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08/12/2017

For the week 8/7-8/11

[Posted Friday, 11:45 PM ET]

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Edition 957

Before I dive into the events of the week concerning Lil’ Kim Jong Un and our president, you know what I find startling about the discussion of the past few weeks? I have yet to hear a single analyst, broadcaster, what have you, talk about a pretty startling fact...an event occurring in now less than six months...the Winter Olympics in Pyeongchang, South Korea!!!

Yes, I see there have been a few sports reporters bringing it up, and the International Olympic Committee (IOC) certainly has it on its radar, but this isn’t 2020, this is February 9-25!

So I guess, for example, the Sunday talk shows, and all the network anchors, and pundits and such are assuming that Kim will just give everything up and turn his state into a Chile, post-Pinochet, or something like that by February.

I mean this is nuts.

Anyway...we now resume our regularly scheduled program.

But first, once again, a reminder of what I wrote in this very space last September.

WIR, 9/24/2016

North Korea: Pyongyang claimed it successfully tested a high-powered rocket engine for launching satellites, which is of course part of the North’s long-range ballistic missile program.

I’m amazed at how some “experts” in the U.S. continue to say that North Korea won’t have the capability to threaten the U.S. with a nuclear weapon until 2020, but these same folks can’t deny the speed at which Kim Jong Un and his Orcs appear to be progressing towards their goal of a full nuclear arsenal.  Depending on the success of coming ballistic missile tests, I have been arguing a realistic target for Pyongyang would be Guam and our heavy military presence there.  That’s a far shorter route than the U.S. west coast...or Hawaii.  [Guam, from North Korea, is roughly the distance from New York to Las Vegas.]

And I would worry Kim could have the capacity to hit Guam by the end of next year (I’ve said Fourth of July).

Remember, U.S. intelligence missed both India and Pakistan’s first nuclear weapons tests.

Japan’s Defense Minister Tomomi Inada said this week that “the speed of North Korea’s development” meant it was important to “take all possible measures” to ensure Japan’s defenses were sufficient and to reinforce the Japan-U.S. alliance.

I reminded you of this after this past Fourth of July, when Kim did indeed test an ICBM that very day...one capable of reaching a lot further than Guam.

On to this week’s developments....

Last Saturday, the U.N. Security Council unanimously imposed new sanctions on North Korea over its continued missile tests that on paper would slash Pyongyang’s export revenue from $3 billion to $2 billion, including a complete ban on North Korean coal instead of capping it as per a prior U.N. resolution.  There were also to be significantly tighter controls over financial transactions with North Korea.  But there are loopholes, and China can still sell crude oil and other oil products to the North.

President Trump tweeted: “The United Nations Security Council just voted 15-0 to sanction North Korea. China and Russia voted with us. Very big financial impact!” 

Doubtful.

Addressing a regional security meeting on Monday in Manila, Chinese Foreign Minister Wang Yi said China will pay the biggest price from the new sanctions because of its close relationship with the country, but will always enforce the resolutions, to which some in the audience I imagine were heard to mutter [Bulls---].

The day before, Wang Yi did warn his North Korean counterpart, Ri Yong Ho, “Do not violate the U.N.’s decision or provoke international society’s goodwill by conducting missile launching or nuclear tests.”

China has never followed through on its promises to enforce sanctions against the North for the simple reason that a collapse of the North Korean regime is not in Beijing’s interests.  It doesn’t want a refugee crisis on its border, and it certainly doesn’t want U.S. and South Korean troops on its border either as part of a unified Korea, though before this occurred there could be a civil war in the North where rival factions are using the most horrendous weapons on each other.  [It’s easy to forget about the massive chemical weapons arsenal that Pyongyang possesses.]

So Monday, North Korea’s Foreign Minister Ri Yong Ho delivered a statement on the sidelines of the Manila security conference that his country would “under no circumstances” negotiate on its nuclear and missile weapons programs, and that it would use nukes against the U.S. if provoked.

Early Tuesday, North Korea described the new round of U.N. sanctions as an attempt “to strangle a nation” and warned in response, “physical action will be taken mercilessly with the mobilization of all its national strength.”

So then the Washington Post reported that a U.S. intelligence assessment the paper had obtained concluded North Korea had crossed a major threshold in its quest to become a full-fledged nuclear power by producing a miniaturized nuclear warhead that can fit onto a missile. If true, the game-changer. The stakes suddenly were raised ten-fold.

[Japan’s Ministry of Defense has also concluded Pyongyang has crossed the miniaturization threshold.]

Trump said from Bedminster: “He has been very threatening beyond a normal state, and as I said they will be met with fire, fury and frankly power, the likes of which this world has never seen before.”

As we learned later his comments were made off the cuff and not checked out with his aides or generals beforehand.  Secretary of State Rex Tillerson assured Americans after that they “should sleep at night” without worrying about an imminent war.  [I’ve been sleeping with one eye open because of North Korea for over ten years.]

Republican Sen. John McCain said Trump should be more cautious.  “The great leaders I’ve seen don’t threaten unless they’re ready to act, and I’m not sure President Trump is ready to act.  It’s the classic Trump, in that he overstates things,” McCain said in an interview with a Phoenix radio station.

Wednesday....

Trump tweeted: “My first order as President was to renovate and modernize our nuclear arsenal. It is now far stronger and more powerful than ever before...Hopefully we will never have to use this power, but there will never be a time that we are not the most powerful nation in the world!”

But the Pentagon has just begun a review of the U.S. nuclear posture.  No money has been pumped into it, which has to come from Congress.  The president was lying.

Separately, Defense Secretary Mattis warned North Korea in stark terms, backing his president.

“The United States and our allies have the demonstrated capabilities and unquestionable commitment to defend ourselves from an attack....The DPRK must choose to stop isolating itself and stand down its pursuit of nuclear weapons. The DPRK should cease any consideration of actions that would lead to the end of its regime and the destruction of its people.”

North Korea announced it would unleash four missiles at military bases near Guam.  Gen. Kim Rak Gyom said in a statement: “The U.S. president at a [golf] links again let out a load of nonsense about ‘fire and fury’ failing to grasp the on-going grave situation.

“This is extremely getting on the nerves of the infuriated Hwasong artillerymen of the KSA.

“Sound dialogue is not possible with such a guy bereft of reason and only absolute force can work on him.”

The statement added the military will have completed its plans by mid-August to launch the four missiles over Japan and 18 miles off the coast of Guam, home to about 160,000 U.S. citizens, as well as the largest U.S. air base in the region, Andersen, a Navy installation that includes a submarine squadron, and a Coast Guard group.

Once the military has completed its plans, we are being told then it’s up to the commander-in-chief of the North Korean nuclear forces and wait for his order.

B-52 and B-1B bombers from Andersen Air Force Base have flown over the Korean Peninsula on flights that the North has denounced as exercises for launching a nuclear strike against it.

For its part, Andersen is protected by the Terminal High Altitude Area Defense missile system (THAAD) and officials there are confident they can stop any attack.

Thursday....

North Korea said it completed the above-discussed plans to fire four intermediate-range missiles over Japan to land near Guam in an unusually detailed threat, calling for the missiles to land in the sea only 18-25 miles from the U.S. territory (30-40km).  Pyongyang’s statement even said the rockets would have a flight time of 17 minutes 45 seconds.

Guam’s governor, Eddie Calvo, said Guam had experienced a Japanese invasion in World War II (I’ll have more on this from my own experiences on the island next WIR) and countless earthquakes and typhoons and there was no community better prepared to meet the North Korean threat.  “Enjoy the beaches,” Calvo said.

Trump then said in one of two mini-pressers he gave reporters out of nowhere from Bedminster, that his “fire and fury” threat from Tuesday perhaps “wasn’t tough enough.”

“It’s about time someone stood up for the people of our country,” and “you’ll see” what is “tougher” than “fire and fury.”

“And we’re backed 100 percent by our military, we’re backed by everybody and we’re backed by many other leaders,” he said.  “And I noticed that many senators and others came out today very much in favor of what I said.  But if anything that statement may not be tough enough.”

He also advised North Korea to “get its act together” or it would be in trouble “like few nations have ever been.”

“If North Korea does anything in terms of even thinking about attack of anybody that we love or we represent or our allies or us, they can be very, very nervous,” Trump blustered on.  “Because things will happen to them like they never thought possible, OK?  [Kim Jong Un] has been pushing the world around for a long time.”

Trump also said about the targeting of Guam:

“Let’s see what (Kim) does with Guam. He does something in Guam, it will be an event the likes of which nobody’s seen before, what will happen in North Korea.”

[And you thought Mayweather-McGregor was big.]

And Trump said of China’s role: “I think China can do a lot more, yes. And I think China will do a lot more.  Look, we have trade with China. We lose hundreds of billions of dollars a year on trade with China. They know how I feel. It’s not going to continue like that.  But if China helps us, I feel a lot differently toward trade, a lot differently toward trade.”

Later Thursday, Defense Secretary Mattis tempered Trump’s harsh words, saying the United States still preferred a diplomatic approach to the North Korean threat.  A war would be “catastrophic,” he said.  Asked if the U.S. was prepared to handle a hostile act by North Korea, Mattis said: “We are ready.”

Friday....

President Trump was at it again, warning in another tweet, U.S. weapons are “locked and loaded.”

“Military solutions are now fully in place, locked and loaded, should North Korea act unwisely,” chirped Trump.  “Hopefully Kim Jong Un will find another path!”

North Korean state news agency, KCNA, responded: “Trump is driving the situation on the Korean peninsula to the brink of a nuclear war, making such outcries as ‘the U.S. will not rule out a war against the DPRK,’” KCNA said.

Russian Foreign Minister Sergei Lavrov said the risks of a military conflict are very high and that Moscow is deeply worried by the threats from Washington and Pyongyang.  Lavrov urged both sides to sign up to a joint Russian-Chinese plan, under which North Korea would freeze its missile tests and the United States and South Korea would impose a moratorium on large-scale military exercises.”

Well that’s a lousy deal.

The Global Times, a Chinese Communist Party mouthpiece, though not always formal government policy, editorialized in part:

“China should make clear that if North Korea launches missiles that threaten U.S. soil first and the U.S. retaliates, China will stay neutral.  If the U.S. and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern of the Korean Peninsula, China will prevent them from doing so.”

Late Friday, Trump appeared yet again before the press.  This is a guy who has literally not had a press conference, nor answered more than about two questions at any joint appearance with a foreign leader, since February.

Speaking of Lil’ Kim, the president said: “If he utters one threat in the form of an overt threat, which, by the way, he has been uttering for years, and his family has been uttering for years, or if he does anything with respect to Guam or any place else that’s an American territory or an American ally, he will truly regret it fast.”

[I have to admit.  When I didn’t study for a final exam at Wake Forest, I, too, regretted it fast.  But I digress....]

Asked about critics who say his rhetoric is making a bad situation worse, the president doubled down.

“My critics are only saying that because it’s me.  If somebody else uttered the exact words, they’d say, ‘What a great statement, what a wonderful statement!”

He continued:

“But I will tell you, we have tens of millions of people in this country that are so happy with what I’m saying, because they’re saying, finally, we have a president that’s sticking up for your nation and frankly sticking up for our friends and allies. And this man will not get away with what he’s doing, believe me.”

God help us.

Opinion

Editorial / Wall Street Journal

“When Donald Trump threatened North Korea with ‘fire and fury’ Tuesday if it continues to menace the U.S. with nuclear weapons, he provoked almost as much backlash at home as in Pyongyang.  The usual diplomatic suspects, including some American lawmakers, claimed his remarks hurt U.S. credibility and were irresponsible.

“The President’s point was that the North’s escalating threats are intolerable; he didn’t set any red lines. True to form, Pyongyang responded by putting the U.S. island of Guam in its cross hairs. Mr. Trump may be guilty of hyperbole (quelle surprise), but that is far less damaging to U.S. credibility than Barack Obama’s failure to enforce his prohibition on the Assad regime’s use of chemical weapons in Syria. The foreign-policy elite who claim to be shocked also don’t have much credibility after their policy across three Administrations led to the current North Korean danger.

“While the President’s words were unusually colorful, the Communist-style language may have been part of the message: Kim Jong Un isn’t the only one who can raise the geopolitical temperature.  The U.S. has military options to neutralize the regime’s nuclear threat if it continues to develop long-range missiles, and the U.S. is considering those options.

“National Security Adviser H.R. McMaster said as much in an interview Saturday, explaining that Pyongyang’s nuclear threat is ‘intolerable from the President’s perspective. So of course, we have to provide all options to do that. And that includes a military option.’  Defense Secretary Jim Mattis reinforced that message Wednesday, warning North Korea to stop acting in ways that could ‘lead to the end of its regime.’

“Last week Senator Lindsey Graham told a morning television program, ‘There is a military option to destroy North Korea’s program and North Korea itself.’ The South Carolina Republican revealed that Mr. Trump told him there will be war if the North continues to develop long-range missiles: ‘He has told me that. I believe him. If I were China, I would believe him, too, and do something about it.’

“The China reference is a tip-off that the main audience for this rhetorical theater is in Beijing.  Kim Jong Un won’t stop now that he’s so close to his goal of a nuclear deterrent.  But China might restrict the flow of oil to the North, for example, if it believes that stronger action on its part could forestall a U.S. pre-emptive strike.

“The other audience for Mr. Trump’s remarks is the North Korean leadership around the young Kim. If they believe they are doomed by Kim’s nuclear course, their best chance of self-preservation is to remove him.  Regime change and then reunification is the ultimate solution to the North Korean problem....

“Diplomacy works best when there is a credible stick to go with the carrots. The Trump Administration has the right idea, even if the President’s words lack the usual diplomatic politesse.”

Editorial / Washington Post

“President Trump’s unsettling threat Tuesday aimed at North Korea was reckless and unnecessary. In its bombast, it resembled nothing so much as Kim Jong Un’s regular denunciations of the United States, frantic and hyperbolic.  Why would the president of the world’s most powerful nation want to descend to that level?  At an event at his New Jersey golf club, Mr. Trump declared, ‘North Korea best not make any more threats to the United States.  They will be met with fire and fury and frankly power, the likes of which this world has never seen before.’  To raise the specter of nuclear war – and to do so to ward off mere threats, at that – is to draw a red line in the most foolish and destabilizing manner.

“Since nuclear bombs were dropped on Hiroshima and Nagasaki seven decades ago, they have not been used in combat. Still, the danger that they will be used again has never disappeared; the years since the end of World War II have been filled with false alarms and close calls, which could easily recur.  The United States and Russia keep thousands of nuclear missiles on launch-ready alert, meaning they are ready to launch within minutes of a president giving the order.  Adversaries know this.  Mr. Trump’s threat of ‘fire and fury’ may sound like hype to American ears, but the words could be heard quite differently by others, such as Mr. Kim, the belligerent leader of a nuclear North Korea.  Mr. Trump’s language could easily be misunderstood – he didn’t say precisely what would lead to ‘fire and fury’ except for North Korea’s ‘threats’ – and the upshot could be miscalculation or, heaven forbid, the kind of accidental entry into conflict that has haunted the globe since the dawn of the atomic age....

