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09/23/2017

For the week 9/18-9/22

[Posted 11:30 PM ET, Friday]

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Edition 963

The way this column works, I normally have it basically finished by 4:00 p.m. or so, then I immediately start proofing, which takes forever, make the changes, fill in market returns, and now it’s about 9:00 p.m., after which I add a little more and try to post by 11:30 p.m.

The column was thus largely complete when President Trump took the stage in Huntsville, Alabama tonight, around 8:00 p.m. ET, and I had to watch it.  It’s what I do.

I can’t rewrite what follows, nor would I, but being the ‘wait 24 hours’ guy, had I been posting tomorrow night, some of it would be.

I was beyond appalled at Trump’s speech for Alabama Sen. Luther Strange.  It was embarrassing, and deeply disturbing.  I had the Fox News channel on and when Trump finally wrapped up around 9:30, I had to catch the initial commentary from “The Five” crew and of course they were fawning all over the president.

Because I don’t like to make snap judgments, I’ll move on for now.  Let me just say that Trump had some good moments this week, but this was one of the worst of his presidency.  And I just bit my tongue straight through.

---

This has been an awful time for Planet Earth, and with the war of words between the United States and North Korea it could easily get far worse.

But I can’t help but start with the devastation wrought by Hurricane Maria on parts of the Caribbean, specifically Dominica, St. Croix and Puerto Rico.  Coupled with the destruction from Hurricane Irma just two week earlier, and before that, Hurricane Harvey, and one can’t help but get depressed when you look at the millions of lives that have been changed forever.

Where do you even begin to rebuild Puerto Rico?  There are zero resources there to draw on, like the citizens of Key West or Houston have in the United States.  If Puerto Rico was attached to us by a causeway, you could at least feel like, ‘they’ll get through this.’

But sitting where they are, and already being bankrupt, and with America being stretched to the max when it comes to emergency resources and response teams, it is beyond overwhelming.

And as for the likes of Dominica, and Barbuda before it, it’s over.  I got a kick out of some on the news this week talking about so-and-so is going to rebuild their bar, like you or I will jump at the opportunity to head on down to party.  You kidding me?

The United States has to do all it can to help these people, especially those that are formally part of us.  But we have to be smart.  Some of these places are gone forever.  Accept it.

I would be in favor, though, of some kind of Peace Corps concept for our young people; give them an opportunity to help rebuild some of the islands.  Yes, it’s going to cost a ton of money, whether it’s Houston or Puerto Rico.  We’re going to have to spend it, with hopefully the world’s greatest watchdog overseeing it all because this is when corruption can be rampant.

For now, you still have 66,000 living in FEMA hotels in Houston, scores doing the same in Florida, and millions without hope in the Caribbean.  Between the three storms, well over 200 have lost their lives. 

And then there is the earthquake in Mexico City, whose toll is undoubtedly 2 or 3 times the official tally thus far.

But we move on.  There’s a certain guy in Pyongyang demanding our attention.

Trump...the UN...North Korea

Over the weekend, North Korea said it was seeking military “equilibrium” with the United States, and Pyongyang would continue to run “full speed and straight” toward achieving this goal, Kim Jong Un told his top missile unit, according to the state news agency.  Last Friday, the North launched its second ballistic missile over Japanese airspace in a month.

On the Sunday news shows, U.N. Ambassador Nikki Haley said that if diplomatic measures with North Korea continue to fail, Defense Secretary James Mattis is ready to “take care” of the situation.

Appearing on CNN’s “State of the Union,” Haley said: “If North Korea keeps on with this reckless behavior, the United States has to defend itself or defend its allies...North Korea will be destroyed, and we know that and none of us want that.  None of us want war,” she said.

President Trump then gave his first speech to the U.N. General Assembly on Tuesday and said America would destroy North Korea if forced to defend itself or its allies.  Trump mocked Kim Jong Un, saying: “Rocket man is on a suicide mission.”

Trump and his administration have repeatedly warned North Korea over its weapons tests, which violate U.N. Security Council resolutions.

“If [the U.S.] is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea,” Trump said.

Just before Trump spoke, U.N. Secretary General Antonio Guterres had urged statesmanship, saying: “We must not sleepwalk our way into war.”

North Korean Foreign Minister Ri Yong-ho said after Trump’s speech: “There is a saying that goes: ‘Even when dogs bark, the parade goes on.’  If [Trump] was thinking about surprising us with the sound of a barking dog then he is clearly dreaming.”

Thursday, Trump announced he would sign an executive order imposing new sanctions on Pyongyang “that significantly expands authority to target individuals, companies, and financial institutions that finance and facilitate trade with North Korea.”  Trump also met with Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in.

In a statement following Trump’s speech, President Moon said: “We view the speech as portraying a firm and specific stance on the key issues regarding keeping peace and safety that the international community and the United Nations are faced with.

“It clearly showed how seriously the United States government views North Korea’s nuclear program as the president spent an unusual amount of time discussing the issue,” the statement read.  [Trump’s speech] “reaffirmed that North Korea should be made to realize denuclearization is the only way to the future through utmost sanctions and pressure.”

But German Chancellor Angela Merkel condemned Trump’s threat to “totally destroy” North Korea, saying sanctions and diplomacy were the only way to get Pyongyang to the negotiating table.  “I am against such threats.”

Friday, Kim Jong Un made an unprecedented televised statement, personally addressing Trump for the first time and accusing him of being “mentally deranged.”

Kim said that Trump would “pay dearly” for the threats, and that North Korea “will consider with seriousness exercising of a corresponding, highest level of hardline countermeasure in history.”

“I am now thinking hard about what response he could have expected when he allowed such eccentric words to trip off his tongue,” Kim said. “I will surely and definitely tame the mentally deranged U.S. dotard with fire.”

Hours later, Pyongyang’s foreign minister told reporters in New York that North Korea could launch a nuclear missile test in response.  “This could probably mean the strongest hydrogen bomb test over the Pacific Ocean,” said Ri Yong Ho.

Trump tweeted: “Kim Jong Un of North Korea who is obviously a madman who doesn’t mind starving or killing his people, will be tested like never before!”

Opinion....

Daniel Henninger / Wall Street Journal

“On July 28 this year, North Korea’s Kim Jong Un tested an intercontinental ballistic missile.  Analysts said its potential flight path on an optimum trajectory could travel some 6,400 miles. We can’t help but notice that most of the commentators who are dumping condescension on President Trump for threatening to ‘totally destroy North Korea’ live in New York or Washington rather than Seattle or San Francisco.  Or Seoul or Tokyo or anywhere people live who no longer see Kim’s 250-kiloton bomb – about 17 times as big as what hit Hiroshima in 1945 – as an intellectual or journalistic abstraction.

“Mr. Trump violated foreign-policy sensibilities on the Eastern Seaboard by saying out loud what has been an implicit reality of U.S. strategic policy since the dawn of the nuclear age: We reserve the right to use nuclear weapons to pre-empt a first strike from an adversary, and that includes an enemy’s nuclear, chemical or biological weapons.  The reason resided in one simple Cold-War word: deterrence.

“Toward the end of the Obama presidency, concerns emerged that Mr. Obama would adopt the ‘no first use’ doctrine on nuclear weapons long favored by progressive arms-control activists. He did not.  Also worth keeping in mind amid the outcry that Mr. Trump’s speech violated some sort of international gentlemen’s agreement is that NATO has refused for 70 years to adopt no first use.

