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08/05/2017

For the week 7/31-8/4

[Posted 11:00 PM ET, Friday]

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

Edition 956

Trump World...Order Restored?

Chief of Staff Gen. John Kelly formally took over on Monday, firing Communications Director Anthony Scaramucci after just ten days in the position and before Kelly had even settled in, while ahead of this, some hoped Kelly’s appointment would spell the end of the president’s tweeting, but this proved not to be the case as Trump tweeted away like an ornery raven.

And then on Thursday, the Wall Street Journal reported that Special Counsel Robert Mueller has impaneled a grand jury in Washington to investigate Russia’s interference in the 2016 election, which virtually everyone agrees is not just a sign his investigation has entered a new phase, but it is in no way a positive for the president.  [Friday we learned there are apparently multiple grand juries.]

So Trump traveled to West Virginia on Thursday night and in a rally blasted the investigation, challenging Democrats to either continue their “obsession with a hoax” or begin serving the interests of the American people.  Trump slammed the probe as a “fake story that is demeaning to all of us and most of all demeaning to our country and demeaning to our Constitution.”

“I just hope the final determination is a truly honest one, which is what the millions of people who gave us our big win in November deserve and what all Americans who want a better future want and deserve.”

Trump added: “Most people know there were no Russians in our campaign. There never were,” he told the cheering crowd, who deep down really are just gearing up for another season of West Virginia football.  “We didn’t win because of Russia. We won because of you.”

Trump argued that Democrats are pushing the “totally made-up Russia story” because “they have no message, no agenda and no vision.”  Well, the Donald is indeed right on this last part.

“The Russia story is a total fabrication.  It’s just an excuse for the greatest loss in the history of American politics.  It just makes them feel better when they have nothing else to talk about.”

OK, stop.  Your own intel team, Mr. President, is unanimous in its belief the Russians meddled in the election at the very least.

Second, the June 2016 meeting with your boy and key campaign staffers was held at your Trump Tower for the purpose of meeting with Russians and, supposedly, collecting dirt on Hillary, at the very least.  Yet your son said nothing of the meeting until confronted on it a year later, and then we learned you personally dictated a misleading statement for Donald Jr. to parrot on the meeting.

I personally don’t see any collusion as yet, but the Russia story is not a “total fabrication.”  You take some of us to be idiots.

Long ago, if the president had just said, “We’re going to let the investigation run its course,” and every time the topic came up in a presser or interview afterward he simply said, “We’re letting Special Counsel Robert Mueller do his thing.  I’m sure we’ll be exonerated of any wrong doing. But we’re focused on our agenda,” and said that with a smile, imagine how much better off he would be, as well as the rest of us.

But noooo!  He may have gone to “great schools,” and believe he’s a “pretty smart guy,” but there’s always a few that slip through the cracks.

[Earlier Thursday, Trump blamed Congress for the current “very dangerous” relationship with Russia.  “Our relationship with Russia is at an all-time & very dangerous low,” he tweeted one day after signing the new sanctions bill overwhelmingly approved by both Houses of Congress.]

Otherwise, I have nothing to say on the grand jury situation.  I’m just going to wait like the rest of you to see what happens next.

I do have to say that one of Sean Hannity’s big deals, that Mueller’s crew of attorneys are major donors to the Democratic Party, is a bunch of hogwash.  You’ve seen the numbers he puts up on the screen, night after night, with the same talking points night after night after night after night....yes, I watch Hannity every evening for balance in my own coverage of the world...and they are small.

Hannity will go, “And Greg Andres.  He gave $3,700 to Democrats!”

That’s nothing!  My name is scattered throughout the Web for giving similar amounts, just like many of yours are.  That doesn’t mean we couldn’t be impartial on something thrown at us.

Anyway, Sens. Thom Tillis (R-N.C.) and Chris Coons (D-Del.) introduced legislation Thursday making it harder for President Trump to fire Mueller.  Under the bill, a special counsel could challenge his or her removal, with a three-judge panel ruling within 14 days on whether the firing was justified.  If the panel found no good cause for the firing, the special counsel would immediately be reinstated.  Needless to say this further fueled Trump’s ire.  Sens. Lindsey Graham (R-S.C.) and Cory Booker (D-N.J.) introduced similar legislation.

The Senate also blocked President Trump from being able to make recess appointments on Thursday as lawmakers left D.C. for their summer break.

Alaska Republican Sen. Lisa Murkowski did the honors, locking in nine “pro-forma” sessions – brief meetings that normally last roughly a minute. What this does is it means the Senate will be in session every three business days during the recess, and under the rules, which I really have no clue about but I’m relying on The Hill and other sources for this, it precludes Trump from making the appointments that so concerned many.  [Such as in making a recess appointment for a replacement for Jeff Sessions at AG.]

In the past the Senate has used similar devices and did so last year to prevent President Obama from being able to fill a vacant Supreme Court seat.  Under the rules, every three days a GOP senator would briefly preside over the upper chamber.

Trumpets....

--I refuse to comment at length on the leaked transcripts of phone conversations between Donald Trump and two world leaders, Australian Prime Minister Malcolm Turnbull and Mexican President Enrique Pena Nieto.  But it is outrageous this was leaked and whoever did it deserves prison time.  Yes, it is a real national security issue.  World leaders will hesitate to talk to Trump or any future president in confidence after this episode.  You don’t want that.

That said, the transcripts hardly make President Trump look good, and of course that was the point of the leaker. The damage has been done, though for the first time you saw some bipartisan backlash. 

And speaking of leaks, Attorney General Sessions said Friday that the Justice Department has more than tripled the number of leak investigations compared to that of the last year of the Obama administration.

Sessions said the Department of Justice had received nearly as many criminal referrals involving unauthorized disclosures of classified information in the first six months of the year as it had received in the prior three years combined.

But just last week, Trump tweeted that Sessions had taken a “VERY weak position” on “Intel leakers.”

--West Virginia Gov. Jim Justice switched parties, going from Democrat to Republican and making the announcement at Trump’s Huntington, W. Va., rally. He is the first sitting Democratic governor to switch to the GOP since Buddy Roemer, the governor of Louisiana, did so in 1991.

Justice becomes the 34th Republican governor in America, and as Republicans control both chambers of the state Legislature in West Virginia, that makes 26 states where the GOP controls all levers of government, while Democrats only do so in six of the 15 states where they hold the governorship; the six being Oregon, California, Hawaii, Rhode Island, Connecticut and Delaware. 

Nebraska’s unicameral legislature is supposed to be nonpartisan, but it’s effectively controlled by Republicans.  [Johnny Carson grew up in Nebraska....just had to throw that in there as I know some of you, like yours truly, still miss the man...but I digress....]

--Finally, Arizona Republican Sen. Jeff Flake created some waves when in releasing his new book, “Conscience of a Conservative: A Rejection of Destructive Politics and a Return to Principle,” he blisters President Trump, both in opinion pieces and on last Sunday’s talk shows and interviews after.

A few excerpts from his book:

“Who could blame the people who felt abandoned and ignored by the major parties for reaching in despair for a candidate who offered oversimplified answers to infinitely complex questions and managed to entertain them in the process?”

“It was we conservatives who, upon Obama’s election, stated that our No. 1 priority was not advancing a conservative policy agenda but making Obama a one-term president.- the corollary to this binary thinking being that his failure would be our success and the fortunes of the citizenry would presumably be sorted out in the meantime.”

“To carry on in the spring of 2017 as if what was happening was anything approaching normalcy required a determined suspension of critical faculties. And tremendous powers of denial.”

“Too often, we observe the unfolding drama along with the rest of the country, passively, all but saying, ‘Someone should do something!’ without seeming to realize that that someone is us.”

“We shouldn’t hesitate to speak out if the president ‘plays to the base’ in ways that damage the Republican Party’s ability to grow and speak to a larger audience.”

--South Carolina Republican Senator Tim Scott, on the deteriorating relationship between the president and Senate Republicans.

“We work for the American people.  We don’t work for the president.”  Scott added: “We should do what’s good for the administration as long as that does not in any way, shape or form make it harder on the American people.”  [Sean Sullivan / Washington Post]

Wall Street

First the economic news of the week.  Lots of PMI data, around the globe.  The July reading from the Chicago purchasing managers came in at 58.9 (50 being the dividing line between growth and contraction), less than the 60.0 consensus but still very strong.  The national ISM manufacturing index was 56.2, in line, while the services PMI was 53.9, the lowest since August.

June personal income was unchanged, worse than expected, while consumption (consumer spending) was only 0.1%.  The Fed’s key personal consumption expenditures index, its leading inflation barometer, was 0.1% for June, 1.5% on core year-over-year, still well below the Fed’s preferred 2.0% target.

June construction spending was -1.3%, while June factory orders were a solid 3.0%.

So then on Friday we had the July employment data and non-farm payrolls increased a solid 209,000, better than the 180,000 forecast, with the unemployment rate ticking down to a 16-year low at 4.3%.  U6, the underemployment rate, was unchanged at 8.6%.

Importantly, we had some wage growth, up 0.3%, or 2.5% now the last 12 months, which is still just OK for an expansion.  We need this to be 3 to 3.5% at a minimum.

With very slight revisions to May and June, the 3-month average job gain is 195,000, and it’s 184,000 for the first seven months of the year.  When Trump crows “this is job growth never seen before,” forgive me if I throw up my Chex Mix every time I hear it, but you know I know better, as stat focused as I can be.  For starters, the average monthly gain the last six months of 2016 was 193,000 (187,000 for all of that year).  That said the payroll picture is indeed good.  Trump can take some credit.  I just wish like with everything else he was intellectually honest.  You know, like George Washington and Honest Abe Lincoln, “the late, great Abraham Lincoln,” as Mr. Trump is fond of saying.

As for the stock market, President Trump needn’t worry that the press isn’t covering the records.  I saw on more than one occasion that CNN and NBC, for example, led their primary newscasts with this item, and round numbers like 22,000 on the Dow Jones are both important and newsworthy.   

A key has been earnings and they largely continue to come in better than expected, up 11% on the S&P 500, according to Thomson Reuters, and as I’ve been saying, more importantly, revenues (not subject to the financial engineering earnings are), are up a solid 5%.

But you’ve also seen the divergence between the Dow Jones and the Nasdaq, the former up, the latter largely struggling, the Dow being helped by the weaker dollar in particular, as its multinationals profit from sales to overseas customers. Boeing, for example, is profiting mightily from a rise in global airline traffic, which is boosting demand, and the weaker dollar helps against the local competition.

It’s the improving global picture in general that is helping everyone.  As you’ll see below, Europe’s numbers are the best in years, while China hasn’t collapsed, and Asia, in general, does pretty well, save for moribund Japan, whose exporters are nonetheless benefiting mightily from their weak currency.

Europe and Asia

Just a ton of data in both.  For starters....

GDP in the eurozone (EA19) was 0.6% in the second quarter, 2.1% year-over-year vs. 1.9% in the first quarter.  This is the highest reading on growth in the region since Q2 2011.

Eurostat reported that the unemployment rate in June for the EA19 was 9.1%, an 8 ½-year low (Feb. 2009). It was 10.1% a year earlier.

The unemployment rate in Germany was 3.8%; France 9.6%; Italy 11.1%; Spain 17.1%; Ireland 6.3%; and Greece 21.7% (April).

The youth jobless rate remains high in some countries, but it’s been improving like the core figures.  France 21.5%; Italy 36.5%; Spain 39.1%; and Greece 45.5% (April).

A flash reading on inflation in the eurozone for July came in at 1.3%, unchanged from June’s 1.3%, an almost 8-year low. Core inflation, ex-food and energy, rose 1.2%, both well below the ECB’s 2% target.

On the PMI front....the July reading for the EA19 on the manufacturing end was 56.6 vs. 57.4 in June.

Germany 58.1, a 5-month low
France 54.9*
Italy 55.1
Spain 54.0
Netherlands 58.9
Ireland 54.6 (56.1 in June)
Greece 50.5 (at least a second month of growth)

*Factories in France are hiring at their best pace since 2000 and in Spain at a rate not seen since before the start of the monetary union in 1998.

The EA19 services PMI for July was 55.4, unchanged from June.

Germany 53.1 (54.0 in June)
France 56.0
Italy 56.3 (vs. 53.6)
Spain 57.6
Ireland 58.3

In the U.K., the manufacturing PMI for July was 55.1, 53.8 on services.  [All of the above PMIs courtesy of Markit.]

Chris Williamson, IHS Markit

“Eurozone factories were buzzing with activity again in July. The PMI came in slightly below the earlier flash estimate, slipping to a four-month low, but this is still an encouragingly buoyant reading.  The survey indicates that manufacturing output was growing at an annual rate of approximately 4% at the start of the third quarter, sustaining the best growth spell that the region has seen for six years.

“Germany clearly remains a major driver of the upturn, with only neighboring Austria and the Netherlands enjoying faster rates of expansion. But this is a broad-based revival nonetheless, with even Greece enjoying its first back-to-back monthly improvement in manufacturing conditions for three years.

“Employment growth meanwhile continued to run at one of the highest rates seen for at least 20 years, with the hiring boom underscoring the current ebullient mood within euro area factories.”

Eurobits....

--On the Brexit front, Prime Minister Theresa May’s spokesman said on Monday that free movement of people from the European Union will end in March 2019 when Britain leaves the bloc, as Mrs. May tries to clear up some uncertainty among her cabinet members over policy.

British new car registrations fell for the fourth consecutive month in July, the longest run of declines since 2011, in another sign of how uncertainty over Brexit is hitting the economy. Sales were down 9.3% over year ago levels.

In keeping with this, Bank of England Governor Mark Carney said persistent uncertainty over the U.K.’s future relationship with the EU is holding back business investment and household spending. This week the BoE cuts its growth forecast and left interest rates unchanged.  GDP is projected to be 1.7% this year, down from a prior forecasted 1.9%.  Growth will fall to 1.6% next year.  The bank expects wage growth of just 2% this year, well below the current inflation rate of 2.6%.

But Carney said interest rates were still likely to rise further in the next two years than the market anticipates.  It’s easy to be complacent when there hasn’t been a rate increase since July 2007.  The bank voted 6-2 to hold the line.

Meanwhile, consulting firm Oliver Wyman estimates 17,000 investment banking jobs could leave the U.K. soon after Brexit.  Over the long term this figure could rise to 40,000.

But there are 560,000 people employed in banking in the U.K., so while this kind of job loss isn’t good, it doesn’t spell a deathknell for the industry in Britain.  [Housing values in London will be a different story.]

In a poll by Ipsos MORI, more than seven in 10 Britons under 65 think the U.K. government is taking the wrong direction, the country on the wrong track, up 16 percentage points since Prime Minister May unexpectedly called a general election in April and a 7-point increase since the vote in June.

Lastly, Ireland is trying to avoid a border issue come Britain’s exit from the European Union.  In theory, once Britain leaves, taking Northern Ireland with it, of course, you would have a hard border with its Irish cousins to the south.  It’s about carving out a special customs union for Northern Ireland.  It’s complicated. Irish Prime Minister Leo Varadkar has said his government would oppose any customs posts or immigration checks on the land border between the Republic of Ireland and Northern Ireland, as there have not been any since the European single market came into effect in 1993.

About 30,000 people cross every day without any border checks.

--A YouGov poll published Thursday shows only 36% have a favorable view of President Emmanuel Macron, a fall of 7 points on the previous month.  [Other surveys have him higher, but with the trend in all down.]  Unemployment remains the main concern of voters.

The Washington Post’s James McAuley had an extensive piece on Macron last weekend that basically said what I have for weeks now; Macron wants to be front and center on the world stage.  His ambition is beyond sky-high, but the French are now skeptical because he’s been extremely combative, such as in the firing of his defense chief (officially the guy resigned) and he’s been pushing to expand the state’s powers to fight terrorism in ways that some say will curtail civil liberties.

But the biggest thing is he wants to be leader of the free world, which, witness his performance in negotiating a cease-fire agreement between the two key parties in Libya, has pissed off Italy for being excluded.

And Macron skillfully seduced Donald Trump after their tense first meeting in Brussels in May.  Trump now extols his “great relationship” with the man. 

It’s going to be interesting watching the French leader over the coming 6 to 12 months.

--Germany has a big problem on its hands with its critical car industry and its beleaguered diesel technology.  An emergency summit in Berlin was called by the government, with the chief executives of Volkswagen, Daimler and BMW trying to convince state ministers that despite the steady drumbeat of negative news, diesel still has a future.

The automakers hoped to cut a deal whereby they would receive political support to avoid driving bans in exchange for further upgrades to existing vehicles to lower their pollution.

German automakers need diesel as a stop-gap as they frantically try to catch up with the burgeoning electric car industry; while Chancellor Merkel, with an election less than two months away, faces criticism the government is too lenient on carmakers, though she doesn’t want to endanger an industry that employs 800,000.

Germany’s car export business is hugely important and last year, 46% of the cars sold in the country had a diesel engine.  But the emissions scandal has the people, especially environmentalists, all riled up.

So on Wednesday, carmakers agreed to update the software in 5.3 million diesel-powered cars to reduce emissions in an agreement with the Transport Ministry.  The carmakers also agreed to self-fund incentives aimed at encouraging consumers with diesel cars 10 years old and older to trade them in for newer models with lower emissions.  In return, the Transportation and Environment ministers said they would do all they could to avoid driving bans for diesel cars in German cities.