“North Korea’s steadily advancing nuclear weapons and missile programs are serious....Dealing with that will require patient pressure and skilled diplomacy, perhaps for years.  Instead, Mr. Trump has strut into the arena with a jarring rhetorical grenade.”

David Ignatius / Washington Post

“The North Korean nuclear threat is a ‘hinge’ moment for the United States and China, and for the new international order both nations say they want.

“If Washington and Beijing manage to stay together in dealing with Pyongyang, the door opens on a new era in which China will play a larger and more responsible role in global affairs, commensurate with its economic power.  If the great powers can’t cooperate, the door will slam shut – possibly triggering a catastrophic military conflict on the Korean Peninsula.

“President Trump’s bullying style, even in dealing with trivial matters of domestic politics, obscures the extent to which he has tried to marry U.S. policy on North Korea with that of China. For the most part, he has been surprisingly successful. Beijing and Washington have mostly been aligned, as in this past weekend’s unanimous U.N. Security Council vote in favor of additional sanctions against Pyongyang to punish its continued missile tests.

“Washington’s diplomatic goal, although it hasn’t been stated publicly this way, is to encourage China to interpose itself between the United States and North Korea and organize negotiations to de-nuclearize the Korean Peninsula.  The U.S. threat is that if China doesn’t help the United States find such a diplomatic settlement, America will pursue its own solution – by military means if necessary.”

---

This coming week could be the most important one of the century...the entire century...if Kim Jong Un goes through with his threat to Guam. 

Do we shoot them down?  If the U.S. misses, its credibility is shot.  If we hit them (or Japan does), Kim is not likely to just run and hide. 

If we know, as I hope we would, that the missiles (I’m assuming Kim fires one or two, not four) will fall way short of the island, do we just let them drop?  I would.  But if North Korea sits them down 30 miles from the coast, as they said they will, that then tells us everything about Pyongyang’s capability, and a preemptive strike would have to be very much on the table for the U.S.

What if Kim backs down...and waits to fire an ICBM that falls short of Alaska in a few weeks?

Bottom line, the decisions made this coming week, on both sides, could spell disaster.  Unless both sides stand down, this is not going to end well.

And you know who is licking their chops?  Vladimir Putin.  His upcoming massive military exercises could be used as a pretext for far greater trouble in Eastern Europe, while Washington is distracted elsewhere.  [See below.]

Trumpets....

--As part of his comments to reporters on Thursday, President Trump praised Russia for booting hundreds of U.S. diplomats out of the country – saying it will save money.

“I want to thank him because we’re trying to cut down our payroll,” Trump said, incredibly, of Putin.  “There’s no real reason for them to go back.  I greatly appreciate the fact that we’ve been able to cut our payroll of the United States.  We’re going to save a lot of money.”

It took 24 hours but we were told by White House spokeswoman Sarah Sanders that the president was being “sarcastic.”

When asked Friday if he was, Trump really didn’t say, but, standing next to Sec. of State Tillerson, the president said they would have a response to Russia’s actions in early September.

--Speaking at an event in Kentucky this week, Senate Majority Leader Mitch McConnell criticized President Trump’s “artificial deadlines” on issues like health care.

“Our new president has of course not been in this line of work before and, I think, had excessive expectations about how quickly things happen in the democratic process.”

Dan Scavino Jr., Trump’s social media director and a senior aide then tweeted that McConnell “must have needed another 4 years – in addition to the 7 years – to repeal and replace Obamacare.”

President Trump tweeted: “Senator Mitch McConnell said I had ‘excessive expectations,’ but I don’t think so. After 7 years of hearing Repeal & Replace, why not done?”

No doubt this is just the start of a feud between McConnell and Trump at the worst possible time, with the budget and debt-ceiling to be resolved immediately after Congress returns in September, let alone what to do with ObamaCare and hoped for tax reform legislation.

And it’s not just Trump and McConnell.  Sen. Ron Johnson (R-Wis.) said this week that Sen. John McCain’s brain tumor diagnosis may have been a factor in his decision to cast the deciding vote against the Senate repeal-and-replace bill.

“He has a brain tumor right now. That vote occurred at 1:30 in the morning. Some of that might have factored in,” Johnson said.  A McCain spokeswoman said the senator’s remarks were “bizarre and deeply unfortunate.”

Trump has been going after Alaska Republican Sen. Lisa Murkowski, one of the three to vote down the repeal legislation.

Arizona Republican Sen. Jeff Flake has been harshly critical of Trump.  He’s being primaried.  

Editorial / Wall Street Journal

“The damage from the GOP’s health-care debacle has only just begun, and the latest evidence is this week’s public spat between President Trump and Senate Majority Leader Mitch McConnell. The big potential winner here is Democratic leader Chuck Schumer.

“Mr. McConnell has been getting the Kim Jong Un treatment this week, as Mr. Trump has pounded away for the Senate’s recent failure to reform ObamaCare.  ‘Can you believe that Mitch McConnell, who has screamed Repeal & Replace for 7 years, couldn’t get it done. Must Repeal & Replace ObamaCare!,” the President tweeted Thursday morning from his vacation redoubt in Bedminster, N.J.

“Mr. Trump was slightly more gentle six hours later, but he laid down the Senate’s challenge for September: ‘Mitch, get back to work and put Repeal & Replace, Tax Reform & Cuts and a great Infrastructure Bill on my desk for signing.  You can do it!’....

“The ObamaCare collapse was ugly, and Mr. Trump is right to hold Senators accountable for their votes. We certainly don’t plan to forget the many contributors to defeat...

“But Mr. Trump didn’t help the Senate by failing to make a public case for the GOP reforms. Not once did he explain, for example, that paring back ObamaCare’s Medicaid expansion for able-bodied adults would protect health care for the truly needy.  His failure to master even basic policy details made him useless as a public advocate.

“The question is what they do now....The Steve Bannon wing of the White House would welcome a blowup as they try to rebrand the GOP as a nativist, protectionist movement. They might prefer to run in 2020 against Mr. Schumer than with Mr. McConnell.

“But that advice is deadly for Mr. Trump too. He still needs a GOP majority to pass his agenda as much as Republicans need him to sign it.  They need each other in particular this autumn to raise the debt ceiling, press deregulation, and pass a budget and tax reform. Failure on that agenda after the health-care fiasco will open the door to a Democratic House – which means nonstop anti-Trump investigations and perhaps impeachment. The best defense against mutual assured political destruction is a legislative success in the fall.”

As for the raising of the debt ceiling and a budget, with a somewhat arbitrary deadline of Sept. 29 on the former (as set by Treasury Secretary Steven Mnuchin), and a Sept. 30 deadline to prevent a government shutdown, when it comes to the budget, it seems a virtual certainty that Congress will end up with a continuing resolution (CR) to keep the government open and funded at current spending levels for another few months, beyond Sept. 30.* At least that is the thinking now given how little time is left.

But this would postpone a slew of the president’s priorities, including funding for the border wall, significant increases in military spending and cuts to non-defense discretionary spending.

*Under a previous long-term budget deal, new caps are set to kick in in January, which would reduce spending below existing levels unless Congress passes a new law, so think CR through December as most likely.

Republicans could reach a deal on a broader spending bill and avoid a CR, but they would need Democratic support and there’s no time for those kinds of negotiations.

--FBI agents raided the Alexandria, Va., home of Paul Manafort, President Trump’s former campaign chairman last month, using a search warrant to seize documents and other materials, according to sources from Special Counsel Robert Mueller’s office.

There is little to say on this as it would be pure conjecture, but what is interesting is that the predawn raid on July 26 came the day after Manafort voluntarily met with the staff for the Senate Intelligence Committee looking into Russian meddling in the 2016 election.

It thus would seem investigators convinced a judge to issue the warrant because they didn’t believe Manafort was turning over all the pertinent records in the case.

A spokesman for Manafort said he has consistently cooperated with law enforcement and congressional inquiries.

If Mueller builds a case against Manafort, that may force Manafort to divulge information Mueller might be looking for against Trump to save Manafort.

President Trump on Thursday called the treatment of Manafort “rough.”

--Trump senior aide Steve Bannon is out to get National Security Adviser General McMaster and he has his allies in the alt-right media, including Breitbart, waging a vicious battle against him, characterizing the general as soft on issues like Iran, Israel and terrorism.  Bannon is ticked off he has apparently been shut out of discussions on North Korea by the national security team, though he has his own channel to the president.

--Writing in New York magazine, Robin Wright interviewed a number of foreign policy experts for their opinions on Donald Trump.

Michael Hayden, retired four-star general and former director of both the CIA and the National Security Agency: “The President has little understanding of the context” of what’s happening in the world “and even less interest in hearing the people who want to deliver it.  He’s impatient, decision-oriented, and prone to action.  It’s all about the present tense. When he asks, ‘What the hell’s going on in Iraq?’ people around him have learned not to say, ‘Well, in 632....’” [632 being the year when the Prophet Muhammad died, prompting the beginning of the Sunni-Shiite split.]

Geoffrey Kemp, who worked at the Pentagon during the Ford Administration and at the National Security Council during the Reagan years: “Trump has an appalling ignorance of the current world, of history, of previous American engagement, of what former Presidents thought and did.  He has an almost studious rejection of the type of in-depth knowledge that virtually all of his predecessors eventually gain or had views on.”

Wall Street

Stocks had their toughest week, as measured by the Dow and S&P 500, since March, mostly as a result of the worst single day since May, Thursday, on North Korea concerns.

The market also is not cheap, and has not been for some time now.  And the president’s agenda is for now a mess.

Trump even today continued to harp on the “tremendous optimism” among business leaders.  I’d like to poll these same guys tonight.  I guarantee they would not give the same answer they did maybe three months ago.

The economic news of interest this week was the inflation data.  Both July producer and consumer prices were tame, with the PPI -0.1% on both headline and core (ex-food and energy), with 12-month PPI at 1.9%, 1.8% core. The CPI saw both a 0.1% increase on headline and core, with both figures at 1.7% for the 12 months.

So nothing the Federal Reserve needs to worry about and thus a September rate hike is officially off the table, not that it was ever seriously being considered, while December looks less likely, at least as of today.

The Fed will, however, make an announcement in September that it has begun paring down its balance sheet, which, all together now, boys and girls, is in effect a rate hike of a different sort.

Barron’s Kopin Tan had this nugget as part of last week’s market summary.

“The sentiment sentinels at Ned Davis Research pointed out how the total market value of some 3,900 U.S. common stocks ended July at 140.5% of our nominal gross domestic product.  That’s shy of the 167% seen during the 2000 tech bubble peak, but above the 125% in 2007 or the historical average since 1925 of 62.8%.  Note that this ratio had shrunk to 57.6% just before the bull market took off in early 2009.”

Just another arrow for the quiver, a la the Bull / Bear readings below.

As for the debt ceiling issue...touched on above... a Harvard-Harris Poll in June found that 69 percent of voters were opposed to Congress raising it, which shows an appalling lack of knowledge (not that I’m surprised) on what the debt ceiling is all about and reputational risk in the global markets.

But with that poll number, you can see how some politicians love to play with voters’ minds in acting like, ‘Oh yeah...let’s keep the ceiling where it is,’ while not telling their constituents this could entail massive cuts elsewhere, like to their Social Security.

Economist Robert Samuelson / Washington Post

“The crucial question about raising the federal debt ceiling is: What happens if Congress doesn’t?  That is, what happens if Congress defaults? When President Trump returns from his ‘working vacation’ later this month, this promises to be one of the major issues he’ll face, because the treasury is expected to run out of cash in early or mid-October, according to projections by the Congressional Budget Office. The current debt ceiling is $19.8 trillion, which covers Treasury borrowings from the public (individuals, large institutional investors such as pension funds and banks) and from other government agencies (such as the Social Security Trust Fund or the Highway Trust Fund).  If the government hit the ceiling and couldn’t pay all its bills, then someone would get stiffed: bondholders, Social Security recipients, soldiers and sailors, government vendors – and, possibly, many more.

“The harder question is: How would the world react?

“Investing in U.S. Treasury securities (bills, notes and bonds, each with different maturities) is one way that foreign individuals, multinational companies, governments and banks protect their financial well-being. The dollar is the major form of international money; U.S. Treasury securities are considered the world’s safest financial assets. Would a default trigger a panic, as investors dumped Treasurys?  Or would investors just yawn on the assumption that, sooner or later, Congress would raise the debt ceiling and make good on its debts?

“A recent analysis from the Brookings Institution, a liberal think tank, wisely observes: ‘Congress has never failed to act in time, so no one knows with certainty what the consequences [of a default] would be.’....

“The fundamental question facing Trump is whether he will support a clean increase in the debt ceiling – one without other spending measures, which would probably pass easily with Democratic support – or whether he would flirt with default to gain some policy or political advantage.”

Europe and Asia

After all the economic news of the past two weeks in Europe, there was nothing to speak of in looking at the eurozone overall.  So we go straight to....

Eurobits....

--In Germany, exports rose just 0.7% in June year-over-year; up 2.4% to EU countries; down 1.7% to non-EU sorts.

But, more importantly, we’re almost in the stretch run for the Sept. 24 elections (I guess the stretch run would officially begin Sept. 1) and Chancellor Angela Merkel would appear to have smooth sailing with strong approval ratings and a lead for her party of about 15 points in all the latest polls over challenger Martin Schulz.

In order to combat a sense of complacency, Merkel is launching a 50-stop campaign tour Saturday across the country, but she’s in risk-averse mode.  With all the international crises in play, she is a rock of stability, at least in the eyes of a majority of her fellow countrymen, and no doubt in much of Europe overall.

But Merkel will need to pick a junior partner in government and that’s what analysts in Germany appear to be focused on, because this will impact economic policy and relationships with its EU partners.

Schulz leads her current coalition partner, the Social Democrats, and he has vowed over the next six weeks to draw a distinction between the Christian Democrats and the SPD on pensions, health care and tax policy.

But with a solid economy, and record-low unemployment, plus a balanced budget and the prospect of tax cuts, Schulz has little to argue against.

Merkel’s CDU-CSU bloc had 38 percent in the latest Bloomberg composite poll tracker, with the SPD at 24 percent.  Four other parties capture between 6 and 9 percent in this survey, one of which, maybe the Free Democrats, will end up the junior partner.