“Until recently, no American president needed to make such threats in public.  An assumption of the Cold War was that the Soviet Union’s leadership ultimately was rational, and so we negotiated nuclear agreements with them.  Some similar baseline of assumed rationality attached to dealing with each subsequent nuclear power, such as China, India and even Pakistan.

“Pakistan and India – estimated to have more than 100 nuclear warheads each – rattled the world’s nerves as recently as 2002, when the two countries massed armies along their 2,000-mile border after a terrorist attack on the Indian Parliament.

“Whether Iran’s revolutionary and messianic religious leadership is ‘rational’ in the Cold War meaning lies at the heart of the disagreement over the Obama nuclear deal with Tehran.  The Iranians understood this requirement, and so they put forth as their negotiator Foreign Minister Javad Zarif, a ‘rational man’ from Hollywood central casting, unlike the evil-eye mullahs who actually decide Iranian nuclear strategy, which looks a lot like North Korea’s nuclear strategy.  Yet another of Mr. Trump’s violations of Eastern Seaboard sensibilities is to suggest the Iranians are less trustworthy on nukes than, say, Mikhail Gorbachev.

“Since 1993, the U.S. has pursued the standard model of rational-man arms control negotiations with North Korea.  This false, 25-year-long presumption now has brought us to within perhaps one year of Kim being able to attach a miniaturized nuclear bomb to the cone of an ICBM.

“The day that happens, the world will have crossed a Rubicon into a nuclear reality incomparably more dangerous than anything in the previous seven decades.  On Tuesday, a U.S. president spoke truth to nuclear power.  Eastern punditry will never recover from the way Mr. Trump said it, but the rest of the rational world will adapt.”

David Ignatius / Washington Post

“When you discount the rhetorical overkill, the most surprising thing about President Trump’s address to the United Nations on Tuesday was how conventional it was. He supported human rights and democracy; he opposed rogue regimes; he espoused a global community of strong, sovereign nations.  Pretty shocking stuff. Because he’s Trump, the zingers got the headlines: He repeated his childish, snarky (but sort of funny) playground denunciation of North Korean leader Kim Jong Un: ‘Rocket Man is on a suicide mission.’ And he offered a bombastic threat that if North Korea attacks the United States or its allies, ‘we will have no choice but to totally destroy’ it.

“Okay, got that: It’s a restatement of the existing U.S. policy of nuclear deterrence.  Trump also thanked China and Russia for their diplomatic help and pushed them to do more. He said the Iran nuclear deal was ‘an embarrassment’ and Iran’s regional actions were a ‘scourge,’ but he didn’t say he would tear up the deal.  He appealed to the Iranian people, without exactly calling for regime change.  He checked all the hard-liner boxes, in other words, without making any new commitments.

“It was a well-cooked pudding, the sort of speech Trump might have given at his inauguration back in January if he hadn’t been so angry.  Back then, he spoke like a wrecker (raging about ‘American carnage’).  Now he’s using the alliterative phrases that are speechwriters’ earwigs, as in calling for ‘a renewal of will, a rediscovery of resolve and a rebirth of devotion.’  Stirring, pleasant to hear, otherwise incomprehensible.

“Trump even had one of those JFK-style false-dichotomy ‘ask not...but what...’ passages when he talked about the choice between lifting the world to a new height or letting it fall into a ‘valley of disrepair.’

“The speech was reportedly written by Stephen Miller, a.k.a. Darth Vader to many in the mainstream media, but this seemed to be Miller 2.0, and perhaps the language left his now-deposed mentor Stephen K. Bannon gnashing his teeth: What happened to the insurgent populist Trump who talked a year ago as if he wanted to topple the global order?  On Tuesday, Trump seemed instead to embrace an updated version of it.

“Trump’s address offered a heavier dose of nationalism and self-interest: he wanted to root collective action in sovereignty and reciprocity, rather than a vaguer ‘globalism.’  He spoke about righteousness defeating evil, a ‘great reawakening of nations’ and other fuzzy Reaganisms.  But at its core, this was a speech that any president since Harry S. Truman probably could have delivered.  (Interestingly, Trump twice favorably mentioned Truman, the haberdasher from Kansas City whose stubborn common sense shaped the liberal order.)....

“So what worries me about Trump’s speech? Oddly, it’s precisely that it was so conventional.  If Trump is going to deal successfully with North Korea, he’ll truly have to think outside the box.  If he wants a better, longer-lasting deal with Iran, he needs in some way to engage that nation and its people.

“And most of all, Trump needs to bring America with him in making a reformed United Nations a place that actually solves problems. The Great Disrupter says he wants to revive the global community and make it work better.  Okay, Mr. President, let’s see what you’ve got.”

Editorial / Wall Street Journal

“Donald Trump’s method has been to use his speeches on the world stage to roil diplomatic convention, and he did it again Tuesday in his address to the United Nations.  No coterie of complacency deserves candor more, and perhaps Mr. Trump’s definition of ‘America First’ is even evolving to recognize the necessity of American global leadership.

“The President abandoned any nuance, even by his standards, in denouncing the ‘rogue regimes’ in North Korea and Iran.  He was especially unabashed in describing North Korea’s offenses, calling it a ‘depraved regime.’  These aren’t words typically heard at Turtle Bay, where others among the depraved sit on the Human Rights Council, as Mr. Trump also had the effrontery to point out.

“But he really rattled the seats with his threat to act against North Korea if the U.N. fails to do so.  ‘No nation on Earth has an interest in seeing this band of criminals arm itself with nuclear weapons and missiles,’ Mr. Trump said.  ‘The United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea.  Rocket Man is on a suicide mission for himself and for his regime.’

“The threat to destroy the North offended the foreign affairs cognoscenti, who view Mr. Trump as a barbarian. And at first hearing the ‘Rocket Man’ reference to dictator Kim Jong Un does sound like an insult better left to teenagers in the school yard.

“Then again, Mr. Trump inherited the North Korean nuclear crisis, and he is trying to get a cynical world’s attention that he intends to do something about it. Traditional diplomacy isn’t getting through to Mr. Kim and his entourage, or to their patrons in Beijing. After years of Barack Obama’s diplomatic niceties that ducked the problem, maybe the world needs to be told some unpleasant truths about an evil regime with a weapon of mass murder and the means to deliver it.

“Mr. Trump added a challenge that most of the media ignored: ‘The United States is ready, willing, and able, but hopefully this will not be necessary. That’s what the United Nations is all about. That’s what the United Nations is for.  Let’s see how they do.’

“This is another hard truth. The U.N. was founded on the promise to provide what Mr. Obama often called ‘collective security.’  But the U.N. has nearly always failed in that duty amid Russian vetoes at the Security Council, as during the Cold War and this decade in Syria, or out of indifference as in the Rwanda genocide of the 1990s.

“The great exception was the first Iraq war, after the fall of the Berlin Wall, when George H.W. Bush rallied the U.N. to resist Saddam Hussein’s invasion of Kuwait. The U.S. provided the military muscle to enforce the U.N.’s will, but at least the U.N. wasn’t an obstacle.  Alas, Turtle Bay has since returned to its previous habit of abetting the world’s rogues by preventing collective security....

“Mr. Trump is right to challenge the U.N., but the hard truth he may be learning is that there is no substitute for U.S. leadership on behalf of American values and interests if he wants to build a more peaceful world.”