Turning to Asia, China’s PMIs for July were released.  The official National Bureau of Statistics revealed that the manufacturing figure was 51.4 vs. 51.7 in June, with services at 54.5 vs. 54.9.

The unofficial Caixin manufacturing number was 51.1 vs. 50.4 in June, with services at 51.5 vs. 51.6.

It is significant that the Caixin manufacturing figure was as high as it was, almost mirroring the often shoddy NBS data.  Caixin measures the private sector, while the official government figure is largely about the performance of large, state-owned enterprises.

All in all, China is doing fine, even with its massive debt problem and government efforts to deleverage.

In Japan, the July manufacturing PMI came in at 52.1 vs. 52.4 in June, while services was 52.0 vs. 53.3.  Just so-so.  As you all should know by now, the big problem here, Prime Minister Shinzo Abe’s big problem (aside from North Korea), is wage growth. There just is none, like it’s still about 0.6% (vs. the U.S. figure of 2.5%).  The Japanese consumer is not going gang busters without higher wages.  Period. 

Some other manufacturing PMIs for July.

Taiwan 53.6; South Korea 49.1 (50.1 in June); India 47.9 (50.9 in June), the worst reading since Feb. 2009; Russia 52.7 (50.3 June); Brazil 50.0.

One note on the export side.  South Korea’s surged nearly 20% in July, with exports to China and the EU rising by 6.6% and 10.2% year-over-year, respectively, while shipments to the U.S. increased 7%. Shipments to India surged 79%, thanks to robust demand for South Korean mobile phones and steel products.

Street Bytes

--The Dow Jones has risen nine straight trading sessions, hitting a new record each of the last eight, the Dow this week closing up 1.2% a second consecutive week to 22092.  The S&P 500 gained 0.2%, while Nasdaq fell a second straight week, down 0.4%.

--U.S. Treasury Yields

6-mo. 1.13%  2-yr. 1.35%  10-yr. 2.26%  30-yr. 2.84%

Former Federal Reserve Chairman Alan Greenspan said equity bears would be better off worrying about bond prices than stocks.

“By any measure, real long-term interest rates are much too low and therefore unsustainable,” Greenspan said in an interview.  “When they move higher they are likely to move reasonably fast.  We are experiencing a bubble, not in stock prices but in bond prices.  This is not discounted in the marketplace.”

Others have warned rates will break higher than expected as the era of global central-bank accommodation ends.

Greenspan added: “The real problem is that when the bond-market bubble collapses, long-term interest rates will rise.  We are moving into a different phase of the economy – to a stagflation not seen since the 1970s. That is not good for asset prices.”

Stocks will suffer with bonds, he argues.

The Federal Reserve is expected to announce in September that it will begin unwinding its $4.5 trillion balance sheet, which is a rate increase of a different sort.

[On the other hand, St. Louis Fed President James Bullard, who is not a voting member of the Fed’s Open Market Committee this year, said he’s opposed to further U.S. interest rate increases and warned that more hikes could hinder domestic inflation from achieving the Fed’s target.]

--Natural-gas prices swooned on Monday, and stayed at five-month lows all week, around $2.80 a million British thermal units, as the forecast for August is for no major heat spells (save for this past week’s in the Pacific Northwest...sorry, guys), a major driver of natural-gas demand. 

Forecasters at Commodity Weather Group told the Wall Street Journal, “The hottest week of summer 2017 is probably behind us at this point.”

Here in the New York City area, it has been an incredibly average summer temperature wise, with only three “heat waves” of three consecutive days of 90-degree temps, but no more, and this goes back to early June.  Like whoopty-damn do.

Nat-gas prices peaked, by the way, at $3.93 early last winter when the weather was supposed to be very cold in January and February, but that never materialized.  It’s been down ever since.

Should oil stay around $50 a barrel, or higher, that could also lead to more drilling for natural-gas, as the two are often produced alongside each other.  That’s then even more supply on the market depressing prices further.

--For the seventh month in a row, U.S. car sales declined, with even purchases of trucks and SUVs slowing, with any growth from these two not making up for the decline in traditional automobiles.

While the news is bad for manufacturers, it’s good for consumers as they can take advantage of competitive prices.

Overall vehicle sales were down 5.7% in July, year-over-year, and if the current trend continues, auto makers will struggle to sell about 17 million vehicles this year compared with a record 17.6 million in 2016.  [Albeit 17 million is still very good, though Kelly Blue Book pegs it at 16.7m.]

Ford sales were down 7.4% year-over-year in July, with GM’s down 15.4%, and Fiat Chrysler’s 10%.  In the case of GM, the Chevy Colorado midsize pickup truck outsold the Camaro, Impala, Sonic and Spark – combined, so many analysts like Rebecca Lindland at Kelly Blue Book concluded, “GM needs to consider applying tough-love metrics to some car lines.”

Ford focused on SUV retail sales, which rose 9.1%, even as fleet sales plunged 26%.*  Passenger car sales were down 19% year on year.

*GM cut its fleet sales 80% (sales to rental car companies and the like) that generate thin profit margins.

Separately, Toyota’s sales rose 3.6% as its sedan sales have held up better than most competitors.

But Nissan’s fell 3%, Honda’s 1.2%, and Volkswagen’s 5.8%.

--Meanwhile, ahead of its earnings release after the market closed Wednesday, Tesla CEO Elon Musk warned on Monday that the electric carmaker would face “manufacturing hell” as it ramped up production of its new mass-market Model 3 sedan.  At an event Friday, Musk handed over the first 30 cars to employee buyers.

“We’re going to go through at least six months of manufacturing hell,” Musk said, as it looks to ramp up total car production to 500,000 vehicles next year, close to six times its 2016 output, which many believe is unrealistic.  Musk is talking of ramping up from 150 cars in September to an “exponential” jump to 20,000 a month by New Year’s Day.

So Wednesday, Tesla said orders for its two older and more expensive vehicles have accelerated, while ending the quarter with $3 billion in cash on hand after spending less than expected in the April through June period.  CEO Elon Musk tried to allay investor fears that the company would not have enough cash to pay for its ambitious spending projects and give it enough flexibility during the Model 3 ramp up.  Plus he reiterated that by end of 2018 the company would indeed be producing 10,000 vehicles a week.

Revenue more than doubled to $2.79 billion, also beating the Street.

Investors liked what they heard, even as Tesla reported a loss of $336 million, compared with a loss of $239 million a year earlier, but the adjusted per-share loss was less than analysts’ estimate.

End of the day, Tesla shares soared on Thursday on frankly a bunch of hokum, and rallied another 3% Friday to $357, after hitting $311 on Wednesday.

--Japanese automakers Toyota and Mazda announced plans to build a new $1.6 billion vehicle assembly plant in the U.S. that would create 4,000 jobs, a victory for President Trump who has been pushing foreign automakers to make more vehicles in the U.S.

The two companies will have a 50-50 joint venture.  No site has been established yet.

--Apple Inc. reported blowout earnings for the second quarter and forecast current-quarter revenue largely above estimates, helping allay fears about a possible delay in the launch of the iPhone’s 10th-anniversary edition later this year.  The shares hit an all-time high on Wednesday.

Apple reported better-than-expected iPhone sales, even as the latest version could potentially move to October or November, instead of September, due to production issues, with the latest edition expected to adopt high-resolution OLED displays, along with better touchscreen technology and wireless charging – which could come with a $1,000 plus price tag.

The company forecast total revenue of between $49 billion and $52 billion for the current quarter, while analysts were currently pegging $49.2bn.

Analysts on average expect the company to sell 45-55 million iPhones in the current quarter.

In the quarter ended July 1, Apple’s fiscal third quarter, sales of the iPhone rose to 41.03 million, vs. 40.4 million a year earlier.

The company’s net income rose to $8.72 billion, or $1.67 per share, from $7.80 billion, or $1.42 per share, a year earlier. Revenue rose to $45.41 billion from $42.36 billion in the quarter, typically the company’s weakest.

Apple’s revenues from the Greater China region fell 9.5% to $8 billion, as customers switched to newer domestic offerings.

Apple’s services business – which includes the App Store, Apple Pay and iCloud – jumped 21.6% to $7.27 billion.

The company even sold 15% more iPads, a product deemed out of fashion.

CEO Tim Cook told Bloomberg Television, “We’ve put everything we know into coming up with the guidance. We really like what we see for the beginning of the back-to-school business.”

--Separately, Apple is helping China and its crackdown on the internet as software made by foreign companies that helps users evade the Great Firewall and skirt the country’s system of internet filters has vanished form Apple’s app store on the mainland.

One company, ExpressVPN, posted a letter it received from Apple saying that its app had been taken down “because it includes content that is illegal in China.”  [VPN is “virtual-private network,” and heretofore this gave users access to the unfiltered internet in China.]

ExpressVPN wrote in its blog that the removal was “surprising and unfortunate,” adding, “We’re disappointed in this development, as it represents the most drastic measure the Chinese government has taken to block the use of VPNs to date, and we are troubled to see Apple aiding China’s censorship efforts.”

Every American should be upset.  This needs to be a “60 Minutes” story this fall.

Apple has removed apps before at the request of China, and I have warned for years that Apple, which is super reliant on the Chinese market for growth, will one day get screwed royally.  It’s market share is already suffering as noted above, with competition from domestic producers in China gaining more and more.

Apple’s efforts to stay on China’s good side will fail massively in the coming years.  More on this below, but think economic nationalism.

--Job growth in Canada slowed in July after two consecutive months of strong gains, though fewer people looking for work sent the unemployment rate to its lowest level since October 2008, 6.3%.

--Warren Buffett’s Berkshire Hathaway saw its second-quarter profit fall 155 as costs rose for its various businesses and it earned less from its investments. Revenue rose 6%.

The rising costs were most prevalent in its insurance businesses, railroads and financial products providers.

--One-time high-flyer Under Armour lowered its full-year revenue outlook and announced it would cut 280 jobs from its global workforce, even as its second-quarter performance actually topped most expectations.  Because of the guidance, though, shares fell more sharply.

For the full-year, UA now expects revenue growth of 9 to 11 percent, down from a previous outlook of 11 to 12 percent.

For the quarter ended June 30, the company lost $12.3 million, or 3 cents per share, which was better than the 6-cent loss analysts’ forecast.

Revenue climbed to $1.09 billion, from $1 billion, slightly above expectations.

--Martin Shkreli was convicted on three of eight counts of defrauding his hedge fund investors and a pharmaceutical company on Friday.  He faces as much as 20 years in prison.

Prior to the trial, the punk said he was “so innocent” that the judge, jury and prosecutors would be apologizing to him afterward.

But the thing that made this trial so odd is that the defendants actually made more than triple what they invested.

Shkreli became widely known after raising the price of a drug called Daraprim to $750 a pill from $13.50 overnight.  The case against him, though, had nothing to do with Daraprim.

--The nation’s largest theater chain, AMC Entertainment, saw its shares plunge 27% after it reported dwindling attendance nationwide.

AMC, owned by Chinese real estate conglomerate Dalian Wanda Group, operates 1,000 cinemas and four of the nation’s five top grossing theaters, but it is suffering from Netflix’ growing influence as millennials choose to stream videos rather than go to the multiplex.

Just last December, though, AMC acquired rival Carmike for $1.2 billion.

As of July 31, North American ticket sales were off 4.9% from a year ago.  Business is expected to continue to be lax, until December and the release of the new Star Wars flick.

--Shares in two recent IPOs continued to fall from their IPO price. Snap Inc., parent of the Snapchat messaging app, saw its stock price fall to a new low after the lockup period for early investors ended, though after bottoming at $12.60, it ended the week at $13.55.  The early March IPO price was $17.

Shares in meal kit operator Blue Apron, which came out recently at $10 per share, fell to $5.80 at Friday’s close.  But to defend it, there was a story out today that it was cutting 1,270 jobs from its New Jersey facility, which would be almost a quarter of its workers, but it’s my understanding the workers have the option of going to a new expanded facility nearby.  [They are moving from Jersey City to Linden, N.J.]

Man, I was about to write they were slashing jobs by over 1,200 when I just opened to see the full story.

That’s why you always try to get at least two sources, boys and girls!

--Israel’s Teva Pharmaceuticals cratered 24% on Thursday to $24 a share on the heels of a steeper than expected loss for its second quarter.  The world’s biggest seller of generic drugs then announced it would cut 7,000 jobs by year’s end.  Teva also plans to close or sell six plants in 2017 and nine more in 2018.  And by end of the year, Teva vows to have pulled out of 46 countries.

Teva is suffering from increased competition in an industry with already-tight profit margins, and it’s been without a CEO since December. The company is Israel’s largest by market cap, and it’s also suffering from a string of acquisitions, including Allergan’s generic drug unit for $40 billion, that have saddled Teva with a humongous debt load.  There are very real concerns about its viability, which would be disastrous on so many levels, especially for Israel.

--Time Warner Inc. reported better-than-expected quarterly profit, driven by the box-office success of its latest superhero movie “Wonder Woman.”  Revenues from the Warner Bros. unit, which includes the movie business, rose 12.4% to $2.99 billion.  “Wonder Woman” grossed about $800 million worldwide through July 31.  The studio has already announced a December 2019 date for a sequel.

Revenue in the company’s Turner unit, which includes CNN and TNT, rose 3.1% to $3.1bn in the second quarter as higher subscription revenues more than offset declining ad revenue.

Revenue from HBO rose slightly to $1.48 billion, a little below estimates, but with “Game of Thrones” debuting its latest season last month, the impact should be reflected in the third quarter.

Overall, Time Warner revenue rose 5.4% to $7.33 billion, with net income of $1.06bn.

[As for the hack attack at HBO and the possible loss of scripts of programs such as “Game of Thrones,” details are still sketchy.  HBO has told employees, though, that their email is secure, which was an original concern.]

--After two prior failed attempts to merge, Discovery Communications announced it was acquiring Scripps Networks Interactive, the cable programming company that features lifestyle channels popular with women, such as HGTV, Food Network, Travel Channel and Cooking Channel, for $11.9 billion. Discovery features many cable favorites such as “Deadliest Catch” and “Shark Week,” through channels like Animal Planet, and TLC, and the union of these two will command 20% of the cable viewership in the U.S., plus prospects for capturing growth overseas.

The combination will improve Discovery’s leverage with pay-TV distributors, while offering a streaming service directly to consumers with all the channels it can now offer.

--Royal Caribbean Cruises boosted its full year earnings outlook for a second time this year as the recovery in bookings continues after being held back last year by concerns over the Zika virus – as well as terrorist attacks in Europe and Turkey that impacted bookings there.

Earnings for the second quarter were the highest ever, $369.5 million, as total revenue rose more than 4% to $2.19bn. The bottom line was helped by lower fuel and operating costs.  [The cabin crew is now sleeping three to a bunk bed, rather than two...or so I’m surmising.]

--Restaurant Brands International, owners of Tim Hortons, Popeyes and Burger King, missed analyst expectations for the second quarter, as sales at the first two unexpectedly dropped.

Tim Hortons had same-store sales that fell 0.8% compared with last year, when a 2% increase was forecast.  Comp sales at Popeye’s fell 2.7%.  These two overshadowed a solid performance by BK, up 3.9%, though McDonald’s rose 6.6%.

--Shares in Yum Brands fell after the company missed sales for its Taco Bell division.  While Taco Bell’s comp sales growth was 4%, it fell short of the 5.9% expected by the Street.

Yum also owns KFC and Pizza Hut, with the former reporting good comp sales growth of 3%, while Pizza Hut’s fell 1%, which was still better than expected.

--Pearson Plc made good on a pledge to cut costs, slashing 3,000 jobs, about a tenth of its work force, and cutting its interim dividend to preserve cash as it works on a turnaround of its struggling education business.

CEO John Fallon is attempting to create a leaner company more focused on digital education.  He’s been forced to accelerate the cost-cutting because of challenges in the U.S., where college enrollment is falling and online learning is putting pressure on textbook sales.

Back in 2015, the company sold the Financial Times and its stake in The Economist to invest in its education business.  Last month, it announced it was selling a 22 percent stake in book publisher Penguin Random House.

--After weeks of negotiations, Los Angeles and the International Olympic Committee agreed that L.A. would host the 2028 Summer Olympics, not 2024, that going to Paris.  In return for accepting the delay, the IOC agreed to concessions involving sponsorship sales, the retention of any potential surplus and upfront funding for youth sports programs throughout the city.

Mayor Eric Garcetti said, “This deal was too good to pass up.”

Normally, the IOC doesn’t give host cities its advance until two years before the Games, but L.A., among its other goodies, will receive a $180-million advance to cover the organizing committee’s costs years earlier than normal, while pumping $160 million into youth sports throughout the city.  Plus Los Angeles is due to receive about $2 billion of the IOC’s broadcast and sponsorship revenues, more than Paris will receive.

--Heineken NV, the world’s second-largest brewer, bucked the trend in the beer business, posting revenues that increased 5.7% in the first half, while rival Anheuser-Busch InBev struggles.  Heineken’s beer volume grew fastest in the Asia-Pacific region as demand for its Tiger brand (love this beer) surged in Vietnam, one of its largest markets alongside Mexico and Nigeria.

Adjusted operating profit rose 5.9% in the first half to $2.12 billion.

