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09/02/2017

For the week 8/28-9/1

[Posted 11:30 PM ET, Friday]

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Edition 960

Harvey....

I started out last week with the following.

Another extraordinary week...and far from a good one when you factor in Hurricane Harvey, which appears to be next week’s lead if the computer models are correct.

I may just be writing the same line next week, too, but hopefully the name Irma isn’t included.

We saw the best of America this week, amid the misery, and the federal response thus far has been great, for which President Trump can take the credit he craves, but we all know this story has a long, long ways to play out.  The scope is beyond overwhelming and it is going to require a ton of patience, and strength, from the people down there.

It had been 12 years since the United States was hit by a hurricane of Category 3 or stronger, the longest in historical record, while since 1970, the U.S. has only seen four hurricanes of Cat 4 or 5.

The economic damage will no doubt be in excess of $100 billion.

And you’ve got the toxic stew in the fetid water that in a lot of areas will just hang around for days and maybe weeks...lots of chemicals, sewage, debris and waste.  With the warm temperatures, you have fears of cholera, typhoid and other infectious diseases.  You also have two dozen Superfund sites in the Houston area that are no doubt impacted.

Aside from the human toll, 45 deaths and counting, Harvey destroyed an estimated 100,000+ homes, many without flood insurance, and 300,000 to 500,000 vehicles owned by individuals, the latter according to Cox Automotive chief economist Jonathan Smoke, with insurance picking up a large portion of the vehicle losses. 

Superstorm Sandy is believed to have destroyed about 250,000 vehicles, while Katrina ruined 200,000, according to Cox.

President Trump was tweeting away during the storm.

“HISTORIC rainfall in Houston, and all over Texas.  Floods are unprecedented, and more rain coming.  Spirit of the people is incredible. Thanks!”

“Many people are now saying that this is the worst storm/hurricane they have ever seen.  Good news is that we have great talent on the ground.”

“A great book by a great guy, highly recommended!”

Hey, how did this slip in there?  Trump was referring to charlatan David Clarke’s new book, Clarke resigning three days later from his job as Milwaukee County sheriff to potentially take a job in the administration.

Back to the hurricane....

“Wonderful coordination between Federal, State and Local Governments in the Great State of Texas – TEAMWORK!  Record setting rainfall.”

“Major rescue operations underway!”

“Going to a Cabinet Meeting (tele-conference) at 11:00 A.M. on #Harvey.  Even experts said they’ve never seen one like this!”

Uh oh...here comes NAFTA....

“We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada. Both being very difficult, may have to terminate?”

“With Mexico being one of the highest crime Nations in the world, we must have THE WALL.  Mexico will pay for it through reimbursement/other.”

“Wow, - Now experts are calling #Harvey a once in 500 year flood!  We have an all out effort going, and going well!”

Yes, folks, Harvey was a GREAT HURRICANE!  GREATEST EVER!!!

I can only imagine what was going through Gen. Kelly’s head when he saw this stuff light up his screen.

Then Friday, in a White House photo op with representatives from relief agencies, Trump actually said: “Harvey sounds like an innocent name, but I can tell you it isn’t.”

Moving along, before my head explodes like the Arkema plant....

Congress returns Tuesday and it immediately has to confront two big issues, extension of the debt ceiling and funding of the government to avoid a shutdown Oct. 1.  And now, tack on emergency funding for Hurricane Harvey, late Friday Trump requesting an initial $7.8 billion.  I’ll be commenting extensively on all this next week, but for now, just understand the government is funded through Sept. 30, the end of the 2017 fiscal year, while Treasury Secretary Mnuchin has said the U.S. would reach the end of its borrowing capacity by about Sept. 29, as it’s been using emergency measures since this past March to avoid breaching the limit.

There are only about 12 legislative sessions before months’ end to clear these two issues off the table, and at least start on the Texas-Louisiana rebuild.

And this isn’t considering Trump’s threat that he will close the government if he doesn’t receive his funding for the wall. As he told the audience in Phoenix the other week, “If we have to close down our government, we’re building that wall.”

Anyway, as I’ve noted before, the most likely outcome is some resolution on the debt ceiling, while the government is funded through another continuing resolution (CR) on a temporary basis, perhaps into December, which is a weak way out, but then that’s our Congress.

Trumpets....

--President Trump pitched a sweeping tax overhaul plan before an audience in Springfield, Missouri, on Wednesday, promising a large corporate tax cut, while trimming individual income tax rates to boost the middle class.

But while no one expected a lot of specifics, Trump basically emphasized “the biggest ever” in terms of the corporate side, including a goal of slashing the headline rate from 35 percent to 15 percent, while eliminating “loopholes and complexity that primarily benefit the wealthiest Americans and special interests, but little for individuals.”

“This is our once-in-a-generation opportunity to deliver real tax reform for everyday hard-working Americans.  And I don’t want to be disappointed by Congress.”

“Lower taxes on American business means higher wages for American workers,” he added.

Of course this isn’t going to be easy to accomplish in the least.

There is also zero certainty corporations, who are already sitting on $2 trillion in cash, will take any tax cut and reinvest it to the benefit of workers and creating new jobs.

That said the corporate rate must come down to better compete globally, and to repatriate the cash back home. That’s just a fact.

President Trump’s two main advisers on the topic, Treasury Secretary Steve Mnuchin and economic adviser Gary Cohn are insistent there will be a bill by year end, but with everything else Congress has to deal with, I’d be shocked if this were the case.  As of today, there is zero incentive for Democrats to be cooperative, and as things stand in the Senate today, the tax bill would almost certainly require 60 votes, though we’ll see if the Senate is forced to change the rules (i.e., move to ‘reconciliation’ and 51 votes) to get things done.

For their part, Democrats are going to pound away at their base, saying the administration’s proposal does little for the working class, and they may have a point, frankly.

--President Trump is set to rule Tuesday on whether to end the Deferred Action for Childhood Arrivals, or DACA, policy left over from the Obama administration, which protects nearly 600,000 immigrants who entered the country illegally as children and are known as “Dreamers.”

Trump had pledged on the campaign trail to scrap all of Obama’s executive orders on immigration, including DACA.  So we’ll see what happens.

Thursday, a number of high-profile corporate leaders, including Warren Buffett, Tim Cook and Jeff Bezos, co-signed a letter to the president urging him not to rescind the policy.

Friday, Speaker Paul Ryan and Republican Sen. Orrin Hatch were among the lawmakers urging Trump not to scrap the Dreamers policy.

--Back to the border wall and Mexico.  Responding to Trump’s tweet that Mexico was “one of the highest crime nations in the world” and “very difficult” when it came to NAFTA, and that they would pay for the wall, Mexico’s foreign ministry responded in a statement Sunday afternoon: “Mexico will not negotiate NAFTA, nor any other aspect of the bilateral relationship, through social media or any other news platform.”

And Mexico repeated it wouldn’t pay for Trump’s wall, calling its position “a principle of national sovereignty and dignity.”

On the issue of violence in the country, I agree with the Mexican foreign ministry, which said it would “only end if its root causes are addressed: high demand for drugs in the United States and supply from Mexico (and other countries).”

As I’ve always said, my drugged out fellow Americans.  You don’t hear about violent beer cartels.

--With Congress back, the Russia investigation, in terms of coverage, will heat up again as among other things the Kremlin confirmed it had received an email from Trump Organization lawyer Michael Cohen regarding a building project in Moscow, but spokesman Dmitry Peskov said Russian President Vladimir Putin hadn’t been informed.

Cohen said he didn’t tell Trump he had sent the January 2016 email, which was obviously during the campaign.

And then today we learned that special counsel Robert Mueller has obtained an early draft of a letter Trump wrote, together with adviser Stephen Miller, about his reasons for firing FBI Director James Comey, as first reported by the New York Times.  According to the paper, White House counsel Donald McGahn believed parts of the letter were “problematic,” and McGahn eventually persuaded the president not to send the letter to Comey.

There is all manner of conjecture tonight, and whether or not Mueller has a key piece of evidence if he’s bent on building an obstruction of justice case.  We’ll learn the facts eventually.

Wall Street

All the major equity averages closed the week at nearly new highs.  And there was lots of economic news. 

A second look at second-quarter GDP came in better-than-expected, 3.0% vs. an initial figure of 2.6%, far better than the first quarter’s 1.2% pace.  Consumer spending in Q2 was up a solid 3.3%.

The Atlanta Fed’s GDPNow barometer for the third quarter is currently at 3.2%, and back-to-back readings of 3% would be a boon for President Trump.

Separately, the August jobs report was not as strong as forecast, with non-farm payrolls up 156,000 and the unemployment rate ticking up to 4.4%. 

Average hourly earnings rose just 0.1%, just 2.5% year-over-year, when it should be 3.5% in this kind of labor environment.

The jobs data for June and July was also revised downward by a combined 41,000, with June now at 210,000 and July 189,000.

So you add the three up and you have an average of 185,000, while for the first eight months it’s 176,000 for a monthly figure, vs. 187,000 per month for 2016.

Nonetheless, August represented the 83rd consecutive month of job gains.

U6, the underemployment rate recommended by dentists whose patients chew gum, was unchanged at 8.6%.

Among the other data points for the week were key readings on manufacturing; the Chicago PMI, 58.9 (50 being the dividing line between growth and contraction) and the national ISM survey of manufacturers, which was a robust 58.8.

July personal income was a solid 0.4%, while July consumption (consumer spending) came in at 0.3%.

But the Federal Reserve’s preferred inflation barometer, the personal consumption expenditures index, was up only 0.1%, and is running at a 1.4% annualized rate on both core (ex-food and energy) and headline, so not only will the Fed not be discussing a rate hike at its upcoming September meeting, but it’s possible the long-awaited implementation of its program to begin unwinding the balance sheet is delayed further.

Europe and Asia

Lots of economic news from the eurozone.

Markit’s reading on manufacturing for the EA19 was 57.4 in August (matching the flash estimate) vs. July’s 56.6, and equaling June’s 74-month high. 

Germany was at 59.3
France 55.8, 76-month high
Italy 56.3, 78-mo. high
Spain 52.4, 11-mo. low
Netherlands 59.7, 78-mo. high
Ireland 56.1, 25-mo. high
Greece 52.2, 108-mo. high!

*The manufacturing PMI in non-euro U.K. was 56.9 in August vs. 55.3 the prior month, solid, though these days, manufacturing accounts for only 10% of the British economy.

Chris Williamson, Chief Economist / IHS Markit

“The eurozone’s impressive manufacturing upturn regained momentum in August, with a summer surge in factory activity suggesting rising goods production will support another strong GDP reading in the third quarter.

“The survey indicates that euro area manufacturing output is growing at an annual rate of approximately 4%.  Producers across the region are benefitting from rising domestic demand as economic recoveries gain momentum, as well as surging export sales.

“The recent strengthening of the euro may curb export growth from its current 6 ½-year high...However, the still-elevated level of confidence suggests that firms generally expect the current strong growth spell has further to run.

“Firms are also struggling to cope with existing demand: backlogs of uncompleted work are rising at the fastest rate for 11 years, and supply chains are being stretched to a degree not seen for over six years.”

On the inflation front, a flash estimate for the eurozone for August pegged it at 1.5% vs. July’s 1.3%, though the core rate, ex-food and energy, is still just 1.3%, well below the ECB’s 2% target.

And the unemployment rate for the EA19 for July was unchanged over June at 9.1%.

Germany 3.7% (the government pegs it at 5.7%)
France 9.8% (9.6% in June)
Italy 11.3% [35.5% youth rate]
Spain 17.1% [38.6% youth]
Greece 21.7% (May) [44.4% youth jobless rate for May]

[The inflation and unemployment readings are courtesy of Eurostat]

Eurobits....

--The third round of Brexit negotiations with the EU wrapped up this week in acrimony, and the British government of Prime Minister Theresa May is in trouble, as she faces growing opposition, including from the Labour Party, which is now clamoring for Britain to stay in the European Union’s single market for an extended period after it leaves the bloc.  Labour will no doubt attempt to force a Parliamentary vote that will put pressure on Mrs. May’s Conservatives who oppose leaving the EU to vote with Labour.

The EU’s negotiator, Michel Barnier, said the talks had largely gone nowhere, no “decisive” progress thus far, especially in terms of being able to move on to trade discussions in October, which has been the goal all along.

Monday, as talks were getting under way, Barnier said, “To be honest, I am concerned.  Time passes quickly. We must start negotiating seriously...the sooner we remove the ambiguity, the sooner we will be in a position to discuss the future relationship and a transitional period.”

As of today, the biggest sticking point is Britain’s exit bill on coughing up money for commitments the EU made on the assumption of continued U.K. membership, as well as citizens’ rights (including the role of the European Court of Justice) and the border with Northern Ireland.  On this last one, Barnier said the talks had at least been “fruitful.”

There is a critical EU summit on Oct. 19 and some think Prime Minister May is betting on being able to cut a deal with EU leaders at that time, on the Brexit bill, the leaders then agreeing to start trade talks at the same time.  But that means other critical issues are delayed further and time is of the essence.  March 2019 may seem like a ways off, but it isn’t, especially when you consider that IF a comprehensive deal is struck, not only does the European Parliament have to approve of it, but each of the 27 member states does as well.

Brexit Secretary David Davis continues to say the U.K. wants to tie what it owes to a transitional agreement: “Settlement should be in accordance with law and in the spirit of the U.K.’s continuing partnership with the EU,” i.e., we expect something in return for coughing up anywhere from 50bn to 100bn euro.  Britain is also advancing the position they aren’t obliged to make budget payments past its 2019 exit date.

Trade Secretary Liam Fox has said the EU is “blackmailing” Britain by blocking trade talks until the exit price is agreed to.

Mrs. May will be giving a big Brexit speech this month, and then she has to solidify her base at the Conservative Party conference in October.

--French President Emmanuel Macron unveiled his ambitious labor reform plan, and the normally combative unions have thus far been largely mum...for now.

The changes revise a vast number of rules and workers protections that businesses say inhibits growth and has them constantly negotiating over working conditions.

This is a big moment for Macron, whose approval ratings have tumbled since the election.

--Gross domestic product in Greece grew by 0.5% in both the first and second quarters, according to the government’s statistical agency, or a 2% annual rate.  This comes as the latest survey of Greek manufacturers, as stated above, also showed the highest rate of job creation in more than 17 years.

But issues with the country’s massive debt burden remain and present a roadblock for long-term, consistent growth.

At least in the here and now, the struggling government of Prime Minister Alexis Tsipras, whose approval numbers continue to fall, can point to the growth as evidence the immediate crisis is over, as Greece approaches a new round of talks with its lenders and the IMF on its latest bailout review.

--European Commission President Jean-Claude Juncker said Turkey “is taking giant steps away from Europe,” saying President Erdogan wants the EU to halt membership talks with his country that commenced 12 years ago.

The talks, however, have been at a standstill for some time, and with his post-aborted coup crackdown, Erdogan has raised fears about his commitment to EU values such as human rights and the rule of law.

Juncker thinks Erdogan hopes that Europe stops negotiations first “to make it the European Union’s responsibility, and not Turkey’s.”

The thing is the EU desperately needs Turkey’s cooperation on the migrant front.  Remember, Turkey is holding hundreds of thousands that could be unleashed into the European continent any day Erdogan chooses, and it seems the EU hasn’t been paying Turkey the agreed to sums in support.

