinton for refusing to take a cue from former President Obama and just step out of the spotlight.  Her recent remarks explaining her loss, including pointing fingers at the Democratic National Committee for her failure, make her look bitter and the party bad.

One former senior aide to President Obama told The Hill: “If she is trying to come across as the leader of the angry movement of what happened in 2016, then she’s achieving it.  But part of the problem she had was she didn’t have a vision for the Democratic Party, and she needs to now take a break and let others come to the forefront.”

--Rep. Trey Gowdy (R-S.C.) was chosen as the next chairman of the House Oversight Committee, replacing retiring Jason Chaffetz.

--@RealDonaldTrump saw a big spike in followers recently – roughly 3 million, most of which were newly created accounts without photos or tweets, the telltale signs of Twitter bots.  Experts say that eventually the bots can be “weaponized” to spread fake news stories that favor the White House.

--Forbes reported that the Trump Organization took in sizable profits for hosting a charity golf event to benefit children’s cancer research, despite its claims that use of the course had been donated.

Since 2007, Eric Trump has held the event at Trump National Golf Club in Westchester County, N.Y., to raise money for the Eric Trump Foundation on behalf of the St. Jude Children’s Research Hospital in Memphis.

Forbes reported that to date Eric Trump has raised more than $11 million – including $2.9 million last year – for the hospital’s work, mostly through the golf tournament.

But the expenses, which averaged $50,000 during the first four years, quickly escalated to $322,000 by 2015, according to IRS filings.  The president’s son, however, had told Forbes, “We get to use our assets 100% free of charge.”

Forbes reported, “It’s clear that the course wasn’t free – that the Trump Organization received payments for its use, part of more than $1.2 million that has no documented recipients past the Trump Organization.  Golf charity experts say the listed expenses defy any reasonable cost justification for a one-day golf tournament.”

--First there was Kathy Griffin, then came Bill Maher, who in an exchange with Nebraska Sen. Ben Sasse, called himself a “house ni--a” after Sasse suggested he visit the Cornhusker state and work in the fields.

As the comment was made, the audience groaned and Sasse grinned.  [The senator regretted this after.]

Maher turned to the crowd and asserted, “It’s a joke.”

So you have the usual fallout on social media, and Black Lives Matter activist DeRay Mckesson (sic) called for Maher to be fired from HBO’s “Real Time.”

I think there’s a difference between what Kathy Griffin did and what Maher did.  Griffin is getting what she deserved.  Maher is being Maher.  He has a fan base and it’s all up to HBO.  I don’t watch his show, and I have HBO, so I voted with my eyeballs long ago.

But I can’t disagree with a tweet addressing both by Cornell Williams Brooks, president of the NAACP: “Great comedians make us think & laugh. When our humanity is the punchline, it hurts too much to think or laugh.”

--New Jersey and Virginia are the only two states this year with gubernatorial races and we had our primary Tuesday.  My man Jack Ciattarelli lost to Lt. Gov. Kim Guadagno for the Republican nomination, 47% to 31%, though Ciattarelli did better than could have been expected just two months ago.

Guadagno will now get her butt kicked by Democrat Philip Murphy, who won 48% of the vote in the Democratic primary.

---

Gold $1268
Oil $45.90

Returns for the week 6/5-6/9

Dow Jones  +0.3%  [21271]
S&P 500  -0.3%  [2431]
S&P MidCap  +0.4%
Russell 2000  +1.2%
Nasdaq  -1.6%  [6207]

Returns for the period 1/1/17-6/9/17

Dow Jones  +7.6%
S&P 500  +8.6%
S&P MidCap  +5.8%
Russell 2000  +4.8%
Nasdaq  +15.3%

Bulls 55.8
Bears 18.3 [Source: Investors Intelligence]

Have a great week.

Brian Trumbore



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Week in Review

06/10/2017

For the week 6/5-6/9

[Posted 12:30 AM ET, Saturday]

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 948

This was another chaotic week and I’ve left some issues on the cutting-room floor just to get a column out on time. 

It was not a good week for the White House, as the president keeps stepping on his message, or undermining his cabinet, as was the case with Qatar at week’s end.

I’ll just say for now that I don’t see any obstruction of justice or collusion, yet.  We were told that the Mueller investigation would last no more than three months, but I doubt this timeline.

I’ll tie up the loose ends next WIR.

The Comey Testimony....

During 2 ½ hours of testimony before the Senate Intelligence Committee, former FBI director James Comey accused President Trump multiple time of lying and that the president’s shifting explanations for dismissing him were “lies, plain and simple.” Comey said he wrote detailed memos of their conversations because he feared the president would paint a false picture of their encounters.

According to Comey, at a White House meeting in February one day after Flynn was fired, Trump pressed him to ease up on an inquiry into the former national security adviser, Michael Flynn.

“I hope you can see your way clear to letting this go, to letting Flynn go,” Trump said, according to Comey.  “He is a good guy. I hope you can let this go.”

Comey said he interpreted the request on Flynn to be “direction” on what he should do.

“This is the president of the United States with me alone,” Comey said.

Comey told the committee that he began the practice of documenting his meetings with Trump immediately after their first encounter on Jan. 6 in New York, two weeks before the inauguration because of “the nature of the person.”

“I was honestly concerned that he might lie about the nature of our meeting so I thought it was important to document it,” Comey said.  [While the hearing was still under way, spokeswoman Sarah Sanders told reporters, “The president is not a liar.”]

Comey added he had asked a friend at Columbia Law School, who we soon learned was Daniel Richman, a professor there, to share details of his private conversations with the president with the New York Times.  [Richman went into hiding, with the world suddenly after him.]

So lawmakers are left to determine whether Comey’s testimony shows that Trump obstructed justice, with Comey telling senators, “I don’t think it’s for me to say whether the conversation I had with the president was an effort to obstruct,” later adding, “that’s (Special Counsel) Bob Mueller’s job to sort that out.”

Comey also told lawmakers that Trump’s firing of the FBI director angered him because Trump commented to NBC’s Lester Holt that “the FBI was in turmoil.”

“He had repeatedly told me I was doing a great job and hoped I would stay,” Comey said.  But after he was fired, he said “the administration chose to defame me” as well as the bureau.

Trump’s personal lawyer, Marc Kasowitz, fired back hours later, disputing Comey’s claim that Trump demanded loyalty from the FBI chief or directed him to back off a probe of former National Security Adviser Michael Flynn.

Kasowitz said the president “never, in form or substance” directed Comey to stop an investigation into Flynn or anyone else.

Kasowitz slammed Comey for leaking the memo to the Times.

“Today, Mr. Comey admitted that he unilaterally and surreptitiously made unauthorized disclosures to the press of privileged communications with the President,” Kasowitz said in a statement.

“We will leave it [to] the appropriate authorities to determine whether this leak should be investigated along with all those others being investigated,” he said.

Kasowitz did admit that Trump requested that Comey stay loyal to him, but not in the way Comey described.

“The Office of the President is entitled to expect loyalty from those who are serving in an administration, and, from before this President took office to this day, it is overwhelmingly clear that there have been and continue to be those in government who are actively attempting to undermine this administration with selective and illegal leaks of classified information and privileged communications,” he added.

And Kasowitz repeated that Comey had told Trump he was not under investigation in the Russia probe.

House Speaker Paul Ryan defended the president, telling reporters Thursday that Trump was “new at this.”  “He’s new to government, so he probably wasn’t steeped in the long-running protocols that establish the relationships between DOJ, the FBI and the White House.”

Trump didn’t tweet all Thursday.

While there was no smoking gun, questions remain, among them, the former director said there were a “variety of reasons” why Attorney General Jeff Sessions’ involvement in the investigation of Russia’s alleged interference in the 2016 election campaign would be problematic.  But Comey said he was unable to speak about them in an open session.

Sessions recused himself from the investigation in March following revelations he had had conversations with Russian Ambassador Sergei Kislyak during the election campaign; conversations he failed to reveal at his confirmation hearings.

So what couldn’t Comey disclose?

Are there tapes of Comey’s conversations with President Trump? We still don’t know, following that cryptic tweet of his saying Comey should hope there are no tapes.

Why were the senior officials, including Sessions, Jared Kushner and senior intelligence officers asked to leave the Oval Office during a meeting on counter-intelligence with Trump and Comey on February 14?  Comey didn’t explain why Trump wanted to speak to him with no one else present.

Is Trump under investigation?  Comey said in his statement released on Wednesday that he had assured the president on three occasions that he was not personally under investigation, but then in explaining why he hadn’t gone public with this information at the time, Comey said that if anything changed and an investigation into the president was started, he would have felt obliged to go public with that as well.  It certainly seemed from Comey’s testimony that Special Counsel Mueller is investigating the president.

Speaking of Wednesday, Director of National Intelligence Dan Coats and National Security Administration head Mike Rogers both told the Senate Intel Committee that they didn’t feel pressured by President Trump to intervene in the handling of intelligence in any inappropriate way, this after the Washington Post’s Adam Entous, in an extensive report, said Coats, for one, was asked by Trump following a briefing at the White House to intervene with Comey’s investigation into Flynn, the CIA Director Mike Pompeo also being there.

But then when Intel co-chair Democrat Mark Warner asked them to comment on the specifics, both Coats and Rogers declined to do so, calling a public hearing an “inappropriate forum” for the discussion.  So put this on the ‘to do’ list.

Opinion...all sides....

Peter Baker / New York Times

“Upset about the investigation into Russian interference in last year’s election, President Trump sought relief from James B. Comey, then the FBI director.  By Mr. Comey’s account, Mr. Trump asked him to help ‘lift the cloud.’

“But thanks to Mr. Trump’s own actions, the cloud darkened considerably on Thursday and now seems likely to hover over his presidency for months, if not years, to come.

“Rather than relieve the pressure, Mr. Trump’s decision to fire Mr. Comey has generated an even bigger political and legal threat.  In his anger at Mr. Comey for refusing to publicly disclose that the president was not personally under investigation, legal experts said, Mr. Trump may have actually made himself the target of an investigation.

“While delivered in calm, deliberate and unemotional terms, Mr. Comey’s testimony on Thursday was almost certainly the most damning j’accuse moment by a senior law enforcement official against a president in a generation.  In a Capitol Hill hearing room, the astonishing tableau unfolded of a former FBI director accusing the White House of ‘lies, plain and simple’ and asserting that when the president suggested dropping an investigation into his former national security adviser, ‘I took it as a direction.’