Heineken has bid for 1,900 pubs from Punch Taverns in the U.K., and is doubling down on investment in Africa, having recently opened a brewery in Ivory Coast.

--Japan’s Sapporo Holdings Ltd. is acquiring Anchor Brewing Co. of San Francisco for about $85 million.  The business is best known for a fine brew, Anchor Steam, which when you’re looking for a premium domestic, is right up there with Shiner Bock and Yuengling.

With the deal, Sapporo is looking to expand sales of its premium Sapporo beer.  It also owns the fine Canadian premium, Sleeman Breweries Ltd.

Canada...where all domestic is premium.

--“Dunkirk” led last weekend’s box office for a second week with an estimated $28.1 million in the U.S. and Canada.  Through Sunday the film had grossed $102.8 domestically to date, plus more than $131 million overseas.

--Noted bond investor Jeffrey Gundlach is suing a California wine merchant who he says sold him several dozen bottles of fake wine. Gundlach claims in a lawsuit filed the other day that Soutirage sold him at least 67 bottles that were fake, and that it would cost more than $1 million to replace them.

Gundlach hired a “world-renowned” expert to test them and several classics from the Bordeaux region in France, including a 1928 Latour, were found to be bogus.

There have been similar cases over the years. I remember reporting on one involving billionaire William Koch, where he was awarded $1.15 million in a case involving a Silicon Valley entrepreneur.

Foreign Affairs

Iran: Tehran condemned new sanctions passed by Congress and then signed by President Trump against its missile program.

“We will continue with full power our missile program,” Foreign Ministry spokesman Bahram Ghasemi told state broadcaster IRIB.

“We consider the action by the U.S. as hostile, reprehensible and unacceptable, and it’s ultimately an effort to weaken the nuclear deal,” he added, referring to the 2015 agreement with the P5+1 that lifted some sanctions on Iran.

“The military and missile fields...are our domestic policies and others have no right to intervene or comment on them.  We reserve the right to reciprocate and make an adequate response to the U.S. actions,” Ghasemi said.  [Agence France Presse]

Israel: An indictment of Prime Minister Benjamin Netanyahu is coming.  His former aide, Ari Harow, just turned state’s witness in the corruption case and this is huge.  Harow is Netanyahu’s former chief of staff and he has been supplying information in two key affairs: Allegations that the prime minister received gifts from wealthy benefactors, and secret negotiations Netanyahu allegedly held between the publisher of one of Israel’s most popular newspapers in return for favorable coverage.

Under Harow’s deal, he will be convicted of fraud and breach of trust in a separate case, but will receive no jail time, in exchange for his cooperation against his former boss.  [Haaretz]

Afghanistan: The Taliban killed two American soldiers in a suicide bomb attack near the airport in the southern Afghan city of Kandahar on Wednesday, according to the Pentagon.  A local security official told Reuters the attacker drove an explosives-laden vehicle into a NATO convoy. The Taliban then claimed responsibility, with a spokesman for the group saying it had destroyed two vehicles and killed 15 foreign soldiers, but I have seen only confirmation of the two American deaths.

Earlier in the week, suicide bombers attacked a Shiite mosque in the western city of Herat, killing at least 20.  The Taliban denied responsibility and it’s assumed members of a splinter ISIS-affiliated group that has targeted gatherings of Shiites is.

ISIS claimed responsibility for an attack on the Iraqi embassy building in Kabul. Two suicide bombers killed seven guards at the gate, and then two or three gunmen entered the embassy and were eventually killed as well, with no word on Iraqi or Afghan casualties inside.

Close to 1,700 civilians have been killed in the first seven months of the year, according to the U.N.

Editorial / Wall Street Journal

“The Russia election probe aside, President Trump has so far avoided any major foreign-policy mistakes. But he will commit an Obama-sized blunder if he overrules the advice of his generals who want a modest surge of forces and a new strategy in Afghanistan.

“Mr. Trump had by all accounts agreed weeks ago to the Pentagon’s request for an additional 3,000-5,000 troops plus more aggressive use of air power and other assets. But he’s having second thoughts as he indulges his isolationist instincts fanned by aide Stephen Bannon.  Mr. Trump’s decision will determine whether he’ll repeat Mr. Obama’s catastrophic 2011 withdrawal from Iraq, and it will echo among allies and adversaries for the rest of his Presidency....

“Mr. Trump may chafe that he has to spend more money and political capital on Afghanistan, but U.S. presidents can’t withdraw from national commitments without consequences.  North Korea, Russia, China and Iran are sizing up the President in these early months to determine how much military or territorial expansion they can get away with.

“Walking away from Afghanistan, or overruling his generals to satisfy the isolationism of his political base, would show that he’s more like Barack Obama than he wants to admit.”

Pakistan: Lawmakers have elected Shahid Khaqan Abbasi to replace Nawaz Sharif after he was ousted in a corruption probe the prior week, but Abbasi isn’t expected to be in power long, as Sharif’s ruling party, which backed him, wants him to serve only temporarily, until Sharif’s younger brother Shahbaz qualifies – a move expected to take at least 45 days, after he wins a special election for his brother’s seat in the National Assembly. 

Opponents are dismissing the whole process as undemocratic.  But Abassi won 221 of 342 votes in the assembly.  The next general elections are slated for June.

Shabhaz has serious health issues, as he’s undergone multiple treatments for cancer.

North Korea: Early in the week, Sec. of State Rex Tillerson said the U.S. was not seeking regime change in North Korea.  “We’re not your enemy, we’re not your threat but you’re presenting an unacceptable threat to us and we have to respond,” Tillerson said, adding that the U.S. wanted a dialogue at some point.

And while Tillerson’s boss, President Trump, has repeatedly criticized China for not doing enough to stop Pyongyang’s weapons program, Tillerson took a more diplomatic approach, saying that “only the North Koreans are to blame for this situation.”

“But,” he added, “we do believe China has a special and unique relationship, because of this significant economic activity, to influence the North Korean regime in ways that no one else can.”

China’s U.N. ambassador Liu Jieyi said on Monday that it is up to the United States and North Korea, not China, to try to reduce tensions and resume negotiations to denuclearize the Korean Peninsula.  “They hold the primary responsibility to keep things moving, to start moving in the right direction, not China,” Liu said at a news conference.  [Reuters]

An official commentary in the Chinese state news agency Xinhua read in part:

“Trump is a character and enjoys tweeting, but an emotional response cannot be the guiding policy to solve the Korean peninsula’s nuclearization issue.  In order to solve the nuclear issue on the peninsula, related parties need to use practical action and show sincerity, stop shirking responsibility, and especially should not stab China in the back.”

Trump tweeted this week: “I am very disappointed in China. Our foolish past leaders have allowed them to make hundreds of billions of dollars a year in trade, yet they do NOTHING for us with North Korea, just talk. We will no longer allow this to continue. China could easily solve this problem!”

On a related issue, Chinese President Xi Jinping, speaking to senior Communist Party and government officials at an event to celebrate the 90th anniversary of the founding of the People’s Liberation Army, said that China’s military would not tolerate any attempt to damage its territorial integrity.

“We do not allow any individual, any organization, any political party, at any time or by any means, to split any single piece of the Chinese territory.  No one could expect us to swallow consequences that damage our sovereignty, security and developmental interests.”

Xi, commander-in-chief, also asked the military to focus on preparations for war, and urged its leaders to improve capabilities in modern warfare and combat readiness.

At a military parade tied to the celebration of the PLA, China unveiled a new, more mobile intercontinental ballistic missile.  Xi was wearing combat fatigues.  [South China Morning Post]

Editorial / The Economist

“It is odd that North Korea causes so much trouble. It is not exactly a superpower. Its economy is only a fiftieth as big as that of its democratic capitalist cousin, South Korea. Americans spend twice its total GDP on their pets. Yet Kim Jong Un’s backward little dictatorship has grabbed the attention of the whole world, and even of America’s president, with its nuclear brinkmanship.  On July 28th it tested an intercontinental ballistic missile that could hit Los Angeles. Before long, it will be able to mount nuclear warheads on such missiles, as it already can on missiles aimed at South Korea and Japan. In charge of this terrifying arsenal is a man who was brought up as a demigod and cares nothing for human life – witness the innocents beaten to death with hammers in his gigantic gulag. Last week his foreign ministry vowed that if the regime’s “supreme dignity” is threatened, it will ‘pre-emptively annihilate’ the countries that threaten it, with all means ‘including the nuclear ones.’  Only a fool could fail to be alarmed.

“Yet the most serious danger is not that one side will suddenly try to devastate the other. It is that both sides will miscalculate, and that a spiral of escalation will lead to a catastrophe that no one wants....

“President Donald Trump has vowed to stop North Korea from perfecting a nuclear warhead that could threaten the American mainland, tweeting that ‘it won’t happen!’  Some pundits suggest shooting down future test missiles on the launch pad or, improbably, in the air.  Others suggest using force to overthrow the regime or pre-emptive strikes to destroy Mr. Kim’s nuclear arsenal before he has a chance to use it.

“Yet it is just this sort of military action that risks a ruinous escalation.  Mr. Kim’s bombs and missile-launchers are scattered and well hidden. America’s armed forces, for all their might, cannot reliably neutralize the North Korean nuclear threat before Mr. Kim has a chance to retaliate.  The task would be difficult even if the Pentagon had good  intelligence about North Korea; it does not.   The only justification for a pre-emptive strike would be to prevent an imminent nuclear attack on America or one of its allies....

“If military action is reckless and diplomacy insufficient, the only remaining option is to deter and contain Mr. Kim.  Mr. Trump should make clear – in a scripted speech, not a tweet or via his secretary of state – that America is not about to start a war, nuclear or conventional.  However, he should reaffirm that a nuclear attack by North Korea on America or one of its allies will immediately be matched....

“America and its allies should apply pressure that cannot be misconstrued as a declaration of war. They should ramp up economic sanctions not only against the North Korean regime but also against the Chinese companies that trade with it or handle its money.  America should formally extend its nuclear guarantee to South Korea and Japan, and boost the missile defenses that protect both countries. This would help ensure that they do not build nuclear weapons of their own. America should convince the South Koreans, who will suffer greatly if war breaks out, that it will not act without consulting them. China is fed up with the Kim regime, but fears that if it were to collapse, a reunified Korea would mean American troops on China’s border.  Mr. Trump’s team should guarantee that this will not happen, and try to persuade China that in the long run it is better off with a united, prosperous neighbor than a poor, violent and unpredictable one....

“It is worth recalling that America has been here before. When Stalin and Mao were building their first atom bombs, some in the West urged pre-emptive strikes to stop them. Happily, cooler heads prevailed. Since then, the logic of deterrence has ensured that these terrible weapons have never been used. Someday, perhaps by coup or popular uprising, North Koreans will be rid of their repulsive ruler, and the peninsula will reunite as a democracy, like Germany. Until then, the world must keep calm and contain Mr. Kim.”

Ralph Peters / New York Post

“If worse came to worst and North Korea detonated a nuclear warhead above Honolulu, the losses would include up to 44,000 U.S. troops, as well as our vital bases ringing the city – beginning with Pearl Harbor.

“Who would benefit?

“Not North Korea.  We’d level that mountainous country.

“Certainly not us, with our Pacific forces crippled to a degree that the Japanese couldn’t have hoped to achieve in 1941.

“The sole winner would be China – not even a party to the conflict. And that is a cardinal reason why Beijing will not help us halt Pyongyang’s nuke and missile programs.

“Washington has deluded itself into bipartisan groupthink yet again, desperate to believe that, if only we better explain our argument, China will turn on its most important ally, North Korea. Our folly ignores the strategic perspective entirely: We don’t even try to identify China’s ultimate goals.

“The central Chinese ambition is to become the dominant military (as well as economic) power in the Pacific. North Korea could fulfill that ambition for Beijing without the Chinese firing one shot....

“Yes, the scenario outlined above is the worst-case version. But in the military, you always plan for the worst (a dictum ignored, to disastrous effects, in the U.S. invasion of Iraq)....

“So we blunder on, fingers crossed, while the Chinese revel in our strategic blindness.”

Editorial / Wall Street Journal

“In the face of a growing North Korea threat, the White House has struggled to devise a consistent policy toward Pyongyang.

“The top U.S. diplomat, Secretary of State Rex Tillerson, said Tuesday the U.S. wasn’t seeking to overthrow North Korea’s government and that he wanted to hold talks with it. That echoed comments from President Donald Trump in May, who sounded open toward meeting Mr. Kim, telling Bloomberg News that he would be ‘honored’ to do it if it were “appropriate.”

“Last month, CIA Director Mike Pompeo signaled that he wanted to see the North Korean regime fall.

“Meanwhile, North Korea’s weapons capabilities continue to grow, as Pyongyang has conducted two intercontinental ballistic missile tests this year, demonstrating a growing range that jeopardizes the continental U.S., officials say.”

China: Fighting back against U.S. claims, China’s Commerce Ministry said on Thursday that China puts strong emphasis on the protection of intellectual property rights, as President Trump prepares to launch an inquiry into same, as well as Chinese trade practices.  Sanctions appear imminent.

Of course anything out of China’s various mouthpieces is pure bulls---.  But this is a dangerous time in relations between the two. We desperately need diplomacy...quiet diplomacy...not freakin’ tweets.

Separately, China’s Foreign Ministry said on Thursday that India has been building up troops and repairing roads along its side of the border amid an increasingly tense standoff in a remote frontier region beside the Himalayan kingdom of Bhutan.  The standoff is on a plateau next to the Indian state of Sikkim, which borders China.

Large parts of the 2,175-miles that China and India share are in dispute. In the area of the latest flare-up, both seem to be building and repairing roads solely for military purposes.

China’s Defense Ministry said China had shown India goodwill and that its forces had exercised utmost restraint, but warned “restraint has a bottom line” and that India must dispel any illusions.

About 300 troops from each side are involved in the face-off. The two last had a border war in 1962.

Russia: The Kremlin ordered the U.S. to cut its diplomatic staff by 755 in retaliation for new U.S. sanctions, though the vast majority of those impacted are Russian citizens manning the embassy, which softens the impact on the U.S., and appears to be a move by Vladimir Putin to avoid burning all his bridges with Donald Trump.

Trump very reluctantly signed the legislation imposing harsh new sanctions on Russia (as well as North Korea and Iran), and Russian Prime Minister Dmitry Medvedev said the moves are tantamount to declaring a “full-scale trade war” against Moscow, and that the measures signed by Trump demonstrated his complete impotence, humiliated by Congress.

Medvedev said the sanctions package “ends hopes for improving our relations with the new U.S. administration. The sanctions regime has been codified and will remain in effect for decades unless a miracle happens.”

The European Commission, initially fearful of the economic consequences of the sanctions, expressed its satisfaction after the EU had signaled its concerns to Congress.

“Moreover, the U.S. Congress has now also committed to only apply sanctions after the country’s allies are consulted. And I do believe we are still allies of the U.S.,” said European Commission President Jean-Claude Juncker.

Trump accused Congress of overreach, saying in an accompanying statement (which is normal for a president to attach), the measure was “deeply flawed.”  “As president, I can make far better deals with foreign countries than Congress,” he said.

The legislation limits the amount of money Americans can invest in Russian energy projects, among other items, and just makes it more difficult for U.S. companies to do business with Russia.

Appearing in Estonia, Vice President Mike Pence, messaging differently from his boss, warned the Kremlin that the United States will not tolerate Russian force or intimidation toward its neighbors, reassuring the Baltic States that the U.S. supports them in the face of “the specter of aggression from your unpredictable neighbor to the east.”

Editorial / Wall Street Journal

“Vladimir Putin has assumed he can seize territory without endangering his grip on power at home, and he’s been right.  But what if the U.S. changed that calculus by raising the cost of Moscow’s aggression in Ukraine?

“President Trump will soon have a chance to test that question when he receives an imminent recommendation from the State Department and Pentagon to sell Ukraine lethal, defensive weapons such as anti-tank Javelin missiles. These weapons would help Ukrainians defeat Russian armor and make it harder for Mr. Putin’s proxy forces to advance further into Ukraine’s eastern provinces, which the Russians invaded in 2014.

“Ukrainian President Petro Poroshenko has sought this kind of help for years.  But Barack Obama refused on grounds that lethal aid would merely escalate the conflict; he shipped only non-lethal aid...Mr. Putin escalated anyway....

“The Russians have declared separatist strongholds in Donetsk and Luhansk and built up forces in the occupied areas. Kurt Volker, the U.S. Special Representative for Ukraine Negotiations, told Radio Free Europe/Radio Liberty last week that ‘there are more Russian tanks in there than in Western Europe combined.’ That’s in addition to Russia’s plans to deploy as many as 100,000 troops for military exercises in Belarus on NATO’s front lines this summer....

“Mr. Trump now has a chance to show he’s no Obama echo and make Mr. Putin pay attention by helping Ukraine, which has shown it is willing to fight for independence....

“Bolstering Ukraine’s defense would also send a message to Mr. Putin that Mr. Trump wants to negotiate with Russia from a position of strength. This could help the U.S. position in Syria, where Mr. Trump has been too willing to accept Russian and Iranian dominance after the fall of Islamic State.  Mr. Putin took advantage of Mr. Obama after concluding the American was weak and would never push back.  Selling lethal weapons to Ukraine would show the Kremlin those days are over.”