--On the Brexit front, an ORB opinion poll from Monday showed that 61% of British voters disapprove of Prime Minister Theresa May’s handling of the negotiations, which is up from 56% last month and 46% in June.

Granted, August is a month when politicians take lengthy vacations (Germany’s Merkel, for example, is returning this weekend from a 3-week stay in the Italian Alps, where, if you can picture this in the U.S., she was virtually out of sight the entire time).  But one thing is clear, the limited amount of Brexit talks thus far have not gone well; in no small part due not to the EU, but rather internal differences inside Mrs. May’s cabinet.

One former official inside the Foreign Office, who now advises businesses on Brexit, Sir Simon Fraser, told Bloomberg that the UK side had been “a bit absent” from formal negotiations in Brussels.  Fraser said the UK still hasn’t put forward a clear position.

Negotiations will be heating up shortly, and the government has said it will produce “position papers” on key issues soon, but we’re almost in September, and the UK has to pull out in March 2019.  That sounds like a lot of time, but the way things like this work (just look at Congress and the budget), time is of the essence, plus there are countless deadlines to hit well before March ’19.

For instance, the May government better come up with a position on the Northern Ireland border situation soon.

As to the “divorce settlement,” the amount of money for future obligations (like for EU pensions), the latest figure being bandied about is $47 billion.

Bottom line for today, the government needs to show Brussels sufficient progress by October to advance talks to the next phase, which would be the critical trade relationship.

One item on the economic front for the UK, consumer spending fell for a 3rd month in a row in July, another sign that the impact of the Brexit process is now rippling through households, with rising prices and stagnant wages.

Turning to Asia, just a few notes on China’s economy.  Producer prices rose 5.5% in July, year-over-year, with soaring prices for coal, steel and cement, while consumer prices rose 1.4% last month, well below the government’s 3% target, as the key food price component fell 1.1%.

July exports rose 7.2% and imports 11%, both well below expectations, and well off June’s 11.3% for exports, and the 17.2% prior jump in imports.

Street Bytes

--The Dow Jones fell 1.1% to 21858, while the S&P 500 declined 1.4% and Nasdaq continued its rough patch, down a third straight week, 1.5%.

--U.S. Treasury Yields

6-mo. 1.13%  2-yr. 1.29%  10-yr. 2.19%  30-yr. 2.79%

Bonds rallied, yields fell, on a flight to safety play and the tame inflation news.

It was the same situation in Europe, where the yield on the German 10-year Bund fell to 0.38% from 0.54% just two weeks earlier, with the French 10-year at 0.67% vs. 0.80% over the same time period.

--OPEC oil production rose further in July, in a sign its efforts to curb production are falling short.  OPEC said output rose to 32.87 million barrels a day, up by 172,600 barrels from June, driven largely by higher production in Libya, Nigeria and Saudi Arabia.

Libya and Nigeria have been exempt from the deal cut between OPEC and 10 producers outside the cartel, including Russia, because their industries have been crippled by civil unrest, though output has been soaring in both the past few months.  So now there is pressure to include the two in the agreement.

Separately, the International Energy Agency said on Friday that world oil demand would grow more than expected this year to 1.5 million barrels per day from a previous estimate of 1.4 mbd.

“There would be more confidence that rebalancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve,” the IEA said.

--Disney announced it would be launching its own video streaming service – along with an ESPN-branded platform – that will broadcast thousands of movies and sporting events each year.  The new services will launch in 2018 and 2019 and be run by BAMTech, the digital media division founded by Major League Baseball.  MLB really did come up with cutting edge technology for its own Web properties and it’s interesting how BAMTech became a profit center.

Actually, Disney raised its stake in BAMTech from 33% to 75%, acquiring the greater stake for $1.58 billion, that’s how much Disney thought of it.

So this is seen as a blow to Netflix, which had landed a lucrative streaming deal with Disney in 2012, though it had not gone into effect until last year.

In addition to its massive film library, Disney will release an “annual slate of original movies, TV shows, short-form content and other Disney-branded exclusives” for their video service.

2019 is a big year for Disney, as it releases the likes of Toy Story 4, the sequel to Frozen, and a live-action remake of The Lion King.  [Live scenes of lions hunting humans on safari? I can’t wait! ....I was just informed this isn’t the case...never mind....]

What this means for Netflix is they get two more Star Wars installments, but not the release of the final installment, as Disney said the new service “will become the exclusive home in the U.S. for subscription-video-on-demand viewing of the newest live action and animated movies from Disney and Pixar.”

Meanwhile, in the here and now, investors didn’t like the fact it was a weak fiscal third quarter for Disney’s cable unit, with operating income for its cable networks falling 23 percent, largely because of a decline at ESPN, which was hit by high programming costs related to its first year of a new contract with the NBA, plus a contracting ad market.

Overall, Disney beat on earnings, but missed on revenue, the latter at $14.24 billion.

As for Netflix, while it likes to talk of the popularity of its original content, most of what is viewed by its subscribers remains programming that Netflix is licensing from others, including Disney, so the loss of Disney is going to be important.

Some analysts actually believe Disney should acquire Netflix to lock up the audience shift to streaming video.

Back to ESPN, a stand-alone service is what Pay-TV operators have been fearing, because it would give more consumers a reason to ditch their TV subscriptions.

--CBS is another ramping up its digital efforts by expanding its online streaming service “All Access,” while launching a new digital sports network later in the year.

CBS owns sports cable channel CBS Sports Network, but it doesn’t have the level of offerings that ESPN or the Fox Sports unit have.

Overall, CBS’ revenue jumped a solid 9% to $3.26 billion, with advertising revenue growing 4.3%, led by the semifinals and finals of the NCAA Basketball Championship.

--Macy’s and Kohl’s shares tumbled on Thursday as the companies continued to report a drop in quarterly same-store sales, fueling concerns the turnaround for the sector might still be a ways off.

The declines in comp sales weren’t as bad as expected, -2.8% in the quarter for Macy’s, and -0.4% for Kohl’s in its latest quarter, but gross margins dropped amid heavy discounting and promotions, while the companies spend more on online shipping.

Nordstrom’s, however, bucked the trend, reporting a 1.7% increase in comp sales and its shares held steady in response.

Then Friday, JC Penney Co. Inc. reported a wider than expected loss, $62 million, while net sales rose 1.5% to $2.96 billion.

But same-store sales fell 1.3%, marking the fourth straight quarter of decline, and the shares fell 17%.  Yikes.

--Google hired James Damore as a software engineer in 2013, and this week he was fired after penning a 10-page memo, titled “Google’s Ideological Echo Chamber,” which argued that “personality differences” between men and women – like a woman having a lower tolerance for stress – help explain why there are fewer women in engineering and leadership roles at the company.  Damore then said efforts by Google (which mirror recent moves in much of Silicon Valley) to hire more women in tech and leadership positions were “unfair, divisive, and bad for business.”

The memo was originally sent out internally and shared widely throughout the Valley, and was harshly criticized inside Google, as well as the industry.

After his firing, Damore said he didn’t expect such a reaction.

“As far as I know, I have a legal right to express my concerns about the terms and conditions of my working environment and to bring up potentially illegal behavior, which is what my document does.”  Damore said he was taking legal action against Google, starting with his submission of a charge to the U.S. National Labor Relations Board accusing Google upper management of trying to shame him into silence.

So Google on Thursday canceled a scheduled companywide summit at which executives had planned to discuss Damore’s memo, after employees expressed concern that they would be exposed to harassment online.

The employees were worried about being “outed” publicly for asking a question.

Just pathetic.  What a crappy society we have.

--A group of Uber shareholders has demanded that Benchmark, one of Uber’s biggest investors, exit the board, a day after the venture-capital firm filed a lawsuit against founder and former CEO Travis Kalanick, accusing him of fraud.

The three shareholders accused Benchmark of harming Uber’s value and requested Benchmark sell its shares, according to the Financial Times, which obtained a copy of the letter.

--Shares in SeaWorld Entertainment took a dive as the amusement park operator’s appeal wanes following the decision to end orca shows and breeding.

The number of visitors to its locations dropped by 3.8% in the first half of 2017, compared to a year earlier, as its reputational crisis and “competitive pressures” took a toll.

The company, which owns 12 theme parks in five states, said its parks in San Diego and Orlando were especially hard hit. SeaWorld recorded a second-quarter net loss of $176 million, largely due to a large write-down in the value of the Orlando location.

--Tesla Inc. said it intends to raise about $1.5 billion in a bond offering as it seeks to ramp up production of its newest electric sedan, the Model 3.

Tesla had a little over $3 billion in cash on hand at the end of the second quarter, compared with $4 billion three months earlier.  It was expected to burn through $2 billion in 2017.

--Wisconsin Republican Gov. Scott Walker defended a $3 billion tax-incentive package to lure FoxConn Technology Group to the state.

In a much ballyhooed ceremony at the White House last month, President Trump praised Wisconsin and the company in announcing FoxConn would be investing $10 billion to build a huge facility in southeastern Wisconsin in House Speaker Paul Ryan’s district.  It was expected to employ up to 13,000 workers, making liquid-crystal display, or LCD screens used for Apple’s iPhone and other products.

But the deal, which has to be approved by Wisconsin’s state legislature, faces strong opposition because of the high cost to taxpayers, with some estimates projecting the state wouldn’t get its money back until 2042.  I’m not sure when the vote would be held.

--Speaking of the president, his hotel in Washington, D.C., is outperforming the company’s expectations, according to new financial documents.

The Trump International Hotel, in the renovated Old Post Office near the National Mall, brought in about $18 million in revenue in the first four months of 2017, in part by higher room rates than were budgeted, according to the Wall Street Journal, which reviewed the documents.

Get this...from January to April the average daily room rate was $660.28, compared with $495.91 for comparable hotels, while the hotel had projected $416.

The hotel also made a profit of nearly $2 million during this time, when it had forecast a loss of $2 million.

The hotel has to file monthly records to the General Services Administration, which oversees the Trump Organization lease.

--Russia reported second-quarter GDP growth of 2.5%, the fastest in five years, not that I placed this nugget next to a Trump story for any particular reason.

--Shares in Snapchat cratered anew after the company released its second quarter earnings late Thursday.

In its first two earnings reports since it went public, Snap hasn’t delivered.  Growth in usage of Snapchat, the social media app, has declined four straight quarters, while it added only 7 million users during the second quarter.  It is also seeing slowing growth in average revenue per user.  The shares finished the week at $11.80, down from its $17 IPO price.

--In its first earnings report since going public, Blue Apron reported $238 million of revenue for the second quarter, an increase of 18% from a year ago but a decline from the earlier quarter, with the meal-kit delivery service losing $31.6 million, or 47 cents per share.

The company had 943,000 customers at the end of the quarter, down from just over 1 million in the first.  Ah, is this supposed to be a growth company?

The company went public on June 28 at $10 a share.  Six weeks later it is $5.10!

[WIR 7/1/17: “I don’t know about this one.”]

--Tyson Foods handily beat sales expectations for the second quarter, 4.8% higher vs. a year ago, as CEO Tom Hayes said “every segment delivered volume growth behind a strong start to grilling season and new product innovation.”

We’re talkin’ increased demand for pork and beef, meat lovers.  Chicken grew, but not as fast.

--Applebee’s Neighborhood Grill & Bar is expected to shutter 135 of its nearly 2,000 U.S. locations by year’s end, more than the initial estimate of 60 from earlier in the year.

DineEquity, Applebee’s parent company, is also closing 20 to 25 IHOP sites.

But, at the same time, the two chains are opening 125 restaurants globally.

It’s all about the ongoing struggles of the casual-dining segment as more customers gravitate to quick-service options such as Panera Bread or Chipotle Mexican Grill, assuming the latter doesn’t have rats in its store, or an employee coughing all over the food, or forgetting to wash his hands and giving you norovirus.

[Chipotle had another rough week, closing a Dallas restaurant where mice were spotted chatting up customers.  The shares finished today at $327.50, down from the 52-week high of $499.]

--News Corp. reported better circulation figures for its Dow Jones unit for the quarter ending in June, but that was offset by one-time write-downs on its overseas print units.

The company, which is the parent of the New York Post and Wall Street Journal, reported a 7 percent decline in revenue, to $2.08 billion, for the fiscal fourth quarter as compared with year-ago figures.

The news and information-services business, which accounts for just under two-thirds of the top line, reported a 10% decline in revenue, driven by a 12% drop in advertising revenue due to weakness in the print market.  Advertising revenue at Dow Jones fell 14%.

The company did report “tangible improvement in profitability, powered by the fast-growing Digital Real Estate Services segment,” according to CEO Robert Thomson, but he had to concede “we didn’t see the growth that we wanted” from digital advertising overall.

That said the Journal’s digital subscriptions rose to 1.27 million at the end of June, up 72,000 for the quarter.

--Futures prices for the likes of corn, wheat and soyabeans fell sharply on Thursday as the U.S. Dept. of Agriculture issued positive forecasts on crop yields, after fears of a drought in late June.

Globally, supplies are ample, which is also hurting prices.

--Bed Bath & Beyond announced it would be eliminating 800 jobs, most of them at the store manager or assistant manager level in an attempt to streamline operations.

--Bitcoin’s value jumped to a record high this week, reaching $3,550 per coin Friday, not having crossed the $3,000 mark until last weekend.  [The 52-week low, Mar. 25, was $952.  Nice run for the little crypto-currency mined by elves.]

The surge follows the introduction of a new currency spin-off, Bitcoin Cash. I don’t begin to even try to understand this, and the potential for Bitcoin Cash to undermine the original Bitcoin.

But those who care about this say that the introduction of Bitcoin Cash proves there is room for more than one type of Bitcoin....Back to Mets baseball....

--The New York Post reported that Megyn Kelly is currently on a nationwide tour to visit affiliates in major markets, “and she is traveling on a charter jet with a support staff of five or six people, including a hairstylist, a makeup artist, a publicist and a security detail.”

Well this is ticking off her colleagues. 

“People are outraged over her divalike ways,” one network source told the Post.  “They wonder, ‘When does NBC stop throwing money at her?’”

Kelly’s “Sunday Night With Megyn Kelly” had mediocre ratings and ended after eight episodes.  It is supposed to return after the NFL season and the Winter Olympics (or barrel-jumping from Lake Placid if the Olympics are nuked).

Her “Megyn Kelly Today” starts Sept. 25, in the 9 a.m. hour of “Today,” which is what she is hitting the affiliates for.  You talk about a soap opera.  She’ll be coming on the “Today” set, of course, promoting her 9 a.m. show with Savannah and Matt and the chemistry between these three could be, err, rather icy.

--Fox News suspended long-time host Eric Bolling after he was accused of sending lewd photos to three female co-workers.

His lawyer described the claims as “untrue and terribly unfair.”  Bolling then sued the Huffington Post reporter who wrote the story, citing 14 unnamed sources.  Fox is investigating.