“Mr. Comey gave ammunition to the president’s side, too, particularly by admitting that he had orchestrated the leak of his account of his most critical meeting with Mr. Trump with the express purpose of spurring the appointment of a special counsel, which he accomplished.  The president’s defenders said Mr. Comey had proved Mr. Trump was right when he called the former FBI director a ‘showboat’ and a ‘grandstander,’ a conclusion Democrats once shared when he was investigating Hillary Clinton last year.”

John Podhoretz / New York Post

“James Comey thinks, but did not say, that President Trump is going to be toast once the special counsel is done with him – and all because of three little words Trump might have sung in the manner of Elsa the Ice Queen: ‘Let this go.’

“Comey clearly intimated that Trump’s conduct toward him was an effort to obstruct justice when it came to the investigation of former National Security Adviser Michael Flynn – and that special counsel Robert Mueller would be just the guy to get to the bottom of what is clearly an impeachable offense.

“That was the key revelation of the former FBI director’s gripping Senate hearing Thursday. Comey said the president’s behavior at a February White House meeting – during which Trump cleared the room so he and Comey could have a private tete-a-tete about Flynn – had ‘stunned’ him.

“That was when, according to the document he released Wednesday, Trump said to him, ‘I hope you can see your way clear to letting this go, to letting Flynn go.’

“Comey said he believed this was intended as ‘direction’ and he found it ‘a very disturbing thing, very concerning’ the president would say such a thing....

“Comey said that, ‘as an investigator’ himself, ‘of significant fact to me is so why did he kick everybody out of the Oval Office?  Why would you kick the attorney general, the vice president, the chief of staff out to talk to me?’ This was a clear suggestion that Mueller, his fellow investigator, would likely see the same significance he did....

“That ‘disturbing, concerning’ thing is now Mueller’s bailiwick.  Mueller, also a former director of the FBI, is, in Comey’s words, ‘a dogged, tough person and you can have high confidence when he’s done, he’s turned over all of the rocks.’

“Translation for Trump: Uh-oh.

“Now, Comey could be wrong. He’s been wrong before. He was wrong to give a press conference on July 5 last year that effectively indicted Hillary Clinton before announcing she wouldn’t be charged for mishandling classified information – a colossally unfair thing to do.

“And he was wrong to go public on October 28 about reopening the Hillary investigation, an irresponsible declaration that may have had a material effect on the presidential election.

“But in suggesting what a fellow investigator might find problematic in Trump’s behavior, Comey can probably be trusted....

“The problem for Trump is that he’s under investigation now.

“And this investigation, as the Washington Free Beacon’s Matthew Continetti pointed out, arose due to a strange tweet Trump issued right after Comey’s firing about how ‘Comey better hope there are no ‘tapes’ of our conversations before he starts leaking to the press!’

“This triggered Comey’s decision to release, through a friend to the New York Times, his own contemporaneous memo about the president’s effort to pressure him. As Continetti writes, ‘By firing Comey and then tweeting recklessly about it, Trump elevated a long-running but manageable problem – the so-called ‘Russia thing’ – into an independent investigation that seriously endangers his presidency.’

“Twitter giveth – and may taketh away.  And all because Trump couldn’t let it go.”

Andrew C. McCarthy / Washington Post

“James B. Comey’s testimony Thursday...will no doubt embolden those who believe we already know enough to conclude that President Trump obstructed justice by leaning on the then-FBI director to halt a criminal investigation of Michael Flynn.  But nothing that Comey said alters the fact that this claim remains fatally flawed in two critical respects: It overlooks both a requirement for corrupt intent and the principle of executive discretion.

“It is true that federal statutes criminalizing obstruction of the administration of law – including by agencies such as the FBI – cite not only actual interference with an investigation but attempts to do so as well. That is, the fact that the investigation of Flynn, a close Trump campaign adviser who would briefly serve as his national security adviser, was never actually shut down cuts against the case for obstruction, but it is not dispositive.

“But the arguments for presidential obstruction here tend to omit the statute’s most important word: ‘corruptly.’  Not every form of interfering with an investigation, or even the closing down of an investigation, is felony obstruction.  Only corrupt ones. Prosecutors must prove beyond a reasonable doubt that the accused not only acted intentionally but also with an awareness that the actions violated the law.

“The usual examples are straightforward: A public official is paid off to lean on the police to drop a case.  Or an official acts to halt an investigation out of fear that a suspect will reveal wrongdoing by the official.

“So, what would be a legitimate interference with an investigation?

“This brings us to executive discretion. Every day, in FBI and U.S. attorney’s offices throughout the nation, agents and prosecutors decide to close investigations and decline prosecutions.  Many of these cases are viable, but these executive-branch officials judge that the equities weigh against continuing the seriousness of the offense and balance that against personal factors related to the suspect – criminal history, contributions to society, whether alternatives to criminal prosecution would be more appropriate, whether a criminal charge would be overkill because of other consequences the suspect has suffered, etc.

“This is important because the president is the chief executive.  We like to think of law enforcement as insulated from politics, and we certainly aspire to a politics that does not undermine the rule of law.  In our system, however, it is simply not the case that law enforcement is independent of political leadership.  The FBI and Justice Department are not a separate branch of government.   They are subordinate to the president. In fact, they do not exercise their own power; the Constitution vests all executive power in the president.  Prosecutors and FBI agents are delegates.

“That means that when they exercise prosecutorial discretion, they are exercising the president’s power.  Obviously, the president cannot have less authority to exercise his power than his subordinates do....

“Comey, we must note, took pains to say that Trump did not ask him to halt the broader investigation of Russian meddling in the election.  Indeed, he said the president observed in a March 30 phone call that it would be a benefit if potential wrongdoing by any of his ‘satellite’ associates were uncovered. This strongly suggests that he was not lobbying for Flynn out of fear that the investigation would uncover misconduct by Trump and his circle.

“One can certainly disagree with Trump’s marshaling of the equities involved in proceeding against Flynn. But to weigh them and recommend against proceeding was a legitimate exercise of executive discretion. The president has every bit as much authority to engage in that exercise as his subordinates.  And it bears repeating that he did not order a halt to the investigation – though he could have.

“This was clearly not corruption. And without corruption, there cannot be obstruction.

“This is not to suggest the president’s executive discretion is absolute. A president who abuses his power in a manner that undermines our system of justice can and should be impeached. Indeed, the Nixon articles of impeachment alleged obstruction of law-enforcement investigations.  Trump, by contrast, has not obstructed the administration of law, much less done so systematically.”

David Ignatius / Washington Post

“Comey was a compelling witness to the bullying behavior of this president.  But Trump supporters can argue that the president’s hand was strengthened by Thursday’s ‘Super Bowl’ hearing.  Even as Comey chronicled his disturbing encounters with Trump, he also affirmed some important strands of the White House narrative.

“Comey said that as of May, when he was fired, Trump was not personally under FBI investigation – offering, finally, the public acknowledgment Trump had been requesting so assiduously.  Comey also said Trump had never ordered him to halt the overall BI investigation of Russian interference in the 2016 election.

“And on the sensitive subject of leaks, Comey revealed that to ‘prompt the appointment of a special counsel,’ he had used a cut-out to share with the New York Times details of a memo recounting Trump’s Feb. 14 request, ‘I hope you can let this go,’ referring to the FBI investigation of former national security adviser Michael Flynn.

“Thursday’s hearing offered a haunting portrait of a moralist confronting a dealmaker...

“It was ‘Pilgrim’s Progress’ meets ‘House of Cards’ when Comey arrived for a one-on-one dinner at the White House on Jan. 27. ...As Trump stressed so baldly, in Comey’s telling, he wanted loyalty – much as a feudal lord might seek allegiance from his barons....

“The most poignant moments in Thursday’s hearing were Comey’s reflections on what he might have done differently. When Sen. Dianne Feinstein (D-Calif.) asked why he hadn’t rejected outright Trump’s ‘hope’ that he close the Flynn investigation, Comey answered: ‘Maybe other people would be stronger in that circumstance....Maybe if I did it again, I would do it better.’

“Later Comey was pressed about why he accommodatingly told Trump in the March 30 call that he ‘would see what we could do’ to lift the ‘cloud’ of the Russia investigation. He conceded that his response was ‘a slightly cowardly way...of getting off the phone, frankly.’

“What is it about being FBI director that makes people so concerned about image, yet unable to be entirely independent of the politicians they serve?  That’s been part of the bureau’s history ever since J. Edgar Hoover.  Comey couldn’t escape it.

“Comey’s personal ethical dilemmas are now interwoven with the nation’s political history. It’s the stuff of high drama – the temporizing ethicist meets the amoral bulldozer. The story didn’t have a happy ending for Comey – or, it seems, for the country.”

Kimberley A. Strassel / Wall Street Journal

“What if all the painful drama over Donald Trump and Mike Flynn and Hillary Clinton and Russians wasn’t really due to Donald Trump or Mike Flynn or Hillary Clinton or Russians? What if the national spectacle the country has endured comes down to one man, James Comey?

“It was certainly all about the former FBI director on Thursday...Mr. Comey didn’t disappoint. He already had submitted pages of testimony detailing his every second with President Trump, complete with recollections of moments he felt ‘strange’ or ‘uneasy’ or ‘awkward.’  But on Thursday he went further, wowing the media with bold pronouncements: President Trump was a liar; the president fired him to undermine the Russia investigation; the president had directed him to back off Mr. Flynn.

“Mostly he pronounced on what is – and is not – proper in any given situation: when handling investigations, interacting with the president, or releasing information.  By the end, something had become clear.  Mr. Comey was not merely a player in the past year’s palaver. He was the player.

“It was Mr. Comey who botched the investigation of Mrs. Clinton by appropriating the authority to exonerate and excoriate her publicly in an inappropriate press event, and then by reopening the probe right before the election.  This gave Mrs. Clinton’s supporters a reason to claim they’d been robbed, which in turn stoked the ’resistance’ that has overrun U.S. politics.

“We now know it didn’t have to be this way. Mr. Comey explained that he had lost faith in then-Attorney General Loretta Lynch’s ability to handle the affair, in part because she had directed him to describe the probe in public as a ‘matter’ rather than an ‘investigation.’  That one of President Obama’s political appointees outright directed the head of the FBI to play down an investigation is far more scandalous than any accusation aired about Mr. Trump. Mr. Comey said it gave him a ‘queasy’ feeling.  But did he call on Ms. Lynch to recuse herself? Did he demand a special counsel?  No, Mr. Comey instead complied with the request.  Then he judged that the only proper way to clean up the mess was to flout all the normal FBI protocols.  Vive la resistance....

“If Mr. Comey truly had believed the president was interfering, he had a duty to report it or to resign.  Instead he maintained Thursday it wasn’t his role to pronounce whether Mr. Trump had obstructed justice.  Really?  This may count as the only time Mr. Comey suddenly didn’t have an opinion on whether to render justice or to take things into his own hands. 