Venezuela: The attorney general on Thursday sought a court order to halt the installation of a new National Assembly following last weekend’s elections, because of the suspected commission of crimes during the vote.

Atty. Gen. Luisa Ortega Diaz, a critic of President Nicolas Maduro, said she had opened an investigation into alleged voter fraud in connection with the balloting.  Previously, she had filed complaints with the Supreme Court challenging the constitutionality of a new assembly.

This is a rather courageous woman, don’t you think?  How is she still in office?

But the new assembly was seated on Friday and it will set about rewriting the nation’s constitution, which the opposition says is a way for Maduro to skirt the democratic process.

The new assembly consists of 537 members, all of whom were candidates put forth by Maduro. They are to replace the democratically elected and opposition-controlled National Assembly.

Ortega said, “The country is headed toward dictatorship....We have to rebuild the nation by means of a national accord.”

In a televised speech Wednesday, Maduro denied the allegations, saying claims by a voting-machine company, Smartmatic, that the government’s ballot figures were off by at least a million, were trying to “stain the electoral process.”

“They call me a dictator. I am not a dictator,” he said.

Tuesday, Venezuela jailed two leading opposition figures, a day after the United States imposed sanctions on Maduro, calling him a “dictator” for Sunday’s election.

Opposition leader Leopoldo Lopez and veteran politician Antonio Ledezma were already under house arrest, but the pro-government Supreme Court said the two were planning to flee the country and had violated terms of their house arrest.

President Trump warned the U.S. holds Maduro “personally responsible” for the safety of the seized leaders.

As of Thursday, the Venezuelan Penal Forum civil society group said a total of 130 people have been killed in four months of protests, while 5,051 have been arrested, 1,383 of whom are still in jail.

Brazil: Congress voted not to put President Michel Temer on trial for corruption.  In the 513-seat chamber, 263 voted against the motion to send him to trial and 227 voted in favor, well below the 342 needed for the motion to pass.

Temer, who has some strong ideas for reforming the economy, said after, “With the support the lower house has given me, we will pass all the reforms that the country needs.  Now it is time to invest in our country. Brazil is ready to start growing again.”  But his problems politically are far from over.

Australia: This nation dodged a major bullet, as a terror suspect tried to smuggle a bomb onto a plane by planting it on his unsuspecting brother, according to Australian police.

The plan was one of two alleged terror plots recently uncovered by authorities, who made several arrests across Sydney on Saturday. There is an ISIS connection.  [The other plot involved setting off a device that could release poisonous gas in a public enclosed space.]  Both plans have been disrupted.

The police said two suspects had built and concealed a “high-end” military-grade explosive in a piece of luggage.

The brother of one of the suspects was to take the luggage with him onboard an Etihad Airways plane leaving Sydney on July 15.  Police said the brother was not aware of the bomb.

But for some reason the plan was aborted and while the brother took the luggage to the airport, the piece was not checked in.  The brother then boarded the plane without the luggage.

“There is a bit of conjecture [about] why it did not get through the baggage check-in, but I want to make it quite clear – it never got near [security] screening,” said Australian Federal Police Deputy Commissioner Michael Phelan.

A senior ISIS figure had arranged shipment of the bomb parts via Turkey to Sydney. It’s when the bomb plot failed that the suspects embarked on their gas attack scheme.

No doubt we’ll learn much more later.

Random Musings

--Presidential tracking polls....

Gallup has Trump with a 36% approval rating; Rasmussen puts it at 39%.  [For those who follow the Rasmussen survey, this low figure is highly significant.]

--In an extensive Quinnipiac University National Poll, we have a number of findings that do not put President Trump in the best light.

Trump’s approval rating is just 33%, 61% disapprove; down from 55-40 disapproval in a June 29 survey.  White men are divided, 47% approve, 48% disapprove, while Republicans approve 76-17.  White voters with no college degree, a key part of the president’s base, now disapprove 50-43.  A figure I focus on, Independents, disapprove of Trump’s job performance by a 34-60 margin, which is actually about the same as in May.

American voters say 54% to 26% that they are embarrassed rather than proud to have Trump as president.  Voters believe 57% to 40% he is abusing the powers of his office and say 60% to 36% that he believes he is above the law.

By a 71-26 margin, voters believe Trump is not levelheaded.  He is deemed not honest by a 62-34 margin.

On the other hand, 58% believe he is a strong leader; 39% disagree.

But by a 63-34 margin, voters say he does not share their values.

And by a 58-37 margin, Americans believe the president “has attempted to derail or obstruct the investigation into the Russian interference in the 2016 election.”

Separately, American voters give Sen. John McCain a 57% favorability rating, but only 39% of Republicans do.

--In a separate Quinnipiac poll released Thursday, Congress’ approval rating sank to 10%, which compares to 18% in March.

Back in January and March, more than one in three Republicans said they had positive views of Congress.  But that’s now plummeted to just 14% of Republican voters who give Congress a thumbs up.

Using both Quinnipiac data (which goes back to 2003) and Gallup poll data (which goes back to 1974), this is the lowest rating for Congress ever.  [Congress did reach a 9% approval rating in a Gallup survey in November 2013, but this was in the wake of a two-week government shutdown.]

--The commander of the U.S. Coast Guard, Adm. Paul Zukunft, said territorial disputes could pop up in the Arctic soon.

“As I look at what is playing out in the Arctic, it looks eerily familiar to what we’re seeing in the East and South China Sea.

That means first, audacious territorial claims, Zukunft said: “Russia has claimed most of the Arctic Ocean, all the way up to the North Pole and as a signatory of the Law of the Sea Convention has filed this claim.”

Zukunft noted that China’s Snow Dragon “is on her way up to the Arctic from China.  And they routinely stop and do research in our extended continental shelf.  They’ve established a pattern.”

This is a big deal because the extended continental shelf holds up to “13% of the world’s oil reserves, about a third of the world’s gas reserves, and about a trillion dollars’ worth of rare earth metals” that technological advancements will soon make economically feasible to harvest, Zukunft said.

Zukunft said it was an imperative that the United States ratify the United Nations Convention of the Law of the Sea treaty, which grants countries exclusive rights to harvest minerals and materials from the sea, as its clear what China’s, and Russia’s, intentions are.  Only North Korea, Libya and Turkey have also not ratified the treaty, not exactly the best of company.  [Caroline Houck / Defense One]

--Sen. James Lankford (Okla.) / Wall Street Journal

“James Madison explained that the Constitution’s authors considered the Senate to be the great ‘anchor’ of the government.  The upper chamber has become an anchor, but I don’t think today’s dilatory Senate is what the Founders had in mind.

“Many Americans see the main issue in the Senate as the filibuster rule, the 60 vote requirement to move on legislation. The Senate should not go to a 51 vote majority for every vote. Because the Senate is the one entity in the federal government where the minority view is heard and deliberation is protected.

“But the Senate isn’t working.  First, the minority party has for months abused Senate rules to stall the nomination process and therefore the entire Senate calendar.  Second, the arcane rules of the Senate always force a painfully slow legislative pace.

“Since presidential nominations now require only a simple majority to pass, the majority party can confirm nominees without any minority party support.  But the minority can force the full 30 hours of debate time provided within the rules, which they have repeatedly demanded.  At the current rate, it will take 11 years to fill the executive branch....

“How do we get the Senate working again?  First, we should reduce floor debate time for executive nominees from 30 hours to eight or less.  The Senate could debate and vote on five or more nominees a week, instead of just one or two.  Interestingly, this rule change was adopted for a short time by the Senate in 2013, under Harry Reid, as part of a temporary agreement to fill nominations.  It worked then, and it would work now.

“Second, we should lower the voter threshold on the ‘motion to proceed,’ which begins legislative debate and amendment consideration, from 60 votes to 51.  Almost every bill in the Senate currently requires two votes of 60 senators, one vote to start debate and another to end it.  We should change this rule to allow the majority party to open debate, while protecting the minority party by keeping the threshold to end debate at 60....

“It’s time we put an end to the hyperpartisanship and delay to serve the needs of the American people.  We can be deliberative and productive at the same time, but that will require fundamental changes in the rules, not eliminating the filibuster entirely.”

--Robert J. Samuelson / Washington Post

“No one is working harder for the impeachment of Donald Trump than Donald Trump.  It we have learned anything about this president, it is that he has a compulsion to be the center of attention.  He can’t bear being out of the limelight and will say almost anything – no matter how offensive, outrageous or dishonest it strikes millions of Americans – to keep the public fixated on him. The more he does this, the more he risks impeachment.

“Just whether John F. Kelly, the retired Marine general who is Trump’s new chief of staff, can restrain his boss is unclear.  This certainly is a central question hovering over the White House, and it won’t be easy.

“For months, Trump’s behavior has posed a riddle. Why is he so self-destructive?  His constant tweets deepen the country’s divisions, which he promised to heal.  The customary explanation is that Trump is playing to his ‘base,’ but recently, this has seemed less convincing.  Opinion polls suggest his support has slipped even among loyal backers.  In fact, we’ve been asking the wrong question. It has been widely assumed that Trump’s behavior must reflect some political logic.  He is, after all, the nation’s most important politician.  His every move must aim to bolster his popularity and agenda.  Although this sounds reasonable, it doesn’t fit the facts.  Trump’s nonstop outbursts alienate, usually needlessly, countless voters: precisely the people he needs to broaden his support.

“But the mystery vanishes once we realize that Trump’s motives, rather than advancing some grand political strategy, are deeply personal.  He can’t control himself. In his mind, silence means obscurity, which is unbearable, especially when ending it is only a tweet or two away.  It doesn’t matter what he says – whether it is true or false, relevant or irrelevant to the issues – as long as he stirs passions and dominates public discussion....

“Trump is an extreme exhibitionist in a calling – politics – where exhibitionism is normal.  His addiction to incendiary tweets will be hard, though not impossible, to break.  It may defy political or legal logic – indeed, it places him at further risk, because he may get himself in legal trouble or say something hugely unpopular. But it satisfies his need to ‘own’ the news cycle.

“In this sense, Trump can be seen as the strongest and most determined advocate of impeachment. If he must flirt with impeachment to retain his command of the media, so be it.  As a practical matter, he might see impeachment (though not conviction) as acceptable.  He would be automatically in the spotlight every day for months. He would have a new arena in which to fight and ‘win.’

“Perhaps subconsciously, this is his goal: Impeach me, please!”

--Rich Lowry / New York Post

“When President Trump’s policy adviser Stephen Miller stepped to the podium of the White House briefing room on Wednesday to defend a plan for reducing levels of legal immigration, Jim Acosta of CNN was aghast and let everyone know it.

“Put aside that Acosta believed it was his role as a reporter to argue one side of a hot-button political issue (this is how journalism works in 2017).  The exchange illustrated how advocates of high levels of immigration are often the ones who – despite their self-image as the rational bulwark against runaway populism – rely on an ignorant emotionalism to make their case.

“At issue is the bill sponsored by Republican Sens. Tom Cotton of Arkansas and David Perdue of Georgia to cut legal immigration by half.  The legislation would scale back so-called chain migration – immigrants bringing relatives, who bring more relatives in turn – and institute a merit-based system for green cards based on the ability to speak English, educational attainment and job skills.

“Offended by the idea of putting a priority on higher-skilled immigrants, Acosta wanted to know how such a policy would be consistent with the Statue of Liberty. When Miller pointed out that Lady Liberty was conceived as a symbol of...liberty and the famous Emma Lazarus poem added later, Acosta accused him of ‘national park revisionism’ – even though Miller was correct.

“That might seem pedantic, but the underlying debate is over the legitimacy of reducing levels of immigration and whether it is appropriate to craft a policy of mindful, above anything else, of the national interest.  Miller clearly has the best of this argument.

“One, making 21st century policy in accord with late-19th century poetry makes no sense.

“Two, the cap on refugees in the Cotton-Perdue bill of 50,000 a year is in the ballpark of recent annual refugee numbers. We actually admitted fewer than this in the late-1970s and early-2000s, and the Statue of Liberty still stood.

“Three, although Acosta angrily objected to giving a preference to English speakers, knowing English helps people make their way in this country, and it’s reasonable to want immigrants to speak the language. As Miller pointed out, this is already a requirement for naturalization.

“And every comprehensive immigration-reform bill always makes at least a symbolic nod to undocumented immigrants learning English before receiving amnesty.

“Fourth, despite the myth, immigration policy has been highly contested throughout American history, and levels have ebbed and flowed.  Acosta seems to think that the current status quo is the norm, when the past 40 years have represented a historic wave of immigration. The usual pattern has been that we tap the brakes after such a spike, but advocates of high levels of immigration consider that un-American.

“Cotton-Perdue can’t be considered ungenerous in light of how latitudinarian we have been for so long....

“Employers may complain about losing access to immigrant labor, but it is simply not true that there are jobs that Americans won’t do. Almost every occupational category in the country has a majority of native-born workers. If there is really such a dearth of low-skilled labor in this country, wages should be rising smartly for these workers, and they aren’t.

“If nothing else, Cotton-Perdue will force a debate in an area in which thoughtless sentimentality has long dominated – and if the Miller-Acosta exchange is any indication, will be difficult to dislodge.”

Personally, having watched the whole deal, I thought Stephen Miller was terrific, far from the arrogant jerk on display last February in a similar setting.  It helped this time that Miller displayed a good sense of humor and smiled a lot.

As for preening Jim Acosta, his head is about to explode, he is that proud of himself.

--Editorial / Washington Post

“It has been almost a year and a month since Seth Rich was killed in what D.C. police believe was a botched robbery attempt. In that time, the family of the 27-year-old Democratic National Committee staffer has had to deal not only with their private sorrow but also with nonsensical, hurtful conspiracy theories. What was bad when the rumors circulated on far-right websites became worse when a major news organization tried to peddle the bogus story. And that may not be the worst of it – if allegations of White House involvement prove true.  A lawsuit filed this week alleges that Fox News Channel collaborated with a wealthy supporter of President Trump and the White House to create a story published online in May – and since discredited – buttressing wild theories that Rich had leaked Democratic Party emails and was killed by operatives working on behalf of Hillary Clinton. The lawsuit by Rod Wheeler, a former Fox News contributor involved in the May report who says he was defamed, claims the White House – perhaps Mr. Trump personally – was monitoring and encouraging the story’s development.

“Defendants named in the suit, including Dallas investor Ed Butowsky, who is depicted as playing a major role, denied the claims.  White House press secretary Sarah Huckabee Sanders in a Tuesday news briefing said Mr. Trump ‘had no knowledge of the story’ and claimed ‘it’s completely untrue that he or the White House had involvement in the story.’

“Skepticism is always in order when viewing the allegations of a lawsuit, and issues have been raised about Mr. Wheeler’s credibility because he helped to further the discredited story. But, as reported by NPR’s David Folkenflik, Mr. Wheeler has marshaled documentary evidence (including text messages and recorded phone calls) that bolster his account.  ‘Not to add any more pressure but the president just read the article.  He wants the article out immediately. It’s now all up to you,’ reads a May 14 text from Mr. Butowsky to Mr. Wheeler. The story appeared about 36 hours later.  Mr. Butowsky told reporters this week he was joking.”

--Trump tweeted Wednesday evening that he has nothing but love for 1600 Pennsylvania Avenue after the story broke that he told guests at his Bedminster, N.J. club that the White House was a dump.

“I love the White House, one of the most beautiful buildings (homes) I have ever seen,” said Trump.  “But Fake News said I called it a dump – TOTALLY UNTRUE.”

Golf magazine quoted members at Trump National who said the president told them he spent so much time there of late because “that White House is a real dump.”

Well the White House historically has had a problem with rats, and that would freak me out.

Trump is now in Bedminster for the start of a 17-day vacation that has many locals up in arms, especially area airports that run flight schools and sky diving operations because they are under federal flight restrictions anytime Trump is in town.  It’s not fair.

By the way, I hope Barron isn’t imprisoned in Bedminster.  I’m assuming he and his mom are in New York, or on a real vacation.

--I wish Michelle Carter, the Massachusetts woman who was convicted of driving her boyfriend to commit suicide, had received the maximum potential prison sentence of 20 years rather than 2 ½ years the judge handed down on Thursday (with Carter serving 15 months and then supervised probation).

Incredibly, this Devil-like figure expressed zero remorse for her actions throughout.  As she stared blankly after hearing her fate yesterday, you were looking at the face of pure evil. It was chilling.  My thoughts and prayers to the victim’s family and friends.

---

Pray for the men and women of our armed forces...and all the fallen, including the two in Afghanistan...Sgt. Jonathon Hunter and Spc. Christopher Harris.  RIP.

God bless America.

---

Gold $1264
Oil $49.52

Returns for the week 7/31-8/4

Dow Jones  +1.2%  [22092...record]
S&P 500  +0.2%  [2476]
S&P MidCap  -0.6%
Russell 2000  -1.2%
Nasdaq  -0.4%  [6351]

Returns for the period 1/1/17-8/4/17

Dow Jones +11.8%
S&P 500  +10.6%
S&P MidCap  +5.5%
Russell 2000  +4.1%
Nasdaq  +18.0%

Bulls 60.0
Bears 16.2 [Source: Investors Intelligence]

Dr. Bortrum posted a new column!

Have a great week.