Benny Avni / New York Post

“For 50 minutes on Tuesday, President Trump dazzled, and appalled, U.N. denizens in a speech that was the most detailed and reasoned defense to date of his ‘America First’ ideology.  The nationalism was still there, but any hint of isolationism was absent.

“If ‘Rocket Man’ Kim Jong Un refuses to end his missile and nuclear programs and keeps up his ‘suicide mission,’ Trump said, and if countries fail to isolate him despite the U.N.’s own resolutions, America ‘will have no choice but to totally destroy North Korea.’

And he didn’t shy away from attacking several other sacred cows of Turtle Bay. He chastised the U.N. bureaucracy and hinted America won’t continue blindly pouring cash into it.  He asked other countries to shoulder more responsibility in maintaining global peace and prosperity.

“And then there was this: The nuclear deal with Iran is ‘one of the worst and most one-sided transactions the United States has ever entered into,’ Trump said.  ‘Frankly, that deal is an embarrassment to the United States, and I don’t think you’ve heard the last of it – believe me.’

“The usual suspects were appalled.  ‘It was the wrong speech, at the wrong time, to the wrong audience,’ Swedish Foreign Minister Margot Wallstrom told the BBC.

“In reality, it was a more-refined and a better-reasoned version of the worldview Trump’s been proclaiming since the campaign. It was a defense of the role national interests play in facilitating global cooperation.

“He talked about three principles – ‘sovereignty, security and prosperity.’ But the speech might as well have been titled ‘sovereignty, sovereignty and sovereignty.’....

“Trump also brandished his gift for branding. Like other childish, though perfectly pitched, Trump taunts – Lyin’ Ted, Crooked Hillary – Kim of North Korea will forever be known from now as ‘Rocket Man.’  More important, Trump’s vow that ‘our military will soon be the strongest it has ever been’ will – if brought to fruition – warm the hearts of Asian allies who have been less than assured of late about America’s commitment to global protection and defense agreements.

“And as one Arab diplomat observed, Western Europeans, Chinese and Russians may be stunned by Trump’s style, but many Middle Easterners, especially those fearing Iran’s rise, will understand the appeal. 

“Like Israeli Prime Minister Benjamin Netanyahu, who is often criticized in public by world leaders but lauded in private by those very same leaders.  He found a kindred spirit in Trump.  ‘In over 30 years in my experience with the U.N., I never heard a bolder or more courageous speech,’ Bibi tweeted.

“Some U.N. traditionalists heard in Trump’s ‘sovereignty’ approach echoes of the world body’s early years, in the 1940s, when the global governing structure was young and concerns about trampling national boundaries were de rigueur.  But Trump seems intent on bringing it back into fashion.

“So if they want America as an ally, they better get used to it.”

Claudia Rosett / Wall Street Journal

“Since the U.N.’s founding in 1945, no member state has ever been expelled.  The U.N. charter does, however, provide for eviction: ‘A Member of the United Nations which has persistently violated the Principles in the present Charter may be expelled from the Organization by the General Assembly upon the recommendation of the Security Council.’

“North Korea never met the U.N. membership requirements to begin with. The charter says membership is open only to ‘peace-loving states’ that promote ‘respect for human rights and for fundamental freedoms.’ North Korea was admitted in tandem with South Korea on Sept. 17, 1991.  At the time, with the Soviet Union in the process of collapse, the rationalization was that finally bringing North Korea into the U.N. fold might induce it to give up its brutal and predatory ways.

“Instead, the legitimacy and perquisites conferred by U.N. membership might have helped the regime survive. Expelling North Korea now could undermine Mr. Kim domestically.  His regime would lose the international respect that accompanies a U.N. seat.  North Korean diplomats would be forced to give up access to lavishly appointed U.N. offices and soirees in New York, Rome and Vienna.  The U.S. and its allies pay most of the tab for these amenities, while Pyongyang avails itself of opportunities for spying, money laundering and illicit procurement.

“From the start North Korea was intent on causing trouble for the U.N.  As early as 1993 the Security Council was expressing ‘concern’ that Pyongyang was out of compliance with U.N. nuclear safeguards.  North Korea is now in violation of nine Security Council resolutions, after developing intercontinental ballistic missiles and carrying out six nuclear tests....

“A bid to toss North Korea out of the U.N. would need strong U.S. leadership, and it could fail. China and Russia could block it with their Security Council vetoes. The despot-packed General Assembly, wary of setting a precedent, could balk.

“It’s still worth a try. Even failure would better illuminate the perils of relying on a U.N. that values North Korea’s company above its own charter.  Success could help undercut the Kim regime, and confer a measure of badly needed redemption on the U.N. itself.”

Trumpets....

--Senate Republicans were preparing today to try to repeal ObamaCare for a second time next week as they face an end-of-the-month deadline.

It is expected that Graham-Cassidy will hit the floor for a vote and as of now, Republicans do not have 50 votes, which would allow Vice President Mike Pence to break a tie and pass a bill.

GOP Sens. Lisa Murkowski (Alaska), John McCain (Ariz.) and Susan Collins (Maine) were undecided, while Sen. Rand Paul (Ky.) was a definite ‘no.’

Graham-Cassidy, named after Sens. Lindsey Graham (S.C.) and Bill Cassidy (La.) would repeal much of ObamaCare, ending funding for Medicaid’s expansion and the healthcare law’s subsidies that help some people buy insurance.  In their place, block grants would be given to the states.

As for how those with pre-existing conditions would be handled, Graham-Cassidy would allow states to waive regulations protecting people with them from being charged higher premiums, a provision that moderate Republicans have opposed in the past.

The White House and House GOP leadership have thrown their weight behind the legislation, but some Republican governors are adamantly opposed as they would lose money on the trade.

But a more flexible system would give them more latitude to pursue programs that are a better fit for their populations. Every one has its own demographics and health challenges.

Alas, John McCain announced this afternoon that he would vote against the proposal, in all likelihood dooming the bill and, with it, the GOP’s last shot at passing health care overhaul this year.

“I cannot in good conscience vote for the Graham-Cassidy proposal.  I believe we could do better working together, Republicans and Democrats, and have not yet really tried,” he said in a statement.

Earlier Susan Collins said she was “leaning against it.”  Lisa Murkowski was on the fence.

One of McCain’s big objections was he hadn’t seen a CBO score, and the Congressional Budget Office said its analysis wouldn’t be ready until next month.

Needless to say, late-night comedian Jimmy Kimmel, who has been waging a crusade against Graham-Cassidy, hailed McCain as a hero.

So is there still a shot at a bipartisan fix to make repairs to the insurance markets for 2018?

Editorial / Wall Street Journal

“Tennessee Senator Lamar Alexander...took up (an) offer and negotiated in good faith with Democrat Patty Murray to make modest repairs to insurance markets for 2018. There were hearings. There were meetings. Yet this week Mr. Alexander pulled the plug because they had ‘not found the necessary consensus.’  Democrats claim Mr. Alexander was coerced by GOP leaders and the White House, but in our experience the Tennessean doesn’t give up easily or on anyone’s orders. Senate Democrats refused in the talks to make more than de minimis changes to ObamaCare’s waiver process to give states more regulatory flexibility.

“Mr. Schumer is never going to let Ms. Murray make concessions beyond an insurer bailout because he figures he can blame Republicans for higher premiums going into the 2018 election.  He also won’t buck Bernie Sanders or his more than 15 other Members who recently endorsed single-payer health care.  Democrats are moving left on health care, not to the center.  ‘Process’ is beside the point.