“And why did he agree to dinner with Mr. Trump in the first place? Why keep accepting the president’s phone calls? Asked whether he, in those early meetings, ever told the president how things ought to go, he said no. Mr. Comey did nothing to establish a relationship he felt was correct.

“Instead, he kept secret memos, something he’d never done before. He wrote them in an unclassified manner, the better to make them public later. He allowed Mr. Trump to continue, while building up this dossier.

“When he was fired, he leaked to the media, through a ‘close friend,’ highly selective bits of his privileged communications with the president. And then he stayed silent and let the speculation rage. Thus, for the past month the nation has been mired in a new scandal, fueled by half-leaks. Thank you, yet again, Mr. Comey.

“Yes, Russia interfered.  Yes, Mr. Trump damages himself with reckless words and tweets. Yes, the Hillary situation was tricky. Yet you have to ask: How remarkably different would the world look had Mr. Comey chosen to retire in, say, 2015 to focus on his golf game?  If only.”

David Brooks / New York Times

“The first important part of James Comey’s testimony was that he cast some doubt on reports that there was widespread communication between the Russians and the Trump campaign. That was the suspicion that set off this whole chain of events and the possibility that could have quickly brought about impeachment proceedings.

“The second important implication of the hearings is that as far as we know, Donald Trump has not performed any criminal act that would merit removing him from office.

“Sure, he cleared the room so he could lean on Comey to go easy on Michael Flynn.  But he didn’t order Comey to shut down the investigation as a whole or do any of the things (like following up on the request) that would constitute real obstruction.

“And sure, Trump did later fire Comey.  But it’s likely that the Comey firing had little or nothing to do with the Flynn investigation.

“Trump was, as always, thinking about himself.  Comey had told Trump three times that he was not under investigation.  Trump wanted Comey to repeat that fact publicly. When Comey didn’t, Trump took it as a sign that Comey was disloyal, an unforgivable sin. So he fired him, believing, insanely, that the move would be popular.

“All of this would constitute a significant scandal in a normal administration, but it would not be grounds for impeachment.

“The third important lesson of the hearing is that Donald Trump is characterologically at war with the norms and practices of good government. Comey emerged as a superb institutionalist, a man who believes we are a nation of laws.  Trump emerged as a tribalist and a clannist, who simply cannot understand the way modern government works.

“Trump is also plagued with a self-destructive form of selfishness. He is consumed by a hunger for affirmation, but, demented by his own obsessions, he can’t think more than one step ahead.

“In search of praise he is continually doing things that will end up bringing him condemnation.  He lies to people who have the power to publicly devastate him. He betrays people who have the power to damage him.  Trump is most dangerous to the people who are closest to him and are in the best position to take their revenge.

“The upshot is the Trump administration will probably not be brought down by outside forces. It will be incapacitated from within, by the bile, rage and back-stabbing that are already at record levels in the White House staff, by the dueling betrayals of the intimates Trump abuses so wretchedly.

“Although there may be no serious collusion with the Russians, there is now certain to be a wide-ranging independent investigation into all things Trump.

“These investigations will take a White House that is already acidic and turn it sulfuric....

“The good news is the civic institutions are weathering the storm. The Senate Intelligence Committee put on a very good hearing. The FBI is maintaining its integrity.  This has, by and large, been a golden age for the American press corps. The bad news is that these institutions had better be. The Trump death march will be slow, grinding and ugly.”

Peggy Noonan / Wall Street Journal

“In the end Mr. Comey appears to have done himself little or no harm, but he harmed the president by documenting, again and persuasively, that Mr. Trump does not understand the norms, rules and traditions of his job. As I watched, I wondered how many other appointees, officials and White House staffers are writing themselves memos.

“Will all this damage the president with his supporters?

“What consumes Blue America does not consume Red America.

“The photojournalist Chris Arnade reported on Twitter what he was seeing in Mountain Grove, Mo., Thursday morning as Mr. Comey testified. The conversation at the local McDonald’s: ‘1) Yard work/lawn mowers, 2) Danger of Bees, 3) Cardinals sucking, 4) Friend who died, 5) Church.’  He asked a middle aged man in a T-shirt if he planned to watch the hearings.  Kirk said no: ‘I got a lot of yards to mow.’

“Then again, a conservative intellectual with small-town roots wrote, during the testimony, that he thought this might be a break point, a moment when Mr. Trump’s supporters would listen close and think he’s not so much like them, and not so different from the swamp he means to drain.

“I myself don’t know.”

Editorial / Wall Street Journal

“Mr. Comey said that he was ‘so stunned’ that he lacked ‘the presence of mind’ even to tell Mr. Trump that his request (to let the Flynn investigation go) was improper. But he was able to gain enough composure to write up the experience in the car after the meeting, and to discuss the meeting, by his own testimony, with his chief of staff, the FBI deputy director, the associate deputy director, the general counsel, the deputy director’s chief counsel and the head of the FBI office of national security.  But he never informed Attorney General Jeff Sessions, the Deputy AG or any other supervisor.

“This abdication is especially remarkable for someone as experienced in the corridors of power as Mr. Comey. This is a government veteran who served three Presidents in senior positions and in 2004 pre-drafted a letter of resignation as Acting Attorney General to threaten President Bush over wiretapping.

“Quitting and going public after his meeting with Mr. Trump would have let the country know what was happening in Washington, as many other civil servants have done over the years. yet in an exchange with Senator Tom Cotton, Mr. Comey averred that ‘I didn’t find, encounter any circumstance that led me to intend to resign, consider to resign.  No, sir.’  In other words, Mr. Comey thought he was serving a corrupt President but wanted to keep that news a close hold.

“Mr. Comey’s admirers want everyone to take this at face value. But an alternative reading is that Mr. Comey didn’t resign or tell Mr. Sessions because he liked his job and wanted to keep it.  He also knew he could write that memo and share it with his FBI comrades as a form of political insurance. As the fictional President says to Jack Ryan (played by Harrison Ford) in ‘clear and Present Danger,’ ‘you’ve got yourself a chip in the big game now.’  Only after he was fired did Mr. Comey choose to share his moral outrage with the public, while setting up the President who dismissed him as a target for Mr. Mueller.

“Mr. Trump acted like a bullying naif who doesn’t understand the norms of presidential behavior, but Mr. Comey is no Jack Ryan.  He’s a government official motivated by political self-interest who should have resigned if he believed what he now says he did.  That he failed to act at the time suggests his motive now is more revenge than truth-telling.”

Friday afternoon in the Rose Garden, Trump said he is “100 percent” willing to testify under oath about his interactions with Comey, when queried by a reporter at a brief Q&A following his meeting with Romania’s president.

Asked if he would give a sworn statement to Robert Mueller, Trump said, “I would be glad to tell him exactly what I told you.”

Trump said that Comey’s claims the president may have colluded with Russia and obstructed justice were just not true.  Trump further indicated the tapes he tweeted about may not exist.

The president said he did not pressure the FBI chief to drop an investigation into Michael Flynn.

“I didn’t say that,” Trump said in response to a question about his alleged request of Comey to “let go” of the probe.

And the president denied that he demanded a loyalty pledge of personal loyalty from the former FBI director.

“No,” Trump said.  “I hardly know the man.  I’m gonna say, ‘I want you to pledge allegiance?’”

Trump then said, “No collusion, no obstruction. He’s a leaker.  But we want to get back to running our great country.”

As for the potential existence of tapes, Trump added, “I’ll tell you about that maybe sometime in the near future.”  But then he said reporters wondering about the existence of tapes would be “very disappointed.”

I’m biting my tongue.

---

Opinion on Trump’s tweeting habit....

Thomas G. Donlan / Barron’s

“Enough already.  There must be other contenders, but Trump should be close to receiving the world trophy for most influential tweeter.  People believe what he tweets, or he tweets what they already believe. Either way, he’s scripting an American tragedy.

“In many tweets, Trump has fixated on having some foreign country pay for something: Mexico should pay for his wall; European countries should pay for the North Atlantic Treaty Organization; China should ‘solve’ the North Korea problem in order to make a trade deal; Canada should not compete to take away customers from U.S. dairy products or U.S. lumber.

“When the president returned from his foreign trip a week ago, he reported, ‘We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for U.S. This will change.’

“Ignorance is not bliss. If Trump knew more than the single number for the balance of trade, he would be happier with the trade relationship between the U.S. and Germany.

“Our trade deficit – the amount that imports exceed exports – with Germany last year was about $65 billion, or some 13% of the U.S. total 2016 trade deficit. It’s big because Germany is a big country, a highly efficient producer of many high-value goods for export, and because Americans can use their strong dollar to buy cheaply from the eurozone.  Germany’s profits have built a country with high wages and strong unions. As a member of the European Union, it doesn’t even control its own trade and monetary policies.  The only unfair thing is that they are ‘massively’ good at minding their businesses.

“Partly to recycle the dollars they have earned, German companies have done the U.S. the very large favor of investing $255 billion in America over the years, including the construction of car factories by Daimler, Volkswagen, and BMW.  All three export vehicles from the U.S. to other markets, which reduces the goods trade imbalance.  And if jobs matter, U.S. affiliates of German firms employ more than 670,000 Americans....

“Make America Great Again is a slogan for loonies: There’s no ‘again’ about it.  No matter how many Americans have lost their jobs to foreign competition, and no matter how big the trade deficit may be, America is still the world capital of economic and military power, finance, advanced technology, job creation, and above all, wealth creation....

“We can lose our greatness, but only by turning our backs on the world.  Trump’s trade policies could be how America First turns into America Last.  Offensive tweeting looks to be a sadly effective first step.”

Charles Krauthammer / Washington Post

“(Trump’s) behavior over the past several weeks provided ample opportunity for shock  and dismay.

“It’s the tweets, of course. Trump sees them as a direct, ‘unfiltered’ conduit to the public. What he doesn’t quite understand is that for him – indeed, for anyone – they are a direct conduit from the unfiltered id.  They erase whatever membrane normally exists between one’s internal disturbances and their external manifestations.

“For most people, who cares?  For the president of the United States, there are consequences. When the president’s id speaks, the world listens.

“Consider his tweets mocking the mayor of London after the most recent terrorist attack.  They were appalling. This is a time when a president expresses sympathy and solidarity – and stops there.  Trump can’t stop, ever.  He used the atrocity to renew an old feud with a minor official of another country.  Petty in the extreme.

“As was his using London to support his misbegotten travel ban, to attack his own Justice Department for having ‘watered down’ the original executive order (ignoring the fact that Trump himself signed it) and to undermine the case for it just as it goes to the Supreme Court.