Brian Trumbore



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Week in Review

08/05/2017

For the week 7/31-8/4

[Posted 11:00 PM ET, Friday]

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

Edition 956

Trump World...Order Restored?

Chief of Staff Gen. John Kelly formally took over on Monday, firing Communications Director Anthony Scaramucci after just ten days in the position and before Kelly had even settled in, while ahead of this, some hoped Kelly’s appointment would spell the end of the president’s tweeting, but this proved not to be the case as Trump tweeted away like an ornery raven.

And then on Thursday, the Wall Street Journal reported that Special Counsel Robert Mueller has impaneled a grand jury in Washington to investigate Russia’s interference in the 2016 election, which virtually everyone agrees is not just a sign his investigation has entered a new phase, but it is in no way a positive for the president.  [Friday we learned there are apparently multiple grand juries.]

So Trump traveled to West Virginia on Thursday night and in a rally blasted the investigation, challenging Democrats to either continue their “obsession with a hoax” or begin serving the interests of the American people.  Trump slammed the probe as a “fake story that is demeaning to all of us and most of all demeaning to our country and demeaning to our Constitution.”

“I just hope the final determination is a truly honest one, which is what the millions of people who gave us our big win in November deserve and what all Americans who want a better future want and deserve.”

Trump added: “Most people know there were no Russians in our campaign. There never were,” he told the cheering crowd, who deep down really are just gearing up for another season of West Virginia football.  “We didn’t win because of Russia. We won because of you.”

Trump argued that Democrats are pushing the “totally made-up Russia story” because “they have no message, no agenda and no vision.”  Well, the Donald is indeed right on this last part.

“The Russia story is a total fabrication.  It’s just an excuse for the greatest loss in the history of American politics.  It just makes them feel better when they have nothing else to talk about.”

OK, stop.  Your own intel team, Mr. President, is unanimous in its belief the Russians meddled in the election at the very least.

Second, the June 2016 meeting with your boy and key campaign staffers was held at your Trump Tower for the purpose of meeting with Russians and, supposedly, collecting dirt on Hillary, at the very least.  Yet your son said nothing of the meeting until confronted on it a year later, and then we learned you personally dictated a misleading statement for Donald Jr. to parrot on the meeting.

I personally don’t see any collusion as yet, but the Russia story is not a “total fabrication.”  You take some of us to be idiots.

Long ago, if the president had just said, “We’re going to let the investigation run its course,” and every time the topic came up in a presser or interview afterward he simply said, “We’re letting Special Counsel Robert Mueller do his thing.  I’m sure we’ll be exonerated of any wrong doing. But we’re focused on our agenda,” and said that with a smile, imagine how much better off he would be, as well as the rest of us.

But noooo!  He may have gone to “great schools,” and believe he’s a “pretty smart guy,” but there’s always a few that slip through the cracks.

[Earlier Thursday, Trump blamed Congress for the current “very dangerous” relationship with Russia.  “Our relationship with Russia is at an all-time & very dangerous low,” he tweeted one day after signing the new sanctions bill overwhelmingly approved by both Houses of Congress.]

Otherwise, I have nothing to say on the grand jury situation.  I’m just going to wait like the rest of you to see what happens next.

I do have to say that one of Sean Hannity’s big deals, that Mueller’s crew of attorneys are major donors to the Democratic Party, is a bunch of hogwash.  You’ve seen the numbers he puts up on the screen, night after night, with the same talking points night after night after night after night....yes, I watch Hannity every evening for balance in my own coverage of the world...and they are small.

Hannity will go, “And Greg Andres.  He gave $3,700 to Democrats!”

That’s nothing!  My name is scattered throughout the Web for giving similar amounts, just like many of yours are.  That doesn’t mean we couldn’t be impartial on something thrown at us.

Anyway, Sens. Thom Tillis (R-N.C.) and Chris Coons (D-Del.) introduced legislation Thursday making it harder for President Trump to fire Mueller.  Under the bill, a special counsel could challenge his or her removal, with a three-judge panel ruling within 14 days on whether the firing was justified.  If the panel found no good cause for the firing, the special counsel would immediately be reinstated.  Needless to say this further fueled Trump’s ire.  Sens. Lindsey Graham (R-S.C.) and Cory Booker (D-N.J.) introduced similar legislation.

The Senate also blocked President Trump from being able to make recess appointments on Thursday as lawmakers left D.C. for their summer break.

Alaska Republican Sen. Lisa Murkowski did the honors, locking in nine “pro-forma” sessions – brief meetings that normally last roughly a minute. What this does is it means the Senate will be in session every three business days during the recess, and under the rules, which I really have no clue about but I’m relying on The Hill and other sources for this, it precludes Trump from making the appointments that so concerned many.  [Such as in making a recess appointment for a replacement for Jeff Sessions at AG.]

In the past the Senate has used similar devices and did so last year to prevent President Obama from being able to fill a vacant Supreme Court seat.  Under the rules, every three days a GOP senator would briefly preside over the upper chamber.

Trumpets....

--I refuse to comment at length on the leaked transcripts of phone conversations between Donald Trump and two world leaders, Australian Prime Minister Malcolm Turnbull and Mexican President Enrique Pena Nieto.  But it is outrageous this was leaked and whoever did it deserves prison time.  Yes, it is a real national security issue.  World leaders will hesitate to talk to Trump or any future president in confidence after this episode.  You don’t want that.

That said, the transcripts hardly make President Trump look good, and of course that was the point of the leaker. The damage has been done, though for the first time you saw some bipartisan backlash. 

And speaking of leaks, Attorney General Sessions said Friday that the Justice Department has more than tripled the number of leak investigations compared to that of the last year of the Obama administration.

Sessions said the Department of Justice had received nearly as many criminal referrals involving unauthorized disclosures of classified information in the first six months of the year as it had received in the prior three years combined.

But just last week, Trump tweeted that Sessions had taken a “VERY weak position” on “Intel leakers.”

--West Virginia Gov. Jim Justice switched parties, going from Democrat to Republican and making the announcement at Trump’s Huntington, W. Va., rally. He is the first sitting Democratic governor to switch to the GOP since Buddy Roemer, the governor of Louisiana, did so in 1991.

Justice becomes the 34th Republican governor in America, and as Republicans control both chambers of the state Legislature in West Virginia, that makes 26 states where the GOP controls all levers of government, while Democrats only do so in six of the 15 states where they hold the governorship; the six being Oregon, California, Hawaii, Rhode Island, Connecticut and Delaware. 

Nebraska’s unicameral legislature is supposed to be nonpartisan, but it’s effectively controlled by Republicans.  [Johnny Carson grew up in Nebraska....just had to throw that in there as I know some of you, like yours truly, still miss the man...but I digress....]

--Finally, Arizona Republican Sen. Jeff Flake created some waves when in releasing his new book, “Conscience of a Conservative: A Rejection of Destructive Politics and a Return to Principle,” he blisters President Trump, both in opinion pieces and on last Sunday’s talk shows and interviews after.

A few excerpts from his book:

“Who could blame the people who felt abandoned and ignored by the major parties for reaching in despair for a candidate who offered oversimplified answers to infinitely complex questions and managed to entertain them in the process?”

“It was we conservatives who, upon Obama’s election, stated that our No. 1 priority was not advancing a conservative policy agenda but making Obama a one-term president.- the corollary to this binary thinking being that his failure would be our success and the fortunes of the citizenry would presumably be sorted out in the meantime.”

“To carry on in the spring of 2017 as if what was happening was anything approaching normalcy required a determined suspension of critical faculties. And tremendous powers of denial.”

“Too often, we observe the unfolding drama along with the rest of the country, passively, all but saying, ‘Someone should do something!’ without seeming to realize that that someone is us.”

“We shouldn’t hesitate to speak out if the president ‘plays to the base’ in ways that damage the Republican Party’s ability to grow and speak to a larger audience.”

--South Carolina Republican Senator Tim Scott, on the deteriorating relationship between the president and Senate Republicans.

“We work for the American people.  We don’t work for the president.”  Scott added: “We should do what’s good for the administration as long as that does not in any way, shape or form make it harder on the American people.”  [Sean Sullivan / Washington Post]

Wall Street

First the economic news of the week.  Lots of PMI data, around the globe.  The July reading from the Chicago purchasing managers came in at 58.9 (50 being the dividing line between growth and contraction), less than the 60.0 consensus but still very strong.  The national ISM manufacturing index was 56.2, in line, while the services PMI was 53.9, the lowest since August.

June personal income was unchanged, worse than expected, while consumption (consumer spending) was only 0.1%.  The Fed’s key personal consumption expenditures index, its leading inflation barometer, was 0.1% for June, 1.5% on core year-over-year, still well below the Fed’s preferred 2.0% target.

June construction spending was -1.3%, while June factory orders were a solid 3.0%.

So then on Friday we had the July employment data and non-farm payrolls increased a solid 209,000, better than the 180,000 forecast, with the unemployment rate ticking down to a 16-year low at 4.3%.  U6, the underemployment rate, was unchanged at 8.6%.

Importantly, we had some wage growth, up 0.3%, or 2.5% now the last 12 months, which is still just OK for an expansion.  We need this to be 3 to 3.5% at a minimum.

With very slight revisions to May and June, the 3-month average job gain is 195,000, and it’s 184,000 for the first seven months of the year.  When Trump crows “this is job growth never seen before,” forgive me if I throw up my Chex Mix every time I hear it, but you know I know better, as stat focused as I can be.  For starters, the average monthly gain the last six months of 2016 was 193,000 (187,000 for all of that year).  That said the payroll picture is indeed good.  Trump can take some credit.  I just wish like with everything else he was intellectually honest.  You know, like George Washington and Honest Abe Lincoln, “the late, great Abraham Lincoln,” as Mr. Trump is fond of saying.

As for the stock market, President Trump needn’t worry that the press isn’t covering the records.  I saw on more than one occasion that CNN and NBC, for example, led their primary newscasts with this item, and round numbers like 22,000 on the Dow Jones are both important and newsworthy.   

A key has been earnings and they largely continue to come in better than expected, up 11% on the S&P 500, according to Thomson Reuters, and as I’ve been saying, more importantly, revenues (not subject to the financial engineering earnings are), are up a solid 5%.

But you’ve also seen the divergence between the Dow Jones and the Nasdaq, the former up, the latter largely struggling, the Dow being helped by the weaker dollar in particular, as its multinationals profit from sales to overseas customers. Boeing, for example, is profiting mightily from a rise in global airline traffic, which is boosting demand, and the weaker dollar helps against the local competition.

It’s the improving global picture in general that is helping everyone.  As you’ll see below, Europe’s numbers are the best in years, while China hasn’t collapsed, and Asia, in general, does pretty well, save for moribund Japan, whose exporters are nonetheless benefiting mightily from their weak currency.

Europe and Asia

Just a ton of data in both.  For starters....

GDP in the eurozone (EA19) was 0.6% in the second quarter, 2.1% year-over-year vs. 1.9% in the first quarter.  This is the highest reading on growth in the region since Q2 2011.

Eurostat reported that the unemployment rate in June for the EA19 was 9.1%, an 8 ½-year low (Feb. 2009). It was 10.1% a year earlier.

The unemployment rate in Germany was 3.8%; France 9.6%; Italy 11.1%; Spain 17.1%; Ireland 6.3%; and Greece 21.7% (April).

The youth jobless rate remains high in some countries, but it’s been improving like the core figures.  France 21.5%; Italy 36.5%; Spain 39.1%; and Greece 45.5% (April).

A flash reading on inflation in the eurozone for July came in at 1.3%, unchanged from June’s 1.3%, an almost 8-year low. Core inflation, ex-food and energy, rose 1.2%, both well below the ECB’s 2% target.

On the PMI front....the July reading for the EA19 on the manufacturing end was 56.6 vs. 57.4 in June.

Germany 58.1, a 5-month low
France 54.9*
Italy 55.1
Spain 54.0
Netherlands 58.9
Ireland 54.6 (56.1 in June)
Greece 50.5 (at least a second month of growth)

*Factories in France are hiring at their best pace since 2000 and in Spain at a rate not seen since before the start of the monetary union in 1998.

The EA19 services PMI for July was 55.4, unchanged from June.

Germany 53.1 (54.0 in June)
France 56.0
Italy 56.3 (vs. 53.6)
Spain 57.6
Ireland 58.3

In the U.K., the manufacturing PMI for July was 55.1, 53.8 on services.  [All of the above PMIs courtesy of Markit.]

Chris Williamson, IHS Markit

“Eurozone factories were buzzing with activity again in July. The PMI came in slightly below the earlier flash estimate, slipping to a four-month low, but this is still an encouragingly buoyant reading.  The survey indicates that manufacturing output was growing at an annual rate of approximately 4% at the start of the third quarter, sustaining the best growth spell that the region has seen for six years.

“Germany clearly remains a major driver of the upturn, with only neighboring Austria and the Netherlands enjoying faster rates of expansion. But this is a broad-based revival nonetheless, with even Greece enjoying its first back-to-back monthly improvement in manufacturing conditions for three years.

“Employment growth meanwhile continued to run at one of the highest rates seen for at least 20 years, with the hiring boom underscoring the current ebullient mood within euro area factories.”

Eurobits....

--On the Brexit front, Prime Minister Theresa May’s spokesman said on Monday that free movement of people from the European Union will end in March 2019 when Britain leaves the bloc, as Mrs. May tries to clear up some uncertainty among her cabinet members over policy.

British new car registrations fell for the fourth consecutive month in July, the longest run of declines since 2011, in another sign of how uncertainty over Brexit is hitting the economy. Sales were down 9.3% over year ago levels.

In keeping with this, Bank of England Governor Mark Carney said persistent uncertainty over the U.K.’s future relationship with the EU is holding back business investment and household spending. This week the BoE cuts its growth forecast and left interest rates unchanged.  GDP is projected to be 1.7% this year, down from a prior forecasted 1.9%.  Growth will fall to 1.6% next year.  The bank expects wage growth of just 2% this year, well below the current inflation rate of 2.6%.

But Carney said interest rates were still likely to rise further in the next two years than the market anticipates.  It’s easy to be complacent when there hasn’t been a rate increase since July 2007.  The bank voted 6-2 to hold the line.

Meanwhile, consulting firm Oliver Wyman estimates 17,000 investment banking jobs could leave the U.K. soon after Brexit.  Over the long term this figure could rise to 40,000.

But there are 560,000 people employed in banking in the U.K., so while this kind of job loss isn’t good, it doesn’t spell a deathknell for the industry in Britain.  [Housing values in London will be a different story.]

In a poll by Ipsos MORI, more than seven in 10 Britons under 65 think the U.K. government is taking the wrong direction, the country on the wrong track, up 16 percentage points since Prime Minister May unexpectedly called a general election in April and a 7-point increase since the vote in June.

Lastly, Ireland is trying to avoid a border issue come Britain’s exit from the European Union.  In theory, once Britain leaves, taking Northern Ireland with it, of course, you would have a hard border with its Irish cousins to the south.  It’s about carving out a special customs union for Northern Ireland.  It’s complicated. Irish Prime Minister Leo Varadkar has said his government would oppose any customs posts or immigration checks on the land border between the Republic of Ireland and Northern Ireland, as there have not been any since the European single market came into effect in 1993.

About 30,000 people cross every day without any border checks.

--A YouGov poll published Thursday shows only 36% have a favorable view of President Emmanuel Macron, a fall of 7 points on the previous month.  [Other surveys have him higher, but with the trend in all down.]  Unemployment remains the main concern of voters.

The Washington Post’s James McAuley had an extensive piece on Macron last weekend that basically said what I have for weeks now; Macron wants to be front and center on the world stage.  His ambition is beyond sky-high, but the French are now skeptical because he’s been extremely combative, such as in the firing of his defense chief (officially the guy resigned) and he’s been pushing to expand the state’s powers to fight terrorism in ways that some say will curtail civil liberties.

But the biggest thing is he wants to be leader of the free world, which, witness his performance in negotiating a cease-fire agreement between the two key parties in Libya, has pissed off Italy for being excluded.

And Macron skillfully seduced Donald Trump after their tense first meeting in Brussels in May.  Trump now extols his “great relationship” with the man. 

It’s going to be interesting watching the French leader over the coming 6 to 12 months.

--Germany has a big problem on its hands with its critical car industry and its beleaguered diesel technology.  An emergency summit in Berlin was called by the government, with the chief executives of Volkswagen, Daimler and BMW trying to convince state ministers that despite the steady drumbeat of negative news, diesel still has a future.

The automakers hoped to cut a deal whereby they would receive political support to avoid driving bans in exchange for further upgrades to existing vehicles to lower their pollution.

German automakers need diesel as a stop-gap as they frantically try to catch up with the burgeoning electric car industry; while Chancellor Merkel, with an election less than two months away, faces criticism the government is too lenient on carmakers, though she doesn’t want to endanger an industry that employs 800,000.

Germany’s car export business is hugely important and last year, 46% of the cars sold in the country had a diesel engine.  But the emissions scandal has the people, especially environmentalists, all riled up.

So on Wednesday, carmakers agreed to update the software in 5.3 million diesel-powered cars to reduce emissions in an agreement with the Transport Ministry.  The carmakers also agreed to self-fund incentives aimed at encouraging consumers with diesel cars 10 years old and older to trade them in for newer models with lower emissions.  In return, the Transportation and Environment ministers said they would do all they could to avoid driving bans for diesel cars in German cities.