--Regarding the upcoming German national election, Sept. 24, the latest INSA poll has Chancellor Merkel’s CDU at 37%, while the center-left Social Democratic Party is at 24%.  As I said before, the key is what happens with the four lesser parties, all of whom are taking 7% to 10%,   Merkel’s CDU needs a coalition partner, preferably the FDP, Free Democratic Party, generally like-minded, while Martin Schulz of the SPD has a longshot possibility of gaining more seats than Merkel with the Linke (Left) Party and Grune (Greens).  The fourth is Afd, Alternative for Deutschland, the far-right outfit neither the CDU or SPD want to be associated with.

Turning to Asia....

China’s National Bureau of Statistics reported the manufacturing PMI for August was 51.7 vs. 51.4 in July, but the services reading fell to 53.4, the lowest since May 2016.

The private Caixin/Markit manufacturing reading for last month was 51.6 vs. 51.1 in July.

China’s economy grew at a faster-than-expected 6.9% in the first half, with most now forecasting a tick or two below that for the year.

Japan’s manufacturing PMI was 52.2 in August vs. 52.1.

Japan’s 10-year bond yield fell below zero (-0.02%) for the first time since November this week, amid demand for safe haven assets following the launch of the missile by North Korea that overflew the nation.

Elsewhere in the region, Taiwan’s manufacturing PMI was 53.3, South Korea’s 49.9, and India’s 51.2, a big recovery from a 101-month low of 47.9 in July, which was skewed by some kind of tax deal.

Street Bytes

--Stocks rose for a second straight week, with Nasdaq having its best weekly performance since December, up 2.7%, largely on the heels of an 8% rise in the Biotech sector, which was helped by a large acquisition, Gilead Sciences acquiring Kite Pharma, as well as FDA approval of the first gene therapy in the U.S.

The Dow Jones rose 0.8% and S&P 500 1.4%.  Again, all three are within striking distance of their record highs.

--U.S. Treasury Yields

6-mo. 1.08%  2-yr. 1.34%  10-yr. 2.17%*  30-yr. 2.78%

*Mystified by this because it was 2.12% at the close, but I take the after-market, final yields.  Not that I’m going to lose sleep over it, nor should you.

--Hurricane Harvey did a number on the U.S. energy sector with the heavy refining exposure in the region.  The Gulf accounts for nearly half of total U.S. refining capacity and about 25% was impacted, though it is slowly recovering.  The big issue was not just the lack of power in some cases, but just getting employees to the facilities who had their own serious issues to deal with.

But the spike in gasoline prices to a two-year high was relatively insignificant, especially vs. historic levels, though the fear is ongoing pipeline issues, such as with Colonial Pipeline Co., which announced on Thursday it isn’t getting enough fuel to operate its pipeline between Houston and Lake Charles, La., thus limiting the amount it can transport north and east (Houston to New Jersey), which will lead to more rapid hikes.  So when normally prices would quickly recover following a big storm in the Gulf, there is some uncertainty over the outlook for the next month.

[Shockingly, the nearest gas station to me hiked the price 40 cents today.  4-0. It had been stable for months, $2.55-$2.59, then boom.]

The Department of Energy did release 500,000 barrels of oil from the U.S. Strategic Petroleum Reserve, which is being delivered via pipeline to the Phillips 66 refinery in Westlake, LA.

It was just last week that refiners had pushed output to their highest percentage of capacity since 2005, with gasoline demand at an all-time weekly record of 9.85 million barrels, according to the U.S. Energy Department. Now this.

It’s a new normal when it comes to U.S. energy production, as a storm like Harvey has not just had an impact on the U.S. but now overseas, with refineries in Texas and Louisiana exporting 4m barrels per day of refined fuel overseas, including as far away as China.

But this is an Achilles heel, having such large capacity in a hurricane-prone region.

--United Continental Holdings is among the airlines hard hit by Harvey, in United’s case as much as $265 million worth because of its reliance on Houston as one of its biggest hubs, according to Bloomberg (and Helane Becker of Cowen & Co.).  Houston’s George Bush Intercontinental Airport accounts for 17 percent of United’s capacity.

Southwest Airlines is another that will take a major hit because of its large presence at Hobby airport.

While Houston’s two major airports reopened, returning to a normal load was going to take through the weekend.

--U.S. auto sales in August were down over a million vehicles from a year ago, a 16.14 million annualized pace vs. 17.22 million.

But the Big Three Detroit automakers reported better-than-expected sales and issued optimistic outlooks as demand from the areas ravaged by Hurricane Harvey will be strong.  Sales post-Katrina in 2005 were.  Ford is the No. 1 automaker in the Houston market, according to IHS Markit.

For the month, General Motors’ sales were up 7.5% over a year ago, while Ford’s fell 2% and Fiat Chrysler’s 11%.

Toyota’s rose 7%, Honda’s fell 2%, Nissan’s dropped 13% and Hyundai’s sales fell 25%.

Many of the automakers, such as in the case of Hyundai this past month, have been cutting sales to rental companies and other fleets from time to time.  [Hyundai did so 53% last month.]

--Amazon.com commenced with its initiative to lower prices at its new Whole Foods Market Inc. subsidiary and the price of more than 100 items was slashed 30% or more.  Prior to the move, prices at Whole Foods were generally seen to be 15% higher than conventional competitors.

The price cuts are no doubt a marketing stunt, but the traffic at the stores on Monday was said to be significantly higher than normal and it’s a win-win for Amazon, which is playing off its Amazon Prime membership.

At least in some stores, the Amazon Echo was available for sale at Whole Foods for $99.99, ditto the Echo Dot.

--Consumer electronics retailer Best Buy reported better-than-expected fiscal second-quarter sales and earnings and guided analysts higher for the current quarter, so pre-opening on Tuesday, the shares were rising sharply.

But then the CEO said same-store sales growth couldn’t be sustained, and the stock reversed and fell 11% at one point.  Year to date the shares had risen 46% this year as of Monday’s close.

Best Buy reported same-store sales growth of 5.4% in its fiscal second quarter, far exceeding expectations of 2.2%.  But CEO Hubert Joly said this was “not the new normal.”

The company did report its domestic online sales rose 31% to $1.1 billion in the July quarter.  Online sales account for 13.2% of domestic revenue, compared with 10.6% a year ago.

--Shares of Under Armour Inc. took another hit when NBA star Kevin Durant, in an interview, said, “Nobody wants to play in Under Armours.  I’m sorry. The top kids don’t because they all play Nike.”

Durant, who is under contract with Nike, said he had not spoken to teammate Steph Curry, who has a multimillion dollar contract with UA, but Durant said, “Everybody knows that.  They just...nobody don’t want to say anything.”

Demand for the Curry 3 shoe has been underwhelming.

The company said in early August it was cutting jobs and closing stores.  Under Armour shares are down about 45% this year.

--Uber Technologies Inc.’s new CEO took charge this week, Dara Khosrowshahi, who spent 12 years at the helm of Expedia Inc.

Because Khosrowshahi had unvested stock options worth $184.4 million as of last Friday’s close, Uber will make this up and then some.

Yes, this seems outrageous, but the guy is supposed to be good, and these next two years are critical to Uber’s long-term success.

Khosrowshahi won out over two higher-profile CEOs (or former CEOs); GE’s Jeff Immelt and Hewlett Packard’s Meg Whitman.

--Wells Fargo & Co. announced this week that it potentially opened 3.5 million accounts in customers’ names without those customers’ knowledge or consent – far more than the 2.1 million it had previously identified, according to an independent review.

The second study looked at a time frame from January 2009 to September 2016, while the initial analysis examined a period from May 2011 to mid-2015.

--General Electric is preparing to significantly reduce head count, particularly corporate staff, in an effort to boost profits under new CEO, John Flannery.  The goal, first laid out by former CEO Jeff Immelt, is to cut spending by $2 billion, after being spurred on to do so by activist investor Nelson Peltz, whose Trian Fund Management owns about $2 billion in GE stock.

--United Technologies is closing in on a deal to acquire Rockwell Collins, the maker of aviation systems and cabin equipment, for $22.5 billion.  UTX, maker of everything from air conditioning units to moving walkways and jet engines, has been rumored for some time to be going after Rockwell.

Rockwell itself just closed on an acquisition of B/E Aerospace, which supplies cabin interior systems such as seats, galley and those super spacious lavatories.

--I love Campbell’s Soup, but the company continued to struggle despite my purchases of same, reporting earnings that missed expectations, with net sales down 1% from a year ago, so the shares tanked 8% in response.

--India’s government reported second-quarter growth of just 5.7%, down from 6.1% in the first quarter.  Analysts were expecting 6.6%, so a huge miss as these things go.

--Canada’s manufacturing PMI for August came in at 54.6, down from 55.5 in July.

--Macau’s monthly gaming revenue declined month-on-month in August, showing the impact of Typhoon Hato, but was still up 20 percent from August 2016, marking the thirteenth straight month of year-on-year growth.

--Southern California’s housing market stayed white hot amid persistent demand and low supply. The six-county area’s median price climbed 7.7% from a year earlier to $501,000, according to a report from CoreLogic.  That puts the median just $4,000 shy of the all-time high set in the summer of 2007.  [L.A. and Orange counties have already surpassed bubble-era highs.  The median in Orange County is now $690,000, up 7.9% from a year ago.]

--AMC Theatres CEO Adam Aron recently called his company’s performance “simply a bust,” and that pretty well sums up the movie business overall this summer. 

If you go back to the first weekend of May through Labor Day – a period that generates about 40% of domestic ticket sales – Hollywood is down 16% from the same period last year, according to comScore, which is worse than the 10% decline studio executives predicted before the summer began.

The number of tickets sold is also at the lowest level since 1992, as reported by the Los Angeles Times.

So among the high-profile films that flopped domestically were “The Mummy,” “Baywatch,” “The Dark Tower,” and “King Arthur: Legend of the Sword.”  Some of the sequels, such as for the “Aliens” and “Transformers” franchises, also fared poorly vs. expectations.

But, international sales have been OK, and that has eased some of the pain.

--In a letter to announce the birth of his second child, August, Facebook co-founder Mark Zuckerberg, together with wife Priscilla Chan, urged the kid to play outside.

“The world can be a serious place.  That’s why it’s important to make time to go outside and play,” said the letter, signed “Mom and Dad.”

The parents wrote: “Childhood is magical. You only get to be a child once, so don’t spend it worrying too much about the future.”

Tell August I’ll add her to my “sleeping with one eye open so you don’t have to” list.

Of course what Mark Zuckerberg is saying is at odds with his social media empire, where everyone is supposed to huddle in the closet, communicating with their ‘friends.’

--Speaking of millennials, Applebee’s recently announced it was done trying to appeal to the food-trend-obsessed group and instead is going to refocus on its “routine traditionalists,” the Boomers and Gen-Xers.

Last year, the chain spent $40 million installing fire grills in all of its 2,000-plus locations across the country in hopes of luring a younger crowd, and it didn’t work.

It would seem that millennials are after the most “Instagrammable” moments a restaurant can offer, and the casual dining chains like Applebee’s and TGI Friday’s don’t seem to offer that.

But Hooters would...right? 

--The “Game of Thrones” season finale Sunday smashed a series record for ratings, attracting 12.1 million viewers, according to Nielsen, including yours truly.

HBO said that when views on HBO Go and its stand-alone app were included, the 79-minute episode had 16.5 million viewers.

And the audience for the series is only growing, as this finale had total viewership 36% greater than last year’s.

But unfortunately for us fans, there is talk the final season of six episodes may not be available until 2019.  We need to contain Kim Jong Un at least until then.

Foreign Affairs

North Korea: Speaking of Lil’ Kim, he fired an intermediate ballistic missile (Hwasong-12) directly over northern Japan on Monday (Tuesday, Pyongyang time), with Japan implementing its alert system for the Hokkaido area to duck and cover.

It was North Korea’s 13th missile test this year, but the first one over a populated area in Japan.

The missile is estimated to have flown nearly 1,700 miles, reaching an altitude of 340 miles, and if aimed that way, would have been capable of threatening Guam.

Japanese Prime Minister Shinzo Abe told reporters, “North Korea’s reckless action is an unprecedented, serious and grave threat to our nation.”

Kim said this was the first step in military action in the Pacific to “contain” the U.S. territory of Guam, and was also a response to joint U.S. and South Korean military exercises.  Kim urged his military to conduct more such launches into the Pacific in the future, according to a statement from the official Korean Central News Agency.

Pyongyang has also said it won’t place its nuclear program on the negotiating table unless the U.S. drops its “hostile” policies.

The UN Security Council, in an emergency session, called the missile test “outrageous” and once again demanded North Korea halt its weapons program.  US Ambassador Nikki Haley said “enough is enough.”

President Trump tweeted in response: “The U.S. has been talking to North Korea, and paying them extortion money, for 25 years.  Talking is not the answer!”

Shortly thereafter, though, Defense Secretary Jim Mattis replied when asked by reporters if the United States was out of diplomatic solutions, “No.  We are never out of diplomatic solutions,” Mattis said before a meeting with his South Korean counterpart at the Pentagon.  “We continue to work together, and the minister and I share a responsibility to provide for the protection of our nations, our populations and our interests.”

In a formal statement, however, Trump said: “Threatening and destabilizing actions only increase the North Korean regime’s isolation in the region and among all nations of the world.  All options are on the table,” this last bit being the throwaway line used for decades by all U.S. leaders.

It was Aug. 22 that Trump tweeted: “I respect the fact that (Kim) is starting to respect us,” referring to the lack of a follow-up test to the long-range ICBM test of late July that so shook up the world.  Aug. 8, Trump had threatened to unleash “fire and fury” against North Korea if it threatened the United States.

But why didn’t the United States attempt to shoot down the missile? I’ve argued we don’t want to show Kim Jong Un that our capabilities may not be up to snuff.  If we missed it, it would be a huge embarrassment, and stoke fears all around, and probably embolden Kim further.

Defense One’s Patrick Tucker notes that “Between January 2002 and August 14 of this year, the Defense Department attempted 37 intercepts of a mid-range missile and hit the target 29 times with an SM-3. There are many reasons for this, but the biggest, according to the Pentagon’s Office of the Director of Operational Testing and Engineering, is that realistic testing of interceptors is very expensive and requires a lot of lead time and support.”

Remember, these tests are conducted under scripted conditions, not those of a real missile launch by Pyongyang.

In February, the Missile Defense Agency showed that their newest version of the standard missile, the SM-3 IIA, could hit a mid-range missile. But a second test in June was a failure.  The Navy later attributed that to human error.  But 50 percent is not a good record for the most advanced intermediate-range interceptor in the U.S. arsenal.

Also, shooting down a North Korean missile would be considered by them to be an act of war.  Thus there has to be a good reason for the U.S. to attempt to shoot it down, such as an actual threat to U.S. forces, our territory, or that of our allies.   And all of these are split-second decisions.

We also learned this week that South Korea has a special forces unit to infiltrate North Korea and assassinate Kim and his closest advisers if war breaks out, a conventional one.

South Korean President Moon Jae-in told his Defense Ministry Monday to implement reforms to the military to meet the challenges that are increasingly being posed by North Korea.

Moon said that the military should be ready to “quickly switch to an offensive posture in case North Korea stages a provocation that crosses the line or attacks the capital region,” according to the Chosun Ilbo newspaper.