“As when he boasted by tweet that the administration was already doing ‘extreme vetting.’  But that explodes the whole rationale for the travel ban – that a 90-day moratorium on entry was needed while new vetting procedures were developed.  If the vetting is already in place, the ban has no purpose. The rationale evaporates.

“And if that wasn’t mischief enough, he then credited his own interventions in Saudi Arabia for the sudden squeeze that the Saudis, the UAE, Egypt and other Sunni-run states are putting on Qatar for its long-running dirty game of supporting and arming terrorists (such as the Muslim Brotherhood and Hamas) and playing footsie with Iran.  It’s good to see our Sunni allies confront Qatar and try to bring it into line. But why make it personal – other than to feed the presidential id?  [Ed. Trump repeated this today in the Rose Garden.]  Gratuitously injecting the U.S. into the crisis taints the endeavor by making it seem an American rather than an Arab initiative and turns our allies into instruments of American designs rather than defenders of their own region from a double agent in their midst....

“Trump was elected to do politically incorrect – and needed – things like withdrawing from Paris. He was not elected to do crazy things, starting with his tweets.  If he cannot distinguish between the two, Trump Derangement Syndrome will only become epidemic.”

Wall Street

Stocks shrugged off all the sideshows, from renewed terrorism in London, to the various congressional hearings, including the Comey tutorial, and hit new highs, until the Street woke up to the valuations on some of the high-flyers and took Nasdaq down big Friday, 1.6% for the week.

It’s just that investors are way too optimistic about the Trump agenda vs. reality, including the congressional timetable, and the fact repeal of ObamaCare has to get done first, so the Republicans can recognize the deficit savings on whatever plan they come up with jointly between the House and Senate, and then apply that to any tax reform effort and these things just don’t happen overnight.

As for Trump’s initiative on infrastructure this week, as with repealing ObamaCare and a tax cut proposal, Democrats have zero incentive to cooperate with the White House and their Republican colleagues at this point.  They already smell blood in the water re 2018.

Meanwhile, this coming week the Federal Reserve’s Open Market Committee convenes and another rate hike appears to be in the cards.  But with all the uncertainty on the Republicans’ growth agenda, I just believe the Fed should wait.

Europe and Asia

First some economic news in euroland.  GDP was 0.6% in the first quarter, up 1.9% year-over-year, with Germany at 0.6% (1.7% yoy), France 0.4% (1.0%), Spain 0.8% (3.0%), Italy 0.4% (1.2%) and Greece 0.4% (0.4%).  [Source: Eurostat]

So the last four quarters in the eurozone look like this.

Q2 2016...0.3%
Q3 2016...0.4%
Q4 2016...0.5%
Q1 2017...0.6% 

The eurozone final composite PMI reading for May came in at a strong 56.8 (50 being the dividing line between growth and contraction), unchanged from April.  The services reading for the EA19 was 56.3 vs. 56.4. [Markit]

The services PMI in Germany was 55.4, France 57.2, Spain 57.3, Italy 55.1, and Ireland 59.5.

The U.K. service sector reading fell to 53.8 from 55.8 in April, while new car registrations there declined 8.5% last month, according to the Society of Motor Manufacturers and Traders.

Then there was the European Central Bank, which decided to maintain its dovish policies despite an economy that is clearly improving broadly.

The ECB staff, in raising their growth outlook, cut its inflation forecasts to 1.5% in 2017, 1.3% in 2018 and 1.6% in 2019 – still some distance from the target of 2%.  ECB President Mario Draghi continued to warn that there is no sign inflation is picking up.

Draghi said that while there was “stronger momentum in the euro area economy,” a “very substantial degree” of stimulus was still needed to support stronger inflation.

[Growth forecasts were lifted for the EA19 slightly to 1.9% this year, with 1.8% in 2018.  The Organization for Economic Cooperation and Development, OECD, predicted growth in the eurozone would be 1.8% both this year and next.]

It does seem that the current level of bond buying, 60bn euro a month, will slow in 2018.  The next big meeting for the ECB will be in September, at which time it will decide whether to continue bond buying into next year or to start winding down.  Draghi said this week, though, that there was no talk of tapering at their confab.

But German Finance Minister Wolfgang Schauble told voters the ECB was now “on a path of gradually exiting from its ultra-loose monetary policy.”

Separately, Banco Popular, after burning through $4bn of emergency central bank funding in the first two days of this week amid a full-scale bank run, was sold for a symbolic 1 euro ($1.11) to its bigger rival Banco Santander. The ‘run’ occurred after persistent talk that Popular couldn’t survive without a viable merger partner.

But the way this unfolded was a strong test of the EU’s new template for dealing with other problem lenders in the region, including a handful of banks in Italy, the next flashpoint, and it worked. There is also the rising possibility of a snap election in Italy in the fall and this could prove quite chaotic.

The British Elections: The British people learned you don’t pick a “Remainer” politician to lead a Brexit party. What was once a 20-point lead for Prime Minister May’s Conservatives after she called a snap election, began to shrink rapidly. Early in the week an ICM poll had it at 12 points, 46-34 over Labour, but this would give May a majority of 96 seats in Parliament, much larger than the 17 she had prior to the vote.

But a YouGov survey, using a different methodology, said the Conservatives would fall 20 seats short of a majority, and then the first exit poll emerged Thursday and it had the Conservatives winning 314 seats, short of the 326 needed in a 650-seat parliament.

So much for the landslide.

With 649 of 650 seats decided....

318 Conservatives (Tories)
261 Labour
35 SNP (Scottish National Party)
12 LD (Liberal Democrats)
10 DUP (Northern Ireland’s Democratic Unionist Party...holds views similar to Conservatives)
0 UKIP (since Nigel Farage left the party, it’s been a disaster).

The people, in rejecting Prime Minister May’s vision of a hard Brexit, are perhaps hoping this paves the way for a ‘soft’ version.

Prime Minister May asked Queen Elizabeth for permission to form a government on Friday.  The DUP agreed to back May, giving the coalition 328 seats of 650, two above the level needed to have a majority.  To say it is a thin margin is an understatement, especially considering the Tories are far from united.

Mrs. May said Friday afternoon that Brexit negotiations with the EU would commence as planned on June 19, and with such an uncertain political situation in Britain, there is zero guarantee an agreement will be reached within the two-year period allotted and that would be disastrous.  [Extensions can be granted.]

A parliament in a state of flux, though, will lead to tremendous uncertainty in the business community and picture you’re the leader of your corporation, already not knowing how the trade relationship with the EU will work out in the end.  Are you going to be making any investments until you do?  So ‘business’ must be the first priority of the negotiators, but trade deals aren’t just drawn up overnight and implemented (let alone approved by every EU government and parliament).

This is just truly going to be a s---storm.

The main figures in Prime Minister May’s cabinet did agree to stay on, including finance minister Philip Hammond and foreign minister Boris Johnson, while David Davis will remain in charge of the government’s Brexit department, but even here, May probably preferred to shake a few positions up.

Mrs. May knows that for now there will be no new referendum on Brexit and she can’t overturn the vote of the people.

Labour leader Jeremy Corbyn, the big winner on Thursday, said May’s attempt to win a bigger mandate had backfired.

“The mandate she’s got is lost Conservative seats, lost votes, lost support and lost confidence,” he said.  “I would have thought that’s enough to go, actually, and make way for a government that will be truly representative of all of the people of this country.”

Asked whether Brexit negotiations should be delayed, Corbyn told Sky News: “They’re going to have to go ahead because Article 50 has been invoked....Our position is very clear, we want a jobs-first Brexit, therefore the most important thing is the trade deal with Europe,” he said.

What was clear is Corbyn energized the young vote, as Corbyn stressed Britain had had it with austerity and severe cuts to underfunded schools and the education service “and not giving our young people the chance they deserve in our society,” as he put it in his victory speech, taking a massive personal vote of 40,086 in his London constituency of Islington.

Meanwhile, the Scottish secessionist movement suffered a fatal blow when the SNP lost 21 of its 56 seats to parties that want to keep the United Kingdom intact.  Nicola Sturgeon’s bid for a second independence vote is history.

As for the importance of Northern Ireland now, Sinn Fein won a further three seats to bring their total to seven.  Much more on this topic in the coming weeks and months.  It’s complicated.  For example, this week, a massive amount of Semtex, as well as detonators, was discovered after a bomb plot was foiled in Dublin.  Two men were arrested at the scene, one with close links to the New IRA, the dissident republican terror group.

Editorial / The Economist

“Her political career has been defined by caution. So it is cruel for Theresa May, and delicious for her enemies, that it may have been ended by one big, disastrous gamble. Eight weeks ago she called a snap election, risking her government for the chance to bank a bigger majority against an apparently shambolic Labour opposition.  With the Conservatives 20 points ahead in the opinion polls, it looked like a one-way bet to a landslide and a renewed five-year term for her party. But there followed one of the most dramatic collapses in British political history. As we went to press in the early hours of June 9, the Tories were on course to lose seats, and perhaps their majority....

“Whoever becomes prime minister will very soon have to grapple with three crises. First is the chronic instability that has taken hold of Britain’s politics, and which will be hard to suppress. This week’s poll reveals a divided country – between outward- and inward-looking voters, young and old, the cosmopolitan cities and the rest, nationalists and unionists....

“Second, the economy is heading for the rocks in a way that few have yet registered. Whereas in 2016 the economy defied the Brexit referendum to grow at the fastest pace in the G7, in the first quarter of this year it was the slowest.  Unemployment is at its lowest in decades, but with inflation at a three-year high and rising, real wages are falling.  Tax revenues and growth will suffer as inward investment falls and net migration of skilled Europeans tails off. Voters are blissfully unaware of the coming crunch. Just when they have signaled at the ballot box that they have had enough of austerity, they are about to face even harder times.

“And this is the beginning, in just 11 days, of the most important negotiation Britain has attempted in peacetime. Brexit involves dismantling an economic and political arrangement that has been put together over half a century, linking Britain to the bloc to which it sends half its goods exports, from which come half its migrants, and which has helped to keep the peace in Europe and beyond.

“Brexit’s complexity is on a scale that Britain’s political class has willfully ignored. Quite apart from failing to spell out how to negotiate history’s trickiest-ever divorce, no politician has seriously answered the question of how the economic pain of Brexit will be shared.  Less trade, lower growth and fewer migrants will mean higher taxes and lower public spending.  Voters seem resigned to the fact that they were duped by promises of a Brexit dividend of more cash for the National Health Service.  No one has prepared them for the scale of the hardship they will endure in its name.