Boy, working at Fox is just a real barrel of monkeys.

--In another episode of network figures acting badly, CNN fired commentator Jeffrey Lord, one of President Trump’s staunchest defenders, after he tweeted a Nazi salute to a liberal media analyst.

“Nazi salutes are indefensible,” a CNN spokesperson said in a statement.  “Jeffrey Lord is no longer with the network.”

College football is thankfully around the corner.  Premier League action started today...Arsenal with a big 4-3 comeback win over Leicester City, Giroud the decider.

Foreign Affairs

Israel: Facing mounting legal troubles, Israeli Prime Minister Benjamin Netanyahu gave a defiant speech to thousands of supporters in which he accused “left-wing” Israeli media of trying to topple his government through a campaign aimed at pressuring the attorney general to indict him.

Netanyahu, channeling Donald Trump, accused the media establishment of purveying “fake news” as part of “a governmental coup.”

“Their goal is to apply unrelenting pressure on law enforcement agents so that they’ll serve an indictment at all costs, without taking into account the truth or justice,” Netanyahu said.

If the attorney general decides to indict the prime minister, who is the focus of four different corruption investigations, he could be forced to step down, but he does not have to.

Netanyahu ended his speech with his now trademark line regarding the accusations against him: “There will be nothing, because there is nothing.”  [I have to remember this regarding the upcoming New York Jets season.]

On the issue of U.S. Middle East peace efforts, Palestinian executive committee member Hanan Ashrawi blistered Trump adviser Jared Kushner, who is overseeing the U.S. effort.

Kushner has voiced doubts about whether the Israeli-Palestinian conflict can be solved.

“Of course he’s not qualified because he disqualified himself,” Ashrawi (who once had an affair with a now deceased major U.S. network anchor) told The Jerusalem Post two days after a private talk Kushner gave in Washington was leaked.

“His talk was really problematic. It betrays not just deep bias but a lack of knowledge of the history itself and therefore of the needs and requirements for a solution,” Ashwari said.

“If you don’t know the significance of the holy places and the fact that Israel is changing not just the status quo but religious responsibility there, and you don’t know the impact of offending people’s spiritual commitments and feelings, then you don’t know anything about the solution itself.”

I am not in the least a supporter of the PLO in any negotiations it holds with Israel, but having Jared Kushner as the chief negotiator is beyond asinine.  He and his ‘team’ are returning to the region shortly.

Iran: At his swearing-in ceremony for his second term in office, President Hassan Rouhani warned President Trump that he risks political suicide if he scraps the nuclear deal with Iran.

Rouhani said he had nothing to do with “newcomers to the world of politics” and urged “old-timers” to see the nuclear deal as an example of how to manage international relations.

“Those who want to tear apart the JCPOA [nuke deal] should know that they would also be tearing apart their political life.”

He accused the U.S. of a “lack of commitment” to the deal and said it was an “unreliable partner.”

Naftali Bennett, a member of Israel’s Security Cabinet / Wall Street Journal

“An essential part of Tehran’s grand strategy is to control a land corridor from Iran to the Mediterranean Sea.  Under the cover of Syria’s bloody civil war, Hizbullah is helping to build such a highway. Hizbullah, trained and supported by Tehran, is classified as a terror group by the U.S., France and the Arab League, among others.

“Its effort endangers the entire Western world. Controlling this corridor would directly connect Iran with its proxies in Syria and Lebanon, allowing it to transfer advanced weapons cheaply and quickly. The highway would let Iran build its military presence on the Mediterranean, bringing much of Europe into the range of its air force, navy and midrange missiles. Iran could even build arms factories outside its borders.

“Iranian apologists frame Hizbullah’s capture of the border area as a victory over ISIS, as if the U.S.-led coalition ought to be cheering. ISIS needs to be stopped, but Iran is a far greater problem in the long run.  Tehran shouldn’t be mistaken for part of the solution.

“As Syria disintegrated through civil war, Iran acted swiftly. It broke international law and forcefully expelled the Sunni population and replaced it with Shiites. This changed the local demography to support Tehran’s planned land corridor through Syria and Iraq. Iran also sent its generals to train Bashar Assad’s troops. Hizbullah has effectively morphed from a terror group into a division of the Iranian army, working for Tehran not only in Lebanon and Syria, but also in Yemen and Iraq.

“In the game of chess that Syria has become, Western leaders are so focused on the knight attacking their pawns they cannot see the queen maneuvering to defeat them.  Mistaking ISIS has the most serious threat has allowed Iran to move its pieces forward and gain better position. The nuclear deal Iran signed in 2015 demonstrates Tehran’s patience, as it temporarily slows the country’s preparations to acquire nuclear weapons without stopping them over the long term.

“I and others are concerned by the cease-fire in southern Syria brokered by the U.S., Russia and Jordan last month. With American and allied forces present in the north, Iran has focused its efforts on the south. The hiatus from violence in that region only gives Tehran another piece of territory in its bid to build a highway to the coast....

“There are many possible courses of action against Iran. Yet the free world – led by the U.S. – has yet to take the first and most important step: declaring that it cannot abide an Iranian empire from the Persian Gulf to the Mediterranean Sea.”

Meanwhile, you know how I’ve said since the day the Iran nuclear deal was signed that it was now too late?  That you can’t blow it up as Trump spoke of during the campaign?  That you would never get any other members of the P5+1 to go along with breaking the deal?  That the commercial interests between the likes of France, Germany, Russia and China are already too intertwined with those of Iran, post- the lifting of sanctions?

Case in point...Iran’s official news agency announced the other day that two Iranian companies have signed the country’s biggest-ever car deal with French multinational auto manufacturer Groupe Renault to produce 150,000 cars, beginning in 2018.

Last year, French carmaker Peugeot Citroen reached a similar deal to open a plant in Iran.

Afghanistan: The Taliban and ISIS jointly massacred dozens of civilians in an Afghan village, officials said Monday, a rare moment of cooperation between the insurgents that could further train Afghanistan’s security forces.

The fighters killed more than 50 men, women and children in the remote Sayad district of northern Sar-e Pul province on Saturday after overrunning local police in a lengthy battle.  Some of the victims were beheaded.

Iraq: Temperatures hit 50 degrees Celsius on Thursday (122 degrees Fahrenheit), so the government announced a mandatory official holiday.  There are inevitable electricity shortages in such conditions, making life even more miserable.

Russia: As alluded to above:

Editorial / The Economist

“Next month Russia will hold what is expected to be the biggest military exercise in Europe since the end of the cold war. According to NATO estimates, it will involve at least 100,000 troops.

“Revived from Soviet times by Vladimir Putin, the Zapad (West) drills, as they are known, take place every four years.  Although the Kremlin insists that the scenarios it is playing out are purely defensive, that is not always how they have looked to its neighbors.  Countries that have borders with Russia or Belarus, the operational focus of Zapad 2017, are especially worried.

“The climax of Zapad 2009 was a dummy nuclear strike on Warsaw, which rather stretches the meaning of ‘defensive.’  Zapad 2013 was less overtly aggressive, but much of the new equipment Russia tested and the tactical techniques it practiced were put to use barely six months later when it annexed Crimea and launched a covert invasion of eastern Ukraine.  The attack on Ukraine itself started out as a ‘snap’ military drill which gave cover for Russia’s real intentions.  Mr. Putin had used the same ruse in the invasion of Georgia in 2008.

“The secrecy that cloaks Russian military exercises only makes them more threatening.  Mr. Putin is ignoring calls for greater transparency from the Organization for Security and Cooperation in Europe (OSCE), a body with 57 member countries whose functions include trying to reduce the risk of accidental conflict. Under the terms of its Vienna Document, to which Russia is a signatory, countries carrying out drills with more than 9,000 troops must provide advance notice. If they hold an exercise deploying more than 13,000 troops, they must also invite other OSCE countries to send observers.

“The reason for these rules is simple. Observers from the other side make it harder for countries to use military exercises as the springboard for a surprise attack.  They also lower the chances that anyone will mistake a harmless exercise for the real thing. Russia flouts the rules by pretending that its exercise are much smaller than they are, while insisting on its right to observe NATO war games.”

The bastards.

Meanwhile, Russia has drastically increased its activity of aircraft along NATO’s border, and “Far too often, Russian pilots fly without their transponders on, meaning that they cannot easily be identified.”

“Russia says that it does not deserve to be treated with such suspicion. Yet it is largely to blame. It could invite Western observers to Zapad 2017.  It could also seek better military-to-military contacts with NATO.  These relationships, which NATO is eager to forge, can lower the risk of miscalculation when normal diplomacy is strained.  If, on the other hand, Russia’s intention is indeed to intimidate and bully, NATO will have no choice but to prepare for the worst.”

Gee, one thing President Trump could do would be to demand Putin allow observers.  Don’t you think?

What are the chances of that?  Zero.

Venezuela: The U.S. imposed sanctions on eight Venezuelan officials for their role in creating the all-powerful new legislative body, the constituent assembly, that is loyal to President Maduro.

The new sanctions do not target Venezuela’s critical energy industry, the only real source of government income, though U.S. officials are still considering them.  [Even more people would starve if we acted in such a fashion.]

So last week I wondered how the nation’s chief prosecutor, Luisa Ortega, was surviving after her harsh criticism of the Maduro regime, and wouldn’t you know, 24 hours later, the new assembly’s first action was to fire her, after she accused Maduro of human rights abuses, confirming opposition fears that the assembly would purge the government of any dissenting voices.

[Ortega was prevented from entering her office as she alleged authorities were desperate to get their hands on dossiers containing information on dirty dealings by high-level officials, including $millions in bribes paid by a Brazilian construction company.  She is banned from leaving the country and her assets were seized.]

Then we learned of a rebellion against “the murderous tyranny” of the president by dissident officers, most of whom fled the country, seeking asylum, after assailants under the command of a mutinous captain attacked an army base, making off with weapons.

There is no doubt the military is increasingly split on its allegiances.  We can only pray for a coup, which should have occurred two years ago.

But in response to the mutiny, Maduro promoted 195 officers to the rank of general, giving the country 2,000 generals!  If you are a general in Venezuela, you get control of the food supply and a favorable exchange rate for dollars, among other perks.

So Maduro has made sure to reward senior military officers in exchange for their loyalty.

In a joint declaration released on Tuesday, the likes of Canada, Brazil, Argentina, Mexico, Chile and Colombia condemned the “breakdown of democratic order” in Venezuela and said they would not recognize any action taken by its “illegitimate” new constituent assembly.

Then, out of nowhere on Friday afternoon, President Trump threatened military action here when there is NO WAY his generals or Vice President Pence approved of the utterance.  This is absolute insanity.

Kenya: The opposition in this week’s key national election called on the election commission to give it, other candidates and observers access to its computer servers, saying it would accept the results of Tuesday’s vote based on the figures recorded there.

Opposition candidate Raila Odinga rejected the declaration of the commission late Friday that President Uhuru Kenyatta was the winner, 54.3% to 44.7%.

Random Musings

--Presidential tracking polls....

Gallup: 36% approval for Trump
Rasmussen: 45% (rebounding from last week’s low of 38%)

A new CNN poll had President Trump’s approval rating at 38%, while 56% said they disapprove.  The approval rating is down 6 points from an April survey.

Taking stock of the first 200 days of Trump’s term, 36% deemed it a success, 59% consider it a failure.

--According to a different CNN poll conducted by SSRS, 68% of Americans judge the Republican Congress a failure so far, 24% a success, with approval of the current Republican leaders in Congress falling from 39% in January to 24% as well. 

Republicans themselves are split 44-44 on whether the GOP-led Congress has been a success or failure so far.

Only 34% of Americans say they approve of Democratic leaders in Congress, 59% disapprove.

A majority of all Americans, 56%, say Republicans should work with Democrats to make changes to current health care policy.

--Vice President Mike Pence fought back against rumors that he is working behind the scenes to run for president in 2020, saying in a statement: “The American people know that I could not be more honored to be working side by side with a president who is making America great again.”

The American people, Mr. Vice President, sometimes know you are lying, but we forgive you.  You’re in a tough spot.

--According to the U.S. Border Patrol and the Department of Homeland Security, arrests of people caught trying to illegally cross the Mexican border into the U.S. rose in July from a month earlier, the third straight monthly increase.

18,198 people were caught sneaking across the border in July, compared with 16,087 in June.

But, arrests at the border have been dropping since October 2016, down about 36% compared with a year earlier.

The number of immigrant children traveling alone, though, has been rising, with most coming from Honduras, El Salvador or Guatemala, which tells you everything about the situation in those countries.

--According to a report from Vice News, citing White House sources, President Trump is given a dossier of positive news coverage of him twice daily, a packet of 20-25 pages filled with positive cable news headlines, admiring tweets, and sometimes just pictures of him looking presidential.

Now I don’t read Vice, and I have no idea on their track record in terms of veracity, but the outlet reported the idea came from Reince Priebus and Sean Spicer, both of whom are out.

Both were reportedly eager to deliver the package, which, again, if true, is beyond pathetic.

I did see snippets of Team Trump’s effort to combat “fake news,” their Facebook page broadcast of “Real News,” and it was also pathetic propaganda.

Looking back about five years ago, when I had a brief flurry of video newscasts, they were the best of their kind...but they took up a ton of time, and someone has to pay me if I’m to attempt to do it again.  [The technology has improved, I must say, since then.]

--As of Friday morning, there were 215 homicides in Baltimore this year, a record tally for mid-August.

--For the sake of accuracy, last week I mused that I hoped Baron Trump wasn’t trapped at the golf club in Bedminster, N.J.  I have seen since that he is reportedly taking up golf, and if that’s the case, great!   That would then be an enjoyable place to be.

--I saw that a victim of the 9/11 attacks at the World Trade Center was identified the other day, the first victim of the attacks to have been identified since March 2015.

His name was withheld at the family’s request, but new DNA technology helped identify him after previous tests yielded no result.

What I forgot is that 40% of the victims of 9/11 are still unidentified.

---

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

God bless America.

---

Gold  $1295....highest weekly close since 11/16; flight to safety...
Oil
  $48.79

Returns for the week 8/7-8/11

Dow Jones  -1.1%  [21858]
S&P 500  -1.4%  [2441]
S&P MidCap  -2.3%
Russell 2000  -2.7%
Nasdaq  -1.5%  [6256]

Returns for the period 1/1/17-8/11/17

Dow Jones  +10.6%
S&P 500  +9.0%
S&P MidCap  +3.0%
Russell 2000  +1.3%
Nasdaq  +16.2%

Bulls 57.5
Bears  17.0  [Source: Investors Intelligence]

Have a great week....I’ll sleep with one eye open so you don’t have to.