“The shame is that many Democrats once liked a federalist solution to health care, and Lindsey Graham was one of those who worked with them.  In 2007 he and Wisconsin Democrat Russ Feingold proposed the State-Based Health Reform Act that would have given states even more freedom than Graham-Cassidy.  But these days Democrats fear that state laboratories would discredit the command and control approach to health care that they hope will lead to single-payer.

“The choice Republicans face isn’t between Graham-Cassidy or some bipartisan beau ideal.  Their choice is to pass their own bill, which now means Graham-Cassidy, or fail again and cede the health-care advantage to the single-payer wing of the Democratic Party.”

--Kind of ironic how I led my column last week with my thoughts on climate change, “global pollution,” and how it was idiotic for President Trump to withdraw from the Paris Climate Accord, and about 12 hours later, we learned the administration is reconsidering and wants to re-engage in reviewing the terms of its participation.

In June, Trump said the U.S. would withdraw unless it could find more favorable terms.

Deputy White House press secretary Lindsay Walters, though, said, “There has been no change in the U.S.’s position on the Paris agreement. As the president has made abundantly clear, the U.S. is withdrawing unless we can re-enter on terms that are more favorable to our country.”

It’s true that under the agreement, the U.S. couldn’t fully withdraw for almost four years, and some now believe Trump has a little wiggle room, where he can declare he had withdrawn, only to renegotiate terms that he would portray as being more favorable to the U.S.

But China’s special representative for climate change affairs said, “The Paris agreement should not be renegotiated.”

Renegotiation will be very difficult.

For his part, French President Emmanuel Macron strongly defended the accord in his speech to the General Assembly, with Macron, I’m guessing, having some influence on Trump’s decision.

--Federal agents wiretapped the phone of former Trump campaign chair Paul Manafort before and after the 2016 election – capturing conversations between the two, according to a CNN report.  The wiretaps are now part of special counsel Robert Mueller’s intensive probe.

Investigators are looking into whether Manafort had encouraged Russian operatives to aid Trump’s campaign.

Manafort had been a target of the FBI in 2014 over his lobbying efforts on behalf of Ukraine, but the surveillance ended for lack of evidence.  Then the FBI launched a new probe once Manafort became aligned with the Trump campaign.

According to reports, Manafort has been told by Mueller’s investigators that he’ll be indicted.

Separately, former Utah Governor Jon Huntsman, President Trump’s nominee to be ambassador to Russia, said on Tuesday there was “no question” that Moscow meddled in the 2016 election, and pledged to bring up the issue with the Russian government.  Huntsman was testifying before his Senate confirmation hearing.

“Moscow continues to meddle in the democratic processes of our friends and allies,” he added.

Wall Street and the Fed

The Federal Reserve, as expected, opted to hold the line on interest rates at its Open Market Committee meeting on Tuesday and Wednesday, but it seems clear another rate hike is looming come December’s confab, as 11 of 16 Fed officials favor a boost before year end, while the forecast is for three rate increases in 2018.

But, the Fed, also as expected, announced it would initiate its long-telegraphed plan to shrink its $4.5 trillion balance sheet, beginning in October, slowly, but building up to $600 billion a year.  That’s the Fed allowing its Treasury and mortgage securities holdings to roll off, initially at a level of $10 billion, then increasing $10 billion each quarter to a maximum of $50 billion from October next year.  This is a rate hike of a different order, as the Fed is no longer an active buyer.

In her press conference after, Chair Janet Yellen said there is now “a somewhat high bar to resume reinvestments,” and only “a material deterioration in the economic outlook” would prompt the Fed to consider such a move.

“We’re working down our balance sheet because we think in some sense it’s no longer needed. We feel the U.S. economy is performing well,” said Yellen.

The Fed issued its latest GDP forecast, 2.4% for this year vs. its earlier forecast of 2.2%.  2.1% in 2018.  Unemployment is seen at 4.1% in 2018.

Inflation is now not expected to hit 2% until 2019, rather than 2018.  It’s currently at 1.6%.

As for the impact of the storms on economic activity, the Fed said in a statement: “Storm-related disruptions and rebuilding will affect economic activity in the near-term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term.”

[In the third quarter, the Atlanta Fed’s GDPNow indicator has third-quarter GDP at 2.2%.  Had there been no Hurricane Harvey or Irma, that number would be more like 2.7%.]

Chair Janet Yellen didn’t get roped into dropping any hints as to her future, with her term expiring next February.  All she said was she will serve out her term.  She did allow that she hasn’t had a meeting with President Trump since the early days of his presidency.

The OECD (Organization for Cooperation and Development) issued its latest economic forecast and it is calling for global growth of 3.5% this year, 3.7% next (after 3.1% in 2016).

The United States is seen at 2.1% by its forecast for 2017, 2.4% in 2018.

[Solid, consistent growth across the developed world is a major reason for the equity rally.]

Separately, August housing starts fell 0.8%, while August existing home sales fell to 5.35 million on an annualized basis, worse than expected, with the median price down 1.8% to $253,500 over July, though this is normal in the summertime, prices normally peaking in June.

Editorial / Wall Street Journal

“Whether or not you think its post-2008 exertions succeeded, they have taken the Fed far from its legal mandate.

“Its purchase of mortgage securities in particular are a form of credit allocation that distorts financial markets and investment decisions.  Its meddling in the long bond market abetted federal government borrowing by disguising the long-term cost of debt repayment. The Fed offered a free lunch for the Obama Administration with the bill presented to future Presidents and taxpayers.”

Europe and Asia

First, some economic news from the eurozone (EA19).

IHS Markit released its flash readings on the economy for September.

The flash Eurozone Composite reading was 56.7 (50 being the dividing line between growth and contraction), vs. 55.7 in August. 

Manufacturing was at 58.2, vs. 57.4 last month, a 79-month high. 

Services came in at 55.6 vs. 54.7.

Germany: Manufacturing 61.8, up from 60.1 in August, 77-month high.  Services 55.6, 6-mo. high.
France: Manufacturing 56.0, 77-month high. Services 57.1, up from 54.9 in August.

Chris Williamson / Chief Economist at Markit:

“The eurozone economy ended the summer with a burst of activity, with the PMI signaling renewed impetus to already-impressive rates of growth of output, order books and employment during September.

“The survey data point to 0.7% GDP growth for the third quarter, with accelerating momentum boding well for a buoyant end to the year.

“The stronger euro was cited as a concern among manufacturers, but as yet appears to have had only a modest impact on exports.”

Eurostat reported that August inflation in the EA19 was 1.5%, annualized, up from 1.3% in July, and 0.2% ann., August 2016.  Still well below the European Central Bank’s 2% target.

Germany came in at 1.8%, France 1.0%, Italy 1.4% (vs. -0.1% Aug. 2016) and Spain 2.0% (vs. -0.3% Aug. 2016).

The OECD raised its outlook on eurozone growth for 2017 to 2.1%, up from 1.8% in its June forecast, and 1.9% in 2018.  The U.K. is forecast to grow 1.6% this year, and still just 1.0% in 2018, owing to ongoing uncertainty over Brexit.

But August retail sales in the U.K. surged 1.0% month-on-month, up 1.2% for the rolling three months vs. the previous three.

Eurobits....