“Mrs. May said that her reason for calling the election was to get a mandate to negotiate Brexit along the lines she set out in January: to leave the single market and to press ahead with cuts to immigration that no one considers feasible. During the campaign, she added nothing to her thin Brexit strategy beyond resurrecting the fatuous slogan that ‘no deal is better than a bad deal.’

“Let us be clear: after this vote there is no mandate for such an approach.  Only an enemy of the people would now try to ignore the election and press ahead regardless with the masochistic version of Brexit that Mrs. May put to voters.  There are no grounds to reverse the referendum result – though Nigel Farage, the former UKIP leader, warns that a new referendum may be coming.  But the hard Brexit that Mrs. May put at the center of her campaign has been rejected. It must be rethought.”

Therese Raphael / Bloomberg

“Theresa May, the U.K. prime minister, is known as a careful plodder, more technocrat and master-of-the-brief than glad-hander. But she took the biggest gamble possible in politics: She called an election she didn’t have to call in a bid to increase her governing majority. David Cameron did something similar in deciding to put Britain’s membership in the European Union up for a vote last year. Both thought victory was assured and both were punished for their hubris....

“Ultimately, May seemed to harbor the same twin conceits as Cameron, Clinton and even France’s mainstream parties: All underestimated the appeal of their opponent’s message, and all assumed that voter support was sticky – that once you have it, you get to hold it.  Like a fading brick-and-mortar retailer, they banked on loyalty that no longer exists.

“Today’s voters instead resemble online shoppers. They can move quickly and impulsively, but are also ruthless, inclined to deliver a scathing review, and quick to demand a refund if they aren’t happy. Misreading that was May’s biggest error: She looked at poll figures back in April and saw a stock instead of a flow.  With party loyalty at a low in the U.K., as elsewhere, there’s more onus on a leader’s personality, so each one of May’s missteps – and there were many – were magnified.

“There’s irony in how May got here.  Cameron sought to put an end to Tory divisions over Europe by holding a referendum that would settle the matter, unite the party and keep it in power. When his gamble failed, May inherited Brexit and the party, with its simmering divisions. She called a vote of her own to settle any remaining doubts and strengthen her hand.  Her party is still clinging to power – but only just.”

Lastly, the terror attack on London Bridge and nearby Borough Market late Saturday night that killed eight and wounded 48, some critically, was carried out by ISIS, and what emerged is that the three attackers, gunned down by police just eight minutes after the call went out, had been on various terrorism watch lists.

This attack, coupled with the Manchester bombing of an Ariana Grande concert the week before that killed 22, hurt Mrs. May at the polls because she had been Home Secretary for six years, the person most responsible for domestic security and counterterrorism, before taking over as prime minister.

Even her own foreign secretary, Boris Johnson, a former London mayor, said of the findings that the first identified was a known terrorist, “How on earth could we have let this guy or possibly more through the net – what happened?” 

The French Elections: The first round of parliamentary elections is Sunday, run-offs the following week, and the polls here have been consistent...President Emmanuel Macron and his one-year-old party are expected to gain a majority, which would be huge in promoting their reform agenda.  Macron’s Republic on the Move, LREM, is slated to get 350-380 of the seats in the 577-seat lower house by the evening of June 18.

We’ll see what happens with round one, but for the record an Ipsos Sopria-Steria poll had the LREM receiving 29.5% in the first round, vs. 23% for the Conservative Republicans.  Marine Le Pen’s National Front is not expected to fare well at all.

Lastly, Catalonia announced it would hold a referendum on splitting from Spain on October 1, the head of the regional government said on Friday, setting the stage for months of heightened confrontation with the central government, which has long said any such vote is illegal and will not take place.

Turning to Asia, China’s private Caixin services PMI registered 52.8 in May vs. 51.5 in April.

Exports grew more than expected last month, 8.7% year on year in May, while imports jumped 14.8%, also better than forecast.

China’s consumer inflation in May picked up to 1.5% from a year earlier, compared with April’s 1.2% gain. The producer price, or factory gate index rose 5.5% last month, after a 6.4% rise in April.

In Japan, the services PMI last month was 53.0 vs. 52.2. But real wages (adjusted for inflation) were flat in April year-over-year, which impacts household spending, which the government and central bank have been hoping would kick in but likely won’t without sustained pay hikes.

Street Bytes

--Stocks finished mixed, with the Nasdaq finishing down 1.6% after it took a 2% drubbing on Friday following a bearish assessment of the high-flyers by a Goldman Sachs analyst.

Specifically, the likes of Facebook, Amazon, Apple, Microsoft, Netflix and Google, as well as Tesla, Twitter and Snap, all lost 2% to 5% on Friday.

The Dow Jones, though, finished up 0.3% to 21271, a new all-time high, while the S&P 500 fell 0.3%.

--U.S. Treasury Yields

6-mo. 1.11%  2-yr. 1.33%  10-yr. 2.20%  30-yr. 2.86%

All about being on Fed watch this week.

--The House voted 233 to 186 on Thursday to rewrite the 2010 Dodd-Frank financial-overhaul law, the Obama-era response to the financial crisis.  But this isn’t worth spending any real time on because it won’t gain sufficient support in the Senate.  They are working on their own regulatory rollback, which they believe can gain some Democratic support.

That said, aspects of the House plan could be adopted, such as support for small banks and small business.

Editorial / Wall Street Journal

“Dodd-Frank is built on the conceit that the same regulators who missed the last crisis will somehow predict the next one as long as they have more power.  But there will inevitably be another mania and panic, and regulators always miss them. The definition of a financial mania is that everyone thinks the good times will last forever.

“Financial Services Chairman Jeb Hensarling’s Financial Choice Act addresses this tragic flaw by offering banks an option: Stay subject to Dodd-Frank’s costly regulations, or hold capital equal to 10% of assets in return for more lending freedom and less red tape.

“Banks lend with taxpayer-insured deposits, and high levels of capital are a guardrail for taxpayers and shareholders.  If the guardrails are high enough, banks can afford to take more risks without bank examiners second-guessing every loan.  We’d prefer even higher capital levels, but Mr. Hensarling is raising the bar while moving banks away from their Dodd-Frank status as de facto public utilities.

“Democrats call this a favor to Wall Street, but note that the biggest banks oppose the Hensarling bill. They’ve prospered under Dodd-Frank because they can more easily absorb compliance costs than can smaller competitors.  By one estimate the average capital ratio of the seven largest banks is around 7%, while most regional or community banks hold 10% or more in capital....

“The Federal Reserve Bank of Richmond reports that from 2010 through 2013 only four new banks were started in the U.S.  Before the panic the average was 100 a year.  All of this has cut lending for new small businesses essential for faster economic growth.”

We’ll see what the Senate does and what will warrant further reporting.

--“The U.S. exported 1 million barrels of oil a day during some months so far this year – double the pace of 2016 – and is on track to average that amount for all of 2017, according to a Wall Street Journal analysis of data from the U.S. Energy Department and the International Trade Commission.,” as reported by the Journal’s Lynn Cook.

“In another era, a domestic glut and low prices, currently hovering under $50 a barrel, might have caused companies to slow the pace of drilling.  But since Congress lifted a ban on oil exports at the end of 2015, shipments out of Texas and Louisiana have skyrocketed, taking the fruits of the U.S. fracking revolution to new markets....

“Exports represent a relief valve for U.S. drillers, who are ramping up production at a pace to surpass 10 million barrels a day, a new record, by next year if not sooner.”

The U.S. still imports 10 million barrels a day, but this figure has dropped sharply in recent years.

Crude prices continued to decline this week largely on the heels of inventory data that showed a far larger increase than expected.

--Robert Samuelson / Washington Post

“The coal-mining jobs that President Trump thinks were destroyed by government regulation – adopted to combat air pollution and global warming – were actually lost to old-fashioned competition from other American firms and workers.  Eastern coal mines lost market share to Western coal, which was cheaper.  And natural gas grew at coal’s expense because it had low costs and lower greenhouse-gas emissions.

“That’s the conclusion of a new study by economist Charles Kolstad of the Stanford Institute for Economic Policy Research, as reported on the Conversable Economist website.  Kolstad’s conclusion mirrors the findings of Glenn Kessler – The Washington Post’s Fact Checker columnist – who disputed the recent claim by Scott Pruitt, administrator of the Environmental Protection Agency, that Trump’s policies had increased coal employment by nearly 50,000 jobs.  Pruitt had wrongly attributed most increases in ‘mining’ jobs to coal when most occurred in oil and gas operations. The number of added coal jobs, Kessler estimated, was closer to 1,000.

“According to Kolstad, the combined effect of cheaper strip-mined Western coal and greater supplies of natural has devastated the coal industry.

“Consider:

“For years, coal was the dominant fuel for electricity production, accounting for 50 percent to 60 percent of generation. But the expansion of natural gas, made possible by ‘fracking’ (technically: ‘hydraulic fracturing’ – the opening of natural gas fields by injecting high-pressure water into gas reservoirs), has displaced coal in many parts of the country.  Since 2008, coal production has dropped nearly 40 percent, from almost 1.2 billion tons to about 728 million tons in 2016.  The share of electricity fueled by coal fell to 32 percent in 2016, slightly behind the 33 percent for natural gas, estimates the U.S. Energy Information Administration.

“Employment losses are even more dramatic. In its heyday, coal mining accounted for nearly 400,000 (to be precise: 388,000 in 1950). By 1979, that had already dropped to 227,000, and in 2015, the total was 75,000. Although natural gas explains most recent losses, the earlier declines reflected the inroads of cheaper Western coal into the markets long dependent on costlier Eastern coal.  Indeed, Western coal has provided all of the increase in total coal output since the mid-1970s....

“The point here is simple. Even if environmental regulation and climate change didn’t exist, the coal industry would have faced intense pressures to change and adapt.  Government isn’t killing the coal industry.  ‘Progress is the culprit,’ concludes Kolstad’s study.”

--Canada said on Friday that the economy had added 54.500 jobs, well above expectations, with the unemployment rate rising to 6.6%, as forecast, with more people entering the labor force.

--China’s Alibaba issued revenue guidance for 2017 of 45-49%, which would equate to sales of about $34bn, while the Street was forecasting $31.4bn. Shares soared 13% Thursday in response.

Last year, revenue increased 56%, but this included a newly acquired ecommerce group, Lazada, that was incorporated into Alibaba’s results. Strip that out and growth would have been 44-45%.

--Uber fired 20 employees following an internal investigation into harassment and related claims by law firm Perkins Coie, which is investigating in parallel with a broader probe by former Attorney General Eric Holder...part of an investigation into 215 harassment complaints going back to 2012.  Uber told staff it took remedial action in 58 cases and decided no action was needed in 100+ more.  [I have no time to comment on CEO Travis Kalanick’s advice letter on sex ahead of a company celebration from 2013, just uncovered.  But he’ll be fired shortly.]