Brian Trumbore



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Week in Review

08/12/2017

For the week 8/7-8/11

[Posted Friday, 11:45 PM ET]

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 957

Before I dive into the events of the week concerning Lil’ Kim Jong Un and our president, you know what I find startling about the discussion of the past few weeks? I have yet to hear a single analyst, broadcaster, what have you, talk about a pretty startling fact...an event occurring in now less than six months...the Winter Olympics in Pyeongchang, South Korea!!!

Yes, I see there have been a few sports reporters bringing it up, and the International Olympic Committee (IOC) certainly has it on its radar, but this isn’t 2020, this is February 9-25!

So I guess, for example, the Sunday talk shows, and all the network anchors, and pundits and such are assuming that Kim will just give everything up and turn his state into a Chile, post-Pinochet, or something like that by February.

I mean this is nuts.

Anyway...we now resume our regularly scheduled program.

But first, once again, a reminder of what I wrote in this very space last September.

WIR, 9/24/2016

North Korea: Pyongyang claimed it successfully tested a high-powered rocket engine for launching satellites, which is of course part of the North’s long-range ballistic missile program.

I’m amazed at how some “experts” in the U.S. continue to say that North Korea won’t have the capability to threaten the U.S. with a nuclear weapon until 2020, but these same folks can’t deny the speed at which Kim Jong Un and his Orcs appear to be progressing towards their goal of a full nuclear arsenal.  Depending on the success of coming ballistic missile tests, I have been arguing a realistic target for Pyongyang would be Guam and our heavy military presence there.  That’s a far shorter route than the U.S. west coast...or Hawaii.  [Guam, from North Korea, is roughly the distance from New York to Las Vegas.]

And I would worry Kim could have the capacity to hit Guam by the end of next year (I’ve said Fourth of July).

Remember, U.S. intelligence missed both India and Pakistan’s first nuclear weapons tests.

Japan’s Defense Minister Tomomi Inada said this week that “the speed of North Korea’s development” meant it was important to “take all possible measures” to ensure Japan’s defenses were sufficient and to reinforce the Japan-U.S. alliance.

I reminded you of this after this past Fourth of July, when Kim did indeed test an ICBM that very day...one capable of reaching a lot further than Guam.

On to this week’s developments....

Last Saturday, the U.N. Security Council unanimously imposed new sanctions on North Korea over its continued missile tests that on paper would slash Pyongyang’s export revenue from $3 billion to $2 billion, including a complete ban on North Korean coal instead of capping it as per a prior U.N. resolution.  There were also to be significantly tighter controls over financial transactions with North Korea.  But there are loopholes, and China can still sell crude oil and other oil products to the North.

President Trump tweeted: “The United Nations Security Council just voted 15-0 to sanction North Korea. China and Russia voted with us. Very big financial impact!” 

Doubtful.

Addressing a regional security meeting on Monday in Manila, Chinese Foreign Minister Wang Yi said China will pay the biggest price from the new sanctions because of its close relationship with the country, but will always enforce the resolutions, to which some in the audience I imagine were heard to mutter [Bulls---].

The day before, Wang Yi did warn his North Korean counterpart, Ri Yong Ho, “Do not violate the U.N.’s decision or provoke international society’s goodwill by conducting missile launching or nuclear tests.”

China has never followed through on its promises to enforce sanctions against the North for the simple reason that a collapse of the North Korean regime is not in Beijing’s interests.  It doesn’t want a refugee crisis on its border, and it certainly doesn’t want U.S. and South Korean troops on its border either as part of a unified Korea, though before this occurred there could be a civil war in the North where rival factions are using the most horrendous weapons on each other.  [It’s easy to forget about the massive chemical weapons arsenal that Pyongyang possesses.]

So Monday, North Korea’s Foreign Minister Ri Yong Ho delivered a statement on the sidelines of the Manila security conference that his country would “under no circumstances” negotiate on its nuclear and missile weapons programs, and that it would use nukes against the U.S. if provoked.

Early Tuesday, North Korea described the new round of U.N. sanctions as an attempt “to strangle a nation” and warned in response, “physical action will be taken mercilessly with the mobilization of all its national strength.”

So then the Washington Post reported that a U.S. intelligence assessment the paper had obtained concluded North Korea had crossed a major threshold in its quest to become a full-fledged nuclear power by producing a miniaturized nuclear warhead that can fit onto a missile. If true, the game-changer. The stakes suddenly were raised ten-fold.

[Japan’s Ministry of Defense has also concluded Pyongyang has crossed the miniaturization threshold.]

Trump said from Bedminster: “He has been very threatening beyond a normal state, and as I said they will be met with fire, fury and frankly power, the likes of which this world has never seen before.”

As we learned later his comments were made off the cuff and not checked out with his aides or generals beforehand.  Secretary of State Rex Tillerson assured Americans after that they “should sleep at night” without worrying about an imminent war.  [I’ve been sleeping with one eye open because of North Korea for over ten years.]

Republican Sen. John McCain said Trump should be more cautious.  “The great leaders I’ve seen don’t threaten unless they’re ready to act, and I’m not sure President Trump is ready to act.  It’s the classic Trump, in that he overstates things,” McCain said in an interview with a Phoenix radio station.

Wednesday....

Trump tweeted: “My first order as President was to renovate and modernize our nuclear arsenal. It is now far stronger and more powerful than ever before...Hopefully we will never have to use this power, but there will never be a time that we are not the most powerful nation in the world!”

But the Pentagon has just begun a review of the U.S. nuclear posture.  No money has been pumped into it, which has to come from Congress.  The president was lying.

Separately, Defense Secretary Mattis warned North Korea in stark terms, backing his president.

“The United States and our allies have the demonstrated capabilities and unquestionable commitment to defend ourselves from an attack....The DPRK must choose to stop isolating itself and stand down its pursuit of nuclear weapons. The DPRK should cease any consideration of actions that would lead to the end of its regime and the destruction of its people.”

North Korea announced it would unleash four missiles at military bases near Guam.  Gen. Kim Rak Gyom said in a statement: “The U.S. president at a [golf] links again let out a load of nonsense about ‘fire and fury’ failing to grasp the on-going grave situation.

“This is extremely getting on the nerves of the infuriated Hwasong artillerymen of the KSA.

“Sound dialogue is not possible with such a guy bereft of reason and only absolute force can work on him.”

The statement added the military will have completed its plans by mid-August to launch the four missiles over Japan and 18 miles off the coast of Guam, home to about 160,000 U.S. citizens, as well as the largest U.S. air base in the region, Andersen, a Navy installation that includes a submarine squadron, and a Coast Guard group.

Once the military has completed its plans, we are being told then it’s up to the commander-in-chief of the North Korean nuclear forces and wait for his order.

B-52 and B-1B bombers from Andersen Air Force Base have flown over the Korean Peninsula on flights that the North has denounced as exercises for launching a nuclear strike against it.

For its part, Andersen is protected by the Terminal High Altitude Area Defense missile system (THAAD) and officials there are confident they can stop any attack.

Thursday....

North Korea said it completed the above-discussed plans to fire four intermediate-range missiles over Japan to land near Guam in an unusually detailed threat, calling for the missiles to land in the sea only 18-25 miles from the U.S. territory (30-40km).  Pyongyang’s statement even said the rockets would have a flight time of 17 minutes 45 seconds.

Guam’s governor, Eddie Calvo, said Guam had experienced a Japanese invasion in World War II (I’ll have more on this from my own experiences on the island next WIR) and countless earthquakes and typhoons and there was no community better prepared to meet the North Korean threat.  “Enjoy the beaches,” Calvo said.

Trump then said in one of two mini-pressers he gave reporters out of nowhere from Bedminster, that his “fire and fury” threat from Tuesday perhaps “wasn’t tough enough.”

“It’s about time someone stood up for the people of our country,” and “you’ll see” what is “tougher” than “fire and fury.”

“And we’re backed 100 percent by our military, we’re backed by everybody and we’re backed by many other leaders,” he said.  “And I noticed that many senators and others came out today very much in favor of what I said.  But if anything that statement may not be tough enough.”

He also advised North Korea to “get its act together” or it would be in trouble “like few nations have ever been.”

“If North Korea does anything in terms of even thinking about attack of anybody that we love or we represent or our allies or us, they can be very, very nervous,” Trump blustered on.  “Because things will happen to them like they never thought possible, OK?  [Kim Jong Un] has been pushing the world around for a long time.”

Trump also said about the targeting of Guam:

“Let’s see what (Kim) does with Guam. He does something in Guam, it will be an event the likes of which nobody’s seen before, what will happen in North Korea.”

[And you thought Mayweather-McGregor was big.]

And Trump said of China’s role: “I think China can do a lot more, yes. And I think China will do a lot more.  Look, we have trade with China. We lose hundreds of billions of dollars a year on trade with China. They know how I feel. It’s not going to continue like that.  But if China helps us, I feel a lot differently toward trade, a lot differently toward trade.”

Later Thursday, Defense Secretary Mattis tempered Trump’s harsh words, saying the United States still preferred a diplomatic approach to the North Korean threat.  A war would be “catastrophic,” he said.  Asked if the U.S. was prepared to handle a hostile act by North Korea, Mattis said: “We are ready.”

Friday....

President Trump was at it again, warning in another tweet, U.S. weapons are “locked and loaded.”

“Military solutions are now fully in place, locked and loaded, should North Korea act unwisely,” chirped Trump.  “Hopefully Kim Jong Un will find another path!”

North Korean state news agency, KCNA, responded: “Trump is driving the situation on the Korean peninsula to the brink of a nuclear war, making such outcries as ‘the U.S. will not rule out a war against the DPRK,’” KCNA said.

Russian Foreign Minister Sergei Lavrov said the risks of a military conflict are very high and that Moscow is deeply worried by the threats from Washington and Pyongyang.  Lavrov urged both sides to sign up to a joint Russian-Chinese plan, under which North Korea would freeze its missile tests and the United States and South Korea would impose a moratorium on large-scale military exercises.”

Well that’s a lousy deal.

The Global Times, a Chinese Communist Party mouthpiece, though not always formal government policy, editorialized in part:

“China should make clear that if North Korea launches missiles that threaten U.S. soil first and the U.S. retaliates, China will stay neutral.  If the U.S. and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern of the Korean Peninsula, China will prevent them from doing so.”

Late Friday, Trump appeared yet again before the press.  This is a guy who has literally not had a press conference, nor answered more than about two questions at any joint appearance with a foreign leader, since February.

Speaking of Lil’ Kim, the president said: “If he utters one threat in the form of an overt threat, which, by the way, he has been uttering for years, and his family has been uttering for years, or if he does anything with respect to Guam or any place else that’s an American territory or an American ally, he will truly regret it fast.”

[I have to admit.  When I didn’t study for a final exam at Wake Forest, I, too, regretted it fast.  But I digress....]

Asked about critics who say his rhetoric is making a bad situation worse, the president doubled down.

“My critics are only saying that because it’s me.  If somebody else uttered the exact words, they’d say, ‘What a great statement, what a wonderful statement!”

He continued:

“But I will tell you, we have tens of millions of people in this country that are so happy with what I’m saying, because they’re saying, finally, we have a president that’s sticking up for your nation and frankly sticking up for our friends and allies. And this man will not get away with what he’s doing, believe me.”

God help us.

Opinion

Editorial / Wall Street Journal

“When Donald Trump threatened North Korea with ‘fire and fury’ Tuesday if it continues to menace the U.S. with nuclear weapons, he provoked almost as much backlash at home as in Pyongyang.  The usual diplomatic suspects, including some American lawmakers, claimed his remarks hurt U.S. credibility and were irresponsible.

“The President’s point was that the North’s escalating threats are intolerable; he didn’t set any red lines. True to form, Pyongyang responded by putting the U.S. island of Guam in its cross hairs. Mr. Trump may be guilty of hyperbole (quelle surprise), but that is far less damaging to U.S. credibility than Barack Obama’s failure to enforce his prohibition on the Assad regime’s use of chemical weapons in Syria. The foreign-policy elite who claim to be shocked also don’t have much credibility after their policy across three Administrations led to the current North Korean danger.

“While the President’s words were unusually colorful, the Communist-style language may have been part of the message: Kim Jong Un isn’t the only one who can raise the geopolitical temperature.  The U.S. has military options to neutralize the regime’s nuclear threat if it continues to develop long-range missiles, and the U.S. is considering those options.

“National Security Adviser H.R. McMaster said as much in an interview Saturday, explaining that Pyongyang’s nuclear threat is ‘intolerable from the President’s perspective. So of course, we have to provide all options to do that. And that includes a military option.’  Defense Secretary Jim Mattis reinforced that message Wednesday, warning North Korea to stop acting in ways that could ‘lead to the end of its regime.’

“Last week Senator Lindsey Graham told a morning television program, ‘There is a military option to destroy North Korea’s program and North Korea itself.’ The South Carolina Republican revealed that Mr. Trump told him there will be war if the North continues to develop long-range missiles: ‘He has told me that. I believe him. If I were China, I would believe him, too, and do something about it.’

“The China reference is a tip-off that the main audience for this rhetorical theater is in Beijing.  Kim Jong Un won’t stop now that he’s so close to his goal of a nuclear deterrent.  But China might restrict the flow of oil to the North, for example, if it believes that stronger action on its part could forestall a U.S. pre-emptive strike.

“The other audience for Mr. Trump’s remarks is the North Korean leadership around the young Kim. If they believe they are doomed by Kim’s nuclear course, their best chance of self-preservation is to remove him.  Regime change and then reunification is the ultimate solution to the North Korean problem....

“Diplomacy works best when there is a credible stick to go with the carrots. The Trump Administration has the right idea, even if the President’s words lack the usual diplomatic politesse.”

Editorial / Washington Post

“President Trump’s unsettling threat Tuesday aimed at North Korea was reckless and unnecessary. In its bombast, it resembled nothing so much as Kim Jong Un’s regular denunciations of the United States, frantic and hyperbolic.  Why would the president of the world’s most powerful nation want to descend to that level?  At an event at his New Jersey golf club, Mr. Trump declared, ‘North Korea best not make any more threats to the United States.  They will be met with fire and fury and frankly power, the likes of which this world has never seen before.’  To raise the specter of nuclear war – and to do so to ward off mere threats, at that – is to draw a red line in the most foolish and destabilizing manner.

“Since nuclear bombs were dropped on Hiroshima and Nagasaki seven decades ago, they have not been used in combat. Still, the danger that they will be used again has never disappeared; the years since the end of World War II have been filled with false alarms and close calls, which could easily recur.  The United States and Russia keep thousands of nuclear missiles on launch-ready alert, meaning they are ready to launch within minutes of a president giving the order.  Adversaries know this.  Mr. Trump’s threat of ‘fire and fury’ may sound like hype to American ears, but the words could be heard quite differently by others, such as Mr. Kim, the belligerent leader of a nuclear North Korea.  Mr. Trump’s language could easily be misunderstood – he didn’t say precisely what would lead to ‘fire and fury’ except for North Korea’s ‘threats’ – and the upshot could be miscalculation or, heaven forbid, the kind of accidental entry into conflict that has haunted the globe since the dawn of the atomic age....