Turning to Asia, China’s PMIs for July were released.  The official National Bureau of Statistics revealed that the manufacturing figure was 51.4 vs. 51.7 in June, with services at 54.5 vs. 54.9.

The unofficial Caixin manufacturing number was 51.1 vs. 50.4 in June, with services at 51.5 vs. 51.6.

It is significant that the Caixin manufacturing figure was as high as it was, almost mirroring the often shoddy NBS data.  Caixin measures the private sector, while the official government figure is largely about the performance of large, state-owned enterprises.

All in all, China is doing fine, even with its massive debt problem and government efforts to deleverage.

In Japan, the July manufacturing PMI came in at 52.1 vs. 52.4 in June, while services was 52.0 vs. 53.3.  Just so-so.  As you all should know by now, the big problem here, Prime Minister Shinzo Abe’s big problem (aside from North Korea), is wage growth. There just is none, like it’s still about 0.6% (vs. the U.S. figure of 2.5%).  The Japanese consumer is not going gang busters without higher wages.  Period. 

Some other manufacturing PMIs for July.

Taiwan 53.6; South Korea 49.1 (50.1 in June); India 47.9 (50.9 in June), the worst reading since Feb. 2009; Russia 52.7 (50.3 June); Brazil 50.0.

One note on the export side.  South Korea’s surged nearly 20% in July, with exports to China and the EU rising by 6.6% and 10.2% year-over-year, respectively, while shipments to the U.S. increased 7%. Shipments to India surged 79%, thanks to robust demand for South Korean mobile phones and steel products.

Street Bytes

--The Dow Jones has risen nine straight trading sessions, hitting a new record each of the last eight, the Dow this week closing up 1.2% a second consecutive week to 22092.  The S&P 500 gained 0.2%, while Nasdaq fell a second straight week, down 0.4%.

--U.S. Treasury Yields

6-mo. 1.13%  2-yr. 1.35%  10-yr. 2.26%  30-yr. 2.84%

Former Federal Reserve Chairman Alan Greenspan said equity bears would be better off worrying about bond prices than stocks.

“By any measure, real long-term interest rates are much too low and therefore unsustainable,” Greenspan said in an interview.  “When they move higher they are likely to move reasonably fast.  We are experiencing a bubble, not in stock prices but in bond prices.  This is not discounted in the marketplace.”

Others have warned rates will break higher than expected as the era of global central-bank accommodation ends.

Greenspan added: “The real problem is that when the bond-market bubble collapses, long-term interest rates will rise.  We are moving into a different phase of the economy – to a stagflation not seen since the 1970s. That is not good for asset prices.”

Stocks will suffer with bonds, he argues.

The Federal Reserve is expected to announce in September that it will begin unwinding its $4.5 trillion balance sheet, which is a rate increase of a different sort.

[On the other hand, St. Louis Fed President James Bullard, who is not a voting member of the Fed’s Open Market Committee this year, said he’s opposed to further U.S. interest rate increases and warned that more hikes could hinder domestic inflation from achieving the Fed’s target.]

--Natural-gas prices swooned on Monday, and stayed at five-month lows all week, around $2.80 a million British thermal units, as the forecast for August is for no major heat spells (save for this past week’s in the Pacific Northwest...sorry, guys), a major driver of natural-gas demand. 

Forecasters at Commodity Weather Group told the Wall Street Journal, “The hottest week of summer 2017 is probably behind us at this point.”

Here in the New York City area, it has been an incredibly average summer temperature wise, with only three “heat waves” of three consecutive days of 90-degree temps, but no more, and this goes back to early June.  Like whoopty-damn do.

Nat-gas prices peaked, by the way, at $3.93 early last winter when the weather was supposed to be very cold in January and February, but that never materialized.  It’s been down ever since.

Should oil stay around $50 a barrel, or higher, that could also lead to more drilling for natural-gas, as the two are often produced alongside each other.  That’s then even more supply on the market depressing prices further.

--For the seventh month in a row, U.S. car sales declined, with even purchases of trucks and SUVs slowing, with any growth from these two not making up for the decline in traditional automobiles.

While the news is bad for manufacturers, it’s good for consumers as they can take advantage of competitive prices.

Overall vehicle sales were down 5.7% in July, year-over-year, and if the current trend continues, auto makers will struggle to sell about 17 million vehicles this year compared with a record 17.6 million in 2016.  [Albeit 17 million is still very good, though Kelly Blue Book pegs it at 16.7m.]

Ford sales were down 7.4% year-over-year in July, with GM’s down 15.4%, and Fiat Chrysler’s 10%.  In the case of GM, the Chevy Colorado midsize pickup truck outsold the Camaro, Impala, Sonic and Spark – combined, so many analysts like Rebecca Lindland at Kelly Blue Book concluded, “GM needs to consider applying tough-love metrics to some car lines.”

Ford focused on SUV retail sales, which rose 9.1%, even as fleet sales plunged 26%.*  Passenger car sales were down 19% year on year.

*GM cut its fleet sales 80% (sales to rental car companies and the like) that generate thin profit margins.

Separately, Toyota’s sales rose 3.6% as its sedan sales have held up better than most competitors.

But Nissan’s fell 3%, Honda’s 1.2%, and Volkswagen’s 5.8%.

--Meanwhile, ahead of its earnings release after the market closed Wednesday, Tesla CEO Elon Musk warned on Monday that the electric carmaker would face “manufacturing hell” as it ramped up production of its new mass-market Model 3 sedan.  At an event Friday, Musk handed over the first 30 cars to employee buyers.

“We’re going to go through at least six months of manufacturing hell,” Musk said, as it looks to ramp up total car production to 500,000 vehicles next year, close to six times its 2016 output, which many believe is unrealistic.  Musk is talking of ramping up from 150 cars in September to an “exponential” jump to 20,000 a month by New Year’s Day.

So Wednesday, Tesla said orders for its two older and more expensive vehicles have accelerated, while ending the quarter with $3 billion in cash on hand after spending less than expected in the April through June period.  CEO Elon Musk tried to allay investor fears that the company would not have enough cash to pay for its ambitious spending projects and give it enough flexibility during the Model 3 ramp up.  Plus he reiterated that by end of 2018 the company would indeed be producing 10,000 vehicles a week.

Revenue more than doubled to $2.79 billion, also beating the Street.

Investors liked what they heard, even as Tesla reported a loss of $336 million, compared with a loss of $239 million a year earlier, but the adjusted per-share loss was less than analysts’ estimate.

End of the day, Tesla shares soared on Thursday on frankly a bunch of hokum, and rallied another 3% Friday to $357, after hitting $311 on Wednesday.

--Japanese automakers Toyota and Mazda announced plans to build a new $1.6 billion vehicle assembly plant in the U.S. that would create 4,000 jobs, a victory for President Trump who has been pushing foreign automakers to make more vehicles in the U.S.

The two companies will have a 50-50 joint venture.  No site has been established yet.

--Apple Inc. reported blowout earnings for the second quarter and forecast current-quarter revenue largely above estimates, helping allay fears about a possible delay in the launch of the iPhone’s 10th-anniversary edition later this year.  The shares hit an all-time high on Wednesday.

Apple reported better-than-expected iPhone sales, even as the latest version could potentially move to October or November, instead of September, due to production issues, with the latest edition expected to adopt high-resolution OLED displays, along with better touchscreen technology and wireless charging – which could come with a $1,000 plus price tag.

The company forecast total revenue of between $49 billion and $52 billion for the current quarter, while analysts were currently pegging $49.2bn.

Analysts on average expect the company to sell 45-55 million iPhones in the current quarter.

In the quarter ended July 1, Apple’s fiscal third quarter, sales of the iPhone rose to 41.03 million, vs. 40.4 million a year earlier.

The company’s net income rose to $8.72 billion, or $1.67 per share, from $7.80 billion, or $1.42 per share, a year earlier. Revenue rose to $45.41 billion from $42.36 billion in the quarter, typically the company’s weakest.

Apple’s revenues from the Greater China region fell 9.5% to $8 billion, as customers switched to newer domestic offerings.

Apple’s services business – which includes the App Store, Apple Pay and iCloud – jumped 21.6% to $7.27 billion.

The company even sold 15% more iPads, a product deemed out of fashion.

CEO Tim Cook told Bloomberg Television, “We’ve put everything we know into coming up with the guidance. We really like what we see for the beginning of the back-to-school business.”

--Separately, Apple is helping China and its crackdown on the internet as software made by foreign companies that helps users evade the Great Firewall and skirt the country’s system of internet filters has vanished form Apple’s app store on the mainland.

One company, ExpressVPN, posted a letter it received from Apple saying that its app had been taken down “because it includes content that is illegal in China.”  [VPN is “virtual-private network,” and heretofore this gave users access to the unfiltered internet in China.]

ExpressVPN wrote in its blog that the removal was “surprising and unfortunate,” adding, “We’re disappointed in this development, as it represents the most drastic measure the Chinese government has taken to block the use of VPNs to date, and we are troubled to see Apple aiding China’s censorship efforts.”

Every American should be upset.  This needs to be a “60 Minutes” story this fall.

Apple has removed apps before at the request of China, and I have warned for years that Apple, which is super reliant on the Chinese market for growth, will one day get screwed royally.  It’s market share is already suffering as noted above, with competition from domestic producers in China gaining more and more.

Apple’s efforts to stay on China’s good side will fail massively in the coming years.  More on this below, but think economic nationalism.

--Job growth in Canada slowed in July after two consecutive months of strong gains, though fewer people looking for work sent the unemployment rate to its lowest level since October 2008, 6.3%.

--Warren Buffett’s Berkshire Hathaway saw its second-quarter profit fall 155 as costs rose for its various businesses and it earned less from its investments. Revenue rose 6%.

The rising costs were most prevalent in its insurance businesses, railroads and financial products providers.

--One-time high-flyer Under Armour lowered its full-year revenue outlook and announced it would cut 280 jobs from its global workforce, even as its second-quarter performance actually topped most expectations.  Because of the guidance, though, shares fell more sharply.

For the full-year, UA now expects revenue growth of 9 to 11 percent, down from a previous outlook of 11 to 12 percent.

For the quarter ended June 30, the company lost $12.3 million, or 3 cents per share, which was better than the 6-cent loss analysts’ forecast.

Revenue climbed to $1.09 billion, from $1 billion, slightly above expectations.

--Martin Shkreli was convicted on three of eight counts of defrauding his hedge fund investors and a pharmaceutical company on Friday.  He faces as much as 20 years in prison.

Prior to the trial, the punk said he was “so innocent” that the judge, jury and prosecutors would be apologizing to him afterward.

But the thing that made this trial so odd is that the defendants actually made more than triple what they invested.

Shkreli became widely known after raising the price of a drug called Daraprim to $750 a pill from $13.50 overnight.  The case against him, though, had nothing to do with Daraprim.

--The nation’s largest theater chain, AMC Entertainment, saw its shares plunge 27% after it reported dwindling attendance nationwide.

AMC, owned by Chinese real estate conglomerate Dalian Wanda Group, operates 1,000 cinemas and four of the nation’s five top grossing theaters, but it is suffering from Netflix’ growing influence as millennials choose to stream videos rather than go to the multiplex.

Just last December, though, AMC acquired rival Carmike for $1.2 billion.

As of July 31, North American ticket sales were off 4.9% from a year ago.  Business is expected to continue to be lax, until December and the release of the new Star Wars flick.

--Shares in two recent IPOs continued to fall from their IPO price. Snap Inc., parent of the Snapchat messaging app, saw its stock price fall to a new low after the lockup period for early investors ended, though after bottoming at $12.60, it ended the week at $13.55.  The early March IPO price was $17.

Shares in meal kit operator Blue Apron, which came out recently at $10 per share, fell to $5.80 at Friday’s close.  But to defend it, there was a story out today that it was cutting 1,270 jobs from its New Jersey facility, which would be almost a quarter of its workers, but it’s my understanding the workers have the option of going to a new expanded facility nearby.  [They are moving from Jersey City to Linden, N.J.]

Man, I was about to write they were slashing jobs by over 1,200 when I just opened to see the full story.

That’s why you always try to get at least two sources, boys and girls!

--Israel’s Teva Pharmaceuticals cratered 24% on Thursday to $24 a share on the heels of a steeper than expected loss for its second quarter.  The world’s biggest seller of generic drugs then announced it would cut 7,000 jobs by year’s end.  Teva also plans to close or sell six plants in 2017 and nine more in 2018.  And by end of the year, Teva vows to have pulled out of 46 countries.

Teva is suffering from increased competition in an industry with already-tight profit margins, and it’s been without a CEO since December. The company is Israel’s largest by market cap, and it’s also suffering from a string of acquisitions, including Allergan’s generic drug unit for $40 billion, that have saddled Teva with a humongous debt load.  There are very real concerns about its viability, which would be disastrous on so many levels, especially for Israel.

--Time Warner Inc. reported better-than-expected quarterly profit, driven by the box-office success of its latest superhero movie “Wonder Woman.”  Revenues from the Warner Bros. unit, which includes the movie business, rose 12.4% to $2.99 billion.  “Wonder Woman” grossed about $800 million worldwide through July 31.  The studio has already announced a December 2019 date for a sequel.

Revenue in the company’s Turner unit, which includes CNN and TNT, rose 3.1% to $3.1bn in the second quarter as higher subscription revenues more than offset declining ad revenue.

Revenue from HBO rose slightly to $1.48 billion, a little below estimates, but with “Game of Thrones” debuting its latest season last month, the impact should be reflected in the third quarter.

Overall, Time Warner revenue rose 5.4% to $7.33 billion, with net income of $1.06bn.

[As for the hack attack at HBO and the possible loss of scripts of programs such as “Game of Thrones,” details are still sketchy.  HBO has told employees, though, that their email is secure, which was an original concern.]

--After two prior failed attempts to merge, Discovery Communications announced it was acquiring Scripps Networks Interactive, the cable programming company that features lifestyle channels popular with women, such as HGTV, Food Network, Travel Channel and Cooking Channel, for $11.9 billion. Discovery features many cable favorites such as “Deadliest Catch” and “Shark Week,” through channels like Animal Planet, and TLC, and the union of these two will command 20% of the cable viewership in the U.S., plus prospects for capturing growth overseas.

The combination will improve Discovery’s leverage with pay-TV distributors, while offering a streaming service directly to consumers with all the channels it can now offer.

--Royal Caribbean Cruises boosted its full year earnings outlook for a second time this year as the recovery in bookings continues after being held back last year by concerns over the Zika virus – as well as terrorist attacks in Europe and Turkey that impacted bookings there.

Earnings for the second quarter were the highest ever, $369.5 million, as total revenue rose more than 4% to $2.19bn. The bottom line was helped by lower fuel and operating costs.  [The cabin crew is now sleeping three to a bunk bed, rather than two...or so I’m surmising.]

--Restaurant Brands International, owners of Tim Hortons, Popeyes and Burger King, missed analyst expectations for the second quarter, as sales at the first two unexpectedly dropped.

Tim Hortons had same-store sales that fell 0.8% compared with last year, when a 2% increase was forecast.  Comp sales at Popeye’s fell 2.7%.  These two overshadowed a solid performance by BK, up 3.9%, though McDonald’s rose 6.6%.

--Shares in Yum Brands fell after the company missed sales for its Taco Bell division.  While Taco Bell’s comp sales growth was 4%, it fell short of the 5.9% expected by the Street.

Yum also owns KFC and Pizza Hut, with the former reporting good comp sales growth of 3%, while Pizza Hut’s fell 1%, which was still better than expected.

--Pearson Plc made good on a pledge to cut costs, slashing 3,000 jobs, about a tenth of its work force, and cutting its interim dividend to preserve cash as it works on a turnaround of its struggling education business.

CEO John Fallon is attempting to create a leaner company more focused on digital education.  He’s been forced to accelerate the cost-cutting because of challenges in the U.S., where college enrollment is falling and online learning is putting pressure on textbook sales.

Back in 2015, the company sold the Financial Times and its stake in The Economist to invest in its education business.  Last month, it announced it was selling a 22 percent stake in book publisher Penguin Random House.

--After weeks of negotiations, Los Angeles and the International Olympic Committee agreed that L.A. would host the 2028 Summer Olympics, not 2024, that going to Paris.  In return for accepting the delay, the IOC agreed to concessions involving sponsorship sales, the retention of any potential surplus and upfront funding for youth sports programs throughout the city.

Mayor Eric Garcetti said, “This deal was too good to pass up.”

Normally, the IOC doesn’t give host cities its advance until two years before the Games, but L.A., among its other goodies, will receive a $180-million advance to cover the organizing committee’s costs years earlier than normal, while pumping $160 million into youth sports throughout the city.  Plus Los Angeles is due to receive about $2 billion of the IOC’s broadcast and sponsorship revenues, more than Paris will receive.

--Heineken NV, the world’s second-largest brewer, bucked the trend in the beer business, posting revenues that increased 5.7% in the first half, while rival Anheuser-Busch InBev struggles.  Heineken’s beer volume grew fastest in the Asia-Pacific region as demand for its Tiger brand (love this beer) surged in Vietnam, one of its largest markets alongside Mexico and Nigeria.

Adjusted operating profit rose 5.9% in the first half to $2.12 billion.