Remember what I’ve said for years, particularly with my trip to Seoul about 10 years ago.  There are thousands of North Korean agents in Seoul itself, just waiting for orders.  They are liable to do anything.

Russian President Vladimir Putin warned on Friday that the tense standoff between Pyongyang and the United States was on the verge of large-scale conflict.

Putin, who is going to be attending a summit of the BRICS nations (Brazil, Russia, India, China and South Africa) in China next week, wrote in an article published on the Kremlin’s web site ahead of the trip:

“It is essential to resolve the region’s problems through direct dialogue involving all sides without advancing any preconditions (for such talks).

“Provocations, pressure, and bellicose and offensive rhetoric is the road to nowhere.”

The situation on the Korean Peninsula had deteriorated so much that it was now “balanced on the verge of a large-scale conflict,” Putin said, adding, “In Russia’s opinion the calculation that it is possible to halt North Korea’s nuclear missile programs exclusively by putting pressure on Pyongyang is erroneous and futile.”

Earlier, Russian Foreign Minister Sergey Lavrov warned Secretary of State Rex Tillerson that the U.S. should not add new sanctions against North Korea, in response to Trump’s comment that “talking is not the answer.”

Editorial / New York Post

“With its missile launch over Japan, North Korea’s belligerence has entered a dangerous new level – raising a dire question for President Trump: What to do now?

“The missile was the first ever fired by lunatic leader Kim Jong Un over  a core Japanese island, and Tokyo warned citizens to take cover. And though the North also launched rockets over Japan in 1998 and 2009, it at least pretended (unlike on Tuesday) those carried satellites....

“Even Chinese officials said the North’s latest escalation was veering ‘past the point of no return.’  After all, Pyongyang is thought to have at least 20 nukes, and is at least nearing the know-how to mount them on rockets.

“For Trump, the pressure to respond is now sky-high, especially in the wake of his vow to unleash ‘fire and fury’ if Kim keeps up his provocations.

“Trump gets it: ‘The world has received North Korea’s latest message loud and clear...All options are on the table.’

“Trouble is, Kim has heard such words before.  At what point do options come off the table and get put into action?....

“Trump & Co. need to credibly threaten something Kim actually cares about – maybe the luxury goods enjoyed by the regime’s elite. Find some way to make him hurt.

“As American UN envoy Nikki Haley puts it, ‘Something serious has to happen.’”

Editorial / Wall Street Journal

“Japan’s ultimate security is the U.S. defense and nuclear umbrella, with its treaty guarantee that the U.S. will respond if Japan is attacked. But the logic of deterrence depends on having a rational actor as an adversary, and rationality can’t be guaranteed in North Korea. Its recent development of an ICBM capable of hitting the U.S. mainland also changes the equation.  If North Korea attacked Tokyo and the U.S. responded with an attack on Pyongyang, U.S. cities might then be endangered.

“Japanese leaders have long resisted building their own nuclear arsenal, but that could change if they conclude America isn’t reliable in a crisis.  Or the Japanese may simple decide they can’t have their survival depend on even a faithful ally’s judgment. Some Japanese politicians are already talking about their own nuclear deterrent. And while public opinion currently opposes nuclear weapons, fear could change minds.  Japan has enough plutonium from its civilian nuclear reactors for more than 1,000 nuclear warheads, and it has the know-how to build them in months.

“This prospect should alarm China, which would suddenly face a nuclear-armed regional rival.  The U.S. also has a strong interest in preventing a nuclear Japan, not least because South Korea might soon follow.  East Asia would join the Middle East in a new era of nuclear proliferation, with grave risks to world order. This is one reason that acquiescing to a North Korea with nuclear missiles is so dangerous.

“Yet this is the line now peddled by former Obama National Security Adviser Susan Rice and former Director of National Intelligence James Clapper, who says the U.S. must begin ‘accepting it and trying to cap it or control it.’....

“But ‘control it’ how? North Korea has made clear it won’t negotiate away its nuclear program. The U.S. can threaten mutual-assured destruction, but Tuesday’s missile test over Japan shows how North Korea will use its nuclear threat to coerce and divide the U.S. and its allies.  Accepting a nuclear North Korea means accepting a far more dangerous world.”

Syria / Iraq / Iran: U.S.-led airstrikes blocked a convoy of ISIS soldiers attempting to reach a stronghold in eastern Syria. The 300 fighters and 300 family members were being evacuated from Syria’s western border with Lebanon under a ceasefire agreement involving ISIS, the Syrian army and Lebanon’s Hizbullah.

Eight Lebanese soldiers who have been held by Islamic State since 2014 are presumed to be dead.

But the U.S.-led coalition opposes experienced fighters going to an active battlefield.

In Iraq, the military drove out Islamic State from the town of Tal Afar, one of the group’s few remaining strongholds in the country.  Tal Afar was once a gateway between Mosul in Iraq and Raqqa in Syria, serving as a training ground for many of its foreign fighters.

Jonathan S. Tobin / New York Post

“When the United States chose to let Syria slide into chaos while simultaneously seeking to end the isolation of Iran with a nuclear deal, President Barack Obama thought he was avoiding trouble and giving Iran a chance to ‘get right with the world.’

“But it turns out those blunders are still paying dividends for Iran, creating new dangers in the Middle East and threatening the hopes of the Trump administration. That was made clear this week when Yehya al-Sinwar, the leader of Hamas, announced in Gaza that the terror group had reconciled with Iran.

“Prior to the outbreak of the Syrian civil war, Iran was Hamas’ main source of money and weapons and helped the terror group transform Gaza into a fortress bristling with rockets and missiles that rained terror on Israeli towns and cities.

“But the alliance between the two broke up during the Syrian war as Iran backed the Assad regime and Hamas backed Sunni rebels.

“Experts told us that the split was an inevitable result of the differences between the Sunnis of Hamas and Iranian Shiites.  But while that may be a common divide in the Muslim world, it took a U.S. president with the vanity to believe his illusions were more important than the facts on the ground – Obama – to bring them back together.

“Though Obama repeatedly called for Bashar al-Assad’s ouster, he did nothing to aid those trying to make it a reality, especially when a little help would have gone a long way. He ultimately stood by as Russia and Iran intervened to save Assad.

“By backing down on his ‘red line’ warning on the use of chemical weapons and then punting responsibility for that issue to Russia (which allowed Assad to continue using them), Obama also ensured that Syria would become a land bridge between Tehran and its Hizbullah auxiliaries in Lebanon.

“Obama thought intervention would have been an obstacle to his hopes for a rapprochement with Tehran.  Nor did he let Iran’s refusal to give up its nuclear program stop his push for a deal that vastly enriched the regime while only delaying its quest for a nuclear weapon.

“The result: Iran is stronger and bolder than ever and building weapons factories in Lebanon and Syria. By reconciling with Hamas, it has the capacity to create what might be a three-front war against the Jewish state whenever it chooses to heat up the conflict....

“What can Trump do? The options are limited but he must begin by realizing that sticking to Obama’s decision to let the Russians and Iranians have Syria is a mistake. The same applies to listening to those who have so far persuaded him not to start the process of rolling back the nuclear deal*....

“The Iran-Hamas reunion is a warning that policies that strengthen Russia and its Iranian allies are blunders Israel and the West will keep paying for in blood and treasure.”

*I agree with what Mr. Tobin writes, except that I’ve said since the day the Iran nuke deal was signed, it was too late.  You can’t roll it back...not with the other signatories now strengthening their economic ties to Iran, post-removal of sanctions.

Israel: Prime Minister Benjamin Netanyahu, days after meeting a White House delegation to discuss restarting peace negotiations with the Palestinians, said Israel would not scale back Jewish settlements as part of any agreement, which has long been assumed would be part of any deal.

Netanyahu pledged Israel would never evacuate a single settlement, declaring before a large crowd celebrating 50 years of Israeli settlements in the northern West Bank: “We are here to stay forever. There will be no more uprooting of settlements in the land of Israel.  This is the inheritance of our ancestors. This is our land.”

But much of the rest of the world views Jewish settlements in the West Bank as being illegal.  Successive U.S. presidents have, at the least, called for a stop to their expansion. Even President Trump has said further construction is unhelpful.

Russia: The Trump administration ordered Russia to close its consulate in San Francisco and two diplomatic annexes, in New York and Washington, in retaliation against Russia’s order for the United States to reduce its embassy staff in Moscow by 755 people.

Secretary of State Rex Tillerson, in a phone call with his Russian counterpart, Foreign Minister Sergey Lavrov, attempted to emphasize this was a tit-for-tat move and not designed to further escalate tensions between the two countries, especially in that the administration isn’t expelling any Russian diplomatic personnel, nor did it touch the staff at Russia’s main embassy in Washington

But Lavrov then issued a statement saying the Kremlin “expressed regret at the escalation of tension in bilateral relations,” and said Russia would study the move before deciding on a response.

Separately, NATO announced Wednesday it would send three observers to Russia’s Zapad military exercises this month, though this falls short of Russia’s international obligations.

NATO has warned that the Russian exercises in both Russia and Belarus are a potential smokescreen for deploying more military equipment on a permanent basis to the border region, thus heightening the risk of a miscalculation.

So now NATO gets to send two experts to Belarus and one to Russia, which is beyond a joke.  Plus, the experts are allowed to attend the official “Visitor Day” of the exercise, only, though Belarus said there will be more than one such day.

Under the Vienna Document, an international agreement governing military exercises in Europe, NATO is to have access to individual soldiers and overflights of the drill area.

But Moscow claims only 12,700 troops will participate, while NATO and U.S. officials say it will be far larger, as many as 70,000.  The threshold for triggering international observers is 13,000.  As Church Lady would have said, “How conveeenient.”

I have said for months this is a test for the Trump administration, and that it was a layup for our president to show his support for NATO by “demanding” Russia live up to its obligations.

But failing to do so is in keeping with Trump’s modus operandi when it comes to all things Russia.  I’m also surprised I haven’t seen anyone else mention my idea.

Lastly, Azita Raji, a former U.S. ambassador to Sweden, had an op-ed in the Wall Street Journal talking about the growing ties between non-NATO members Sweden and Finland and NATO, which Russia doesn’t like one bit.

“(Sweden and Finland) seem to be playing it safe, with one foot in the NATO camp and the other – even if lightly set down – outside it. But for all the talk of neutrality, Sweden and Finland are as militarily capable as some NATO allies and enjoy a privileged relationship with the alliance.

“The peril in this is Russia’s growing ire at the increasingly close relationships among the Swedes, the Finns and NATO. Russia has warned both nations of harsh consequences if they join the alliance. This ought not be dismissed as idle blather: Mr. Putin has sent aircraft close to the Swedish border to run practice strikes on Stockholm. Swedes and Finns suffer Russian cyberattacks, overflights and misinformation campaigns meant to destabilize their governments.”

So Sweden and Finland feel more vulnerable than they did during the Cold War, and they will be among those most interested in the Zapad exercises.

Raji:

“Leaders in Stockholm and Helsinki are about to witness in Zapad a possible harbinger of the future. How this leads them to rethink their relationship with NATO will have a profound impact on the security of generations to come.”

China: India and China agreed to pull their troops back from a disputed border area after a tense, months-long standoff.

The row began in mid-June when India said it opposed a Chinese attempt to extend a border road on the plateau.

Separately, China said it will shut 6,000 non-coal mines in an effort to reduce mining accidents and deaths by 2020.  More than 500 died in non-coal mining accidents in 2015.

Kenya: The Supreme Court, in a 4-2 decision, invalidated the result of last month’s contentious presidential election and ordered a new vote within 60 days.

The judges upheld a petition filed by opposition candidate Raila Odinga, who claimed the re-election of President Kenyatta was fraudulent.

What I don’t understand is international observers seemed to have reached the consensus the vote was fine.

India / Bangladesh / Nepal: The annual monsoons have been particularly severe this year, killing more than 1,200 at last report.  Mumbai has been particularly hard hit, with millions living in shantytowns and zero established drainage.

Myanmar: The government of Nobel Peace Prize recipient Aung San Suu Kyi continues to battle with the Rohingya Muslim minority in the country’s northwest, with a report that nearly 400 have been killed in fighting and 38,000 Rohingya fleeing to Bangladesh.  It’s complicated, but Suu Kyi looks awful in this crisis.  Pope Francis is also slated to visit the country in a few weeks.

Random Musings

--Presidential tracking polls....

Gallup: 34% approval / 60% disapproval
Rasmussen: 42% approval / 56% disapproval

--An analysis from the University of Wisconsin’s Space Science and Engineering Center has determined that Hurricane Havey is a one-in-1,000-year flood event that overwhelmed an enormous section of Southeast Texas equivalent in size to New Jersey.

According to Wisconsin researcher Shane Hubbard, “In looking at many of these event (in the U.S.), I’ve never seen anything of this magnitude or size.  This is something that hasn’t happened in our modern era of observations.”

At least 20 inches of rain fell over an area larger than 10 states, including West Virginia and Maryland.

Apart from Harvey, there’s simply no record of a 1,000-year event occupying so much real estate.

For the record, Cedar Bayou, east of Houston, reported 51.88 inches of rain, breaking a continental U.S. record previously held by Medina, Tex., which received 48 inches during Tropical Storm Amelia in 1978.

During one 24-hour period, Mon.-Tues., Beaumont, Tex., had over 26 inches.

--Changing the subject, following are two opinions on the issues facing the Republican Party.

David Brooks / New York Times...on Republican identity politics....

“The GOP was founded to fight slavery, and through most of its history it had a decent record on civil rights. A greater percentage of congressional Republicans voted for the Civil Rights Act than Democrats.

“It’s become more of a white party in recent years, of course, and adopted some wrongheaded positions on civil rights enforcement, but it was still possible to be a Republican without feeling like you were violating basic decency on matters of race.  Most of the Republican establishment, from the Bushes to McCain and Romney, fought bigotry, and racism was not a common feature in the conservative movement.

“Between 1984 and 2003 I worked at National Review, The Washington Times, the Wall Street Journal editorial page and The Weekly Standard.  Most of my friends were Republicans.

“In that time, I never heard blatantly racist comments at dinner parties, and there were probably fewer than a dozen times I heard some veiled comment that could have suggested racism.  To be honest, I heard more racial condescension in progressive circles than in conservative ones.

“But the Republican Party has changed since 2005. It has become the vehicle for white identity politics....

“According to a survey from the Public Religion Research Institute, for example, about 48 percent of Republicans believe there is ‘a lot of discrimination’ against Christians in America and about 43 percent believe there is a lot of discrimination against whites....

“(White) identity politics as it plays out in the political arena is completely noxious.  Donald Trump is the maestro here. He established his political identity through birtherism, he won the Republican nomination on the Muslim ban, he campaigned on the Mexican wall, he governed by being neutral on Charlottesville and pardoning the racialist Joe Arpaio.

“Each Republican is now compelled to embrace this garbage or not. The choice is unavoidable, and white resentment is bound to define Republicanism more and more in the months ahead.  It’s what Trump cares about.  The identity warriors on the left will deface statues or whatever and set up mutually beneficial confrontations with the identity warriors on the right.  Things will get uglier.

“And this is where the dissolution of the GOP comes in.  Conservative universalists are coming to realize their party has become a vehicle for white identity and racial conflict. This faction is prior to and deeper than Trump.