Speaking of Brexit, Prime Minister Theresa May gave her key speech on Britain’s plans for exiting the EU on Friday, from Florence, with Mrs. May talking of a transitional period of two years from the formal date of withdrawal in March 2019, during which trade should continue on current terms.

“So during the implementation period access to one another’s markets should continue on current terms and Britain also should continue to take part in existing security measures.”

May spoke of the historic ties between Britain and the E.U., and that European leaders had a “profound sense of responsibility” to agree to good terms.

EU migrants will still be able to live and work in the UK, but they will have to register with the authorities, under her proposals.

And the UK will pay into the EU budget.

While her pitch was to European leaders, in the hopes of unblocking Brexit talks, it was really to her own citizens, with the latest opinion poll showing 52% of Britons favor staying in the European Union.

The prime minister also proposed a “bold new security agreement” and said the UK would be the EU’s “strongest partner and friend.”

On trade, Mrs. May said there was “no need to impose tariffs where there are none now.”

While May didn’t specify an exit bill, it is believed to be at least 20bn euros, or $24 billion.

In her speech, the prime minister said Britain would “honor commitments” made while it had been a member to avoid creating “uncertainty for the remaining member states.”

The EU’s chief Brexit negotiator Michel Barnier described the speech as “constructive” and said the prime minister had shown “a willingness to move forward, as time is of the essence.”

Indeed it is.  A key EU summit is October 19-20.

Meanwhile, it has been a tension convention between Mrs. May and her foreign secretary, Boris Johnson, a chief party rival.  For a while, it looked as if Boris, as he’s known in Britain, was about to resign or get fired for speaking out of turn on Brexit.  Last weekend, he dropped a lengthy opinion piece in the Daily Telegraph that challenged May’s leadership and strategy just days before her speech in Florence.

Johnson had been the figurehead of last year’s Brexit campaign and he urged Mrs. May to stick with her strategy for exiting the bloc that she outlined in January.

“Before the referendum, we all agreed on what leaving the EU logically must entail: leaving the customs union and the single market, leaving the penumbra of the European Court of Justice; taking back control of our borders, cash, laws,” Johnson wrote.  “That is what she and her government will deliver.”

He also declared that the U.K. should not pay access to Europe’s single market for goods and services after Brexit.  Johnson said quitting the EU would allow the government to strike new trade deals, revamp the tax system, reboot infrastructure projects, advance science and improve access to housing.

Johnson said earlier this year that EU officials could “go whistle” if they expected a large financial settlement, although he subsequently conceded some money would be paid.

You have to picture the two were at the United Nations together for the General Assembly, staying in the same hotel, but in the end, Johnson hitched a ride on May’s plane back home to the U.K. on Thursday, in time for a Cabinet meeting.

Now, we look to see what happens at the Conservative Party annual conference in October and whether Johnson mounts a challenge to May.  The Sun newspaper reported that Johnson has told friends he believes Brexit negotiations will fail and end up with May being humiliated.  I tend to agree.

--Germany’s big national election is Sunday, and Chancellor Angela Merkel’s Christian Democrats will win comfortably, setting Merkel up for a fourth term.  But the issue is who can Merkel and her center-right Christian Democrats form a coalition with.  So we’ll see how the lesser parties do.

What we do know today is that the far-right, anti-immigrant AfD, (Alternative For Germany) is polling third at around 10%, which is significant because you need 5% for parliamentary seats and at 10%, they’d pick up quite a few, pretty astonishing for a four-year-old party. 

Far more next time.  The results could be fascinating.

Meanwhile, whereas it was once feared Russia would be meddling in the vote, it seems right-wing groups in the U.S. are behind materials popping up on YouTube, message boards and other platforms.

--Police in Spain raided Catalan government offices and arrested officials on Wednesday to halt a banned referendum on independence slated for Oct. 1.  But Catalan President Carles Puigdemont said in a televised address, “The Spanish state has by all rights intervened in Catalonia’s government and has established emergency rule. We condemn and reject the anti-democratic and totalitarian actions of the Spanish state.”

The FC Barcelona soccer club said in a statement: “FC Barcelona, in remaining faithful to its historic commitment to the defense of the nation, to democracy, to freedom of speech, and to self-determination, condemns any act that may impede the free exercise of these rights.”

Protests will be held this weekend.  It could get ugly.

--Marine Le Pen’s top aide, Florian Philippot, the National Front’s vice president in charge of communications and strategy since 2012, said he was leaving after weeks of tensions with other party officials over the reasons for Le Pen’s defeat in the presidential election and the strategy going forward.  [Le Pen actually canned him.]

It seems Le Pen wants to go back to her anti-EU hardline stance that the party softened in an attempt to get crossover votes in the election vs. Emmanuel Macron.  Philippot had been the architect of the so-called undemonization strategy that aimed to attract voters from the mainstream.

--Portuguese bonds staged their sharpest rally in 1 ½ years as S&P upgraded its credit rating, with the yield on the 10-year bond tumbling from 2.75% last Friday to 2.35% on Wednesday, before finishing the week at 2.38%.  The yield was 4% last February.

S&P applauded the “solid progress [Portugal] has made in reducing its budget deficit and the receded risk of a marked deterioration in external financing conditions.”

Turning to Asia, the OECD pegs China’s growth at 6.8% this year, 6.6% next, after 6.7% in 2016.

Average new home prices rose in August at the slowest pace in seven months, up 0.2%, 8.3% year-over-year.  Of the 70 cities in the major cities index, as reported by the National Bureau of Statistics, 52 showed an increase.

But Shenzhen, across from Hong Kong, has seen prices fall 1.9% year on year, while Shanghai is up just 2.8% and Beijing 5.2%, yoy.

Separately, Standard & Poor’s downgraded China’s sovereign debt rating a notch for the first time in nearly two decades.  Fitch and Moody’s had done so earlier, but the downgrade comes at a sensitive time as the Chinese Communist Party is holding its 19th National Congress in a  few weeks; the gathering where President Xi Jinping is going to further consolidate his power.

It’s nothing new, but S&P cited China’s fast-accumulating debt load, which is raising financial and economic risks.

China’s finance ministry hit back on Friday, calling it a “wrong decision.”  The ratings agency was “neglecting China’s sound economic fundamentals and development potential,” the ministry said in a statement on its website, calling the decision “perplexing.”

In Japan, the OECD forecasts 1.6% growth in 2017, 1.2% in 2018, after 1.0% last year.

August exports soared 18.1%, year over year, owing largely to cars and electronics amid the solid global economy, the fastest pace since Nov. 2013, after July’s 13.4% pace.

Exports to the U.S. rose 21.8%; 25.8% to China, year on year, thanks to sales of screen panels in the latter.

Imports rose 15.2%.

Meanwhile, the Bank of Japan left policy unchanged Thursday, sticking with its aggressive monetary stimulus measures that have left the target yield on the 10-year government bond at zero.  The BOJ continues to point to stagnant inflation, which remains far from the central bank’s 2% target despite pretty solid growth.

The bank also reiterated its pledge to continue buying government paper at an annual rate of $713 billion.

There are zero signs the BOJ will change policy any time soon, unlike our Fed.

Street Bytes

--Stocks finished mixed, with the Dow Jones adding 0.4% to 22331, having hit an all-time high on Wednesday, 22411.  The S&P 500 tacked on 0.8%, while Nasdaq lost 0.3%.  Both of these also hit record highs before losing a little ground late.