Heineken has bid for 1,900 pubs from Punch Taverns in the U.K., and is doubling down on investment in Africa, having recently opened a brewery in Ivory Coast.

--Japan’s Sapporo Holdings Ltd. is acquiring Anchor Brewing Co. of San Francisco for about $85 million.  The business is best known for a fine brew, Anchor Steam, which when you’re looking for a premium domestic, is right up there with Shiner Bock and Yuengling.

With the deal, Sapporo is looking to expand sales of its premium Sapporo beer.  It also owns the fine Canadian premium, Sleeman Breweries Ltd.

Canada...where all domestic is premium.

--“Dunkirk” led last weekend’s box office for a second week with an estimated $28.1 million in the U.S. and Canada.  Through Sunday the film had grossed $102.8 domestically to date, plus more than $131 million overseas.

--Noted bond investor Jeffrey Gundlach is suing a California wine merchant who he says sold him several dozen bottles of fake wine. Gundlach claims in a lawsuit filed the other day that Soutirage sold him at least 67 bottles that were fake, and that it would cost more than $1 million to replace them.

Gundlach hired a “world-renowned” expert to test them and several classics from the Bordeaux region in France, including a 1928 Latour, were found to be bogus.

There have been similar cases over the years. I remember reporting on one involving billionaire William Koch, where he was awarded $1.15 million in a case involving a Silicon Valley entrepreneur.

Foreign Affairs

Iran: Tehran condemned new sanctions passed by Congress and then signed by President Trump against its missile program.

“We will continue with full power our missile program,” Foreign Ministry spokesman Bahram Ghasemi told state broadcaster IRIB.

“We consider the action by the U.S. as hostile, reprehensible and unacceptable, and it’s ultimately an effort to weaken the nuclear deal,” he added, referring to the 2015 agreement with the P5+1 that lifted some sanctions on Iran.

“The military and missile fields...are our domestic policies and others have no right to intervene or comment on them.  We reserve the right to reciprocate and make an adequate response to the U.S. actions,” Ghasemi said.  [Agence France Presse]

Israel: An indictment of Prime Minister Benjamin Netanyahu is coming.  His former aide, Ari Harow, just turned state’s witness in the corruption case and this is huge.  Harow is Netanyahu’s former chief of staff and he has been supplying information in two key affairs: Allegations that the prime minister received gifts from wealthy benefactors, and secret negotiations Netanyahu allegedly held between the publisher of one of Israel’s most popular newspapers in return for favorable coverage.

Under Harow’s deal, he will be convicted of fraud and breach of trust in a separate case, but will receive no jail time, in exchange for his cooperation against his former boss.  [Haaretz]

Afghanistan: The Taliban killed two American soldiers in a suicide bomb attack near the airport in the southern Afghan city of Kandahar on Wednesday, according to the Pentagon.  A local security official told Reuters the attacker drove an explosives-laden vehicle into a NATO convoy. The Taliban then claimed responsibility, with a spokesman for the group saying it had destroyed two vehicles and killed 15 foreign soldiers, but I have seen only confirmation of the two American deaths.

Earlier in the week, suicide bombers attacked a Shiite mosque in the western city of Herat, killing at least 20.  The Taliban denied responsibility and it’s assumed members of a splinter ISIS-affiliated group that has targeted gatherings of Shiites is.

ISIS claimed responsibility for an attack on the Iraqi embassy building in Kabul. Two suicide bombers killed seven guards at the gate, and then two or three gunmen entered the embassy and were eventually killed as well, with no word on Iraqi or Afghan casualties inside.

Close to 1,700 civilians have been killed in the first seven months of the year, according to the U.N.

Editorial / Wall Street Journal

“The Russia election probe aside, President Trump has so far avoided any major foreign-policy mistakes. But he will commit an Obama-sized blunder if he overrules the advice of his generals who want a modest surge of forces and a new strategy in Afghanistan.

“Mr. Trump had by all accounts agreed weeks ago to the Pentagon’s request for an additional 3,000-5,000 troops plus more aggressive use of air power and other assets. But he’s having second thoughts as he indulges his isolationist instincts fanned by aide Stephen Bannon.  Mr. Trump’s decision will determine whether he’ll repeat Mr. Obama’s catastrophic 2011 withdrawal from Iraq, and it will echo among allies and adversaries for the rest of his Presidency....

“Mr. Trump may chafe that he has to spend more money and political capital on Afghanistan, but U.S. presidents can’t withdraw from national commitments without consequences.  North Korea, Russia, China and Iran are sizing up the President in these early months to determine how much military or territorial expansion they can get away with.

“Walking away from Afghanistan, or overruling his generals to satisfy the isolationism of his political base, would show that he’s more like Barack Obama than he wants to admit.”

Pakistan: Lawmakers have elected Shahid Khaqan Abbasi to replace Nawaz Sharif after he was ousted in a corruption probe the prior week, but Abbasi isn’t expected to be in power long, as Sharif’s ruling party, which backed him, wants him to serve only temporarily, until Sharif’s younger brother Shahbaz qualifies – a move expected to take at least 45 days, after he wins a special election for his brother’s seat in the National Assembly. 

Opponents are dismissing the whole process as undemocratic.  But Abassi won 221 of 342 votes in the assembly.  The next general elections are slated for June.

Shabhaz has serious health issues, as he’s undergone multiple treatments for cancer.

North Korea: Early in the week, Sec. of State Rex Tillerson said the U.S. was not seeking regime change in North Korea.  “We’re not your enemy, we’re not your threat but you’re presenting an unacceptable threat to us and we have to respond,” Tillerson said, adding that the U.S. wanted a dialogue at some point.

And while Tillerson’s boss, President Trump, has repeatedly criticized China for not doing enough to stop Pyongyang’s weapons program, Tillerson took a more diplomatic approach, saying that “only the North Koreans are to blame for this situation.”

“But,” he added, “we do believe China has a special and unique relationship, because of this significant economic activity, to influence the North Korean regime in ways that no one else can.”

China’s U.N. ambassador Liu Jieyi said on Monday that it is up to the United States and North Korea, not China, to try to reduce tensions and resume negotiations to denuclearize the Korean Peninsula.  “They hold the primary responsibility to keep things moving, to start moving in the right direction, not China,” Liu said at a news conference.  [Reuters]

An official commentary in the Chinese state news agency Xinhua read in part:

“Trump is a character and enjoys tweeting, but an emotional response cannot be the guiding policy to solve the Korean peninsula’s nuclearization issue.  In order to solve the nuclear issue on the peninsula, related parties need to use practical action and show sincerity, stop shirking responsibility, and especially should not stab China in the back.”

Trump tweeted this week: “I am very disappointed in China. Our foolish past leaders have allowed them to make hundreds of billions of dollars a year in trade, yet they do NOTHING for us with North Korea, just talk. We will no longer allow this to continue. China could easily solve this problem!”

On a related issue, Chinese President Xi Jinping, speaking to senior Communist Party and government officials at an event to celebrate the 90th anniversary of the founding of the People’s Liberation Army, said that China’s military would not tolerate any attempt to damage its territorial integrity.

“We do not allow any individual, any organization, any political party, at any time or by any means, to split any single piece of the Chinese territory.  No one could expect us to swallow consequences that damage our sovereignty, security and developmental interests.”

Xi, commander-in-chief, also asked the military to focus on preparations for war, and urged its leaders to improve capabilities in modern warfare and combat readiness.

At a military parade tied to the celebration of the PLA, China unveiled a new, more mobile intercontinental ballistic missile.  Xi was wearing combat fatigues.  [South China Morning Post]

Editorial / The Economist

“It is odd that North Korea causes so much trouble. It is not exactly a superpower. Its economy is only a fiftieth as big as that of its democratic capitalist cousin, South Korea. Americans spend twice its total GDP on their pets. Yet Kim Jong Un’s backward little dictatorship has grabbed the attention of the whole world, and even of America’s president, with its nuclear brinkmanship.  On July 28th it tested an intercontinental ballistic missile that could hit Los Angeles. Before long, it will be able to mount nuclear warheads on such missiles, as it already can on missiles aimed at South Korea and Japan. In charge of this terrifying arsenal is a man who was brought up as a demigod and cares nothing for human life – witness the innocents beaten to death with hammers in his gigantic gulag. Last week his foreign ministry vowed that if the regime’s “supreme dignity” is threatened, it will ‘pre-emptively annihilate’ the countries that threaten it, with all means ‘including the nuclear ones.’  Only a fool could fail to be alarmed.

“Yet the most serious danger is not that one side will suddenly try to devastate the other. It is that both sides will miscalculate, and that a spiral of escalation will lead to a catastrophe that no one wants....

“President Donald Trump has vowed to stop North Korea from perfecting a nuclear warhead that could threaten the American mainland, tweeting that ‘it won’t happen!’  Some pundits suggest shooting down future test missiles on the launch pad or, improbably, in the air.  Others suggest using force to overthrow the regime or pre-emptive strikes to destroy Mr. Kim’s nuclear arsenal before he has a chance to use it.

“Yet it is just this sort of military action that risks a ruinous escalation.  Mr. Kim’s bombs and missile-launchers are scattered and well hidden. America’s armed forces, for all their might, cannot reliably neutralize the North Korean nuclear threat before Mr. Kim has a chance to retaliate.  The task would be difficult even if the Pentagon had good  intelligence about North Korea; it does not.   The only justification for a pre-emptive strike would be to prevent an imminent nuclear attack on America or one of its allies....

“If military action is reckless and diplomacy insufficient, the only remaining option is to deter and contain Mr. Kim.  Mr. Trump should make clear – in a scripted speech, not a tweet or via his secretary of state – that America is not about to start a war, nuclear or conventional.  However, he should reaffirm that a nuclear attack by North Korea on America or one of its allies will immediately be matched....

“America and its allies should apply pressure that cannot be misconstrued as a declaration of war. They should ramp up economic sanctions not only against the North Korean regime but also against the Chinese companies that trade with it or handle its money.  America should formally extend its nuclear guarantee to South Korea and Japan, and boost the missile defenses that protect both countries. This would help ensure that they do not build nuclear weapons of their own. America should convince the South Koreans, who will suffer greatly if war breaks out, that it will not act without consulting them. China is fed up with the Kim regime, but fears that if it were to collapse, a reunified Korea would mean American troops on China’s border.  Mr. Trump’s team should guarantee that this will not happen, and try to persuade China that in the long run it is better off with a united, prosperous neighbor than a poor, violent and unpredictable one....

“It is worth recalling that America has been here before. When Stalin and Mao were building their first atom bombs, some in the West urged pre-emptive strikes to stop them. Happily, cooler heads prevailed. Since then, the logic of deterrence has ensured that these terrible weapons have never been used. Someday, perhaps by coup or popular uprising, North Koreans will be rid of their repulsive ruler, and the peninsula will reunite as a democracy, like Germany. Until then, the world must keep calm and contain Mr. Kim.”

Ralph Peters / New York Post

“If worse came to worst and North Korea detonated a nuclear warhead above Honolulu, the losses would include up to 44,000 U.S. troops, as well as our vital bases ringing the city – beginning with Pearl Harbor.

“Who would benefit?

“Not North Korea.  We’d level that mountainous country.

“Certainly not us, with our Pacific forces crippled to a degree that the Japanese couldn’t have hoped to achieve in 1941.

“The sole winner would be China – not even a party to the conflict. And that is a cardinal reason why Beijing will not help us halt Pyongyang’s nuke and missile programs.

“Washington has deluded itself into bipartisan groupthink yet again, desperate to believe that, if only we better explain our argument, China will turn on its most important ally, North Korea. Our folly ignores the strategic perspective entirely: We don’t even try to identify China’s ultimate goals.

“The central Chinese ambition is to become the dominant military (as well as economic) power in the Pacific. North Korea could fulfill that ambition for Beijing without the Chinese firing one shot....

“Yes, the scenario outlined above is the worst-case version. But in the military, you always plan for the worst (a dictum ignored, to disastrous effects, in the U.S. invasion of Iraq)....

“So we blunder on, fingers crossed, while the Chinese revel in our strategic blindness.”

Editorial / Wall Street Journal

“In the face of a growing North Korea threat, the White House has struggled to devise a consistent policy toward Pyongyang.

“The top U.S. diplomat, Secretary of State Rex Tillerson, said Tuesday the U.S. wasn’t seeking to overthrow North Korea’s government and that he wanted to hold talks with it. That echoed comments from President Donald Trump in May, who sounded open toward meeting Mr. Kim, telling Bloomberg News that he would be ‘honored’ to do it if it were “appropriate.”

“Last month, CIA Director Mike Pompeo signaled that he wanted to see the North Korean regime fall.

“Meanwhile, North Korea’s weapons capabilities continue to grow, as Pyongyang has conducted two intercontinental ballistic missile tests this year, demonstrating a growing range that jeopardizes the continental U.S., officials say.”

China: Fighting back against U.S. claims, China’s Commerce Ministry said on Thursday that China puts strong emphasis on the protection of intellectual property rights, as President Trump prepares to launch an inquiry into same, as well as Chinese trade practices.  Sanctions appear imminent.

Of course anything out of China’s various mouthpieces is pure bulls---.  But this is a dangerous time in relations between the two. We desperately need diplomacy...quiet diplomacy...not freakin’ tweets.

Separately, China’s Foreign Ministry said on Thursday that India has been building up troops and repairing roads along its side of the border amid an increasingly tense standoff in a remote frontier region beside the Himalayan kingdom of Bhutan.  The standoff is on a plateau next to the Indian state of Sikkim, which borders China.

Large parts of the 2,175-miles that China and India share are in dispute. In the area of the latest flare-up, both seem to be building and repairing roads solely for military purposes.

China’s Defense Ministry said China had shown India goodwill and that its forces had exercised utmost restraint, but warned “restraint has a bottom line” and that India must dispel any illusions.

About 300 troops from each side are involved in the face-off. The two last had a border war in 1962.

Russia: The Kremlin ordered the U.S. to cut its diplomatic staff by 755 in retaliation for new U.S. sanctions, though the vast majority of those impacted are Russian citizens manning the embassy, which softens the impact on the U.S., and appears to be a move by Vladimir Putin to avoid burning all his bridges with Donald Trump.

Trump very reluctantly signed the legislation imposing harsh new sanctions on Russia (as well as North Korea and Iran), and Russian Prime Minister Dmitry Medvedev said the moves are tantamount to declaring a “full-scale trade war” against Moscow, and that the measures signed by Trump demonstrated his complete impotence, humiliated by Congress.

Medvedev said the sanctions package “ends hopes for improving our relations with the new U.S. administration. The sanctions regime has been codified and will remain in effect for decades unless a miracle happens.”

The European Commission, initially fearful of the economic consequences of the sanctions, expressed its satisfaction after the EU had signaled its concerns to Congress.

“Moreover, the U.S. Congress has now also committed to only apply sanctions after the country’s allies are consulted. And I do believe we are still allies of the U.S.,” said European Commission President Jean-Claude Juncker.

Trump accused Congress of overreach, saying in an accompanying statement (which is normal for a president to attach), the measure was “deeply flawed.”  “As president, I can make far better deals with foreign countries than Congress,” he said.

The legislation limits the amount of money Americans can invest in Russian energy projects, among other items, and just makes it more difficult for U.S. companies to do business with Russia.

Appearing in Estonia, Vice President Mike Pence, messaging differently from his boss, warned the Kremlin that the United States will not tolerate Russian force or intimidation toward its neighbors, reassuring the Baltic States that the U.S. supports them in the face of “the specter of aggression from your unpredictable neighbor to the east.”

Editorial / Wall Street Journal

“Vladimir Putin has assumed he can seize territory without endangering his grip on power at home, and he’s been right.  But what if the U.S. changed that calculus by raising the cost of Moscow’s aggression in Ukraine?

“President Trump will soon have a chance to test that question when he receives an imminent recommendation from the State Department and Pentagon to sell Ukraine lethal, defensive weapons such as anti-tank Javelin missiles. These weapons would help Ukrainians defeat Russian armor and make it harder for Mr. Putin’s proxy forces to advance further into Ukraine’s eastern provinces, which the Russians invaded in 2014.

“Ukrainian President Petro Poroshenko has sought this kind of help for years.  But Barack Obama refused on grounds that lethal aid would merely escalate the conflict; he shipped only non-lethal aid...Mr. Putin escalated anyway....

“The Russians have declared separatist strongholds in Donetsk and Luhansk and built up forces in the occupied areas. Kurt Volker, the U.S. Special Representative for Ukraine Negotiations, told Radio Free Europe/Radio Liberty last week that ‘there are more Russian tanks in there than in Western Europe combined.’ That’s in addition to Russia’s plans to deploy as many as 100,000 troops for military exercises in Belarus on NATO’s front lines this summer....

“Mr. Trump now has a chance to show he’s no Obama echo and make Mr. Putin pay attention by helping Ukraine, which has shown it is willing to fight for independence....

“Bolstering Ukraine’s defense would also send a message to Mr. Putin that Mr. Trump wants to negotiate with Russia from a position of strength. This could help the U.S. position in Syria, where Mr. Trump has been too willing to accept Russian and Iranian dominance after the fall of Islamic State.  Mr. Putin took advantage of Mr. Obama after concluding the American was weak and would never push back.  Selling lethal weapons to Ukraine would show the Kremlin those days are over.”