“When you have an intraparty fight about foreign or domestic issues, you think your rivals are wrong.  When you have an intraparty fight on race, you think your rivals are disgusting.  That’s what’s happening.  Friendships are now ending across the right.  People who supported Trump for partisan reasons now feel locked in to support him on race, and they are making themselves repellent.

“It may someday be possible to reduce the influence of white identity politics, but probably not while Trump is in office. As long as he is in power the GOP is a house viciously divided against itself, and cannot stand.”

So here’s a retort, courtesy of Kurt Schlichter of Townhall.com...an old friend of WIR, Richard H., having passed it along.

“But what’s the end game (for the Never-Trump crowd)?  What are they thinking is going to happen?  Do they think that one morning Trump is going to wake up and think ‘Gosh, all these people telling me I’m wrong and mean and crude and tweet too darn much must be right.  I’ll change, because I always take the advice of people who I’ve already broken and humiliated.’

“Unlikely, because Trump doesn’t respect you.  And he doesn’t respect you because he’s already beaten you. He’s not a gracious winner, but to be fair, you’ve hardly been gracious losers.  Oh, how it must gall you to be so utterly defeated by someone you consider your moral and intellectual inferior.

“So if you’re not going to change Trump, what do you think you’re going to do?  Do you think you’re going to somehow drive Trump out of office?  Let’s run down that scenario. Now we have President Pence, and about 75% of your party’s base infuriated at your backstabbing betrayal. That seems disastrous even if you buy the idea that President Pence would somehow preside over a return to something like business as usual. He might, at least until the next election. Then you’re all toast.  Let’s just say that in addition to your treachery, your past track record of total failure to achieve the conservative goals you promised won’t particularly inspire Trump supporters to lend you their support.

“Or maybe you think our voters would just be so disgusted that they would let the Democrats grab a majority on Capitol Hill and the White House too.  Maybe you figure you could live with that. Maybe you think you can wait out the base’s fury by crawling back into the comfortable gimp box of submissive GOP congressional opposition.

“Except it won’t work that way.  Through all this Tea Partying and Trumping, we normal got a taste for power, and we like it. We’re not just going to just shrug our shoulders when the guy we picked gets deposed in a coup. We’re going to get mad. Really mad. And you’re going to get primaried. Just ask Jeff Flake (Dork-AZ).  Have you seen his approval numbers?  There are strains of the herpes virus that poll higher.  [Ed. I checked...yes, Flake’s numbers aren’t good.  And I like the guy.]

“No, there’s no going back to the old days.  This is the new normal, and there are new rules, rules you better learn to play by. The most important of these is, ‘Take your own voters’ side in a fight.’ You should try it, because if you didn’t like the Tea Party, and you hate Donald Trump, you are going to be really, really, really unhappy with what we normal will do next.”

Again, just presenting both sides.

--Kid Rock continues to flirt with a run for the Senate in Michigan as a Republican, against Dem. incumbent Debbie Stabenow, and I’m on record as supporting his candidacy should be choose to do so.  I’ve read a lot on this man, seen a lot of interviews, and I believe he’d be a fantastic senator.  [I would tell him, though, that in some of his recent tweets on a potential bid that he needs to eliminate the F-words.  I would vote for him anyway...but that’s not how you expand the base.]

So from Ben Kamisar of The Hill, these are the comments of Robert Steele, the Republican National Committeeman from Michigan.

“People know him – he’s an extremely strong brand in Michigan.  He’s fought for Detroit, he’s fought hard for kids who want to go to his concerts, he’s fought hard for the working class, he’s a southeast Michigan booster through and through.

“If he were in the race, I think he would win. But I doubt we’ll see him in the race.”

And some don’t think Robert Ritchie (his real name) is interested in learning how to be a senator. Plus Stabenow has won both of her past two Senate races by double-digit margins.

But among Ritchie’s biggest supporters, surprisingly to moi, is former New York Gov. George Pataki, citing his ability to draw big crowds, and being one “who has supported our troops and been supportive of the concept of limited government.”

One big problem, Ritchie most likely has to use his real name on the ballot, at least as the law in Michigan stands today.

At the end of the day, though, fellow Michigan rocker Ted Nugent may have it right: Ritchie “ain’t running for jack squat.”

--Tom Moran / Star Ledger

“The lurid indictment against Sen. Robert Menendez, D-New Jersey, reads like an episode of ‘House of Cards,’ with dark tales of bribery, private jets and powerful old men in the intimate company of beautiful young women. So, if you like spicy romance novels, pull up a chair.

“But I’ve been digging at the politics around this high-stakes trial, which starts next week, and have come to two conclusions:

“One, Menendez is almost certain to be convicted of at least one felony, for his failure to disclose gifts he concedes receiving. The bribery charges will be tougher to prove, given there is no wiretap and no sign yet that the man alleged to have paid the bribes, Dr. Salomon Melgen, will testify against Menendez.

“But the disclosure charge is straightforward, and even the senator’s friends concede privately that he’s in real trouble on that one.  The best defense Menendez has offered, so far, is that it slipped his mind.  He was magically reminded by media reports.

“Is there a jury in America today that is inclined to give a politician that enormous benefit of the doubt?  How many of them would forget that a friend flew them on a private jet to a luxury resort in the Caribbean – twice?”

As a Republican you might think I’m gleeful over Democrat Menendez’ problems, but this is one of the smarter folks in the Senate when it comes to foreign policy and with all the crises we face, I wish he could have stayed clean.  [Very similar to another former Democratic senator from my state, Robert Torricelli, fiercely bright, and corrupt, who has an outside shot of replacing Menendez, if we get that far.  This wouldn’t be Republican Gov. Chris Christie’s decision, in case you’re wondering. A Democrat is replacing him with the November gubernatorial election.]

--Antifa

Editorial / Wall Street Journal

“Politically charged street brawls broke out in Berkeley, California, on Sunday, with police arresting 13 charming participants on charges including assault with a deadly weapon. One Twitter video showed masked activists kicking a man curled in a fetal position on the ground; the beat-down stopped only when a journalist, Al Letson, shielded the man with his body.  ‘I was scared they were going to kill him,’ Mr. Letson said.

“As Charlottesville drew attention to the worst elements of the far right, Sunday’s melee revealed an increasingly violent fringe of the radical left that has received far less media coverage, much less criticism. It’s called Antifa, pronounced ‘An-tee-fa,’ which is short for ‘anti-fascist.’

“Antifa members sometimes claim their movement spans the globe and dates to the 1920s and ‘30s, citing the 1936 Battle of Cable Street, where protesters shut down a march by the British Union of Fascists.  But in the United States and Britain, Antifa grew in the 1980s primarily out of the punk rock scene. As Nazi and white supremacist skinheads became a bigger part of this largely un-policed subculture, far-leftists met violence, calling it self-defense.

“As it grew beyond punk, Antifa’s adherents organized through the now-defunct Anti-Racist Action network and now sometimes through the Torch Network, as well as other less visible groups.  Many activists also aligned themselves with the broader anti-globalization movement. But Donald Trump’s election has become the catalyst launching Antifa into a broader political movement.

“The Antifa members we’ve interviewed shun the Democratic Party label, saying their activism constitutes its own political orientation.  They’re mostly anarchists and anarcho-communists, and they often refer to fellow protesters as ‘comrades.’  Adherents typically despise the government and corporate America alike, seeing police as defenders of both and thus also legitimate targets....

“Antifa activists have also developed their own moral justification for suppressing free speech and assembly. As anarchists, they don’t want state censorship. But they do believe it’s the role of a healthy civil society to make sure some ideas don’t gain currency....

“Words don’t constitute violence, despite what Antifa activists believe.  But there are dangerous ideas and practice, and the radical left has embraced several of them. Democracies solve conflict through debate, not fisticuffs.  But Antifa’s protesters believe that some ideas are better fought with force, and that some people are incapable of reason.

“Implicit in this view is that Antifa alone has the right to define who is racist, fascist or Nazi. It’s a guerrilla twist on the culture wars, when a microaggression must be met with a macroaggression.

“Antifa has also widely embraced ‘Black Bloc’ tactics, including disguising themselves with black garb and covering their faces with bandanas and balaclava.  It’s not a good look for a supposedly anti-authoritarian group to show up in uniform, like the KKK in white hoods, much less armed with batons.

“Which brings us back to Berkeley. This weekend two right-wing groups sought to hold peaceful rallies. Their leaders – Patriot Prayer’s Joey Gibson, a Japanese-American, and Amber Cummings, a transgender Trump supporter – explicitly denounced racism. Amid fears of violence, both cancelled their events. Antifa showed up anyway, outnumbering and terrorizing any right-wingers or Trump supporters who dared show their faces.

“Antifa views itself as fundamentally reactionary, as necessary opposition to corrosive ideologies.  But because your foe is a really bad guy doesn’t mean you’re inherently a good one.  Movements are defined not merely by what they oppose but by what they do.  Antifa’s censorious criminality resembles the very political behavior it claims to fight. The mainstream  left ought to denounce it as much as the right should reject white supremacists.”

House Democratic Leader Nancy Pelosi:

“Our democracy has no room for inciting violence or endangering the public, no matter the ideology of those who commit such acts.  The violent actions of people calling themselves antifa in Berkeley this weekend deserve unequivocal condemnation, and the perpetrators should be arrested and prosecuted.

“In California, as across all of our great nation, we have deep reverence for the Constitutional right to peaceful dissent and free speech. Non-violence is fundamental to that right.  Let us use this sad event to reaffirm that we must never fight hate with hate, and to remember the values of peace, openness and justice that represent the best of America.”

Marc A. Thiessen / Washington Post

“Last weekend in Berkeley, Calif., a group of neo-communist antifa – ‘anti-fascist’ – thugs attacked peaceful protesters at a ‘No to Marxism in America’ rally, wielding sticks and pepper spray, and beating people with homemade shields that read (I kid you not) ‘No Hate.’ The Post reports how one peaceful protester ‘was attacked by five black-clad antifa members, each windmilling kicks and punches into a man desperately trying to protect himself.’  Members of the Berkeley College Republicans were then stalked by antifa goons who followed them to a gas station and demanded they ‘get the [expletive] out’ of their car, warning, ‘We are real hungry for supremacists and there is more of us.’

“The organizer of the anti-Marxism protest is not a white supremacist. Amber Cummings is a self-described ‘transsexual female who embraces diversity’ and had announced on Facebook that ‘any racist groups like the KKK [and] Neo Nazis...are not welcome.’ The protest was needed, Cummings said, because ‘Berkeley is a ground zero for the Marxist Movement.’

“As if to prove Cumming’s point, the antifa movement responded with jackboots and clubs – because their definition of ‘fascist’ includes not just neo-Nazis but also anyone who opposed their totalitarian worldview.

“And let’s be clear: Totalitarian is precisely what they are.  Mark Bray, a Dartmouth lecturer who has defended antifa’s violent tactics, recently explain in The Post, ‘Its adherents are predominantly communists, socialists and anarchists’ who believe that physical violence ‘is both ethically justifiable and strategically effective.’ In other words, they are no different from neo-Nazis.  Neo-Nazis are the violent advocates of a murderous ideology that killed 25 million people last century. Antifa members are the violent advocates of a murderous ideology that, according to ‘The Black Book of Communism,’ killed between 85 million and 100 million people last century. Both practice violence and preach hate.  They are morally indistinguishable. There is no difference between those who beat innocent people in the name of the ideology that gave us Hitler and Himmler and those who beat innocent people in the name of the ideology that gave us Stalin and Dzerzhinsky.  The United States defeated two murderous ideologies in the 20th century. So we should all be repulsed by the sight of our fellow Americans carrying the banners of either movement, whether they are waving the red flags of communism or black flags of Nazism. Yet we are not.  Communism is not viewed as an evil comparable to Nazism today. As Alex Griswold recently pointed out, the New York Times has published no fewer than six opinion pieces this year defending communism, including essays praising Lenin as a conservationist, explaining why Stalinism inspired Americans, and arguing that the Bolsheviks were romantics at heart and that women had better sex under communism. Can one imagine the Times running similar pieces about the Nazis?....

“After Charlottesville, the media rightly demanded that President Trump and all Republicans condemn the neo-Nazis and the KKK. So where are the calls for Democrats to condemn antifa [Ed. Thiesen notes Nancy Pelosi has been the exception.] – and the brutal public condemnation for those who fail to do so? If black-clad neo-Nazis had attacked peaceful protesters at a ‘No to Racism in America’ march in Berkeley, politicians in Washington would be falling over themselves to express their disgust – and any who failed to do so would be vilified. But when neo-communists commit this kind of violence, they get a pass from the Left.

“That cannot be allowed to stand.”

--Editorial / Wall Street Journal

“To paraphrase Marx, all great historical events occur twice: first as tragedy, second as some action by the Los Angeles City Council. The latest demonstration came Wednesday when the council banished Columbus Day from the city calendar. Henceforth in L.A., the second Monday in October will be Indigenous Peoples Day.

“We have no dispute with any group or city that wishes to celebrate the culture and achievements of indigenous peoples.  Such celebrations are a staple of American life and contribute in their way to e pluribus unum.

“But L.A.’s move isn’t about celebrating.  It’s about indicting anything that represents Western civilization, as Christopher Columbus most certainly does. So how ironic that in deposing the Italian explorer, Los Angeles council members find themselves taking the side of the Ku Klux Klan of the early 20th century – whose nativism led it to oppose statues, memorials and days devoted to Columbus because he was Catholic, Southern European and called to mind the new waves of non-English immigrants at the time.

“That’s precisely the danger of applying modern sensibilities to judge people from the past. Columbus had his faults, and honest histories address them. But if we honored only saints, few would make it onto pedestals.

“If Columbus has to go, does FDR’s wartime internment of Japanese-Americans mean we tear down his memorial on the national mall?  Most Americans sensibly would say no, but today it’s the vandals who are ascendant...

“So perhaps it’s fitting that an L.A. City Council that thinks it is leading a politically correct charge is really completing the work urged by an earlier generation of haters and nativists. We wonder if the council knows it has given President Trump a political gift by demonstrating that what so many on the left really oppose is the larger triumph of Western civilization.”

--Defense Secretary Mattis, addressing troops stationed abroad, at an unknown location; a video having recently surfaced.

Mattis said the U.S. is facing “problems.”

“Our country right now, it’s got problems we don’t have in the military.  You just hold the line until our country gets back to understanding and respecting each other and showing it.”

Mattis added he came out of retirement to “serve alongside young people like you who are so selfless and, frankly, so rambunctious.”

It is assumed Mattis’ comments were made on a recent trip to Jordan, Turkey and Ukraine, and likely following the turmoil in Charlottesville.

---

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

God bless America.

How about our Coast Guard?!

---

Gold $1329...first weekly close over $1300 since November
Oil $47.35

Returns for the week 8/28-9/1

Dow Jones  +0.8%  [21987]
S&P 500  +1.4%  [2476]
S&P MidCap  +1.7%
Russell 2000  +2.6%
Nasdaq  +2.7%  [6435]

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

Dow Jones  +11.3%
S&P 500  +10.6%
S&P MidCap  +4.7%
Russell 2000  +4.2%
Nasdaq  +19.6%

Bulls 49.5
Bears 19.1 [Source: Investors Intelligence]

Have a great week.

Dr. Bortrum posted a new column.

Next WIR is going to be lacking in some late detail that Friday and may be posted later than normal. 