--U.S. Treasury Yields

6-mo. 1.18%  2-yr. 1.43% 10-yr. 2.25%  30-yr. 2.78%

The yield on the two-year is at its highest level since 2008 on the prospects for further action at the Fed on rates.

--We learned this week that hackers roamed undetected in Equifax Inc.’s computer network for more than four months before its security team identified the massive data breach.

FireEye’s Mandiant group, which has been hired by Equifax to investigate the hack, said the first evidence of the hackers’ activity occurred on March 10, according to a confidential memo the company sent to some of its customers this week, as first reported by the Wall Street Journal.

Equifax has been telling us the intrusion took place in May, which it then didn’t discover until July 29.  It didn’t disclose the breach to the public until Sept. 7.

Equifax said the March breach was different from the May one, claiming Mandiant “has investigated both events and found no evidence that these two separate events or the attackers were related,” according to the company.  I find this doubtful.

This whole thing is a massive debacle.

Mandiant, in a report earlier in the year prior to the Equifax attack, said it takes companies 100 days to discover they have been hacked.  In Equifax’s case, it took 141 days.

--We learned this week that the Securities and Exchange Commission’s web site was hacked back in 2016.  The SEC’s new chairman, Jay Clayton, uncovered the extent of the hack only after he launched a review of the agency’s cybersecurity vulnerabilities in the spring.  Some of the SEC’s commissioners didn’t learn of the hack until this week, and the SEC didn’t say exactly when the hack occurred and what information was accessed. The agency is investigating whether illegal trading occurred as a result of the breach.

--Shares in Apple Inc. slid 2% on Wednesday after reports that the company admitted it had connectivity issues with its latest smartwatch, and, as the Wall Street Journal’s Joanna Stern wrote: “You’re lucky if the battery allows you to roam on cellular for longer than half a day, especially if you’re making calls.”

As for the launch of the IPhone X and iPhone 8, it’s already clear the X is cutting into interest for the 8, and while the profit margin for the $999, retail, X is estimated at 59 percent, that’s down from 70%+ with the iPhone 6S and the 66 percent from the iPhone 7, according to Chinese analysts, the X and iPhone 8 being introduced at the same time there as the U.S.  [South China Morning Post]

Apple shares then slid further on Thursday after Google announced it was spending $1.1 billion to hire a team of engineers from the smartphone business of struggling Taiwanese manufacturer HTC as Google seeks to bring in more expertise for its own mobile technology operations.

HTC said many of the estimated 2,000 employees were already working with Google on smartphones, and it is working with the company to produce the next version of its Pixel smartphone, which is to be announced first week in October.

So this is a big bet on hardware by Google and further competition for Apple.

Friday, Apple shares fell further, for its worst week in 17 months, as there was a tepid response to the launch of the iPhone 8 in the U.S.

--The total net worth of U.S. households rose by $1.7 trillion in the second quarter to a record $96.2 trillion, according to a report from the Federal Reserve.  This is the seventh straight quarter overall wealth rose in the U.S.

Household wealth in the stock market climbed by $1.1 trillion in Q2.  The value of real estate rose by $564 billion.

--A first look at holiday sales from Deloitte pegs them at 4 to 4.5 percent. Others also have it at 4 percent, with the National Retail Federation yet to weigh in. The NRF said holiday sales grew 4 percent last year.

--Toys R Us said it will continue to keep operating as usual and continue getting toys from suppliers as the critical holiday season approaches, even as the company declared Chapter 11.  The retailer said it had obtained $3 billion in bankruptcy financing and by week’s end the company’s stores showed no signs of the parent being sick.

But while Toys R Us, which operates 1,695 stores, including the Babies R Us store in the U.S., it did not as yet announce any store closures, though clearly they are coming.  The company employs 65,000 and said it planned to still hire thousands of additional seasonal workers.

Forget the competition from the likes of Amazon.com, Toys R Us has been suffering for years from pricing pressure from the likes of Wal-Mart and Target, which carry all the popular toys, often at lower prices.

The company has long-term debt of more than $5 billion, much of it the legacy of a $7.5 billion leveraged buyout in 2005 in which Bain Capital, KKR and Vornado Realty Trust loaded it up with debt to take it private.  It now looks to restructure same.

Toys R Us hasn’t shown an annual profit since 2013.

--London’s transport authority said Friday it won’t renew Uber’s license to operate in the British capital, arguing it demonstrates a lack of corporate responsibility with implications in public safety and security.

Uber is appealing and will continue to operate while the appeal is being heard.

--UPS said it expects to hire about 95,000 seasonal employees for the upcoming holiday season, Black Friday after Thanksgiving through early January, until ‘return’ season wears down.  The number of seasonal workers has not changed for UPS since 2014.  The company has about 355,000 permanent employees in the U.S.

Up to 35 percent of seasonably hired employees over the last three years have become full-time employees.

On some days during last year’s holiday season, UPS’s average daily volume surpassed 30 million packages, vs. normal daily volume of more than 19 million.

--As for competitor FedEx, it said it would hire 50,000 people this holiday season, also same as last year.

FedEx reported earnings and revenue that failed to match Wall Street’s expectations, as the company said it was hurt by a June cyberattack at its TNT Express business that caused shipping delays in Europe, as well as service disruptions related to Hurricane Harvey.  And the company cut its profit outlook for the year.

So the shares fell initially on all this, but then rallied when investors looked beyond immediate concerns (those from the cyberattack were already rectified) and to 2018, with FedEx slated to participate in the ongoing global rebound. The shares thus rallied back to a new all-time high before finishing the week a few $s below it at $220.

--Ireland’s discount air carrier, Ryanair, has had a chaotic week, and it’s just the beginning.  The company first said it was preparing to take a charge of nearly $24 million in compensation claims and $5 million in lost fares as it dealt with a wave of cancellations.

The cancellations, the airline said, were due to a shortage of pilots, and it will need to cancel 40-50 flights every day for the next six weeks, after it admitted it had “messed up” the planning of pilot holidays. An internal memo, obtained by the BBC, suggested the shortage could extend until year end.

In a letter to pilots, Sept. 13, chief operations officer Michael Hickey said the firm’s crewing forecast to the end of December was “for tighter pilot numbers.”

But the pilots were just learning of this, while it seems Hickey knew last year they may face a leave backlog.

What happened is the company changed its “holiday year,” currently April to March, to January to December, which had large numbers of the staff taking holidays in September and October.

The pilots are now demanding improved working conditions and pay.  By Wednesday, they threatened to go on strike. The company then offered senior pilots who agree to work an additional 10 days a bonus of up to $14,000 in a bid to avoid additional passenger disruption.

As of Wednesday, 400,000 passengers have been affected by the flight cancellations.

The pilot situation is so bad for Ryanair that it has been forced to scour Brazil in an effort to recruit more to get out of its scheduling issues.

CEO Michael O’Leary said he had “no difficulty in getting captains,” with a “waiting list” of 2,500 pilots who want to join the company, but he needs flight officers.  [Bobby C., weigh in if you can.]

At the same time, Ryanair has denied it lost 140 pilots to new rival Norwegian Air, but Norwegian Air confirmed the figures to the Irish Independent.

Norwegian Air also announced this week it had formed a flight connection agreement with EasyJet, not Ryanair, despite its conversations with the latter.