Venezuela: The attorney general on Thursday sought a court order to halt the installation of a new National Assembly following last weekend’s elections, because of the suspected commission of crimes during the vote.

Atty. Gen. Luisa Ortega Diaz, a critic of President Nicolas Maduro, said she had opened an investigation into alleged voter fraud in connection with the balloting.  Previously, she had filed complaints with the Supreme Court challenging the constitutionality of a new assembly.

This is a rather courageous woman, don’t you think?  How is she still in office?

But the new assembly was seated on Friday and it will set about rewriting the nation’s constitution, which the opposition says is a way for Maduro to skirt the democratic process.

The new assembly consists of 537 members, all of whom were candidates put forth by Maduro. They are to replace the democratically elected and opposition-controlled National Assembly.

Ortega said, “The country is headed toward dictatorship....We have to rebuild the nation by means of a national accord.”

In a televised speech Wednesday, Maduro denied the allegations, saying claims by a voting-machine company, Smartmatic, that the government’s ballot figures were off by at least a million, were trying to “stain the electoral process.”

“They call me a dictator. I am not a dictator,” he said.

Tuesday, Venezuela jailed two leading opposition figures, a day after the United States imposed sanctions on Maduro, calling him a “dictator” for Sunday’s election.

Opposition leader Leopoldo Lopez and veteran politician Antonio Ledezma were already under house arrest, but the pro-government Supreme Court said the two were planning to flee the country and had violated terms of their house arrest.

President Trump warned the U.S. holds Maduro “personally responsible” for the safety of the seized leaders.

As of Thursday, the Venezuelan Penal Forum civil society group said a total of 130 people have been killed in four months of protests, while 5,051 have been arrested, 1,383 of whom are still in jail.

Brazil: Congress voted not to put President Michel Temer on trial for corruption.  In the 513-seat chamber, 263 voted against the motion to send him to trial and 227 voted in favor, well below the 342 needed for the motion to pass.

Temer, who has some strong ideas for reforming the economy, said after, “With the support the lower house has given me, we will pass all the reforms that the country needs.  Now it is time to invest in our country. Brazil is ready to start growing again.”  But his problems politically are far from over.

Australia: This nation dodged a major bullet, as a terror suspect tried to smuggle a bomb onto a plane by planting it on his unsuspecting brother, according to Australian police.

The plan was one of two alleged terror plots recently uncovered by authorities, who made several arrests across Sydney on Saturday. There is an ISIS connection.  [The other plot involved setting off a device that could release poisonous gas in a public enclosed space.]  Both plans have been disrupted.

The police said two suspects had built and concealed a “high-end” military-grade explosive in a piece of luggage.

The brother of one of the suspects was to take the luggage with him onboard an Etihad Airways plane leaving Sydney on July 15.  Police said the brother was not aware of the bomb.

But for some reason the plan was aborted and while the brother took the luggage to the airport, the piece was not checked in.  The brother then boarded the plane without the luggage.

“There is a bit of conjecture [about] why it did not get through the baggage check-in, but I want to make it quite clear – it never got near [security] screening,” said Australian Federal Police Deputy Commissioner Michael Phelan.

A senior ISIS figure had arranged shipment of the bomb parts via Turkey to Sydney. It’s when the bomb plot failed that the suspects embarked on their gas attack scheme.

No doubt we’ll learn much more later.

Random Musings

--Presidential tracking polls....

Gallup has Trump with a 36% approval rating; Rasmussen puts it at 39%.  [For those who follow the Rasmussen survey, this low figure is highly significant.]

--In an extensive Quinnipiac University National Poll, we have a number of findings that do not put President Trump in the best light.

Trump’s approval rating is just 33%, 61% disapprove; down from 55-40 disapproval in a June 29 survey.  White men are divided, 47% approve, 48% disapprove, while Republicans approve 76-17.  White voters with no college degree, a key part of the president’s base, now disapprove 50-43.  A figure I focus on, Independents, disapprove of Trump’s job performance by a 34-60 margin, which is actually about the same as in May.

American voters say 54% to 26% that they are embarrassed rather than proud to have Trump as president.  Voters believe 57% to 40% he is abusing the powers of his office and say 60% to 36% that he believes he is above the law.

By a 71-26 margin, voters believe Trump is not levelheaded.  He is deemed not honest by a 62-34 margin.

On the other hand, 58% believe he is a strong leader; 39% disagree.

But by a 63-34 margin, voters say he does not share their values.

And by a 58-37 margin, Americans believe the president “has attempted to derail or obstruct the investigation into the Russian interference in the 2016 election.”

Separately, American voters give Sen. John McCain a 57% favorability rating, but only 39% of Republicans do.

--In a separate Quinnipiac poll released Thursday, Congress’ approval rating sank to 10%, which compares to 18% in March.

Back in January and March, more than one in three Republicans said they had positive views of Congress.  But that’s now plummeted to just 14% of Republican voters who give Congress a thumbs up.

Using both Quinnipiac data (which goes back to 2003) and Gallup poll data (which goes back to 1974), this is the lowest rating for Congress ever.  [Congress did reach a 9% approval rating in a Gallup survey in November 2013, but this was in the wake of a two-week government shutdown.]

--The commander of the U.S. Coast Guard, Adm. Paul Zukunft, said territorial disputes could pop up in the Arctic soon.

“As I look at what is playing out in the Arctic, it looks eerily familiar to what we’re seeing in the East and South China Sea.

That means first, audacious territorial claims, Zukunft said: “Russia has claimed most of the Arctic Ocean, all the way up to the North Pole and as a signatory of the Law of the Sea Convention has filed this claim.”

Zukunft noted that China’s Snow Dragon “is on her way up to the Arctic from China.  And they routinely stop and do research in our extended continental shelf.  They’ve established a pattern.”

This is a big deal because the extended continental shelf holds up to “13% of the world’s oil reserves, about a third of the world’s gas reserves, and about a trillion dollars’ worth of rare earth metals” that technological advancements will soon make economically feasible to harvest, Zukunft said.

Zukunft said it was an imperative that the United States ratify the United Nations Convention of the Law of the Sea treaty, which grants countries exclusive rights to harvest minerals and materials from the sea, as its clear what China’s, and Russia’s, intentions are.  Only North Korea, Libya and Turkey have also not ratified the treaty, not exactly the best of company.  [Caroline Houck / Defense One]

--Sen. James Lankford (Okla.) / Wall Street Journal

“James Madison explained that the Constitution’s authors considered the Senate to be the great ‘anchor’ of the government.  The upper chamber has become an anchor, but I don’t think today’s dilatory Senate is what the Founders had in mind.

“Many Americans see the main issue in the Senate as the filibuster rule, the 60 vote requirement to move on legislation. The Senate should not go to a 51 vote majority for every vote. Because the Senate is the one entity in the federal government where the minority view is heard and deliberation is protected.

“But the Senate isn’t working.  First, the minority party has for months abused Senate rules to stall the nomination process and therefore the entire Senate calendar.  Second, the arcane rules of the Senate always force a painfully slow legislative pace.

“Since presidential nominations now require only a simple majority to pass, the majority party can confirm nominees without any minority party support.  But the minority can force the full 30 hours of debate time provided within the rules, which they have repeatedly demanded.  At the current rate, it will take 11 years to fill the executive branch....

“How do we get the Senate working again?  First, we should reduce floor debate time for executive nominees from 30 hours to eight or less.  The Senate could debate and vote on five or more nominees a week, instead of just one or two.  Interestingly, this rule change was adopted for a short time by the Senate in 2013, under Harry Reid, as part of a temporary agreement to fill nominations.  It worked then, and it would work now.

“Second, we should lower the voter threshold on the ‘motion to proceed,’ which begins legislative debate and amendment consideration, from 60 votes to 51.  Almost every bill in the Senate currently requires two votes of 60 senators, one vote to start debate and another to end it.  We should change this rule to allow the majority party to open debate, while protecting the minority party by keeping the threshold to end debate at 60....

“It’s time we put an end to the hyperpartisanship and delay to serve the needs of the American people.  We can be deliberative and productive at the same time, but that will require fundamental changes in the rules, not eliminating the filibuster entirely.”

--Robert J. Samuelson / Washington Post

“No one is working harder for the impeachment of Donald Trump than Donald Trump.  It we have learned anything about this president, it is that he has a compulsion to be the center of attention.  He can’t bear being out of the limelight and will say almost anything – no matter how offensive, outrageous or dishonest it strikes millions of Americans – to keep the public fixated on him. The more he does this, the more he risks impeachment.

“Just whether John F. Kelly, the retired Marine general who is Trump’s new chief of staff, can restrain his boss is unclear.  This certainly is a central question hovering over the White House, and it won’t be easy.

“For months, Trump’s behavior has posed a riddle. Why is he so self-destructive?  His constant tweets deepen the country’s divisions, which he promised to heal.  The customary explanation is that Trump is playing to his ‘base,’ but recently, this has seemed less convincing.  Opinion polls suggest his support has slipped even among loyal backers.  In fact, we’ve been asking the wrong question. It has been widely assumed that Trump’s behavior must reflect some political logic.  He is, after all, the nation’s most important politician.  His every move must aim to bolster his popularity and agenda.  Although this sounds reasonable, it doesn’t fit the facts.  Trump’s nonstop outbursts alienate, usually needlessly, countless voters: precisely the people he needs to broaden his support.

“But the mystery vanishes once we realize that Trump’s motives, rather than advancing some grand political strategy, are deeply personal.  He can’t control himself. In his mind, silence means obscurity, which is unbearable, especially when ending it is only a tweet or two away.  It doesn’t matter what he says – whether it is true or false, relevant or irrelevant to the issues – as long as he stirs passions and dominates public discussion....

“Trump is an extreme exhibitionist in a calling – politics – where exhibitionism is normal.  His addiction to incendiary tweets will be hard, though not impossible, to break.  It may defy political or legal logic – indeed, it places him at further risk, because he may get himself in legal trouble or say something hugely unpopular. But it satisfies his need to ‘own’ the news cycle.

“In this sense, Trump can be seen as the strongest and most determined advocate of impeachment. If he must flirt with impeachment to retain his command of the media, so be it.  As a practical matter, he might see impeachment (though not conviction) as acceptable.  He would be automatically in the spotlight every day for months. He would have a new arena in which to fight and ‘win.’

“Perhaps subconsciously, this is his goal: Impeach me, please!”

--Rich Lowry / New York Post

“When President Trump’s policy adviser Stephen Miller stepped to the podium of the White House briefing room on Wednesday to defend a plan for reducing levels of legal immigration, Jim Acosta of CNN was aghast and let everyone know it.

“Put aside that Acosta believed it was his role as a reporter to argue one side of a hot-button political issue (this is how journalism works in 2017).  The exchange illustrated how advocates of high levels of immigration are often the ones who – despite their self-image as the rational bulwark against runaway populism – rely on an ignorant emotionalism to make their case.

“At issue is the bill sponsored by Republican Sens. Tom Cotton of Arkansas and David Perdue of Georgia to cut legal immigration by half.  The legislation would scale back so-called chain migration – immigrants bringing relatives, who bring more relatives in turn – and institute a merit-based system for green cards based on the ability to speak English, educational attainment and job skills.

“Offended by the idea of putting a priority on higher-skilled immigrants, Acosta wanted to know how such a policy would be consistent with the Statue of Liberty. When Miller pointed out that Lady Liberty was conceived as a symbol of...liberty and the famous Emma Lazarus poem added later, Acosta accused him of ‘national park revisionism’ – even though Miller was correct.

“That might seem pedantic, but the underlying debate is over the legitimacy of reducing levels of immigration and whether it is appropriate to craft a policy of mindful, above anything else, of the national interest.  Miller clearly has the best of this argument.

“One, making 21st century policy in accord with late-19th century poetry makes no sense.

“Two, the cap on refugees in the Cotton-Perdue bill of 50,000 a year is in the ballpark of recent annual refugee numbers. We actually admitted fewer than this in the late-1970s and early-2000s, and the Statue of Liberty still stood.

“Three, although Acosta angrily objected to giving a preference to English speakers, knowing English helps people make their way in this country, and it’s reasonable to want immigrants to speak the language. As Miller pointed out, this is already a requirement for naturalization.

“And every comprehensive immigration-reform bill always makes at least a symbolic nod to undocumented immigrants learning English before receiving amnesty.

“Fourth, despite the myth, immigration policy has been highly contested throughout American history, and levels have ebbed and flowed.  Acosta seems to think that the current status quo is the norm, when the past 40 years have represented a historic wave of immigration. The usual pattern has been that we tap the brakes after such a spike, but advocates of high levels of immigration consider that un-American.

“Cotton-Perdue can’t be considered ungenerous in light of how latitudinarian we have been for so long....

“Employers may complain about losing access to immigrant labor, but it is simply not true that there are jobs that Americans won’t do. Almost every occupational category in the country has a majority of native-born workers. If there is really such a dearth of low-skilled labor in this country, wages should be rising smartly for these workers, and they aren’t.

“If nothing else, Cotton-Perdue will force a debate in an area in which thoughtless sentimentality has long dominated – and if the Miller-Acosta exchange is any indication, will be difficult to dislodge.”

Personally, having watched the whole deal, I thought Stephen Miller was terrific, far from the arrogant jerk on display last February in a similar setting.  It helped this time that Miller displayed a good sense of humor and smiled a lot.

As for preening Jim Acosta, his head is about to explode, he is that proud of himself.

--Editorial / Washington Post

“It has been almost a year and a month since Seth Rich was killed in what D.C. police believe was a botched robbery attempt. In that time, the family of the 27-year-old Democratic National Committee staffer has had to deal not only with their private sorrow but also with nonsensical, hurtful conspiracy theories. What was bad when the rumors circulated on far-right websites became worse when a major news organization tried to peddle the bogus story. And that may not be the worst of it – if allegations of White House involvement prove true.  A lawsuit filed this week alleges that Fox News Channel collaborated with a wealthy supporter of President Trump and the White House to create a story published online in May – and since discredited – buttressing wild theories that Rich had leaked Democratic Party emails and was killed by operatives working on behalf of Hillary Clinton. The lawsuit by Rod Wheeler, a former Fox News contributor involved in the May report who says he was defamed, claims the White House – perhaps Mr. Trump personally – was monitoring and encouraging the story’s development.

“Defendants named in the suit, including Dallas investor Ed Butowsky, who is depicted as playing a major role, denied the claims.  White House press secretary Sarah Huckabee Sanders in a Tuesday news briefing said Mr. Trump ‘had no knowledge of the story’ and claimed ‘it’s completely untrue that he or the White House had involvement in the story.’

“Skepticism is always in order when viewing the allegations of a lawsuit, and issues have been raised about Mr. Wheeler’s credibility because he helped to further the discredited story. But, as reported by NPR’s David Folkenflik, Mr. Wheeler has marshaled documentary evidence (including text messages and recorded phone calls) that bolster his account.  ‘Not to add any more pressure but the president just read the article.  He wants the article out immediately. It’s now all up to you,’ reads a May 14 text from Mr. Butowsky to Mr. Wheeler. The story appeared about 36 hours later.  Mr. Butowsky told reporters this week he was joking.”

--Trump tweeted Wednesday evening that he has nothing but love for 1600 Pennsylvania Avenue after the story broke that he told guests at his Bedminster, N.J. club that the White House was a dump.

“I love the White House, one of the most beautiful buildings (homes) I have ever seen,” said Trump.  “But Fake News said I called it a dump – TOTALLY UNTRUE.”

Golf magazine quoted members at Trump National who said the president told them he spent so much time there of late because “that White House is a real dump.”

Well the White House historically has had a problem with rats, and that would freak me out.

Trump is now in Bedminster for the start of a 17-day vacation that has many locals up in arms, especially area airports that run flight schools and sky diving operations because they are under federal flight restrictions anytime Trump is in town.  It’s not fair.

By the way, I hope Barron isn’t imprisoned in Bedminster.  I’m assuming he and his mom are in New York, or on a real vacation.

--I wish Michelle Carter, the Massachusetts woman who was convicted of driving her boyfriend to commit suicide, had received the maximum potential prison sentence of 20 years rather than 2 ½ years the judge handed down on Thursday (with Carter serving 15 months and then supervised probation).

Incredibly, this Devil-like figure expressed zero remorse for her actions throughout.  As she stared blankly after hearing her fate yesterday, you were looking at the face of pure evil. It was chilling.  My thoughts and prayers to the victim’s family and friends.

---

Pray for the men and women of our armed forces...and all the fallen, including the two in Afghanistan...Sgt. Jonathon Hunter and Spc. Christopher Harris.  RIP.

God bless America.

---

Gold $1264
Oil $49.52

Returns for the week 7/31-8/4

Dow Jones  +1.2%  [22092...record]
S&P 500  +0.2%  [2476]
S&P MidCap  -0.6%
Russell 2000  -1.2%
Nasdaq  -0.4%  [6351]

Returns for the period 1/1/17-8/4/17

Dow Jones +11.8%
S&P 500  +10.6%
S&P MidCap  +5.5%
Russell 2000  +4.1%
Nasdaq  +18.0%

Bulls 60.0
Bears 16.2 [Source: Investors Intelligence]

Dr. Bortrum posted a new column!

Have a great week.

Brian Trumbore