“North Korea’s steadily advancing nuclear weapons and missile programs are serious....Dealing with that will require patient pressure and skilled diplomacy, perhaps for years.  Instead, Mr. Trump has strut into the arena with a jarring rhetorical grenade.”

David Ignatius / Washington Post

“The North Korean nuclear threat is a ‘hinge’ moment for the United States and China, and for the new international order both nations say they want.

“If Washington and Beijing manage to stay together in dealing with Pyongyang, the door opens on a new era in which China will play a larger and more responsible role in global affairs, commensurate with its economic power.  If the great powers can’t cooperate, the door will slam shut – possibly triggering a catastrophic military conflict on the Korean Peninsula.

“President Trump’s bullying style, even in dealing with trivial matters of domestic politics, obscures the extent to which he has tried to marry U.S. policy on North Korea with that of China. For the most part, he has been surprisingly successful. Beijing and Washington have mostly been aligned, as in this past weekend’s unanimous U.N. Security Council vote in favor of additional sanctions against Pyongyang to punish its continued missile tests.

“Washington’s diplomatic goal, although it hasn’t been stated publicly this way, is to encourage China to interpose itself between the United States and North Korea and organize negotiations to de-nuclearize the Korean Peninsula.  The U.S. threat is that if China doesn’t help the United States find such a diplomatic settlement, America will pursue its own solution – by military means if necessary.”

---

This coming week could be the most important one of the century...the entire century...if Kim Jong Un goes through with his threat to Guam. 

Do we shoot them down?  If the U.S. misses, its credibility is shot.  If we hit them (or Japan does), Kim is not likely to just run and hide. 

If we know, as I hope we would, that the missiles (I’m assuming Kim fires one or two, not four) will fall way short of the island, do we just let them drop?  I would.  But if North Korea sits them down 30 miles from the coast, as they said they will, that then tells us everything about Pyongyang’s capability, and a preemptive strike would have to be very much on the table for the U.S.

What if Kim backs down...and waits to fire an ICBM that falls short of Alaska in a few weeks?

Bottom line, the decisions made this coming week, on both sides, could spell disaster.  Unless both sides stand down, this is not going to end well.

And you know who is licking their chops?  Vladimir Putin.  His upcoming massive military exercises could be used as a pretext for far greater trouble in Eastern Europe, while Washington is distracted elsewhere.  [See below.]

Trumpets....

--As part of his comments to reporters on Thursday, President Trump praised Russia for booting hundreds of U.S. diplomats out of the country – saying it will save money.

“I want to thank him because we’re trying to cut down our payroll,” Trump said, incredibly, of Putin.  “There’s no real reason for them to go back.  I greatly appreciate the fact that we’ve been able to cut our payroll of the United States.  We’re going to save a lot of money.”

It took 24 hours but we were told by White House spokeswoman Sarah Sanders that the president was being “sarcastic.”

When asked Friday if he was, Trump really didn’t say, but, standing next to Sec. of State Tillerson, the president said they would have a response to Russia’s actions in early September.

--Speaking at an event in Kentucky this week, Senate Majority Leader Mitch McConnell criticized President Trump’s “artificial deadlines” on issues like health care.

“Our new president has of course not been in this line of work before and, I think, had excessive expectations about how quickly things happen in the democratic process.”

Dan Scavino Jr., Trump’s social media director and a senior aide then tweeted that McConnell “must have needed another 4 years – in addition to the 7 years – to repeal and replace Obamacare.”

President Trump tweeted: “Senator Mitch McConnell said I had ‘excessive expectations,’ but I don’t think so. After 7 years of hearing Repeal & Replace, why not done?”

No doubt this is just the start of a feud between McConnell and Trump at the worst possible time, with the budget and debt-ceiling to be resolved immediately after Congress returns in September, let alone what to do with ObamaCare and hoped for tax reform legislation.

And it’s not just Trump and McConnell.  Sen. Ron Johnson (R-Wis.) said this week that Sen. John McCain’s brain tumor diagnosis may have been a factor in his decision to cast the deciding vote against the Senate repeal-and-replace bill.

“He has a brain tumor right now. That vote occurred at 1:30 in the morning. Some of that might have factored in,” Johnson said.  A McCain spokeswoman said the senator’s remarks were “bizarre and deeply unfortunate.”

Trump has been going after Alaska Republican Sen. Lisa Murkowski, one of the three to vote down the repeal legislation.

Arizona Republican Sen. Jeff Flake has been harshly critical of Trump.  He’s being primaried.  

Editorial / Wall Street Journal

“The damage from the GOP’s health-care debacle has only just begun, and the latest evidence is this week’s public spat between President Trump and Senate Majority Leader Mitch McConnell. The big potential winner here is Democratic leader Chuck Schumer.

“Mr. McConnell has been getting the Kim Jong Un treatment this week, as Mr. Trump has pounded away for the Senate’s recent failure to reform ObamaCare.  ‘Can you believe that Mitch McConnell, who has screamed Repeal & Replace for 7 years, couldn’t get it done. Must Repeal & Replace ObamaCare!,” the President tweeted Thursday morning from his vacation redoubt in Bedminster, N.J.

“Mr. Trump was slightly more gentle six hours later, but he laid down the Senate’s challenge for September: ‘Mitch, get back to work and put Repeal & Replace, Tax Reform & Cuts and a great Infrastructure Bill on my desk for signing.  You can do it!’....

“The ObamaCare collapse was ugly, and Mr. Trump is right to hold Senators accountable for their votes. We certainly don’t plan to forget the many contributors to defeat...

“But Mr. Trump didn’t help the Senate by failing to make a public case for the GOP reforms. Not once did he explain, for example, that paring back ObamaCare’s Medicaid expansion for able-bodied adults would protect health care for the truly needy.  His failure to master even basic policy details made him useless as a public advocate.

“The question is what they do now....The Steve Bannon wing of the White House would welcome a blowup as they try to rebrand the GOP as a nativist, protectionist movement. They might prefer to run in 2020 against Mr. Schumer than with Mr. McConnell.

“But that advice is deadly for Mr. Trump too. He still needs a GOP majority to pass his agenda as much as Republicans need him to sign it.  They need each other in particular this autumn to raise the debt ceiling, press deregulation, and pass a budget and tax reform. Failure on that agenda after the health-care fiasco will open the door to a Democratic House – which means nonstop anti-Trump investigations and perhaps impeachment. The best defense against mutual assured political destruction is a legislative success in the fall.”

As for the raising of the debt ceiling and a budget, with a somewhat arbitrary deadline of Sept. 29 on the former (as set by Treasury Secretary Steven Mnuchin), and a Sept. 30 deadline to prevent a government shutdown, when it comes to the budget, it seems a virtual certainty that Congress will end up with a continuing resolution (CR) to keep the government open and funded at current spending levels for another few months, beyond Sept. 30.* At least that is the thinking now given how little time is left.

But this would postpone a slew of the president’s priorities, including funding for the border wall, significant increases in military spending and cuts to non-defense discretionary spending.

*Under a previous long-term budget deal, new caps are set to kick in in January, which would reduce spending below existing levels unless Congress passes a new law, so think CR through December as most likely.

Republicans could reach a deal on a broader spending bill and avoid a CR, but they would need Democratic support and there’s no time for those kinds of negotiations.

--FBI agents raided the Alexandria, Va., home of Paul Manafort, President Trump’s former campaign chairman last month, using a search warrant to seize documents and other materials, according to sources from Special Counsel Robert Mueller’s office.

There is little to say on this as it would be pure conjecture, but what is interesting is that the predawn raid on July 26 came the day after Manafort voluntarily met with the staff for the Senate Intelligence Committee looking into Russian meddling in the 2016 election.

It thus would seem investigators convinced a judge to issue the warrant because they didn’t believe Manafort was turning over all the pertinent records in the case.

A spokesman for Manafort said he has consistently cooperated with law enforcement and congressional inquiries.

If Mueller builds a case against Manafort, that may force Manafort to divulge information Mueller might be looking for against Trump to save Manafort.

President Trump on Thursday called the treatment of Manafort “rough.”

--Trump senior aide Steve Bannon is out to get National Security Adviser General McMaster and he has his allies in the alt-right media, including Breitbart, waging a vicious battle against him, characterizing the general as soft on issues like Iran, Israel and terrorism.  Bannon is ticked off he has apparently been shut out of discussions on North Korea by the national security team, though he has his own channel to the president.

--Writing in New York magazine, Robin Wright interviewed a number of foreign policy experts for their opinions on Donald Trump.

Michael Hayden, retired four-star general and former director of both the CIA and the National Security Agency: “The President has little understanding of the context” of what’s happening in the world “and even less interest in hearing the people who want to deliver it.  He’s impatient, decision-oriented, and prone to action.  It’s all about the present tense. When he asks, ‘What the hell’s going on in Iraq?’ people around him have learned not to say, ‘Well, in 632....’” [632 being the year when the Prophet Muhammad died, prompting the beginning of the Sunni-Shiite split.]

Geoffrey Kemp, who worked at the Pentagon during the Ford Administration and at the National Security Council during the Reagan years: “Trump has an appalling ignorance of the current world, of history, of previous American engagement, of what former Presidents thought and did.  He has an almost studious rejection of the type of in-depth knowledge that virtually all of his predecessors eventually gain or had views on.”

Wall Street

Stocks had their toughest week, as measured by the Dow and S&P 500, since March, mostly as a result of the worst single day since May, Thursday, on North Korea concerns.

The market also is not cheap, and has not been for some time now.  And the president’s agenda is for now a mess.

Trump even today continued to harp on the “tremendous optimism” among business leaders.  I’d like to poll these same guys tonight.  I guarantee they would not give the same answer they did maybe three months ago.

The economic news of interest this week was the inflation data.  Both July producer and consumer prices were tame, with the PPI -0.1% on both headline and core (ex-food and energy), with 12-month PPI at 1.9%, 1.8% core. The CPI saw both a 0.1% increase on headline and core, with both figures at 1.7% for the 12 months.

So nothing the Federal Reserve needs to worry about and thus a September rate hike is officially off the table, not that it was ever seriously being considered, while December looks less likely, at least as of today.

The Fed will, however, make an announcement in September that it has begun paring down its balance sheet, which, all together now, boys and girls, is in effect a rate hike of a different sort.

Barron’s Kopin Tan had this nugget as part of last week’s market summary.

“The sentiment sentinels at Ned Davis Research pointed out how the total market value of some 3,900 U.S. common stocks ended July at 140.5% of our nominal gross domestic product.  That’s shy of the 167% seen during the 2000 tech bubble peak, but above the 125% in 2007 or the historical average since 1925 of 62.8%.  Note that this ratio had shrunk to 57.6% just before the bull market took off in early 2009.”

Just another arrow for the quiver, a la the Bull / Bear readings below.

As for the debt ceiling issue...touched on above... a Harvard-Harris Poll in June found that 69 percent of voters were opposed to Congress raising it, which shows an appalling lack of knowledge (not that I’m surprised) on what the debt ceiling is all about and reputational risk in the global markets.

But with that poll number, you can see how some politicians love to play with voters’ minds in acting like, ‘Oh yeah...let’s keep the ceiling where it is,’ while not telling their constituents this could entail massive cuts elsewhere, like to their Social Security.

Economist Robert Samuelson / Washington Post

“The crucial question about raising the federal debt ceiling is: What happens if Congress doesn’t?  That is, what happens if Congress defaults? When President Trump returns from his ‘working vacation’ later this month, this promises to be one of the major issues he’ll face, because the treasury is expected to run out of cash in early or mid-October, according to projections by the Congressional Budget Office. The current debt ceiling is $19.8 trillion, which covers Treasury borrowings from the public (individuals, large institutional investors such as pension funds and banks) and from other government agencies (such as the Social Security Trust Fund or the Highway Trust Fund).  If the government hit the ceiling and couldn’t pay all its bills, then someone would get stiffed: bondholders, Social Security recipients, soldiers and sailors, government vendors – and, possibly, many more.

“The harder question is: How would the world react?

“Investing in U.S. Treasury securities (bills, notes and bonds, each with different maturities) is one way that foreign individuals, multinational companies, governments and banks protect their financial well-being. The dollar is the major form of international money; U.S. Treasury securities are considered the world’s safest financial assets. Would a default trigger a panic, as investors dumped Treasurys?  Or would investors just yawn on the assumption that, sooner or later, Congress would raise the debt ceiling and make good on its debts?

“A recent analysis from the Brookings Institution, a liberal think tank, wisely observes: ‘Congress has never failed to act in time, so no one knows with certainty what the consequences [of a default] would be.’....

“The fundamental question facing Trump is whether he will support a clean increase in the debt ceiling – one without other spending measures, which would probably pass easily with Democratic support – or whether he would flirt with default to gain some policy or political advantage.”

Europe and Asia

After all the economic news of the past two weeks in Europe, there was nothing to speak of in looking at the eurozone overall.  So we go straight to....

Eurobits....

--In Germany, exports rose just 0.7% in June year-over-year; up 2.4% to EU countries; down 1.7% to non-EU sorts.

But, more importantly, we’re almost in the stretch run for the Sept. 24 elections (I guess the stretch run would officially begin Sept. 1) and Chancellor Angela Merkel would appear to have smooth sailing with strong approval ratings and a lead for her party of about 15 points in all the latest polls over challenger Martin Schulz.

In order to combat a sense of complacency, Merkel is launching a 50-stop campaign tour Saturday across the country, but she’s in risk-averse mode.  With all the international crises in play, she is a rock of stability, at least in the eyes of a majority of her fellow countrymen, and no doubt in much of Europe overall.

But Merkel will need to pick a junior partner in government and that’s what analysts in Germany appear to be focused on, because this will impact economic policy and relationships with its EU partners.

Schulz leads her current coalition partner, the Social Democrats, and he has vowed over the next six weeks to draw a distinction between the Christian Democrats and the SPD on pensions, health care and tax policy.

But with a solid economy, and record-low unemployment, plus a balanced budget and the prospect of tax cuts, Schulz has little to argue against.

Merkel’s CDU-CSU bloc had 38 percent in the latest Bloomberg composite poll tracker, with the SPD at 24 percent.  Four other parties capture between 6 and 9 percent in this survey, one of which, maybe the Free Democrats, will end up the junior partner.