Brian Trumbore



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Week in Review

09/02/2017

For the week 8/28-9/1

[Posted 11:30 PM ET, Friday]

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

Edition 960

Harvey....

I started out last week with the following.

Another extraordinary week...and far from a good one when you factor in Hurricane Harvey, which appears to be next week’s lead if the computer models are correct.

I may just be writing the same line next week, too, but hopefully the name Irma isn’t included.

We saw the best of America this week, amid the misery, and the federal response thus far has been great, for which President Trump can take the credit he craves, but we all know this story has a long, long ways to play out.  The scope is beyond overwhelming and it is going to require a ton of patience, and strength, from the people down there.

It had been 12 years since the United States was hit by a hurricane of Category 3 or stronger, the longest in historical record, while since 1970, the U.S. has only seen four hurricanes of Cat 4 or 5.

The economic damage will no doubt be in excess of $100 billion.

And you’ve got the toxic stew in the fetid water that in a lot of areas will just hang around for days and maybe weeks...lots of chemicals, sewage, debris and waste.  With the warm temperatures, you have fears of cholera, typhoid and other infectious diseases.  You also have two dozen Superfund sites in the Houston area that are no doubt impacted.

Aside from the human toll, 45 deaths and counting, Harvey destroyed an estimated 100,000+ homes, many without flood insurance, and 300,000 to 500,000 vehicles owned by individuals, the latter according to Cox Automotive chief economist Jonathan Smoke, with insurance picking up a large portion of the vehicle losses. 

Superstorm Sandy is believed to have destroyed about 250,000 vehicles, while Katrina ruined 200,000, according to Cox.

President Trump was tweeting away during the storm.

“HISTORIC rainfall in Houston, and all over Texas.  Floods are unprecedented, and more rain coming.  Spirit of the people is incredible. Thanks!”

“Many people are now saying that this is the worst storm/hurricane they have ever seen.  Good news is that we have great talent on the ground.”

“A great book by a great guy, highly recommended!”

Hey, how did this slip in there?  Trump was referring to charlatan David Clarke’s new book, Clarke resigning three days later from his job as Milwaukee County sheriff to potentially take a job in the administration.

Back to the hurricane....

“Wonderful coordination between Federal, State and Local Governments in the Great State of Texas – TEAMWORK!  Record setting rainfall.”

“Major rescue operations underway!”

“Going to a Cabinet Meeting (tele-conference) at 11:00 A.M. on #Harvey.  Even experts said they’ve never seen one like this!”

Uh oh...here comes NAFTA....

“We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada. Both being very difficult, may have to terminate?”

“With Mexico being one of the highest crime Nations in the world, we must have THE WALL.  Mexico will pay for it through reimbursement/other.”

“Wow, - Now experts are calling #Harvey a once in 500 year flood!  We have an all out effort going, and going well!”

Yes, folks, Harvey was a GREAT HURRICANE!  GREATEST EVER!!!

I can only imagine what was going through Gen. Kelly’s head when he saw this stuff light up his screen.

Then Friday, in a White House photo op with representatives from relief agencies, Trump actually said: “Harvey sounds like an innocent name, but I can tell you it isn’t.”

Moving along, before my head explodes like the Arkema plant....

Congress returns Tuesday and it immediately has to confront two big issues, extension of the debt ceiling and funding of the government to avoid a shutdown Oct. 1.  And now, tack on emergency funding for Hurricane Harvey, late Friday Trump requesting an initial $7.8 billion.  I’ll be commenting extensively on all this next week, but for now, just understand the government is funded through Sept. 30, the end of the 2017 fiscal year, while Treasury Secretary Mnuchin has said the U.S. would reach the end of its borrowing capacity by about Sept. 29, as it’s been using emergency measures since this past March to avoid breaching the limit.

There are only about 12 legislative sessions before months’ end to clear these two issues off the table, and at least start on the Texas-Louisiana rebuild.

And this isn’t considering Trump’s threat that he will close the government if he doesn’t receive his funding for the wall. As he told the audience in Phoenix the other week, “If we have to close down our government, we’re building that wall.”

Anyway, as I’ve noted before, the most likely outcome is some resolution on the debt ceiling, while the government is funded through another continuing resolution (CR) on a temporary basis, perhaps into December, which is a weak way out, but then that’s our Congress.

Trumpets....

--President Trump pitched a sweeping tax overhaul plan before an audience in Springfield, Missouri, on Wednesday, promising a large corporate tax cut, while trimming individual income tax rates to boost the middle class.

But while no one expected a lot of specifics, Trump basically emphasized “the biggest ever” in terms of the corporate side, including a goal of slashing the headline rate from 35 percent to 15 percent, while eliminating “loopholes and complexity that primarily benefit the wealthiest Americans and special interests, but little for individuals.”

“This is our once-in-a-generation opportunity to deliver real tax reform for everyday hard-working Americans.  And I don’t want to be disappointed by Congress.”

“Lower taxes on American business means higher wages for American workers,” he added.

Of course this isn’t going to be easy to accomplish in the least.

There is also zero certainty corporations, who are already sitting on $2 trillion in cash, will take any tax cut and reinvest it to the benefit of workers and creating new jobs.

That said the corporate rate must come down to better compete globally, and to repatriate the cash back home. That’s just a fact.

President Trump’s two main advisers on the topic, Treasury Secretary Steve Mnuchin and economic adviser Gary Cohn are insistent there will be a bill by year end, but with everything else Congress has to deal with, I’d be shocked if this were the case.  As of today, there is zero incentive for Democrats to be cooperative, and as things stand in the Senate today, the tax bill would almost certainly require 60 votes, though we’ll see if the Senate is forced to change the rules (i.e., move to ‘reconciliation’ and 51 votes) to get things done.

For their part, Democrats are going to pound away at their base, saying the administration’s proposal does little for the working class, and they may have a point, frankly.

--President Trump is set to rule Tuesday on whether to end the Deferred Action for Childhood Arrivals, or DACA, policy left over from the Obama administration, which protects nearly 600,000 immigrants who entered the country illegally as children and are known as “Dreamers.”

Trump had pledged on the campaign trail to scrap all of Obama’s executive orders on immigration, including DACA.  So we’ll see what happens.

Thursday, a number of high-profile corporate leaders, including Warren Buffett, Tim Cook and Jeff Bezos, co-signed a letter to the president urging him not to rescind the policy.

Friday, Speaker Paul Ryan and Republican Sen. Orrin Hatch were among the lawmakers urging Trump not to scrap the Dreamers policy.

--Back to the border wall and Mexico.  Responding to Trump’s tweet that Mexico was “one of the highest crime nations in the world” and “very difficult” when it came to NAFTA, and that they would pay for the wall, Mexico’s foreign ministry responded in a statement Sunday afternoon: “Mexico will not negotiate NAFTA, nor any other aspect of the bilateral relationship, through social media or any other news platform.”

And Mexico repeated it wouldn’t pay for Trump’s wall, calling its position “a principle of national sovereignty and dignity.”

On the issue of violence in the country, I agree with the Mexican foreign ministry, which said it would “only end if its root causes are addressed: high demand for drugs in the United States and supply from Mexico (and other countries).”

As I’ve always said, my drugged out fellow Americans.  You don’t hear about violent beer cartels.

--With Congress back, the Russia investigation, in terms of coverage, will heat up again as among other things the Kremlin confirmed it had received an email from Trump Organization lawyer Michael Cohen regarding a building project in Moscow, but spokesman Dmitry Peskov said Russian President Vladimir Putin hadn’t been informed.

Cohen said he didn’t tell Trump he had sent the January 2016 email, which was obviously during the campaign.

And then today we learned that special counsel Robert Mueller has obtained an early draft of a letter Trump wrote, together with adviser Stephen Miller, about his reasons for firing FBI Director James Comey, as first reported by the New York Times.  According to the paper, White House counsel Donald McGahn believed parts of the letter were “problematic,” and McGahn eventually persuaded the president not to send the letter to Comey.

There is all manner of conjecture tonight, and whether or not Mueller has a key piece of evidence if he’s bent on building an obstruction of justice case.  We’ll learn the facts eventually.

Wall Street

All the major equity averages closed the week at nearly new highs.  And there was lots of economic news. 

A second look at second-quarter GDP came in better-than-expected, 3.0% vs. an initial figure of 2.6%, far better than the first quarter’s 1.2% pace.  Consumer spending in Q2 was up a solid 3.3%.

The Atlanta Fed’s GDPNow barometer for the third quarter is currently at 3.2%, and back-to-back readings of 3% would be a boon for President Trump.

Separately, the August jobs report was not as strong as forecast, with non-farm payrolls up 156,000 and the unemployment rate ticking up to 4.4%. 

Average hourly earnings rose just 0.1%, just 2.5% year-over-year, when it should be 3.5% in this kind of labor environment.

The jobs data for June and July was also revised downward by a combined 41,000, with June now at 210,000 and July 189,000.

So you add the three up and you have an average of 185,000, while for the first eight months it’s 176,000 for a monthly figure, vs. 187,000 per month for 2016.

Nonetheless, August represented the 83rd consecutive month of job gains.

U6, the underemployment rate recommended by dentists whose patients chew gum, was unchanged at 8.6%.

Among the other data points for the week were key readings on manufacturing; the Chicago PMI, 58.9 (50 being the dividing line between growth and contraction) and the national ISM survey of manufacturers, which was a robust 58.8.

July personal income was a solid 0.4%, while July consumption (consumer spending) came in at 0.3%.

But the Federal Reserve’s preferred inflation barometer, the personal consumption expenditures index, was up only 0.1%, and is running at a 1.4% annualized rate on both core (ex-food and energy) and headline, so not only will the Fed not be discussing a rate hike at its upcoming September meeting, but it’s possible the long-awaited implementation of its program to begin unwinding the balance sheet is delayed further.

Europe and Asia

Lots of economic news from the eurozone.

Markit’s reading on manufacturing for the EA19 was 57.4 in August (matching the flash estimate) vs. July’s 56.6, and equaling June’s 74-month high. 

Germany was at 59.3
France 55.8, 76-month high
Italy 56.3, 78-mo. high
Spain 52.4, 11-mo. low
Netherlands 59.7, 78-mo. high
Ireland 56.1, 25-mo. high
Greece 52.2, 108-mo. high!

*The manufacturing PMI in non-euro U.K. was 56.9 in August vs. 55.3 the prior month, solid, though these days, manufacturing accounts for only 10% of the British economy.

Chris Williamson, Chief Economist / IHS Markit

“The eurozone’s impressive manufacturing upturn regained momentum in August, with a summer surge in factory activity suggesting rising goods production will support another strong GDP reading in the third quarter.

“The survey indicates that euro area manufacturing output is growing at an annual rate of approximately 4%.  Producers across the region are benefitting from rising domestic demand as economic recoveries gain momentum, as well as surging export sales.

“The recent strengthening of the euro may curb export growth from its current 6 ½-year high...However, the still-elevated level of confidence suggests that firms generally expect the current strong growth spell has further to run.

“Firms are also struggling to cope with existing demand: backlogs of uncompleted work are rising at the fastest rate for 11 years, and supply chains are being stretched to a degree not seen for over six years.”

On the inflation front, a flash estimate for the eurozone for August pegged it at 1.5% vs. July’s 1.3%, though the core rate, ex-food and energy, is still just 1.3%, well below the ECB’s 2% target.

And the unemployment rate for the EA19 for July was unchanged over June at 9.1%.

Germany 3.7% (the government pegs it at 5.7%)
France 9.8% (9.6% in June)
Italy 11.3% [35.5% youth rate]
Spain 17.1% [38.6% youth]
Greece 21.7% (May) [44.4% youth jobless rate for May]

[The inflation and unemployment readings are courtesy of Eurostat]

Eurobits....

--The third round of Brexit negotiations with the EU wrapped up this week in acrimony, and the British government of Prime Minister Theresa May is in trouble, as she faces growing opposition, including from the Labour Party, which is now clamoring for Britain to stay in the European Union’s single market for an extended period after it leaves the bloc.  Labour will no doubt attempt to force a Parliamentary vote that will put pressure on Mrs. May’s Conservatives who oppose leaving the EU to vote with Labour.

The EU’s negotiator, Michel Barnier, said the talks had largely gone nowhere, no “decisive” progress thus far, especially in terms of being able to move on to trade discussions in October, which has been the goal all along.

Monday, as talks were getting under way, Barnier said, “To be honest, I am concerned.  Time passes quickly. We must start negotiating seriously...the sooner we remove the ambiguity, the sooner we will be in a position to discuss the future relationship and a transitional period.”

As of today, the biggest sticking point is Britain’s exit bill on coughing up money for commitments the EU made on the assumption of continued U.K. membership, as well as citizens’ rights (including the role of the European Court of Justice) and the border with Northern Ireland.  On this last one, Barnier said the talks had at least been “fruitful.”

There is a critical EU summit on Oct. 19 and some think Prime Minister May is betting on being able to cut a deal with EU leaders at that time, on the Brexit bill, the leaders then agreeing to start trade talks at the same time.  But that means other critical issues are delayed further and time is of the essence.  March 2019 may seem like a ways off, but it isn’t, especially when you consider that IF a comprehensive deal is struck, not only does the European Parliament have to approve of it, but each of the 27 member states does as well.

Brexit Secretary David Davis continues to say the U.K. wants to tie what it owes to a transitional agreement: “Settlement should be in accordance with law and in the spirit of the U.K.’s continuing partnership with the EU,” i.e., we expect something in return for coughing up anywhere from 50bn to 100bn euro.  Britain is also advancing the position they aren’t obliged to make budget payments past its 2019 exit date.

Trade Secretary Liam Fox has said the EU is “blackmailing” Britain by blocking trade talks until the exit price is agreed to.

Mrs. May will be giving a big Brexit speech this month, and then she has to solidify her base at the Conservative Party conference in October.

--French President Emmanuel Macron unveiled his ambitious labor reform plan, and the normally combative unions have thus far been largely mum...for now.

The changes revise a vast number of rules and workers protections that businesses say inhibits growth and has them constantly negotiating over working conditions.

This is a big moment for Macron, whose approval ratings have tumbled since the election.

--Gross domestic product in Greece grew by 0.5% in both the first and second quarters, according to the government’s statistical agency, or a 2% annual rate.  This comes as the latest survey of Greek manufacturers, as stated above, also showed the highest rate of job creation in more than 17 years.

But issues with the country’s massive debt burden remain and present a roadblock for long-term, consistent growth.

At least in the here and now, the struggling government of Prime Minister Alexis Tsipras, whose approval numbers continue to fall, can point to the growth as evidence the immediate crisis is over, as Greece approaches a new round of talks with its lenders and the IMF on its latest bailout review.

--European Commission President Jean-Claude Juncker said Turkey “is taking giant steps away from Europe,” saying President Erdogan wants the EU to halt membership talks with his country that commenced 12 years ago.

The talks, however, have been at a standstill for some time, and with his post-aborted coup crackdown, Erdogan has raised fears about his commitment to EU values such as human rights and the rule of law.

Juncker thinks Erdogan hopes that Europe stops negotiations first “to make it the European Union’s responsibility, and not Turkey’s.”

The thing is the EU desperately needs Turkey’s cooperation on the migrant front.  Remember, Turkey is holding hundreds of thousands that could be unleashed into the European continent any day Erdogan chooses, and it seems the EU hasn’t been paying Turkey the agreed to sums in support.