--Sears Holdings is closing 66 more stores in its Sears and Kmart chains as it strives to return to profitability.  49 Kmart and 17 Sears stores are involved, with most shutting down by September. So this is on top of a previously announced, and unannounced, 180 closures (126 Kmart, 54 Sears).

--J Crew announced that longtime CEO Mickey Drexler will be stepping down, replaced by James Brett, president of home-furnishing retailer West Elm (a subsidiary of Williams-Sonoma).

Drexler, who joined J Crew in 2003 from rival retailer Gap, will retain the chairman title.  The company has been struggling of late, reporting a 3% decline in total revenues last year, with a whopping 7% drop in same-store sales.

--It seems the members of the founding Nordstrom family have had enough of being a public company after 39 years, and the department store operator appears likely to go private again.

Any deal, though, would require the family to acquire 100 percent of Nordstrom’s outstanding shares.

--General Motors said its sales in China fell in May for a second consecutive month.  GM is the second-largest foreign automaker behind Volkswagen.

In the first five months of the year, GM’s sales in China fell 3.7% to 1.48 million vehicles.

Overall auto sales in China rose 4% for January to April, according to the China Association of Automobile Manufacturers.

--Bridgewater Associates chief Ray Dalio, who was initially high on the Trump presidency and his economic agenda, is having doubts today.

“When faced with the choices between what’s good for the whole and what’s good for the part, and between harmony and conflict, he has a strong tendency to choose the part and conflict,” Dalio said in a LinkedIn post.  “The more I see Donald Trump moving toward conflict rather than cooperation, the more I worry about him harming his presidency and its effects on most of us.”

Dalio, founder of the $160bn hedge fund, said Trump’s decision to exit the Paris climate accord was the latest example of his approach to conflict.

“Every week is telling in that regard,” he said Monday.

--Apple Inc. introduced a voice-activated speaker on Monday, the HomePod, which is designed to compete with Amazon.com’s Alexa and Alphabet’s Google Assistant, Apple having fallen behind with its virtual assistant Siri that it launched in 2011.

Amazon is estimated to have sold about $1 billion in speakers in about two years in the U.S. (the company doesn’t break it out individually in its earnings reports).

About 36 million Americans will use a voice-enabled speaker at least once a month this year – twice as many as last year, according to eMarketer, a market-research firm.

The HomePod is the third major piece of hardware that Apple has launched since CEO Tim Cook assumed leadership in 2011; the other two being Apple Watch, launched in 2015 and a bust, and AirPods, the wireless headphones introduced last September, which have had  production issues.

--Verizon Communications is expected to cut about 2,000 jobs when it completes its $4.48 billion acquisition of Yahoo Inc.’s core assets next week, with the cuts to come from the AOL and Yahoo units, about 15% of the staff at the two units.  Many of the jobs are in California and some outside the U.S., according to Reuters.

Yahoo shareholders on Thursday approved the company’s sale.  Verizon will now rebrand AOL and Yahoo as part of a new venture called Oath, led by AOL CEO Tim Armstrong.

--Matthew Zames, the chief operating officer at JPMorgan Chase, is leaving the firm.  Zames, 46, had once been thought to be a possible successor to CEO Jamie Dimon, but with Dimon apparently prepared to stick around for another five years, Zames wants to explore opportunities elsewhere.

--SpaceX launched its first recycled cargo ship to the International Space Station on Saturday. The unmanned Falcon rocket blasted off carrying a Dragon capsule that made a station delivery nearly three years ago.

The first-stage booster flown Saturday was brand new, and returned to Cape Canaveral following liftoff for a successful vertical touchdown. The plan is to use it again as well, instead of junking it in the ocean.

--The Centers for Disease Control and Prevention issued the first report on how the Zika virus affected U.S. territories and it showed that 5 percent of women with confirmed infections had babies with birth defects.  The study included official numbers from Puerto Rico, which on Monday declared the Zika epidemic had ended.  But the CDC continued to reiterate that Zika remains a risk for pregnant women there and anywhere else the mosquito-borne virus is active.

“Zika virus poses a serious threat to pregnant women and their babies, regardless of when the infection occurs during the pregnancy,” said CDC Acting Director Dr. Anne Schuchat.

--According to figures from International Wine and Spirits Research, a London-based industry group, the global market for alcoholic drinks fell 1.3% last year, steeper than the average 0.3% decline of the previous five years.

Beer sales fell 1.8% in 2016, versus a five-year average decline of 0.6%.  In the U.S., a Bernstein analysis concludes beer sales in the U.S. this year will decline 2%, which according to Trevor Stirling would be “the worst year for beer volumes” here “since 2009.”

According to the Beer Institute, volumes fell 5% in the three months February to April.

Don’t look at me.  I’m more than doing my part.

--After 17 years in the cellar, MSNBC was No. 1 in prime-time cable news last month, buoyed by a surge in interest in news and the success of Rachel Maddow.  MSNBC beat its rivals in the critical 25-to-54 age demographic, up a whopping 118% from a year earlier.

MSNBC’s morning and afternoon audience is growing fast as well, far outstripping the growth at CNN and Fox News. The network has also recently hired conservative commentators Hugh Hewitt and George Will, while assigning a former senior aide to President George W. Bush, Nicolle Wallace, an afternoon talk show; moves not appreciated by some liberals.

But ratings are fickle and last week Fox News was No. 1 again in weekday prime time.

--Meanwhile, CBS’ “60 Minutes” edged out the heavily promoted premiere of NBC’s “Sunday Night with Megyn Kelly” in the ratings, but it did beat CBS in the 25-to-54 demo.

I will comment on Kelly’s interview with Russian President Putin down below.

--The Comey hearings on Thursday drew 19.5 million viewers, according to Nielsen, which is a big number for a daytime event, but less than the 30.6 million who tuned in to President Trump’s inauguration.  Trump will be most pleased by this. Might even tweet about it.

Foreign Affairs

Saudi Arabia, Qatar et al: In a sudden move on Monday, Saudi Arabia, Egypt and a number of Gulf states, cut ties with Qatar, accusing it of supporting terrorism in the region and for its growing relations with Iran.  Qatari nationals in Bahrain, Saudi Arabia and the UAE were given two weeks to leave, while Egypt joined the others in closing its airspace to Qatari planes, with Qatar’s capital of Doha a major hub for international flight connections. Airlines affected include Qatar Airways, Etihad and Emirates. Qatari planes will now have to take longer routes to avoid Saudi airspace.

Yemen then expelled Qatar from its Saudi-led Arab coalition fighting Iranian-backed Houthi rebels in the country.

There were immediate concerns over food and water supplies as Qatar is reliant on imported food, much of it transported across the now closed border with Saudi Arabia.

Trump has offered to help mediate the crisis, and Qatar said it would welcome his participation.  Trump called Qatari Emir Sheikh al Thani and urged action against terrorism.  Saudi Foreign Minister Adel al-Jubeir said Gulf states could resolve a row with Qatar among themselves without outside help.  Saudi Arabia apparently has 10 demands of Qatar, including shutting down Al Jazeera.

Meanwhile, the UAW threatened anyone publishing expressions of sympathy towards Doha with up to 15 years in prison while barring entry to Qataris.

Qatar has backed Islamist movements but denies supporting terrorism. Turkey pledged to provide food and water to Qatar if needed.  Defense Secretary James Mattis spoke to his Qatari counterpart to express commitment to the Gulf region’s security.

Qatar said there was “no legitimate justification” for the countries’ decision to cut ties, though it vowed its citizens wouldn’t be affected by the “violation of its sovereignty.”

Qatar is to host the 2022 FIFA World Cup.

Editorial / Wall Street Journal

“The rift between Qatar and four of America’s Sunni-Arab allies led by Saudi Arabia broke into the open this week....President Trump seemed to signal support for the diplomatic blockade on – where else? – Twitter.  This is an overdue reckoning for Qatar, albeit with some risk to Western interests.

“On Monday, Bahrain, Egypt, the Saudis and the United Arab Emirates suspended diplomatic ties with the Qataris. The Saudis spoke for the other three when they accused Doha of ‘financing, adopting and sheltering extremists,’ and they are right.  For years the Qataris have maintained a two-faced policy toward the West, their Arab neighbors and the various Islamist movements that threaten Middle East stability.

“Qatar hosts a military base that is crucial to American operations against jihadists including Islamic State. The base is also a guarantor of the tiny country’s independence, against the Saudis as well as Iran, with which Doha shares a natural-gas field in the Gulf.

“At the same time the Qataris have supported the Islamist groups that seek to overthrow established regimes. Al Jazeera, the Qataris’ popular television network, provides a platform to Yusuf al-Qaradawi, a leading Islamist ideologue who has praised Hitler for carrying out ‘divine punishment’ against the Jews....

“It isn’t clear what triggered this week’s rupture, which some attribute to a recent ransom payment of $1 billion to an Iranian-backed militia that had kidnapped prominent Qataris in Iraq.  Others point to Mr. Trump’s tough anti-Islamist rhetoric during his visit to Riyadh last month. The Saudis may have interpreted Mr. Trump’s speech as a green light to confront Qatar after eight years during which his predecessor looked the other way.  Mr. Trump bolstered that conclusion with a tweet Tuesday: ‘During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology.  Leaders pointed to Qatar – look!’

“Mr. Trump can’t seem to resist giving himself credit for everything.  But the goal of U.S. policy now should be to restore Arab unity to forge a common front against Sunni radicals and Iranian imperialism.  The aim of the current pressure shouldn’t be to permanently isolate Doha but to bring its conduct into line with what is expected of a Western ally. The diplomatic brawl has put Qatar on notice that it must stop supporting radicals, but the country will be an even larger problem if it joins arms with Iran.”

Editorial / The Economist

The tribal feuding among the Al Thanis, Al Khalifas, Al Sabahs and Al Sauds has been the norm for centuries. From their beginnings in Nejd, the barren interior of the Arabian peninsula, they sparred for the best coastal spots from which to launch pirate raids into the Gulf. But even at the height of acrimony, they always observed unwritten rules of refuge and hospitality. When the tribes became states five decades ago, their people still traveled, lived and intermarried across lines in the sand.  Their sheikhs might withdraw their ambassadors when tempers flared, but even when King Salman of Saudi Arabia went to war in Yemen in 2015, he let more than a million Yemenis in his kingdom stay.