--On the Brexit front, an ORB opinion poll from Monday showed that 61% of British voters disapprove of Prime Minister Theresa May’s handling of the negotiations, which is up from 56% last month and 46% in June.

Granted, August is a month when politicians take lengthy vacations (Germany’s Merkel, for example, is returning this weekend from a 3-week stay in the Italian Alps, where, if you can picture this in the U.S., she was virtually out of sight the entire time).  But one thing is clear, the limited amount of Brexit talks thus far have not gone well; in no small part due not to the EU, but rather internal differences inside Mrs. May’s cabinet.

One former official inside the Foreign Office, who now advises businesses on Brexit, Sir Simon Fraser, told Bloomberg that the UK side had been “a bit absent” from formal negotiations in Brussels.  Fraser said the UK still hasn’t put forward a clear position.

Negotiations will be heating up shortly, and the government has said it will produce “position papers” on key issues soon, but we’re almost in September, and the UK has to pull out in March 2019.  That sounds like a lot of time, but the way things like this work (just look at Congress and the budget), time is of the essence, plus there are countless deadlines to hit well before March ’19.

For instance, the May government better come up with a position on the Northern Ireland border situation soon.

As to the “divorce settlement,” the amount of money for future obligations (like for EU pensions), the latest figure being bandied about is $47 billion.

Bottom line for today, the government needs to show Brussels sufficient progress by October to advance talks to the next phase, which would be the critical trade relationship.

One item on the economic front for the UK, consumer spending fell for a 3rd month in a row in July, another sign that the impact of the Brexit process is now rippling through households, with rising prices and stagnant wages.

Turning to Asia, just a few notes on China’s economy.  Producer prices rose 5.5% in July, year-over-year, with soaring prices for coal, steel and cement, while consumer prices rose 1.4% last month, well below the government’s 3% target, as the key food price component fell 1.1%.

July exports rose 7.2% and imports 11%, both well below expectations, and well off June’s 11.3% for exports, and the 17.2% prior jump in imports.

Street Bytes

--The Dow Jones fell 1.1% to 21858, while the S&P 500 declined 1.4% and Nasdaq continued its rough patch, down a third straight week, 1.5%.

--U.S. Treasury Yields

6-mo. 1.13%  2-yr. 1.29%  10-yr. 2.19%  30-yr. 2.79%

Bonds rallied, yields fell, on a flight to safety play and the tame inflation news.

It was the same situation in Europe, where the yield on the German 10-year Bund fell to 0.38% from 0.54% just two weeks earlier, with the French 10-year at 0.67% vs. 0.80% over the same time period.

--OPEC oil production rose further in July, in a sign its efforts to curb production are falling short.  OPEC said output rose to 32.87 million barrels a day, up by 172,600 barrels from June, driven largely by higher production in Libya, Nigeria and Saudi Arabia.

Libya and Nigeria have been exempt from the deal cut between OPEC and 10 producers outside the cartel, including Russia, because their industries have been crippled by civil unrest, though output has been soaring in both the past few months.  So now there is pressure to include the two in the agreement.

Separately, the International Energy Agency said on Friday that world oil demand would grow more than expected this year to 1.5 million barrels per day from a previous estimate of 1.4 mbd.

“There would be more confidence that rebalancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve,” the IEA said.

--Disney announced it would be launching its own video streaming service – along with an ESPN-branded platform – that will broadcast thousands of movies and sporting events each year.  The new services will launch in 2018 and 2019 and be run by BAMTech, the digital media division founded by Major League Baseball.  MLB really did come up with cutting edge technology for its own Web properties and it’s interesting how BAMTech became a profit center.

Actually, Disney raised its stake in BAMTech from 33% to 75%, acquiring the greater stake for $1.58 billion, that’s how much Disney thought of it.

So this is seen as a blow to Netflix, which had landed a lucrative streaming deal with Disney in 2012, though it had not gone into effect until last year.

In addition to its massive film library, Disney will release an “annual slate of original movies, TV shows, short-form content and other Disney-branded exclusives” for their video service.

2019 is a big year for Disney, as it releases the likes of Toy Story 4, the sequel to Frozen, and a live-action remake of The Lion King.  [Live scenes of lions hunting humans on safari? I can’t wait! ....I was just informed this isn’t the case...never mind....]

What this means for Netflix is they get two more Star Wars installments, but not the release of the final installment, as Disney said the new service “will become the exclusive home in the U.S. for subscription-video-on-demand viewing of the newest live action and animated movies from Disney and Pixar.”

Meanwhile, in the here and now, investors didn’t like the fact it was a weak fiscal third quarter for Disney’s cable unit, with operating income for its cable networks falling 23 percent, largely because of a decline at ESPN, which was hit by high programming costs related to its first year of a new contract with the NBA, plus a contracting ad market.

Overall, Disney beat on earnings, but missed on revenue, the latter at $14.24 billion.

As for Netflix, while it likes to talk of the popularity of its original content, most of what is viewed by its subscribers remains programming that Netflix is licensing from others, including Disney, so the loss of Disney is going to be important.

Some analysts actually believe Disney should acquire Netflix to lock up the audience shift to streaming video.

Back to ESPN, a stand-alone service is what Pay-TV operators have been fearing, because it would give more consumers a reason to ditch their TV subscriptions.

--CBS is another ramping up its digital efforts by expanding its online streaming service “All Access,” while launching a new digital sports network later in the year.

CBS owns sports cable channel CBS Sports Network, but it doesn’t have the level of offerings that ESPN or the Fox Sports unit have.

Overall, CBS’ revenue jumped a solid 9% to $3.26 billion, with advertising revenue growing 4.3%, led by the semifinals and finals of the NCAA Basketball Championship.

--Macy’s and Kohl’s shares tumbled on Thursday as the companies continued to report a drop in quarterly same-store sales, fueling concerns the turnaround for the sector might still be a ways off.

The declines in comp sales weren’t as bad as expected, -2.8% in the quarter for Macy’s, and -0.4% for Kohl’s in its latest quarter, but gross margins dropped amid heavy discounting and promotions, while the companies spend more on online shipping.

Nordstrom’s, however, bucked the trend, reporting a 1.7% increase in comp sales and its shares held steady in response.

Then Friday, JC Penney Co. Inc. reported a wider than expected loss, $62 million, while net sales rose 1.5% to $2.96 billion.

But same-store sales fell 1.3%, marking the fourth straight quarter of decline, and the shares fell 17%.  Yikes.

--Google hired James Damore as a software engineer in 2013, and this week he was fired after penning a 10-page memo, titled “Google’s Ideological Echo Chamber,” which argued that “personality differences” between men and women – like a woman having a lower tolerance for stress – help explain why there are fewer women in engineering and leadership roles at the company.  Damore then said efforts by Google (which mirror recent moves in much of Silicon Valley) to hire more women in tech and leadership positions were “unfair, divisive, and bad for business.”

The memo was originally sent out internally and shared widely throughout the Valley, and was harshly criticized inside Google, as well as the industry.

After his firing, Damore said he didn’t expect such a reaction.

“As far as I know, I have a legal right to express my concerns about the terms and conditions of my working environment and to bring up potentially illegal behavior, which is what my document does.”  Damore said he was taking legal action against Google, starting with his submission of a charge to the U.S. National Labor Relations Board accusing Google upper management of trying to shame him into silence.

So Google on Thursday canceled a scheduled companywide summit at which executives had planned to discuss Damore’s memo, after employees expressed concern that they would be exposed to harassment online.

The employees were worried about being “outed” publicly for asking a question.

Just pathetic.  What a crappy society we have.

--A group of Uber shareholders has demanded that Benchmark, one of Uber’s biggest investors, exit the board, a day after the venture-capital firm filed a lawsuit against founder and former CEO Travis Kalanick, accusing him of fraud.

The three shareholders accused Benchmark of harming Uber’s value and requested Benchmark sell its shares, according to the Financial Times, which obtained a copy of the letter.

--Shares in SeaWorld Entertainment took a dive as the amusement park operator’s appeal wanes following the decision to end orca shows and breeding.

The number of visitors to its locations dropped by 3.8% in the first half of 2017, compared to a year earlier, as its reputational crisis and “competitive pressures” took a toll.

The company, which owns 12 theme parks in five states, said its parks in San Diego and Orlando were especially hard hit. SeaWorld recorded a second-quarter net loss of $176 million, largely due to a large write-down in the value of the Orlando location.

--Tesla Inc. said it intends to raise about $1.5 billion in a bond offering as it seeks to ramp up production of its newest electric sedan, the Model 3.

Tesla had a little over $3 billion in cash on hand at the end of the second quarter, compared with $4 billion three months earlier.  It was expected to burn through $2 billion in 2017.

--Wisconsin Republican Gov. Scott Walker defended a $3 billion tax-incentive package to lure FoxConn Technology Group to the state.

In a much ballyhooed ceremony at the White House last month, President Trump praised Wisconsin and the company in announcing FoxConn would be investing $10 billion to build a huge facility in southeastern Wisconsin in House Speaker Paul Ryan’s district.  It was expected to employ up to 13,000 workers, making liquid-crystal display, or LCD screens used for Apple’s iPhone and other products.

But the deal, which has to be approved by Wisconsin’s state legislature, faces strong opposition because of the high cost to taxpayers, with some estimates projecting the state wouldn’t get its money back until 2042.  I’m not sure when the vote would be held.

--Speaking of the president, his hotel in Washington, D.C., is outperforming the company’s expectations, according to new financial documents.

The Trump International Hotel, in the renovated Old Post Office near the National Mall, brought in about $18 million in revenue in the first four months of 2017, in part by higher room rates than were budgeted, according to the Wall Street Journal, which reviewed the documents.

Get this...from January to April the average daily room rate was $660.28, compared with $495.91 for comparable hotels, while the hotel had projected $416.

The hotel also made a profit of nearly $2 million during this time, when it had forecast a loss of $2 million.

The hotel has to file monthly records to the General Services Administration, which oversees the Trump Organization lease.

--Russia reported second-quarter GDP growth of 2.5%, the fastest in five years, not that I placed this nugget next to a Trump story for any particular reason.

--Shares in Snapchat cratered anew after the company released its second quarter earnings late Thursday.

In its first two earnings reports since it went public, Snap hasn’t delivered.  Growth in usage of Snapchat, the social media app, has declined four straight quarters, while it added only 7 million users during the second quarter.  It is also seeing slowing growth in average revenue per user.  The shares finished the week at $11.80, down from its $17 IPO price.

--In its first earnings report since going public, Blue Apron reported $238 million of revenue for the second quarter, an increase of 18% from a year ago but a decline from the earlier quarter, with the meal-kit delivery service losing $31.6 million, or 47 cents per share.

The company had 943,000 customers at the end of the quarter, down from just over 1 million in the first.  Ah, is this supposed to be a growth company?

The company went public on June 28 at $10 a share.  Six weeks later it is $5.10!

[WIR 7/1/17: “I don’t know about this one.”]

--Tyson Foods handily beat sales expectations for the second quarter, 4.8% higher vs. a year ago, as CEO Tom Hayes said “every segment delivered volume growth behind a strong start to grilling season and new product innovation.”

We’re talkin’ increased demand for pork and beef, meat lovers.  Chicken grew, but not as fast.

--Applebee’s Neighborhood Grill & Bar is expected to shutter 135 of its nearly 2,000 U.S. locations by year’s end, more than the initial estimate of 60 from earlier in the year.

DineEquity, Applebee’s parent company, is also closing 20 to 25 IHOP sites.

But, at the same time, the two chains are opening 125 restaurants globally.

It’s all about the ongoing struggles of the casual-dining segment as more customers gravitate to quick-service options such as Panera Bread or Chipotle Mexican Grill, assuming the latter doesn’t have rats in its store, or an employee coughing all over the food, or forgetting to wash his hands and giving you norovirus.

[Chipotle had another rough week, closing a Dallas restaurant where mice were spotted chatting up customers.  The shares finished today at $327.50, down from the 52-week high of $499.]

--News Corp. reported better circulation figures for its Dow Jones unit for the quarter ending in June, but that was offset by one-time write-downs on its overseas print units.

The company, which is the parent of the New York Post and Wall Street Journal, reported a 7 percent decline in revenue, to $2.08 billion, for the fiscal fourth quarter as compared with year-ago figures.

The news and information-services business, which accounts for just under two-thirds of the top line, reported a 10% decline in revenue, driven by a 12% drop in advertising revenue due to weakness in the print market.  Advertising revenue at Dow Jones fell 14%.

The company did report “tangible improvement in profitability, powered by the fast-growing Digital Real Estate Services segment,” according to CEO Robert Thomson, but he had to concede “we didn’t see the growth that we wanted” from digital advertising overall.

That said the Journal’s digital subscriptions rose to 1.27 million at the end of June, up 72,000 for the quarter.

--Futures prices for the likes of corn, wheat and soyabeans fell sharply on Thursday as the U.S. Dept. of Agriculture issued positive forecasts on crop yields, after fears of a drought in late June.

Globally, supplies are ample, which is also hurting prices.

--Bed Bath & Beyond announced it would be eliminating 800 jobs, most of them at the store manager or assistant manager level in an attempt to streamline operations.

--Bitcoin’s value jumped to a record high this week, reaching $3,550 per coin Friday, not having crossed the $3,000 mark until last weekend.  [The 52-week low, Mar. 25, was $952.  Nice run for the little crypto-currency mined by elves.]

The surge follows the introduction of a new currency spin-off, Bitcoin Cash. I don’t begin to even try to understand this, and the potential for Bitcoin Cash to undermine the original Bitcoin.

But those who care about this say that the introduction of Bitcoin Cash proves there is room for more than one type of Bitcoin....Back to Mets baseball....

--The New York Post reported that Megyn Kelly is currently on a nationwide tour to visit affiliates in major markets, “and she is traveling on a charter jet with a support staff of five or six people, including a hairstylist, a makeup artist, a publicist and a security detail.”

Well this is ticking off her colleagues. 

“People are outraged over her divalike ways,” one network source told the Post.  “They wonder, ‘When does NBC stop throwing money at her?’”

Kelly’s “Sunday Night With Megyn Kelly” had mediocre ratings and ended after eight episodes.  It is supposed to return after the NFL season and the Winter Olympics (or barrel-jumping from Lake Placid if the Olympics are nuked).

Her “Megyn Kelly Today” starts Sept. 25, in the 9 a.m. hour of “Today,” which is what she is hitting the affiliates for.  You talk about a soap opera.  She’ll be coming on the “Today” set, of course, promoting her 9 a.m. show with Savannah and Matt and the chemistry between these three could be, err, rather icy.

--Fox News suspended long-time host Eric Bolling after he was accused of sending lewd photos to three female co-workers.

His lawyer described the claims as “untrue and terribly unfair.”  Bolling then sued the Huffington Post reporter who wrote the story, citing 14 unnamed sources.  Fox is investigating.