--Regarding the upcoming German national election, Sept. 24, the latest INSA poll has Chancellor Merkel’s CDU at 37%, while the center-left Social Democratic Party is at 24%.  As I said before, the key is what happens with the four lesser parties, all of whom are taking 7% to 10%,   Merkel’s CDU needs a coalition partner, preferably the FDP, Free Democratic Party, generally like-minded, while Martin Schulz of the SPD has a longshot possibility of gaining more seats than Merkel with the Linke (Left) Party and Grune (Greens).  The fourth is Afd, Alternative for Deutschland, the far-right outfit neither the CDU or SPD want to be associated with.

Turning to Asia....

China’s National Bureau of Statistics reported the manufacturing PMI for August was 51.7 vs. 51.4 in July, but the services reading fell to 53.4, the lowest since May 2016.

The private Caixin/Markit manufacturing reading for last month was 51.6 vs. 51.1 in July.

China’s economy grew at a faster-than-expected 6.9% in the first half, with most now forecasting a tick or two below that for the year.

Japan’s manufacturing PMI was 52.2 in August vs. 52.1.

Japan’s 10-year bond yield fell below zero (-0.02%) for the first time since November this week, amid demand for safe haven assets following the launch of the missile by North Korea that overflew the nation.

Elsewhere in the region, Taiwan’s manufacturing PMI was 53.3, South Korea’s 49.9, and India’s 51.2, a big recovery from a 101-month low of 47.9 in July, which was skewed by some kind of tax deal.

Street Bytes

--Stocks rose for a second straight week, with Nasdaq having its best weekly performance since December, up 2.7%, largely on the heels of an 8% rise in the Biotech sector, which was helped by a large acquisition, Gilead Sciences acquiring Kite Pharma, as well as FDA approval of the first gene therapy in the U.S.

The Dow Jones rose 0.8% and S&P 500 1.4%.  Again, all three are within striking distance of their record highs.

--U.S. Treasury Yields

6-mo. 1.08%  2-yr. 1.34%  10-yr. 2.17%*  30-yr. 2.78%

*Mystified by this because it was 2.12% at the close, but I take the after-market, final yields.  Not that I’m going to lose sleep over it, nor should you.

--Hurricane Harvey did a number on the U.S. energy sector with the heavy refining exposure in the region.  The Gulf accounts for nearly half of total U.S. refining capacity and about 25% was impacted, though it is slowly recovering.  The big issue was not just the lack of power in some cases, but just getting employees to the facilities who had their own serious issues to deal with.

But the spike in gasoline prices to a two-year high was relatively insignificant, especially vs. historic levels, though the fear is ongoing pipeline issues, such as with Colonial Pipeline Co., which announced on Thursday it isn’t getting enough fuel to operate its pipeline between Houston and Lake Charles, La., thus limiting the amount it can transport north and east (Houston to New Jersey), which will lead to more rapid hikes.  So when normally prices would quickly recover following a big storm in the Gulf, there is some uncertainty over the outlook for the next month.

[Shockingly, the nearest gas station to me hiked the price 40 cents today.  4-0. It had been stable for months, $2.55-$2.59, then boom.]

The Department of Energy did release 500,000 barrels of oil from the U.S. Strategic Petroleum Reserve, which is being delivered via pipeline to the Phillips 66 refinery in Westlake, LA.

It was just last week that refiners had pushed output to their highest percentage of capacity since 2005, with gasoline demand at an all-time weekly record of 9.85 million barrels, according to the U.S. Energy Department. Now this.

It’s a new normal when it comes to U.S. energy production, as a storm like Harvey has not just had an impact on the U.S. but now overseas, with refineries in Texas and Louisiana exporting 4m barrels per day of refined fuel overseas, including as far away as China.

But this is an Achilles heel, having such large capacity in a hurricane-prone region.

--United Continental Holdings is among the airlines hard hit by Harvey, in United’s case as much as $265 million worth because of its reliance on Houston as one of its biggest hubs, according to Bloomberg (and Helane Becker of Cowen & Co.).  Houston’s George Bush Intercontinental Airport accounts for 17 percent of United’s capacity.

Southwest Airlines is another that will take a major hit because of its large presence at Hobby airport.

While Houston’s two major airports reopened, returning to a normal load was going to take through the weekend.

--U.S. auto sales in August were down over a million vehicles from a year ago, a 16.14 million annualized pace vs. 17.22 million.

But the Big Three Detroit automakers reported better-than-expected sales and issued optimistic outlooks as demand from the areas ravaged by Hurricane Harvey will be strong.  Sales post-Katrina in 2005 were.  Ford is the No. 1 automaker in the Houston market, according to IHS Markit.

For the month, General Motors’ sales were up 7.5% over a year ago, while Ford’s fell 2% and Fiat Chrysler’s 11%.

Toyota’s rose 7%, Honda’s fell 2%, Nissan’s dropped 13% and Hyundai’s sales fell 25%.

Many of the automakers, such as in the case of Hyundai this past month, have been cutting sales to rental companies and other fleets from time to time.  [Hyundai did so 53% last month.]

--Amazon.com commenced with its initiative to lower prices at its new Whole Foods Market Inc. subsidiary and the price of more than 100 items was slashed 30% or more.  Prior to the move, prices at Whole Foods were generally seen to be 15% higher than conventional competitors.

The price cuts are no doubt a marketing stunt, but the traffic at the stores on Monday was said to be significantly higher than normal and it’s a win-win for Amazon, which is playing off its Amazon Prime membership.

At least in some stores, the Amazon Echo was available for sale at Whole Foods for $99.99, ditto the Echo Dot.

--Consumer electronics retailer Best Buy reported better-than-expected fiscal second-quarter sales and earnings and guided analysts higher for the current quarter, so pre-opening on Tuesday, the shares were rising sharply.

But then the CEO said same-store sales growth couldn’t be sustained, and the stock reversed and fell 11% at one point.  Year to date the shares had risen 46% this year as of Monday’s close.

Best Buy reported same-store sales growth of 5.4% in its fiscal second quarter, far exceeding expectations of 2.2%.  But CEO Hubert Joly said this was “not the new normal.”

The company did report its domestic online sales rose 31% to $1.1 billion in the July quarter.  Online sales account for 13.2% of domestic revenue, compared with 10.6% a year ago.

--Shares of Under Armour Inc. took another hit when NBA star Kevin Durant, in an interview, said, “Nobody wants to play in Under Armours.  I’m sorry. The top kids don’t because they all play Nike.”

Durant, who is under contract with Nike, said he had not spoken to teammate Steph Curry, who has a multimillion dollar contract with UA, but Durant said, “Everybody knows that.  They just...nobody don’t want to say anything.”

Demand for the Curry 3 shoe has been underwhelming.

The company said in early August it was cutting jobs and closing stores.  Under Armour shares are down about 45% this year.

--Uber Technologies Inc.’s new CEO took charge this week, Dara Khosrowshahi, who spent 12 years at the helm of Expedia Inc.

Because Khosrowshahi had unvested stock options worth $184.4 million as of last Friday’s close, Uber will make this up and then some.

Yes, this seems outrageous, but the guy is supposed to be good, and these next two years are critical to Uber’s long-term success.

Khosrowshahi won out over two higher-profile CEOs (or former CEOs); GE’s Jeff Immelt and Hewlett Packard’s Meg Whitman.

--Wells Fargo & Co. announced this week that it potentially opened 3.5 million accounts in customers’ names without those customers’ knowledge or consent – far more than the 2.1 million it had previously identified, according to an independent review.

The second study looked at a time frame from January 2009 to September 2016, while the initial analysis examined a period from May 2011 to mid-2015.

--General Electric is preparing to significantly reduce head count, particularly corporate staff, in an effort to boost profits under new CEO, John Flannery.  The goal, first laid out by former CEO Jeff Immelt, is to cut spending by $2 billion, after being spurred on to do so by activist investor Nelson Peltz, whose Trian Fund Management owns about $2 billion in GE stock.

--United Technologies is closing in on a deal to acquire Rockwell Collins, the maker of aviation systems and cabin equipment, for $22.5 billion.  UTX, maker of everything from air conditioning units to moving walkways and jet engines, has been rumored for some time to be going after Rockwell.

Rockwell itself just closed on an acquisition of B/E Aerospace, which supplies cabin interior systems such as seats, galley and those super spacious lavatories.

--I love Campbell’s Soup, but the company continued to struggle despite my purchases of same, reporting earnings that missed expectations, with net sales down 1% from a year ago, so the shares tanked 8% in response.

--India’s government reported second-quarter growth of just 5.7%, down from 6.1% in the first quarter.  Analysts were expecting 6.6%, so a huge miss as these things go.

--Canada’s manufacturing PMI for August came in at 54.6, down from 55.5 in July.

--Macau’s monthly gaming revenue declined month-on-month in August, showing the impact of Typhoon Hato, but was still up 20 percent from August 2016, marking the thirteenth straight month of year-on-year growth.

--Southern California’s housing market stayed white hot amid persistent demand and low supply. The six-county area’s median price climbed 7.7% from a year earlier to $501,000, according to a report from CoreLogic.  That puts the median just $4,000 shy of the all-time high set in the summer of 2007.  [L.A. and Orange counties have already surpassed bubble-era highs.  The median in Orange County is now $690,000, up 7.9% from a year ago.]

--AMC Theatres CEO Adam Aron recently called his company’s performance “simply a bust,” and that pretty well sums up the movie business overall this summer. 

If you go back to the first weekend of May through Labor Day – a period that generates about 40% of domestic ticket sales – Hollywood is down 16% from the same period last year, according to comScore, which is worse than the 10% decline studio executives predicted before the summer began.

The number of tickets sold is also at the lowest level since 1992, as reported by the Los Angeles Times.

So among the high-profile films that flopped domestically were “The Mummy,” “Baywatch,” “The Dark Tower,” and “King Arthur: Legend of the Sword.”  Some of the sequels, such as for the “Aliens” and “Transformers” franchises, also fared poorly vs. expectations.

But, international sales have been OK, and that has eased some of the pain.

--In a letter to announce the birth of his second child, August, Facebook co-founder Mark Zuckerberg, together with wife Priscilla Chan, urged the kid to play outside.

“The world can be a serious place.  That’s why it’s important to make time to go outside and play,” said the letter, signed “Mom and Dad.”

The parents wrote: “Childhood is magical. You only get to be a child once, so don’t spend it worrying too much about the future.”

Tell August I’ll add her to my “sleeping with one eye open so you don’t have to” list.

Of course what Mark Zuckerberg is saying is at odds with his social media empire, where everyone is supposed to huddle in the closet, communicating with their ‘friends.’

--Speaking of millennials, Applebee’s recently announced it was done trying to appeal to the food-trend-obsessed group and instead is going to refocus on its “routine traditionalists,” the Boomers and Gen-Xers.

Last year, the chain spent $40 million installing fire grills in all of its 2,000-plus locations across the country in hopes of luring a younger crowd, and it didn’t work.

It would seem that millennials are after the most “Instagrammable” moments a restaurant can offer, and the casual dining chains like Applebee’s and TGI Friday’s don’t seem to offer that.

But Hooters would...right? 

--The “Game of Thrones” season finale Sunday smashed a series record for ratings, attracting 12.1 million viewers, according to Nielsen, including yours truly.

HBO said that when views on HBO Go and its stand-alone app were included, the 79-minute episode had 16.5 million viewers.

And the audience for the series is only growing, as this finale had total viewership 36% greater than last year’s.

But unfortunately for us fans, there is talk the final season of six episodes may not be available until 2019.  We need to contain Kim Jong Un at least until then.

Foreign Affairs

North Korea: Speaking of Lil’ Kim, he fired an intermediate ballistic missile (Hwasong-12) directly over northern Japan on Monday (Tuesday, Pyongyang time), with Japan implementing its alert system for the Hokkaido area to duck and cover.

It was North Korea’s 13th missile test this year, but the first one over a populated area in Japan.

The missile is estimated to have flown nearly 1,700 miles, reaching an altitude of 340 miles, and if aimed that way, would have been capable of threatening Guam.

Japanese Prime Minister Shinzo Abe told reporters, “North Korea’s reckless action is an unprecedented, serious and grave threat to our nation.”

Kim said this was the first step in military action in the Pacific to “contain” the U.S. territory of Guam, and was also a response to joint U.S. and South Korean military exercises.  Kim urged his military to conduct more such launches into the Pacific in the future, according to a statement from the official Korean Central News Agency.

Pyongyang has also said it won’t place its nuclear program on the negotiating table unless the U.S. drops its “hostile” policies.

The UN Security Council, in an emergency session, called the missile test “outrageous” and once again demanded North Korea halt its weapons program.  US Ambassador Nikki Haley said “enough is enough.”

President Trump tweeted in response: “The U.S. has been talking to North Korea, and paying them extortion money, for 25 years.  Talking is not the answer!”

Shortly thereafter, though, Defense Secretary Jim Mattis replied when asked by reporters if the United States was out of diplomatic solutions, “No.  We are never out of diplomatic solutions,” Mattis said before a meeting with his South Korean counterpart at the Pentagon.  “We continue to work together, and the minister and I share a responsibility to provide for the protection of our nations, our populations and our interests.”

In a formal statement, however, Trump said: “Threatening and destabilizing actions only increase the North Korean regime’s isolation in the region and among all nations of the world.  All options are on the table,” this last bit being the throwaway line used for decades by all U.S. leaders.

It was Aug. 22 that Trump tweeted: “I respect the fact that (Kim) is starting to respect us,” referring to the lack of a follow-up test to the long-range ICBM test of late July that so shook up the world.  Aug. 8, Trump had threatened to unleash “fire and fury” against North Korea if it threatened the United States.

But why didn’t the United States attempt to shoot down the missile? I’ve argued we don’t want to show Kim Jong Un that our capabilities may not be up to snuff.  If we missed it, it would be a huge embarrassment, and stoke fears all around, and probably embolden Kim further.

Defense One’s Patrick Tucker notes that “Between January 2002 and August 14 of this year, the Defense Department attempted 37 intercepts of a mid-range missile and hit the target 29 times with an SM-3. There are many reasons for this, but the biggest, according to the Pentagon’s Office of the Director of Operational Testing and Engineering, is that realistic testing of interceptors is very expensive and requires a lot of lead time and support.”

Remember, these tests are conducted under scripted conditions, not those of a real missile launch by Pyongyang.

In February, the Missile Defense Agency showed that their newest version of the standard missile, the SM-3 IIA, could hit a mid-range missile. But a second test in June was a failure.  The Navy later attributed that to human error.  But 50 percent is not a good record for the most advanced intermediate-range interceptor in the U.S. arsenal.

Also, shooting down a North Korean missile would be considered by them to be an act of war.  Thus there has to be a good reason for the U.S. to attempt to shoot it down, such as an actual threat to U.S. forces, our territory, or that of our allies.   And all of these are split-second decisions.

We also learned this week that South Korea has a special forces unit to infiltrate North Korea and assassinate Kim and his closest advisers if war breaks out, a conventional one.

South Korean President Moon Jae-in told his Defense Ministry Monday to implement reforms to the military to meet the challenges that are increasingly being posed by North Korea.

Moon said that the military should be ready to “quickly switch to an offensive posture in case North Korea stages a provocation that crosses the line or attacks the capital region,” according to the Chosun Ilbo newspaper.