“For Gulf Arabs, the expulsion of Qataris by Bahrain, the United Arab Emirates (UAE) and Saudi Arabia ordered on June 5th is more shocking than a declaration of war.  It has torn up their code of conduct.  With two weeks’ notice to leave, Saudi husbands fear they might forfeit their livelihoods if they follow their Qatari wives. The queues at Qatar’s only land border, with Saudi Arabia, already tail back for miles. The dunes have become barriers, preventing the entry of people and goods, including much of Qatar’s food supply.  Short-haul tourism has collapsed. The UAE has criminalized any expression of sympathy for Qatar, tweets included. Diplomatic ties have been severed, and air, land and sea links closed by the three neighbors, as well as by Egypt and Yemen.

“Protruding like a sore thumb from the Arabian peninsula, tiny Qatar has long bugged its neighbors.  But the explanations offered for the sudden, unprecedented closure seem inadequate.  Only a fortnight beforehand, the Qatari emir had stood smiling alongside those who have now banished him.  In a show of unity, they feted Donald Trump, the American president, in Riyadh.  Saudi Arabia blames Qatar’s involvement in terrorism, which to those recalling the role of Saudi jihadists played on 9/11 sounds rich. Qatar’s ties to Iran, too, irk Saudi clerics and kings, particularly the joint and expanding development of South Paris, the world’s largest gas field. But Kuwait and Oman are on similarly good terms with the Islamic Republic, and Dubai, one of the UAE’s seven emirates, provided the biggest back door into Iran when the world imposed sanctions on it.

“The pretensions of Qatar’s ruling Al Thani family to global grandeur have also vexed other rulers. The statelet has sought significance by offering a sanctuary to the Muslim Brotherhood, the Arab world’s foremast movement.  Diplomats found in Qatar a place in which to talk to Islamists, including Yousef Qaradawi, the Brotherhood’s favorite preacher; Khaled Meshal, until recently the leader of Hamas, the militant Palestinian group; Abbassi Madani from Algeria; and several of the Taliban’s leaders.  A media empire led by Al Jazeera, a satellite TV channel, has for decades helped Qatar find a mass audience.  It offered a platform to dissidents from across the region (except Qatar), giving voice to popular anger which erupted in the Arab spring of 2011.  It then goaded revolutionaries to take up arms, and endorsed Islamists who stood in elections.  Qatar bankrolled their campaigns and filled their coffers when they took power....

“A generation ago the Gulf was led by consensus-builders... But petrodollars, vast arsenals and Mr. Trump’s blessing risk turning their descendants into vainglorious autocrats with talents for inflaming, not compromising....

“For now, the Al Thanis have the means to withstand the pressure....Mr. Trump might celebrate Qatar’s come-uppance in tweets, but he must still consider the roughly 10,000 soldiers stationed there at al-Udeid, America’s largest air base in the Middle East...Egypt, which has also severed ties, knows that Qatar may retaliate by expelling its workers if it hinders Qatari exports through the Suez canal.  Even the UAE worries that Qatar might shut off the gas pipeline supplying its domestic market.

“But things can get much nastier....Gulf officials warn that more ‘punitive, economic measures could follow.  An attack, claimed by Islamic State, on Tehran’s parliament on June 7th has heightened the tension: Iran is blaming Saudi Arabia, though without evidence.

“There will be few winners....Investors already unnerved by Yemen’s protracted war have further cause to fear Arabian instability.  Mr. Trump’s recent proposal for an Arab NATO looks aborted.  Plans for the Gulf Co-operation Council to forge a common foreign and economic policy lie in tatters.  If only the world had a superpower focused more on diplomacy and less on selling weapons.”

At Friday’s Rose Garden press conference, President Trump opened by chiding Qatar for funding terrorism, in remarks that further complicate the situation.

“The nation of Qatar has unfortunately been a funder of terrorism, and at a very high level,” the president said.

But this came just hours after Secretary of State Rex Tillerson called for all sides to de-escalate the conflict, and for other Arab nations to end their blockade against Qatar.  Yet there was Tillerson in the Rose Garden.  You can’t make this stuff up.  It’s beyond distressing.

Iran: Militants armed with AK-47s and hand grenades staged a rare and brazen attack on two targets in Tehran; Parliament and a mausoleum containing the tomb of Ayatollah Khomeini, a tourist destination, killing 13.

The speaker of Parliament, Ali Larijani, tried to play down the attacks as a “minor incident,” saying that “some cowardly terrorists” had infiltrated the legislative complex and vowing that “the security forces will definitely take serious measures against them.”

ISIS claimed responsibility, its first attack in Iran, but Iran’s Revolutionary Guards say Saudi Arabia was behind the twin attacks.

“This terrorist attack happened only a week after the meeting between the U.S. president (Donald Trump) and the (Saudi) backward leaders who support terrorists.  That Islamic State has claimed responsibility proves that they were involved in the brutal attack,” said the statement, published by Iranian media.

Iraq/Syria: U.S.-backed fighters have begun the assault on ISIS’ de-facto capital of Raqqa in Syria. The Syrian Democratic Forces alliance of Kurdish and Arab fighters began the battle for the city earlier this week after seven months of fighting to surround the stronghold. The Pentagon announced that “hundreds” of U.S. military personnel are taking part in the offensive, and said Thursday it believed up to 2.500 ISIS fighters were still holed up in Raqqa.

An estimated 300,000 civilians were believed to be living under ISIS rule, including 80,000 displaced from other parts of Syria.  But after thousands have fled, the UN estimates there are 160,000 left.

Meanwhile, in a potentially dangerous escalation, the U.S. launched an air strike on Tuesday against Iranian-backed fighters who it said posed a threat to U.S. and U.S.-backed forces in southern Syria.  The Syrian military command warned against such action. The U.S. said it issued several warnings before the strike, via a military hotline with Russia

In Iraq, the battle for Mosul continues, with the UN saying it had reports of a “significant escalation” of Iraqi civilians being killed by ISIS as they try to flee.

“Credible reports indicate that more than 231 civilians attempting to flee western Mosul have been killed since 26 May, including at least 204 over three days last week alone,” the UN human rights office said in a statement.

The UN also said it estimated 100,000 boys and girls are still in ISIS-held neighborhoods.  This isn’t good.

Afghanistan: At a funeral last weekend for the son of the deputy speaker of the Senate, who was shot in clashes with police at a protest against the government over its failure to prevent the massive attack on Kabul, May 31, at least seven more killed in a triple suicide bombing.

Meanwhile, the Afghan army is a shambles after the resignation of top officials following the devastating attack by the Taliban on a base in April that killed 170.

North Korea: Pyongyang fired another slew of missiles Thursday morning, as their relentless missile testing program continues.  The latest barrage featured short-range missiles that appeared to be anti-ship weapons rather than the ballistic missiles North Korea had been testing recently.

This latest salvo means that Kim Jong Un has now ordered as many missile launches this year, 16, as his father oversaw in 17 years in power.

The head of the U.S. Missile Defense Agency, Vice Admiral James Syring, said on Wednesday that Pyongyang’s technological advances have caused him “great concern.” Syring told a hearing of the House Armed Services Committee that it was incumbent on his agency to assume that North Korea today could “range” the U.S. with an intercontinental ballistic missile carrying a nuclear warhead.

Henry F. Cooper / Wall Street Journal

“Conventional wisdom holds that it will be years before North Korea can credibly threaten the United States with a nuclear attack.  Kim Jong Un’s scientists are still testing only low-yield nuclear weapons, the thinking goes, and have yet to place them on ballistic missiles capable of reaching America’s West Coast.

“While its technological shortcomings have been well documented, North Korea’s desire to provoke a nuclear conflict with the U.S. should not be minimized or ignored.  Pyongyang is surely close to getting it right.

“For South Korea the danger is more immediate. According to physicist David Albright, the founder and president of the Institute for Science and International Security, the North Koreans have between 13 and 30 nuclear weapons and can build as many as five more every year.  If Mr. Kim were to detonate one of these bombs in the atmosphere 40 miles above Seoul, it could inflict catastrophic damage on South Korea’s electric power grid, leading to a prolonged blackout that could have deadly consequences.

“The United States has 28,500 soldiers, sailors, airmen and Marines in South Korea stationed below the 38th parallel – and more at sea nearby. An electromagnetic pulse attack on South Korea could play havoc with America’s ability to mount an effective response to North Korean aggression.  One hopes the troops manning the two already-deployed batteries of the THAAD ballistic-missile defense system are prepared for such a scenario...

“According to Peter Vincent Pry, staff director of the congressional EMP commission, a recent North Korean medium-range missile test that was widely reported to have exploded midflight could in fact have been deliberately detonated at an altitude of 40 miles.  Was it a dry run for an EMP attack?  Detonation at that altitude of a nuclear warhead with a yield of 10 to 20 kilotons – similar to those tested by North Korea – would produce major EMP effects and inflict catastrophic damage to unhardened electronics across hundreds of miles of surface territory. It is a myth that large yield nuclear weapons of hundreds of kilotons are required to produce such effects.”

What is particularly scary is that Kim Jong Un may prefer an EMP attack because, “for one thing, accuracy is not a concern; the North Koreans simply need to get near their target to sow chaos.  Nor would they need to worry about developing a reliable re-entry vehicle for their ballistic missiles....

“The U.S. and South Korea should ensure their ballistic-missile defenses are effective and harden their electric power grids against EMP effects as soon as possible.  The day of reckoning could come sooner than anyone in either country thinks.”

Meanwhile, South Korea said the deployment of the U.S. missile defense system, THAAD, should be suspended until the government looks at the environmental impact.  Oh brother.

But, late Friday, Seoul announced it does not aim to change its agreement on the deployment of the system, per the national security adviser.  Chung Eui-yong said the environmental impact move was just to ensure the democratic process was adhered to and that the decision was now made.

China: A Pentagon report on Tuesday singled out Pakistan as a possible location for a future Chinese military base, as it forecast that China would likely build more bases overseas once it establishes a facility in Djibouti. 

Separately, speaking at a security conference in Singapore, Defense Secretary James Mattis said the U.S. will not accept China’s militarization of islands in the South China Sea.

Mattis said: “We oppose countries militarizing artificial islands and enforcing excessive maritime claims.

“We cannot and will not accept unilateral, coercive changes to the status quo.”

Mattis also appealed to China for help in dealing with the nuclear threat from North Korea.                   

Addressing the annual Shangri-La Dialogue, Euan Graham, an Asia expert at an Australian think-tank, said: “North Korea is a win-win for China this year, because if North Korea misbehaves we don’t talk about the South China Sea.  If North Korea behaves, China can say it has delivered on its part of the bargain.”

Meanwhile, China’s delegation to the summit in Singapore blasted the U.S. for including Taiwan in its regional strategic partnership with the Asian countries.