Boy, working at Fox is just a real barrel of monkeys.

--In another episode of network figures acting badly, CNN fired commentator Jeffrey Lord, one of President Trump’s staunchest defenders, after he tweeted a Nazi salute to a liberal media analyst.

“Nazi salutes are indefensible,” a CNN spokesperson said in a statement.  “Jeffrey Lord is no longer with the network.”

College football is thankfully around the corner.  Premier League action started today...Arsenal with a big 4-3 comeback win over Leicester City, Giroud the decider.

Foreign Affairs

Israel: Facing mounting legal troubles, Israeli Prime Minister Benjamin Netanyahu gave a defiant speech to thousands of supporters in which he accused “left-wing” Israeli media of trying to topple his government through a campaign aimed at pressuring the attorney general to indict him.

Netanyahu, channeling Donald Trump, accused the media establishment of purveying “fake news” as part of “a governmental coup.”

“Their goal is to apply unrelenting pressure on law enforcement agents so that they’ll serve an indictment at all costs, without taking into account the truth or justice,” Netanyahu said.

If the attorney general decides to indict the prime minister, who is the focus of four different corruption investigations, he could be forced to step down, but he does not have to.

Netanyahu ended his speech with his now trademark line regarding the accusations against him: “There will be nothing, because there is nothing.”  [I have to remember this regarding the upcoming New York Jets season.]

On the issue of U.S. Middle East peace efforts, Palestinian executive committee member Hanan Ashrawi blistered Trump adviser Jared Kushner, who is overseeing the U.S. effort.

Kushner has voiced doubts about whether the Israeli-Palestinian conflict can be solved.

“Of course he’s not qualified because he disqualified himself,” Ashrawi (who once had an affair with a now deceased major U.S. network anchor) told The Jerusalem Post two days after a private talk Kushner gave in Washington was leaked.

“His talk was really problematic. It betrays not just deep bias but a lack of knowledge of the history itself and therefore of the needs and requirements for a solution,” Ashwari said.

“If you don’t know the significance of the holy places and the fact that Israel is changing not just the status quo but religious responsibility there, and you don’t know the impact of offending people’s spiritual commitments and feelings, then you don’t know anything about the solution itself.”

I am not in the least a supporter of the PLO in any negotiations it holds with Israel, but having Jared Kushner as the chief negotiator is beyond asinine.  He and his ‘team’ are returning to the region shortly.

Iran: At his swearing-in ceremony for his second term in office, President Hassan Rouhani warned President Trump that he risks political suicide if he scraps the nuclear deal with Iran.

Rouhani said he had nothing to do with “newcomers to the world of politics” and urged “old-timers” to see the nuclear deal as an example of how to manage international relations.

“Those who want to tear apart the JCPOA [nuke deal] should know that they would also be tearing apart their political life.”

He accused the U.S. of a “lack of commitment” to the deal and said it was an “unreliable partner.”

Naftali Bennett, a member of Israel’s Security Cabinet / Wall Street Journal

“An essential part of Tehran’s grand strategy is to control a land corridor from Iran to the Mediterranean Sea.  Under the cover of Syria’s bloody civil war, Hizbullah is helping to build such a highway. Hizbullah, trained and supported by Tehran, is classified as a terror group by the U.S., France and the Arab League, among others.

“Its effort endangers the entire Western world. Controlling this corridor would directly connect Iran with its proxies in Syria and Lebanon, allowing it to transfer advanced weapons cheaply and quickly. The highway would let Iran build its military presence on the Mediterranean, bringing much of Europe into the range of its air force, navy and midrange missiles. Iran could even build arms factories outside its borders.

“Iranian apologists frame Hizbullah’s capture of the border area as a victory over ISIS, as if the U.S.-led coalition ought to be cheering. ISIS needs to be stopped, but Iran is a far greater problem in the long run.  Tehran shouldn’t be mistaken for part of the solution.

“As Syria disintegrated through civil war, Iran acted swiftly. It broke international law and forcefully expelled the Sunni population and replaced it with Shiites. This changed the local demography to support Tehran’s planned land corridor through Syria and Iraq. Iran also sent its generals to train Bashar Assad’s troops. Hizbullah has effectively morphed from a terror group into a division of the Iranian army, working for Tehran not only in Lebanon and Syria, but also in Yemen and Iraq.

“In the game of chess that Syria has become, Western leaders are so focused on the knight attacking their pawns they cannot see the queen maneuvering to defeat them.  Mistaking ISIS has the most serious threat has allowed Iran to move its pieces forward and gain better position. The nuclear deal Iran signed in 2015 demonstrates Tehran’s patience, as it temporarily slows the country’s preparations to acquire nuclear weapons without stopping them over the long term.

“I and others are concerned by the cease-fire in southern Syria brokered by the U.S., Russia and Jordan last month. With American and allied forces present in the north, Iran has focused its efforts on the south. The hiatus from violence in that region only gives Tehran another piece of territory in its bid to build a highway to the coast....

“There are many possible courses of action against Iran. Yet the free world – led by the U.S. – has yet to take the first and most important step: declaring that it cannot abide an Iranian empire from the Persian Gulf to the Mediterranean Sea.”

Meanwhile, you know how I’ve said since the day the Iran nuclear deal was signed that it was now too late?  That you can’t blow it up as Trump spoke of during the campaign?  That you would never get any other members of the P5+1 to go along with breaking the deal?  That the commercial interests between the likes of France, Germany, Russia and China are already too intertwined with those of Iran, post- the lifting of sanctions?

Case in point...Iran’s official news agency announced the other day that two Iranian companies have signed the country’s biggest-ever car deal with French multinational auto manufacturer Groupe Renault to produce 150,000 cars, beginning in 2018.

Last year, French carmaker Peugeot Citroen reached a similar deal to open a plant in Iran.

Afghanistan: The Taliban and ISIS jointly massacred dozens of civilians in an Afghan village, officials said Monday, a rare moment of cooperation between the insurgents that could further train Afghanistan’s security forces.

The fighters killed more than 50 men, women and children in the remote Sayad district of northern Sar-e Pul province on Saturday after overrunning local police in a lengthy battle.  Some of the victims were beheaded.

Iraq: Temperatures hit 50 degrees Celsius on Thursday (122 degrees Fahrenheit), so the government announced a mandatory official holiday.  There are inevitable electricity shortages in such conditions, making life even more miserable.

Russia: As alluded to above:

Editorial / The Economist

“Next month Russia will hold what is expected to be the biggest military exercise in Europe since the end of the cold war. According to NATO estimates, it will involve at least 100,000 troops.

“Revived from Soviet times by Vladimir Putin, the Zapad (West) drills, as they are known, take place every four years.  Although the Kremlin insists that the scenarios it is playing out are purely defensive, that is not always how they have looked to its neighbors.  Countries that have borders with Russia or Belarus, the operational focus of Zapad 2017, are especially worried.

“The climax of Zapad 2009 was a dummy nuclear strike on Warsaw, which rather stretches the meaning of ‘defensive.’  Zapad 2013 was less overtly aggressive, but much of the new equipment Russia tested and the tactical techniques it practiced were put to use barely six months later when it annexed Crimea and launched a covert invasion of eastern Ukraine.  The attack on Ukraine itself started out as a ‘snap’ military drill which gave cover for Russia’s real intentions.  Mr. Putin had used the same ruse in the invasion of Georgia in 2008.

“The secrecy that cloaks Russian military exercises only makes them more threatening.  Mr. Putin is ignoring calls for greater transparency from the Organization for Security and Cooperation in Europe (OSCE), a body with 57 member countries whose functions include trying to reduce the risk of accidental conflict. Under the terms of its Vienna Document, to which Russia is a signatory, countries carrying out drills with more than 9,000 troops must provide advance notice. If they hold an exercise deploying more than 13,000 troops, they must also invite other OSCE countries to send observers.

“The reason for these rules is simple. Observers from the other side make it harder for countries to use military exercises as the springboard for a surprise attack.  They also lower the chances that anyone will mistake a harmless exercise for the real thing. Russia flouts the rules by pretending that its exercise are much smaller than they are, while insisting on its right to observe NATO war games.”

The bastards.

Meanwhile, Russia has drastically increased its activity of aircraft along NATO’s border, and “Far too often, Russian pilots fly without their transponders on, meaning that they cannot easily be identified.”

“Russia says that it does not deserve to be treated with such suspicion. Yet it is largely to blame. It could invite Western observers to Zapad 2017.  It could also seek better military-to-military contacts with NATO.  These relationships, which NATO is eager to forge, can lower the risk of miscalculation when normal diplomacy is strained.  If, on the other hand, Russia’s intention is indeed to intimidate and bully, NATO will have no choice but to prepare for the worst.”

Gee, one thing President Trump could do would be to demand Putin allow observers.  Don’t you think?

What are the chances of that?  Zero.

Venezuela: The U.S. imposed sanctions on eight Venezuelan officials for their role in creating the all-powerful new legislative body, the constituent assembly, that is loyal to President Maduro.

The new sanctions do not target Venezuela’s critical energy industry, the only real source of government income, though U.S. officials are still considering them.  [Even more people would starve if we acted in such a fashion.]

So last week I wondered how the nation’s chief prosecutor, Luisa Ortega, was surviving after her harsh criticism of the Maduro regime, and wouldn’t you know, 24 hours later, the new assembly’s first action was to fire her, after she accused Maduro of human rights abuses, confirming opposition fears that the assembly would purge the government of any dissenting voices.

[Ortega was prevented from entering her office as she alleged authorities were desperate to get their hands on dossiers containing information on dirty dealings by high-level officials, including $millions in bribes paid by a Brazilian construction company.  She is banned from leaving the country and her assets were seized.]

Then we learned of a rebellion against “the murderous tyranny” of the president by dissident officers, most of whom fled the country, seeking asylum, after assailants under the command of a mutinous captain attacked an army base, making off with weapons.

There is no doubt the military is increasingly split on its allegiances.  We can only pray for a coup, which should have occurred two years ago.

But in response to the mutiny, Maduro promoted 195 officers to the rank of general, giving the country 2,000 generals!  If you are a general in Venezuela, you get control of the food supply and a favorable exchange rate for dollars, among other perks.

So Maduro has made sure to reward senior military officers in exchange for their loyalty.

In a joint declaration released on Tuesday, the likes of Canada, Brazil, Argentina, Mexico, Chile and Colombia condemned the “breakdown of democratic order” in Venezuela and said they would not recognize any action taken by its “illegitimate” new constituent assembly.

Then, out of nowhere on Friday afternoon, President Trump threatened military action here when there is NO WAY his generals or Vice President Pence approved of the utterance.  This is absolute insanity.

Kenya: The opposition in this week’s key national election called on the election commission to give it, other candidates and observers access to its computer servers, saying it would accept the results of Tuesday’s vote based on the figures recorded there.

Opposition candidate Raila Odinga rejected the declaration of the commission late Friday that President Uhuru Kenyatta was the winner, 54.3% to 44.7%.

Random Musings

--Presidential tracking polls....

Gallup: 36% approval for Trump
Rasmussen: 45% (rebounding from last week’s low of 38%)

A new CNN poll had President Trump’s approval rating at 38%, while 56% said they disapprove.  The approval rating is down 6 points from an April survey.

Taking stock of the first 200 days of Trump’s term, 36% deemed it a success, 59% consider it a failure.

--According to a different CNN poll conducted by SSRS, 68% of Americans judge the Republican Congress a failure so far, 24% a success, with approval of the current Republican leaders in Congress falling from 39% in January to 24% as well. 

Republicans themselves are split 44-44 on whether the GOP-led Congress has been a success or failure so far.

Only 34% of Americans say they approve of Democratic leaders in Congress, 59% disapprove.

A majority of all Americans, 56%, say Republicans should work with Democrats to make changes to current health care policy.

--Vice President Mike Pence fought back against rumors that he is working behind the scenes to run for president in 2020, saying in a statement: “The American people know that I could not be more honored to be working side by side with a president who is making America great again.”

The American people, Mr. Vice President, sometimes know you are lying, but we forgive you.  You’re in a tough spot.

--According to the U.S. Border Patrol and the Department of Homeland Security, arrests of people caught trying to illegally cross the Mexican border into the U.S. rose in July from a month earlier, the third straight monthly increase.

18,198 people were caught sneaking across the border in July, compared with 16,087 in June.

But, arrests at the border have been dropping since October 2016, down about 36% compared with a year earlier.

The number of immigrant children traveling alone, though, has been rising, with most coming from Honduras, El Salvador or Guatemala, which tells you everything about the situation in those countries.

--According to a report from Vice News, citing White House sources, President Trump is given a dossier of positive news coverage of him twice daily, a packet of 20-25 pages filled with positive cable news headlines, admiring tweets, and sometimes just pictures of him looking presidential.

Now I don’t read Vice, and I have no idea on their track record in terms of veracity, but the outlet reported the idea came from Reince Priebus and Sean Spicer, both of whom are out.

Both were reportedly eager to deliver the package, which, again, if true, is beyond pathetic.

I did see snippets of Team Trump’s effort to combat “fake news,” their Facebook page broadcast of “Real News,” and it was also pathetic propaganda.

Looking back about five years ago, when I had a brief flurry of video newscasts, they were the best of their kind...but they took up a ton of time, and someone has to pay me if I’m to attempt to do it again.  [The technology has improved, I must say, since then.]

--As of Friday morning, there were 215 homicides in Baltimore this year, a record tally for mid-August.

--For the sake of accuracy, last week I mused that I hoped Baron Trump wasn’t trapped at the golf club in Bedminster, N.J.  I have seen since that he is reportedly taking up golf, and if that’s the case, great!   That would then be an enjoyable place to be.

--I saw that a victim of the 9/11 attacks at the World Trade Center was identified the other day, the first victim of the attacks to have been identified since March 2015.

His name was withheld at the family’s request, but new DNA technology helped identify him after previous tests yielded no result.

What I forgot is that 40% of the victims of 9/11 are still unidentified.

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

God bless America.

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Gold  $1295....highest weekly close since 11/16; flight to safety...
Oil
  $48.79

Returns for the week 8/7-8/11

Dow Jones  -1.1%  [21858]
S&P 500  -1.4%  [2441]
S&P MidCap  -2.3%
Russell 2000  -2.7%
Nasdaq  -1.5%  [6256]

Returns for the period 1/1/17-8/11/17

Dow Jones  +10.6%
S&P 500  +9.0%
S&P MidCap  +3.0%
Russell 2000  +1.3%
Nasdaq  +16.2%

Bulls 57.5
Bears  17.0  [Source: Investors Intelligence]

Have a great week....I’ll sleep with one eye open so you don’t have to.

Brian Trumbore