Remember what I’ve said for years, particularly with my trip to Seoul about 10 years ago.  There are thousands of North Korean agents in Seoul itself, just waiting for orders.  They are liable to do anything.

Russian President Vladimir Putin warned on Friday that the tense standoff between Pyongyang and the United States was on the verge of large-scale conflict.

Putin, who is going to be attending a summit of the BRICS nations (Brazil, Russia, India, China and South Africa) in China next week, wrote in an article published on the Kremlin’s web site ahead of the trip:

“It is essential to resolve the region’s problems through direct dialogue involving all sides without advancing any preconditions (for such talks).

“Provocations, pressure, and bellicose and offensive rhetoric is the road to nowhere.”

The situation on the Korean Peninsula had deteriorated so much that it was now “balanced on the verge of a large-scale conflict,” Putin said, adding, “In Russia’s opinion the calculation that it is possible to halt North Korea’s nuclear missile programs exclusively by putting pressure on Pyongyang is erroneous and futile.”

Earlier, Russian Foreign Minister Sergey Lavrov warned Secretary of State Rex Tillerson that the U.S. should not add new sanctions against North Korea, in response to Trump’s comment that “talking is not the answer.”

Editorial / New York Post

“With its missile launch over Japan, North Korea’s belligerence has entered a dangerous new level – raising a dire question for President Trump: What to do now?

“The missile was the first ever fired by lunatic leader Kim Jong Un over  a core Japanese island, and Tokyo warned citizens to take cover. And though the North also launched rockets over Japan in 1998 and 2009, it at least pretended (unlike on Tuesday) those carried satellites....

“Even Chinese officials said the North’s latest escalation was veering ‘past the point of no return.’  After all, Pyongyang is thought to have at least 20 nukes, and is at least nearing the know-how to mount them on rockets.

“For Trump, the pressure to respond is now sky-high, especially in the wake of his vow to unleash ‘fire and fury’ if Kim keeps up his provocations.

“Trump gets it: ‘The world has received North Korea’s latest message loud and clear...All options are on the table.’

“Trouble is, Kim has heard such words before.  At what point do options come off the table and get put into action?....

“Trump & Co. need to credibly threaten something Kim actually cares about – maybe the luxury goods enjoyed by the regime’s elite. Find some way to make him hurt.

“As American UN envoy Nikki Haley puts it, ‘Something serious has to happen.’”

Editorial / Wall Street Journal

“Japan’s ultimate security is the U.S. defense and nuclear umbrella, with its treaty guarantee that the U.S. will respond if Japan is attacked. But the logic of deterrence depends on having a rational actor as an adversary, and rationality can’t be guaranteed in North Korea. Its recent development of an ICBM capable of hitting the U.S. mainland also changes the equation.  If North Korea attacked Tokyo and the U.S. responded with an attack on Pyongyang, U.S. cities might then be endangered.

“Japanese leaders have long resisted building their own nuclear arsenal, but that could change if they conclude America isn’t reliable in a crisis.  Or the Japanese may simple decide they can’t have their survival depend on even a faithful ally’s judgment. Some Japanese politicians are already talking about their own nuclear deterrent. And while public opinion currently opposes nuclear weapons, fear could change minds.  Japan has enough plutonium from its civilian nuclear reactors for more than 1,000 nuclear warheads, and it has the know-how to build them in months.

“This prospect should alarm China, which would suddenly face a nuclear-armed regional rival.  The U.S. also has a strong interest in preventing a nuclear Japan, not least because South Korea might soon follow.  East Asia would join the Middle East in a new era of nuclear proliferation, with grave risks to world order. This is one reason that acquiescing to a North Korea with nuclear missiles is so dangerous.

“Yet this is the line now peddled by former Obama National Security Adviser Susan Rice and former Director of National Intelligence James Clapper, who says the U.S. must begin ‘accepting it and trying to cap it or control it.’....

“But ‘control it’ how? North Korea has made clear it won’t negotiate away its nuclear program. The U.S. can threaten mutual-assured destruction, but Tuesday’s missile test over Japan shows how North Korea will use its nuclear threat to coerce and divide the U.S. and its allies.  Accepting a nuclear North Korea means accepting a far more dangerous world.”

Syria / Iraq / Iran: U.S.-led airstrikes blocked a convoy of ISIS soldiers attempting to reach a stronghold in eastern Syria. The 300 fighters and 300 family members were being evacuated from Syria’s western border with Lebanon under a ceasefire agreement involving ISIS, the Syrian army and Lebanon’s Hizbullah.

Eight Lebanese soldiers who have been held by Islamic State since 2014 are presumed to be dead.

But the U.S.-led coalition opposes experienced fighters going to an active battlefield.

In Iraq, the military drove out Islamic State from the town of Tal Afar, one of the group’s few remaining strongholds in the country.  Tal Afar was once a gateway between Mosul in Iraq and Raqqa in Syria, serving as a training ground for many of its foreign fighters.

Jonathan S. Tobin / New York Post

“When the United States chose to let Syria slide into chaos while simultaneously seeking to end the isolation of Iran with a nuclear deal, President Barack Obama thought he was avoiding trouble and giving Iran a chance to ‘get right with the world.’

“But it turns out those blunders are still paying dividends for Iran, creating new dangers in the Middle East and threatening the hopes of the Trump administration. That was made clear this week when Yehya al-Sinwar, the leader of Hamas, announced in Gaza that the terror group had reconciled with Iran.

“Prior to the outbreak of the Syrian civil war, Iran was Hamas’ main source of money and weapons and helped the terror group transform Gaza into a fortress bristling with rockets and missiles that rained terror on Israeli towns and cities.

“But the alliance between the two broke up during the Syrian war as Iran backed the Assad regime and Hamas backed Sunni rebels.

“Experts told us that the split was an inevitable result of the differences between the Sunnis of Hamas and Iranian Shiites.  But while that may be a common divide in the Muslim world, it took a U.S. president with the vanity to believe his illusions were more important than the facts on the ground – Obama – to bring them back together.

“Though Obama repeatedly called for Bashar al-Assad’s ouster, he did nothing to aid those trying to make it a reality, especially when a little help would have gone a long way. He ultimately stood by as Russia and Iran intervened to save Assad.

“By backing down on his ‘red line’ warning on the use of chemical weapons and then punting responsibility for that issue to Russia (which allowed Assad to continue using them), Obama also ensured that Syria would become a land bridge between Tehran and its Hizbullah auxiliaries in Lebanon.

“Obama thought intervention would have been an obstacle to his hopes for a rapprochement with Tehran.  Nor did he let Iran’s refusal to give up its nuclear program stop his push for a deal that vastly enriched the regime while only delaying its quest for a nuclear weapon.

“The result: Iran is stronger and bolder than ever and building weapons factories in Lebanon and Syria. By reconciling with Hamas, it has the capacity to create what might be a three-front war against the Jewish state whenever it chooses to heat up the conflict....

“What can Trump do? The options are limited but he must begin by realizing that sticking to Obama’s decision to let the Russians and Iranians have Syria is a mistake. The same applies to listening to those who have so far persuaded him not to start the process of rolling back the nuclear deal*....

“The Iran-Hamas reunion is a warning that policies that strengthen Russia and its Iranian allies are blunders Israel and the West will keep paying for in blood and treasure.”

*I agree with what Mr. Tobin writes, except that I’ve said since the day the Iran nuke deal was signed, it was too late.  You can’t roll it back...not with the other signatories now strengthening their economic ties to Iran, post-removal of sanctions.

Israel: Prime Minister Benjamin Netanyahu, days after meeting a White House delegation to discuss restarting peace negotiations with the Palestinians, said Israel would not scale back Jewish settlements as part of any agreement, which has long been assumed would be part of any deal.

Netanyahu pledged Israel would never evacuate a single settlement, declaring before a large crowd celebrating 50 years of Israeli settlements in the northern West Bank: “We are here to stay forever. There will be no more uprooting of settlements in the land of Israel.  This is the inheritance of our ancestors. This is our land.”

But much of the rest of the world views Jewish settlements in the West Bank as being illegal.  Successive U.S. presidents have, at the least, called for a stop to their expansion. Even President Trump has said further construction is unhelpful.

Russia: The Trump administration ordered Russia to close its consulate in San Francisco and two diplomatic annexes, in New York and Washington, in retaliation against Russia’s order for the United States to reduce its embassy staff in Moscow by 755 people.

Secretary of State Rex Tillerson, in a phone call with his Russian counterpart, Foreign Minister Sergey Lavrov, attempted to emphasize this was a tit-for-tat move and not designed to further escalate tensions between the two countries, especially in that the administration isn’t expelling any Russian diplomatic personnel, nor did it touch the staff at Russia’s main embassy in Washington

But Lavrov then issued a statement saying the Kremlin “expressed regret at the escalation of tension in bilateral relations,” and said Russia would study the move before deciding on a response.

Separately, NATO announced Wednesday it would send three observers to Russia’s Zapad military exercises this month, though this falls short of Russia’s international obligations.

NATO has warned that the Russian exercises in both Russia and Belarus are a potential smokescreen for deploying more military equipment on a permanent basis to the border region, thus heightening the risk of a miscalculation.

So now NATO gets to send two experts to Belarus and one to Russia, which is beyond a joke.  Plus, the experts are allowed to attend the official “Visitor Day” of the exercise, only, though Belarus said there will be more than one such day.

Under the Vienna Document, an international agreement governing military exercises in Europe, NATO is to have access to individual soldiers and overflights of the drill area.

But Moscow claims only 12,700 troops will participate, while NATO and U.S. officials say it will be far larger, as many as 70,000.  The threshold for triggering international observers is 13,000.  As Church Lady would have said, “How conveeenient.”

I have said for months this is a test for the Trump administration, and that it was a layup for our president to show his support for NATO by “demanding” Russia live up to its obligations.

But failing to do so is in keeping with Trump’s modus operandi when it comes to all things Russia.  I’m also surprised I haven’t seen anyone else mention my idea.

Lastly, Azita Raji, a former U.S. ambassador to Sweden, had an op-ed in the Wall Street Journal talking about the growing ties between non-NATO members Sweden and Finland and NATO, which Russia doesn’t like one bit.

“(Sweden and Finland) seem to be playing it safe, with one foot in the NATO camp and the other – even if lightly set down – outside it. But for all the talk of neutrality, Sweden and Finland are as militarily capable as some NATO allies and enjoy a privileged relationship with the alliance.

“The peril in this is Russia’s growing ire at the increasingly close relationships among the Swedes, the Finns and NATO. Russia has warned both nations of harsh consequences if they join the alliance. This ought not be dismissed as idle blather: Mr. Putin has sent aircraft close to the Swedish border to run practice strikes on Stockholm. Swedes and Finns suffer Russian cyberattacks, overflights and misinformation campaigns meant to destabilize their governments.”

So Sweden and Finland feel more vulnerable than they did during the Cold War, and they will be among those most interested in the Zapad exercises.

Raji:

“Leaders in Stockholm and Helsinki are about to witness in Zapad a possible harbinger of the future. How this leads them to rethink their relationship with NATO will have a profound impact on the security of generations to come.”

China: India and China agreed to pull their troops back from a disputed border area after a tense, months-long standoff.

The row began in mid-June when India said it opposed a Chinese attempt to extend a border road on the plateau.

Separately, China said it will shut 6,000 non-coal mines in an effort to reduce mining accidents and deaths by 2020.  More than 500 died in non-coal mining accidents in 2015.

Kenya: The Supreme Court, in a 4-2 decision, invalidated the result of last month’s contentious presidential election and ordered a new vote within 60 days.

The judges upheld a petition filed by opposition candidate Raila Odinga, who claimed the re-election of President Kenyatta was fraudulent.

What I don’t understand is international observers seemed to have reached the consensus the vote was fine.

India / Bangladesh / Nepal: The annual monsoons have been particularly severe this year, killing more than 1,200 at last report.  Mumbai has been particularly hard hit, with millions living in shantytowns and zero established drainage.

Myanmar: The government of Nobel Peace Prize recipient Aung San Suu Kyi continues to battle with the Rohingya Muslim minority in the country’s northwest, with a report that nearly 400 have been killed in fighting and 38,000 Rohingya fleeing to Bangladesh.  It’s complicated, but Suu Kyi looks awful in this crisis.  Pope Francis is also slated to visit the country in a few weeks.

Random Musings

--Presidential tracking polls....

Gallup: 34% approval / 60% disapproval
Rasmussen: 42% approval / 56% disapproval

--An analysis from the University of Wisconsin’s Space Science and Engineering Center has determined that Hurricane Havey is a one-in-1,000-year flood event that overwhelmed an enormous section of Southeast Texas equivalent in size to New Jersey.

According to Wisconsin researcher Shane Hubbard, “In looking at many of these event (in the U.S.), I’ve never seen anything of this magnitude or size.  This is something that hasn’t happened in our modern era of observations.”

At least 20 inches of rain fell over an area larger than 10 states, including West Virginia and Maryland.

Apart from Harvey, there’s simply no record of a 1,000-year event occupying so much real estate.

For the record, Cedar Bayou, east of Houston, reported 51.88 inches of rain, breaking a continental U.S. record previously held by Medina, Tex., which received 48 inches during Tropical Storm Amelia in 1978.

During one 24-hour period, Mon.-Tues., Beaumont, Tex., had over 26 inches.

--Changing the subject, following are two opinions on the issues facing the Republican Party.

David Brooks / New York Times...on Republican identity politics....

“The GOP was founded to fight slavery, and through most of its history it had a decent record on civil rights. A greater percentage of congressional Republicans voted for the Civil Rights Act than Democrats.

“It’s become more of a white party in recent years, of course, and adopted some wrongheaded positions on civil rights enforcement, but it was still possible to be a Republican without feeling like you were violating basic decency on matters of race.  Most of the Republican establishment, from the Bushes to McCain and Romney, fought bigotry, and racism was not a common feature in the conservative movement.

“Between 1984 and 2003 I worked at National Review, The Washington Times, the Wall Street Journal editorial page and The Weekly Standard.  Most of my friends were Republicans.

“In that time, I never heard blatantly racist comments at dinner parties, and there were probably fewer than a dozen times I heard some veiled comment that could have suggested racism.  To be honest, I heard more racial condescension in progressive circles than in conservative ones.

“But the Republican Party has changed since 2005. It has become the vehicle for white identity politics....

“According to a survey from the Public Religion Research Institute, for example, about 48 percent of Republicans believe there is ‘a lot of discrimination’ against Christians in America and about 43 percent believe there is a lot of discrimination against whites....

“(White) identity politics as it plays out in the political arena is completely noxious.  Donald Trump is the maestro here. He established his political identity through birtherism, he won the Republican nomination on the Muslim ban, he campaigned on the Mexican wall, he governed by being neutral on Charlottesville and pardoning the racialist Joe Arpaio.

“Each Republican is now compelled to embrace this garbage or not. The choice is unavoidable, and white resentment is bound to define Republicanism more and more in the months ahead.  It’s what Trump cares about.  The identity warriors on the left will deface statues or whatever and set up mutually beneficial confrontations with the identity warriors on the right.  Things will get uglier.

“And this is where the dissolution of the GOP comes in.  Conservative universalists are coming to realize their party has become a vehicle for white identity and racial conflict. This faction is prior to and deeper than Trump.