Mattis said the U.S. would abide by its commitment to Taiwan and other Asian nations, the first time Taiwan has been mentioned by a U.S. delegation to the regional security forum since its inception in 2002.

“The Department of Defense remains steadfastly committed to working with Taiwan and with its democratic government to provide it the defense articles necessary, consistent with the obligations set out in the Taiwan Relations Act, because we stand for the peaceful resolution of any issues in a manner acceptable to the people on both sides of the Taiwan strait,” said the defense secretary.  [South China Morning Post]

Russia: In the above-mentioned interview with NBC’s Megyn Kelly, President Putin said he was not the culprit behind the election hacks of 2016 and argued they could have been executed by anyone, even proud Russian patriots without his personal knowledge.

“Hackers are free people,” Putin told Kelly, “just like artists who wake up in the morning in a good mood and start painting...The hackers are the same. They would wake up, read about something going on in inter-state relations, and if they feel patriotic they may try to contribute to the fight against those who speak badly about Russia.”

This alibi harkens back to 2014 and Putin’s claim that masked soldiers armed with Russian weapons in eastern Ukraine were simply “local self-defense forces.” A year later, he then admitted Russian soldiers participated in an invasion of the country.

Former FBI director Comey, in his testimony this week, said there was no doubt Russia was involved in the hacks of the DNC and other operations.

But back to Megyn Kelly, if NBC is going to give her a high-profile gig on Sunday’s opposite “60 Minutes,” and she lands a big ‘get’ for her premiere in Putin, why the heck did the network cut the interview to less than 15 minutes?  Why wasn’t it the full hour?  In the edited portion, there was nothing on Ukraine or Syria, for example.

But I was startled that in a promo with the NBC local affiliate in New York prior to the show, Kelly said of the interview with Vlad the Impaler that he is “more complex than the media would portray. He is portrayed as some kind of devil.”

He’s a killer, Megyn.

Brazil: Andrew Purcell / Sydney Morning Herald

“The Rio Olympics were presented as a transformative project that would leave world-class sporting facilities and a modern public transport system as a legacy. Guanabara Bay would be cleaned up, violence brought under control.  An 8.5-billion-real program of investment, Morar Carioca, would urbanize Rio’s favelas by 2020, installing running water, drainage systems, paved roads and street lights.

“Nine months after the Games, violent crime is surging, the bay is as polluted as ever, and the arenas are padlocked and deteriorating. New transport networks are poorly integrated and under-used, and favelas remain neglected by the state, lacking the most basic modern conveniences.  At best, the Olympics represent a criminal waste of a prosperous decade. The gulf between promises made and change delivered is galling.

“ ‘What was the true legacy?  Lots of money for developers and construction companies, and for their colonels, the politicians,’ says Roberto Marinho, a community leader in Morro da Providencia, Rio’s oldest favela.  ‘Where are the basic services in this city? Security is in chaos, the idea of social development has been abandoned... The only legacy is the millions that were pocketed.”

Random Musings

--A 25-year-old Federal contractor was charged Monday with leaking a top secret NSA report – detailing how Russian hackers targeted U.S. voting systems.

The document was published Monday by the Intercept and describes how the Russians infiltrated the voting infrastructure through a spear-phishing scheme targeting local government officials and employees.

Reality Leigh Winner was the dirtball, and NBC was reporting Friday night the girl may have been planning to disclose far more damaging material.

Reality’s mother has expressed concerns over whether the government will make an example of her daughter.  I hope it does, Mrs. Winner.  I hope, if found guilty, the rest of Reality’s life is beyond miserable.

--In the latest job approval ratings for President Trump, Rasmussen has him at 46% approval, Gallup 37%.

--Fox News host Neil Cavuto criticized President Trump’s use of social media and accused him of alienating members of his own party.  On Tuesday Cavuto said on his program:

“Mr. President, it is not the fake news media that’s your problem.  It’s you.  It’s not just your tweeting, it’s your scapegoating.  It’s your refusal to see that sometimes you’re the one who’s feeding your own beast.”

Cavuto tried to give Trump a little “common sense” saying, “Mr. President, they didn’t tweet disparaging comments about a London mayor in the middle of a murder spree – you did.  They didn’t turn on a travel ban that you signed – you did.  You’re right to say a lot of people are out to get you...but...the buck stops with you, Mr. President.”

Cavuto urged Trump to treat the critique coming from “usually friendly and supportive allies as sort of like an intervention...because firing off these angry missives and tweets risk your political destruction.”

Kellyanne Conway’s husband, George, a prominent attorney and Republican supporter, also called out the president for his tweeting habits.

--Sen. John McCain (R-Ariz.) was the side story of the Comey hearings Thursday. The last senator to question the former director, McCain focused his line of questioning on two FBI probes: the 2016 investigation into Hillary Clinton’s use of a private email server and the 2017 investigation into Russian interference in the election.

But McCain seemed confused, Comey was confused by McCain’s questions, and McCain appeared incoherent.  It became the most-tweeted moment of the hearing.

“In the case of Hillary Clinton, you made the statement that there wasn’t sufficient evidence to bring a suit against her, although it had been very careless in their behavior, but you did reach a conclusion in that case that it was not necessary to further pursue her,” McCain’s line of questioning began.  “Yet at the same time, in the case of Mr. (Trump), you said that there was not enough information to make a conclusion.  Tell me the difference between your conclusion as far as former Secretary Clinton is concerned, and Mr. Trump.”

McCain didn’t accept Comey’s answer that the Clinton email investigation was a completed, closed one at the time he announced that “no reasonable prosecutor” would bring a case against her last July, while the Russia investigation is still underway and could be for some time.

McCain then went on and on, refusing to accept one investigation was closed and the other open and viewers were as confused as Comey over what McCain’s point was.

So after Twitter lit up (and I had two family members ask me about McCain’s performance), the senator released a statement that read in part: “What I was trying to get at was whether Mr. Comey believes that any of his interactions with the President rise to the level of obstruction of justice.  In the case of Secretary Clinton’s emails, Mr. Comey was willing to step beyond his role as an investigator and state his belief about what ‘no reasonable prosecutor’ would conclude about the evidence.  I wanted Mr. Comey to apply the same approach to the key question surrounding his interactions with President Trump – whether or not the President’s conduct constitutes obstruction of justice.”

--President Trump nominated Christopher Wray to be the new FBI director.

A former assistant attorney general who led the Justice Department’s criminal division, Wray was appointed by former President George W. Bush.

I agree with President Trump that it seems Wray is “a man of impeccable credentials,” but Wray will be questioned vigorously, you can be sure, over his representation of Gov. Chris Christie in the Bridgegate scandal.

--U.S. Secretary of State Rex Tillerson arrived in Wellington, New Zealand on Tuesday and his motorcade was met by a large number of people greeting his motorcade by flipping him the bird, leaving reporters traveling with Tillerson stunned, a number of them saying they hadn’t seen anything like it.

Granted, a majority of New Zealanders have generally been anti-American, but we’ll let them slide.  Very good beer there...and at the end of the day....

--Democrats are increasingly upset at Hillary Clinton for refusing to take a cue from former President Obama and just step out of the spotlight.  Her recent remarks explaining her loss, including pointing fingers at the Democratic National Committee for her failure, make her look bitter and the party bad.

One former senior aide to President Obama told The Hill: “If she is trying to come across as the leader of the angry movement of what happened in 2016, then she’s achieving it.  But part of the problem she had was she didn’t have a vision for the Democratic Party, and she needs to now take a break and let others come to the forefront.”

--Rep. Trey Gowdy (R-S.C.) was chosen as the next chairman of the House Oversight Committee, replacing retiring Jason Chaffetz.

--@RealDonaldTrump saw a big spike in followers recently – roughly 3 million, most of which were newly created accounts without photos or tweets, the telltale signs of Twitter bots.  Experts say that eventually the bots can be “weaponized” to spread fake news stories that favor the White House.

--Forbes reported that the Trump Organization took in sizable profits for hosting a charity golf event to benefit children’s cancer research, despite its claims that use of the course had been donated.

Since 2007, Eric Trump has held the event at Trump National Golf Club in Westchester County, N.Y., to raise money for the Eric Trump Foundation on behalf of the St. Jude Children’s Research Hospital in Memphis.

Forbes reported that to date Eric Trump has raised more than $11 million – including $2.9 million last year – for the hospital’s work, mostly through the golf tournament.

But the expenses, which averaged $50,000 during the first four years, quickly escalated to $322,000 by 2015, according to IRS filings.  The president’s son, however, had told Forbes, “We get to use our assets 100% free of charge.”

Forbes reported, “It’s clear that the course wasn’t free – that the Trump Organization received payments for its use, part of more than $1.2 million that has no documented recipients past the Trump Organization.  Golf charity experts say the listed expenses defy any reasonable cost justification for a one-day golf tournament.”

--First there was Kathy Griffin, then came Bill Maher, who in an exchange with Nebraska Sen. Ben Sasse, called himself a “house ni--a” after Sasse suggested he visit the Cornhusker state and work in the fields.

As the comment was made, the audience groaned and Sasse grinned.  [The senator regretted this after.]

Maher turned to the crowd and asserted, “It’s a joke.”

So you have the usual fallout on social media, and Black Lives Matter activist DeRay Mckesson (sic) called for Maher to be fired from HBO’s “Real Time.”

I think there’s a difference between what Kathy Griffin did and what Maher did.  Griffin is getting what she deserved.  Maher is being Maher.  He has a fan base and it’s all up to HBO.  I don’t watch his show, and I have HBO, so I voted with my eyeballs long ago.

But I can’t disagree with a tweet addressing both by Cornell Williams Brooks, president of the NAACP: “Great comedians make us think & laugh. When our humanity is the punchline, it hurts too much to think or laugh.”

--New Jersey and Virginia are the only two states this year with gubernatorial races and we had our primary Tuesday.  My man Jack Ciattarelli lost to Lt. Gov. Kim Guadagno for the Republican nomination, 47% to 31%, though Ciattarelli did better than could have been expected just two months ago.

Guadagno will now get her butt kicked by Democrat Philip Murphy, who won 48% of the vote in the Democratic primary.

---

Gold $1268
Oil $45.90

Returns for the week 6/5-6/9

Dow Jones  +0.3%  [21271]
S&P 500  -0.3%  [2431]
S&P MidCap  +0.4%
Russell 2000  +1.2%
Nasdaq  -1.6%  [6207]

Returns for the period 1/1/17-6/9/17

Dow Jones  +7.6%
S&P 500  +8.6%
S&P MidCap  +5.8%
Russell 2000  +4.8%
Nasdaq  +15.3%

Bulls 55.8
Bears 18.3 [Source: Investors Intelligence]

Have a great week.

Brian Trumbore