Ergo, the high-flying Michael O’Leary, always a highly cocky, and entertaining, sort, has been brought down to earth and with the change in the holiday period, you can see how it was all self-inflicted.

Thursday, which happened to be the airline’s annual meeting, O’Leary apologized, blaming “a failure within its pilot rostering function” for the cancellations, and said 95 percent of its customers impacted would have new travel arrangements, or refunds approved, by the end of the week.

O’Leary insisted there would be no issues with staff.  But the chaos could impact Ryanair’s potential acquisition of Italy’s troubled flag carrier, Alitalia.

Italy’s competition authority has already said that it will open an investigation into whether Ryanair violated the country’s consumer code over the cancellations.

--Travelers who check at least one bag when flying domestically are paying more overall to fly than they did before airlines began unbundling fares in 2008 and charging them separately for checked baggage.

A study by the Government Accountability Office shows that charging separately for bags reduced fares by less than the new bag fee itself.

One of the studies the GAO looked at found that airlines with bag fees lowered fares to appear more competitive and then made up the lost revenue in those fees.

Airlines collected $7.1 billion in revenue from checked bag and changed reservations fees in the federal budget year that ended Sept. 30, 2016, the GAO said.  The Department of Transportation said this week that airlines collected nearly $1.2 billion in checked bag fees alone during the second quarter, a record.

--Staying on the airline theme, Stewart International Airport, which is north of New York City, near West Point, has seen its traffic increase 45% this year after a decade in decline, owing largely to the impact of Norwegian Air’s Shuttle ASA, which launched international flights from Stewart in June.

It’s anticipated 400,000 will go through the airport this year, but I forgot this place once took in 900,000 a decade ago.

Passengers love that the immigration and baggage claim experience is much quicker than, say, Newark or JFK, and then you can hop on a bus to New York City’s Port Authority Bus Terminal in midtown for $20, about 90 minutes. 

Thanks to Norwegian Air, flights to the likes of Dublin are far cheaper than the alternatives.  But then you can tack on fees.

--Facebook handed over detailed records about the Russian ad purchases on its platform to special counsel Robert Mueller that go beyond what it shared with Congress recently.

Mueller’s office now has copies of the ads and details about the accounts that bought them and the targeting criteria, as part of the special counsel’s probe into how Russia used social media to meddle in the presidential election.

Liberal groups are upset with Facebook, and the top Democrat on the Senate Intelligence Committee, Sen. Mark Warner (Va.), has said Facebook has to be more forthcoming about the full extent of the buys.

Rep. Adam Schiff (D-Calif.) suggested Facebook has been slow to release details because “it’s against their economic interest to be advertising problems about how a foreign government was exploiting their technologies.”

So Thursday, Facebook pledged a sweeping overhaul of  political advertising and said it will give Congress all the evidence it has on the campaigns.

CEO Mark Zuckerberg said in a video yesterday: “I don’t want anyone to use our tools to undermine democracy. That’s not what we stand for. The integrity of elections is fundamental to democracy around the world.”

Zuckerberg said he will add 250 employees to work on election integrity and make political ads on Facebook  more transparent.

--It’s the end of an era as Cisco Systems Inc. Executive Chairman John Chambers announced he was stepping down in December, after a two-decade+ career in which he was in charge of the network-equipment maker at its most volatile time.  Current CEO Chuck Robbins is taking over, completely, a la Xi Jinping, wrote the editor, mischievously.  Clearly, Robbins and Chambers didn’t see eye-to-eye.

Chambers joined Cisco in 1991, the year after its initial public offering.  He started out in charge of sales and then became CEO as the company rapidly grew during the dot-com era.

At one point, Cisco’s market value exceeded $500 billion, and he delivered a return 17 times over to shareholders.  Based mostly on this, Harvard Business Review in 2015 named Chambers the second-best performing CEO in the world out of 907 executives.

--Bitcoin miners in China are scared about losing their line of work as the government crackdown on the cryptocurrency plays out.  Nearly 70 percent of all new bitcoin are mined there – miners using computer hardware to find bitcoin by creating new links in its blockchain, which is essentially a huge digital ledger.

You need massive amounts of computer power, i.e., server farms, and miners have picked out some of the poorer provinces in China, where costs are lower for setting up a warehouse, for example, than elsewhere.

--Hewlett Packard Enterprise Co. is planning to cut at least 5,000 workers as part of a broader effort to reduce costs amid mounting competition.

--Amazon.com plans to open an office on the far West Side of Manhattan (450 W. 33rd St.) and create more than 2,000 jobs in New York City.

--Needless to say, the U.S. cruise industry is in a state of flux these days after Hurricanes Irma and Maria.  As of early this week, about 150,000 vacationers on 51 cruises have been affected by cancellations, delays and route changes, and this figure will only grow.  After Maria, between the two storms, there really isn’t a Caribbean destination that has been untouched.

One destination that could benefit, though, is something like Cozumel, but now every cruise line operator will want to go there, and that’s just not possible.  [Plus as a tourist that would suck.]

Heck, since Greenland’s ice sheet has been melting, this could be the new Caribbean. #GreenlandIsGreening

--New York City taxi medallions, which you need to operate a taxi, were sold for $186,000 recently, when they had fetched $965,000 in early 2014, after topping $1 million in 2013, before Uber and other ride-hailing companies began taking business away from yellow cabs in late 2014.

The 46 recently scarfed up in an auction this past Monday by MGPE, Inc., a hedge fund, were purchased from Evgeny Freidman, who had acquired them in the 2000s, only to have them foreclosed upon by Citibank.

But hedge funds see these as distressed assets.

As reported by Matthew Flamm of Crain’s New York Business, Freidman once managed 800 medallions and was accused of bidding up the prices to increase the value of his own assets.  He then declared bankruptcy and the 46 are part of a court order to turn them over to pay creditors.

--“Saturday Night Live” won nine Emmys the other day, including for outstanding variety series, and Season 43 premieres on Sept. 30, with Jay-Z as musical guest.  NBC announced the show will once again air live in all time zones, just as it did for last season’s final four episodes.

NBC said last season’s live cost-to-coast airings resulted in an 11 percent jump in average viewers compared to earlier in the season.

The issue when you air at 8:30 p.m. Pacific, 9:30 p.m. Mountain, is that you are outside the FCC’s “safe harbor” period between 10:00 p.m. and 6 a.m. local time, in which stations can air “indecent and/or profane material.”

--As I wrote was rumored last week, Fox News channel did hire Laura Ingraham for the 10:00 p.m. hour, shifting Sean Hannity to 9:00 p.m., sending him head-to-head with MSNBC’s Rachel Maddow.

The network is adding a new live show for 11:00 p.m. anchored by Shannon Bream.

But Fox was beset by further sexual harassment allegations, this one by former guest commentator Scottie Nell Hughes, who sued Fox News and Fox Business Network host Charles Payne, accusing him of rape, after which she says the network retaliated against her when she came forward with the allegation.

Payne, who hosts one of Fox Business’ shows, recently returned to the air after he was suspended in July while the company investigated sexual harassment allegations.

--Megyn Kelly is launching her morning show on NBC Monday.  Yawn.

--The audience for last Sunday’s “Emmy Awards” was the same as last year, which hit a new low, as the show not only had to compete with “Sunday Night Football,” but also the PBS premiere of Ken Burns’ “Vietnam,” which is truly outstanding (more below). 