“When you have an intraparty fight about foreign or domestic issues, you think your rivals are wrong.  When you have an intraparty fight on race, you think your rivals are disgusting.  That’s what’s happening.  Friendships are now ending across the right.  People who supported Trump for partisan reasons now feel locked in to support him on race, and they are making themselves repellent.

“It may someday be possible to reduce the influence of white identity politics, but probably not while Trump is in office. As long as he is in power the GOP is a house viciously divided against itself, and cannot stand.”

So here’s a retort, courtesy of Kurt Schlichter of Townhall.com...an old friend of WIR, Richard H., having passed it along.

“But what’s the end game (for the Never-Trump crowd)?  What are they thinking is going to happen?  Do they think that one morning Trump is going to wake up and think ‘Gosh, all these people telling me I’m wrong and mean and crude and tweet too darn much must be right.  I’ll change, because I always take the advice of people who I’ve already broken and humiliated.’

“Unlikely, because Trump doesn’t respect you.  And he doesn’t respect you because he’s already beaten you. He’s not a gracious winner, but to be fair, you’ve hardly been gracious losers.  Oh, how it must gall you to be so utterly defeated by someone you consider your moral and intellectual inferior.

“So if you’re not going to change Trump, what do you think you’re going to do?  Do you think you’re going to somehow drive Trump out of office?  Let’s run down that scenario. Now we have President Pence, and about 75% of your party’s base infuriated at your backstabbing betrayal. That seems disastrous even if you buy the idea that President Pence would somehow preside over a return to something like business as usual. He might, at least until the next election. Then you’re all toast.  Let’s just say that in addition to your treachery, your past track record of total failure to achieve the conservative goals you promised won’t particularly inspire Trump supporters to lend you their support.

“Or maybe you think our voters would just be so disgusted that they would let the Democrats grab a majority on Capitol Hill and the White House too.  Maybe you figure you could live with that. Maybe you think you can wait out the base’s fury by crawling back into the comfortable gimp box of submissive GOP congressional opposition.

“Except it won’t work that way.  Through all this Tea Partying and Trumping, we normal got a taste for power, and we like it. We’re not just going to just shrug our shoulders when the guy we picked gets deposed in a coup. We’re going to get mad. Really mad. And you’re going to get primaried. Just ask Jeff Flake (Dork-AZ).  Have you seen his approval numbers?  There are strains of the herpes virus that poll higher.  [Ed. I checked...yes, Flake’s numbers aren’t good.  And I like the guy.]

“No, there’s no going back to the old days.  This is the new normal, and there are new rules, rules you better learn to play by. The most important of these is, ‘Take your own voters’ side in a fight.’ You should try it, because if you didn’t like the Tea Party, and you hate Donald Trump, you are going to be really, really, really unhappy with what we normal will do next.”

Again, just presenting both sides.

--Kid Rock continues to flirt with a run for the Senate in Michigan as a Republican, against Dem. incumbent Debbie Stabenow, and I’m on record as supporting his candidacy should be choose to do so.  I’ve read a lot on this man, seen a lot of interviews, and I believe he’d be a fantastic senator.  [I would tell him, though, that in some of his recent tweets on a potential bid that he needs to eliminate the F-words.  I would vote for him anyway...but that’s not how you expand the base.]

So from Ben Kamisar of The Hill, these are the comments of Robert Steele, the Republican National Committeeman from Michigan.

“People know him – he’s an extremely strong brand in Michigan.  He’s fought for Detroit, he’s fought hard for kids who want to go to his concerts, he’s fought hard for the working class, he’s a southeast Michigan booster through and through.

“If he were in the race, I think he would win. But I doubt we’ll see him in the race.”

And some don’t think Robert Ritchie (his real name) is interested in learning how to be a senator. Plus Stabenow has won both of her past two Senate races by double-digit margins.

But among Ritchie’s biggest supporters, surprisingly to moi, is former New York Gov. George Pataki, citing his ability to draw big crowds, and being one “who has supported our troops and been supportive of the concept of limited government.”

One big problem, Ritchie most likely has to use his real name on the ballot, at least as the law in Michigan stands today.

At the end of the day, though, fellow Michigan rocker Ted Nugent may have it right: Ritchie “ain’t running for jack squat.”

--Tom Moran / Star Ledger

“The lurid indictment against Sen. Robert Menendez, D-New Jersey, reads like an episode of ‘House of Cards,’ with dark tales of bribery, private jets and powerful old men in the intimate company of beautiful young women. So, if you like spicy romance novels, pull up a chair.

“But I’ve been digging at the politics around this high-stakes trial, which starts next week, and have come to two conclusions:

“One, Menendez is almost certain to be convicted of at least one felony, for his failure to disclose gifts he concedes receiving. The bribery charges will be tougher to prove, given there is no wiretap and no sign yet that the man alleged to have paid the bribes, Dr. Salomon Melgen, will testify against Menendez.

“But the disclosure charge is straightforward, and even the senator’s friends concede privately that he’s in real trouble on that one.  The best defense Menendez has offered, so far, is that it slipped his mind.  He was magically reminded by media reports.

“Is there a jury in America today that is inclined to give a politician that enormous benefit of the doubt?  How many of them would forget that a friend flew them on a private jet to a luxury resort in the Caribbean – twice?”

As a Republican you might think I’m gleeful over Democrat Menendez’ problems, but this is one of the smarter folks in the Senate when it comes to foreign policy and with all the crises we face, I wish he could have stayed clean.  [Very similar to another former Democratic senator from my state, Robert Torricelli, fiercely bright, and corrupt, who has an outside shot of replacing Menendez, if we get that far.  This wouldn’t be Republican Gov. Chris Christie’s decision, in case you’re wondering. A Democrat is replacing him with the November gubernatorial election.]

--Antifa

Editorial / Wall Street Journal

“Politically charged street brawls broke out in Berkeley, California, on Sunday, with police arresting 13 charming participants on charges including assault with a deadly weapon. One Twitter video showed masked activists kicking a man curled in a fetal position on the ground; the beat-down stopped only when a journalist, Al Letson, shielded the man with his body.  ‘I was scared they were going to kill him,’ Mr. Letson said.

“As Charlottesville drew attention to the worst elements of the far right, Sunday’s melee revealed an increasingly violent fringe of the radical left that has received far less media coverage, much less criticism. It’s called Antifa, pronounced ‘An-tee-fa,’ which is short for ‘anti-fascist.’

“Antifa members sometimes claim their movement spans the globe and dates to the 1920s and ‘30s, citing the 1936 Battle of Cable Street, where protesters shut down a march by the British Union of Fascists.  But in the United States and Britain, Antifa grew in the 1980s primarily out of the punk rock scene. As Nazi and white supremacist skinheads became a bigger part of this largely un-policed subculture, far-leftists met violence, calling it self-defense.

“As it grew beyond punk, Antifa’s adherents organized through the now-defunct Anti-Racist Action network and now sometimes through the Torch Network, as well as other less visible groups.  Many activists also aligned themselves with the broader anti-globalization movement. But Donald Trump’s election has become the catalyst launching Antifa into a broader political movement.

“The Antifa members we’ve interviewed shun the Democratic Party label, saying their activism constitutes its own political orientation.  They’re mostly anarchists and anarcho-communists, and they often refer to fellow protesters as ‘comrades.’  Adherents typically despise the government and corporate America alike, seeing police as defenders of both and thus also legitimate targets....

“Antifa activists have also developed their own moral justification for suppressing free speech and assembly. As anarchists, they don’t want state censorship. But they do believe it’s the role of a healthy civil society to make sure some ideas don’t gain currency....

“Words don’t constitute violence, despite what Antifa activists believe.  But there are dangerous ideas and practice, and the radical left has embraced several of them. Democracies solve conflict through debate, not fisticuffs.  But Antifa’s protesters believe that some ideas are better fought with force, and that some people are incapable of reason.

“Implicit in this view is that Antifa alone has the right to define who is racist, fascist or Nazi. It’s a guerrilla twist on the culture wars, when a microaggression must be met with a macroaggression.

“Antifa has also widely embraced ‘Black Bloc’ tactics, including disguising themselves with black garb and covering their faces with bandanas and balaclava.  It’s not a good look for a supposedly anti-authoritarian group to show up in uniform, like the KKK in white hoods, much less armed with batons.

“Which brings us back to Berkeley. This weekend two right-wing groups sought to hold peaceful rallies. Their leaders – Patriot Prayer’s Joey Gibson, a Japanese-American, and Amber Cummings, a transgender Trump supporter – explicitly denounced racism. Amid fears of violence, both cancelled their events. Antifa showed up anyway, outnumbering and terrorizing any right-wingers or Trump supporters who dared show their faces.

“Antifa views itself as fundamentally reactionary, as necessary opposition to corrosive ideologies.  But because your foe is a really bad guy doesn’t mean you’re inherently a good one.  Movements are defined not merely by what they oppose but by what they do.  Antifa’s censorious criminality resembles the very political behavior it claims to fight. The mainstream  left ought to denounce it as much as the right should reject white supremacists.”

House Democratic Leader Nancy Pelosi:

“Our democracy has no room for inciting violence or endangering the public, no matter the ideology of those who commit such acts.  The violent actions of people calling themselves antifa in Berkeley this weekend deserve unequivocal condemnation, and the perpetrators should be arrested and prosecuted.

“In California, as across all of our great nation, we have deep reverence for the Constitutional right to peaceful dissent and free speech. Non-violence is fundamental to that right.  Let us use this sad event to reaffirm that we must never fight hate with hate, and to remember the values of peace, openness and justice that represent the best of America.”

Marc A. Thiessen / Washington Post

“Last weekend in Berkeley, Calif., a group of neo-communist antifa – ‘anti-fascist’ – thugs attacked peaceful protesters at a ‘No to Marxism in America’ rally, wielding sticks and pepper spray, and beating people with homemade shields that read (I kid you not) ‘No Hate.’ The Post reports how one peaceful protester ‘was attacked by five black-clad antifa members, each windmilling kicks and punches into a man desperately trying to protect himself.’  Members of the Berkeley College Republicans were then stalked by antifa goons who followed them to a gas station and demanded they ‘get the [expletive] out’ of their car, warning, ‘We are real hungry for supremacists and there is more of us.’

“The organizer of the anti-Marxism protest is not a white supremacist. Amber Cummings is a self-described ‘transsexual female who embraces diversity’ and had announced on Facebook that ‘any racist groups like the KKK [and] Neo Nazis...are not welcome.’ The protest was needed, Cummings said, because ‘Berkeley is a ground zero for the Marxist Movement.’

“As if to prove Cumming’s point, the antifa movement responded with jackboots and clubs – because their definition of ‘fascist’ includes not just neo-Nazis but also anyone who opposed their totalitarian worldview.

“And let’s be clear: Totalitarian is precisely what they are.  Mark Bray, a Dartmouth lecturer who has defended antifa’s violent tactics, recently explain in The Post, ‘Its adherents are predominantly communists, socialists and anarchists’ who believe that physical violence ‘is both ethically justifiable and strategically effective.’ In other words, they are no different from neo-Nazis.  Neo-Nazis are the violent advocates of a murderous ideology that killed 25 million people last century. Antifa members are the violent advocates of a murderous ideology that, according to ‘The Black Book of Communism,’ killed between 85 million and 100 million people last century. Both practice violence and preach hate.  They are morally indistinguishable. There is no difference between those who beat innocent people in the name of the ideology that gave us Hitler and Himmler and those who beat innocent people in the name of the ideology that gave us Stalin and Dzerzhinsky.  The United States defeated two murderous ideologies in the 20th century. So we should all be repulsed by the sight of our fellow Americans carrying the banners of either movement, whether they are waving the red flags of communism or black flags of Nazism. Yet we are not.  Communism is not viewed as an evil comparable to Nazism today. As Alex Griswold recently pointed out, the New York Times has published no fewer than six opinion pieces this year defending communism, including essays praising Lenin as a conservationist, explaining why Stalinism inspired Americans, and arguing that the Bolsheviks were romantics at heart and that women had better sex under communism. Can one imagine the Times running similar pieces about the Nazis?....

“After Charlottesville, the media rightly demanded that President Trump and all Republicans condemn the neo-Nazis and the KKK. So where are the calls for Democrats to condemn antifa [Ed. Thiesen notes Nancy Pelosi has been the exception.] – and the brutal public condemnation for those who fail to do so? If black-clad neo-Nazis had attacked peaceful protesters at a ‘No to Racism in America’ march in Berkeley, politicians in Washington would be falling over themselves to express their disgust – and any who failed to do so would be vilified. But when neo-communists commit this kind of violence, they get a pass from the Left.

“That cannot be allowed to stand.”

--Editorial / Wall Street Journal

“To paraphrase Marx, all great historical events occur twice: first as tragedy, second as some action by the Los Angeles City Council. The latest demonstration came Wednesday when the council banished Columbus Day from the city calendar. Henceforth in L.A., the second Monday in October will be Indigenous Peoples Day.

“We have no dispute with any group or city that wishes to celebrate the culture and achievements of indigenous peoples.  Such celebrations are a staple of American life and contribute in their way to e pluribus unum.

“But L.A.’s move isn’t about celebrating.  It’s about indicting anything that represents Western civilization, as Christopher Columbus most certainly does. So how ironic that in deposing the Italian explorer, Los Angeles council members find themselves taking the side of the Ku Klux Klan of the early 20th century – whose nativism led it to oppose statues, memorials and days devoted to Columbus because he was Catholic, Southern European and called to mind the new waves of non-English immigrants at the time.

“That’s precisely the danger of applying modern sensibilities to judge people from the past. Columbus had his faults, and honest histories address them. But if we honored only saints, few would make it onto pedestals.

“If Columbus has to go, does FDR’s wartime internment of Japanese-Americans mean we tear down his memorial on the national mall?  Most Americans sensibly would say no, but today it’s the vandals who are ascendant...

“So perhaps it’s fitting that an L.A. City Council that thinks it is leading a politically correct charge is really completing the work urged by an earlier generation of haters and nativists. We wonder if the council knows it has given President Trump a political gift by demonstrating that what so many on the left really oppose is the larger triumph of Western civilization.”

--Defense Secretary Mattis, addressing troops stationed abroad, at an unknown location; a video having recently surfaced.

Mattis said the U.S. is facing “problems.”

“Our country right now, it’s got problems we don’t have in the military.  You just hold the line until our country gets back to understanding and respecting each other and showing it.”

Mattis added he came out of retirement to “serve alongside young people like you who are so selfless and, frankly, so rambunctious.”

It is assumed Mattis’ comments were made on a recent trip to Jordan, Turkey and Ukraine, and likely following the turmoil in Charlottesville.

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

God bless America.

How about our Coast Guard?!

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Gold $1329...first weekly close over $1300 since November
Oil $47.35

Returns for the week 8/28-9/1

Dow Jones  +0.8%  [21987]
S&P 500  +1.4%  [2476]
S&P MidCap  +1.7%
Russell 2000  +2.6%
Nasdaq  +2.7%  [6435]

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

Dow Jones  +11.3%
S&P 500  +10.6%
S&P MidCap  +4.7%
Russell 2000  +4.2%
Nasdaq  +19.6%

Bulls 49.5
Bears 19.1 [Source: Investors Intelligence]

Have a great week.

Dr. Bortrum posted a new column.

Next WIR is going to be lacking in some late detail that Friday and may be posted later than normal. 

Brian Trumbore