The audience of 11.3 million for the Emmys, as reported by Nielsen, compares with 2014’s 15.6 million on a football-less Monday night in August.

Foreign Affairs

Iran: As alluded to above, in his U.N. General Assembly speech, President Trump attacked Iran, saying it was a “corrupt dictatorship” intent on destabilizing the Middle East.

He called on Tehran to cease supporting terrorism and again criticized the nuclear deal, which he called an embarrassment.  Iran’s government, Trump said, was bent on “death and destruction,” while its people wanted change.

Iranian President Hassan Rouhani said the next day: “The ignorant, absurd and hateful rhetoric, filled with ridiculously baseless allegations, that was uttered before this august body yesterday, was not only unfit” for U.N. ears, but also slows everyone’s attempt “together to combat war and terror,” he said.

Rouhani warned that renegotiation of the nuclear deal was out of the question.

“Iran will not be the first country to violate the agreement, but it will respond decisively and resolutely to its violation by any party,” he told the General Assembly.  The accord should not be “destroyed by rogue newcomers to the world of politics,” attacking as “ignorant” President Trump’s criticisms of the agreement.

Iranian Foreign Minister Javad Zarif commented on Twitter that “Trump’s ignorant hate speech” belonged “in medieval times – not the 21st Century UN.”

Trump said on Wednesday that he had made a decision about the future of the Iran deal, but, “I’ll let you know what the decision is.” 

Oct. 15 is the next deadline for the Administration to certify Iranian compliance to Congress.  If Trump fails to do so, Congress will receive a 60-day window in which it may re-impose the sanctions that were lifted under the deal.  If lawmakers do that, the U.S. will directly violate its obligations for sanctions relief, and virtually guarantee the deal’s collapse.

Secretary of State Rex Tillerson has said the United States wants to renegotiate the deal’s sunset clauses, that relieve Iran of certain restrictions starting in 2025.

French President Macron defended the nuke deal: “Renouncing it would be a grave error.” But he said talks for a new agreement to take over in 2025 are possible.  “We need to start discussions on what happens afterwards,” said Macron.

“If there are some concerns about Iran we need to work together...and ensure [the deal’s] full implementation.”

Israeli Prime Minister Benjamin Netanyahu sided with Trump, saying the nuclear deal should be amended or scrapped altogether, and warned against the spread of Iranian influence in the Middle East.

Netanyahu also warned Iran was spreading a “curtain of tyranny and terror” across the region, and that Israel would defend itself.

“We will act to prevent Iran from establishing permanent military bases in Syria for its air, sea and ground forces.  We will act to prevent Iran from producing deadly weapons in Syria or in Lebanon for use against us. And we will act to prevent Iran from opening new terror fronts against Israel along our northern border,” he said in his U.N. address.

[Israeli Intelligence Minister Yisrael Katz said this week at a security conference that Iran and Syria are working on an agreement that could bring an Iranian naval base, airport or army bases to Israel’s doorstep, a major boost for Hizbullah.]

Friday, President Hassan Rouhani vowed that Iran would boost its missile capabilities despite warnings from Washington that it is ready to ditch the nuclear accord.

Iran displayed a new missile at a military parade marking the anniversary of the outbreak of the 1980-88 war with Saddam’s Iraq.

“Whether you like it or not, we are going to strengthen our military capabilities which are necessary for deterrence,” Rouhani said.  “We will strengthen not only our missiles but also our air, land and sea forces... When it comes to defending our country, we will ask nobody for their permission.” 

Rouhani hit out at those who “create problems for the peoples of our region every day and boast of selling arms to the bloodthirsty Zionist regime which has been attacking the peoples of our region for 70 years like a cancerous tumor.”  [Agence France Presse]

The new missile, named Khoramshahr, has a range of 1,250 miles and can carry multiple warheads, as reported by the official IRNA news agency.  The distance is long enough to reach Israel or U.S. bases in the Gulf.

Benny Avni / New York Post

“Iranian President Hassan Rouhani suffers, or benefits, from what the shrinks call ‘projection’ – seeing in other people one’s own faults.

“ ‘Moderation is the inclination as well as the chosen path of the great Iranian people,’ Rouhani told the U.N. General Assembly Wednesday.

“This from a man who told supporters back in May, after winning an election that included only mullah-approved candidates, ‘We are proud of our armed forces, the Revolutionary Guards, the Basij and the security forces.’

“These thugs are the skullcrushers of regime opponents at home and exporters of the Islamic Revolution abroad, where they create proxy armies like Hizbullah. Rouhani’s Iran also sends weapons to the Houthis in Yemen, Hamas in Gaza and Shiite proxy gangs from Afghanistan to Africa.  Its troops and militias help keep Syrian butcher Bashar al-Assad in power.

“Yet, Rouhani told the United Nations, his Iran is the same country that once defended Jews and now defends the people of Palestine.  It’s ‘supporting justice and seeking tranquility,’ he said. And ‘our ambassadors are our poets, our mystics and our philosophers.’

“The real threat, as he sees it, to that tranquility? You can probably guess.

“ ‘It is reprehensible that the rogue Zionist regime that threatens regional and global security with its nuclear arsenal and is not committed to any international instrument or safeguard has the audacity to preach to peaceful nations,’ said the man Obama officials swore was a ‘moderate.’

“Which may explain why his regime annually celebrates the future erasure of those Zionists from the map, while chanting ‘death to America.’”

Iraq / Syria / Russia / Turkey: President Tayyip Erdogan said Turkey will deploy troops in Syria’s northern Idlib region as part of a “de-escalation” agreement brokered by Russia last month.  In New York, he also said the United States, as a strategic partner, should extradite U.S.-based cleric Fethullah Gulen, whom Erdogan accuses of orchestrating a coup that failed in 2015.

And Erdogan warned the U.S. that a decision to arm YPG Kurdish forces fighting Islamic State in Syria could end up hurting Washington and its allies.  Turkey views the YPG as the Syrian extension of the outlawed Kurdistan Workers Party (PKK).

Russia’s Interfax news agency reported that Russia’s air force had killed about 850 militants in the above-referenced zone of de-escalation in Idlib in 24 hours.  I have not seen any confirmation of this. 

In Iraq, tensions are high in the city of Kirkuk, ahead of a Sept. 25 referendum on Kurdish independence that Baghdad has warned is illegal, saying the Kurds are “playing with fire,” while the U.S. said the move could undermine the fight against Islamic State forces. Iraq’s high court declared the referendum must be suspended.

The referendum doesn’t immediately mean a declaration of independence, but would prompt negotiations with Baghdad, or so supporters of independence hope.

But in the key oil city of Kirkuk, the Kurds vie with Turkmen and Arabs for power.  President Erdogan declared Kirkuk could not be a Kurdish city.  Turkish soldiers are based nearby. But at the same time, Turkey doesn’t want to disrupt the oil business in the region.

Late Friday, Turkey made a direct appeal to the Kurdish government not to go forward with the vote.

Israel: The Palestinian Authority’s Fatah movement and its militant rival, Hamas, appear to be moving toward ending a 10-year split after Hamas vowed to accept conditions for a unity government and general elections in the West Bank and Gaza.

Hamas took control of Gaza in 2007, and by abandoning its hold on the Strip, Hamas would be accepting conditions called for by Palestinian Authority President Mahmoud Abbas, whose internationally recognized government is in the West Bank city of Ramallah.

Fatah had been expelled from Gaza when Hamas took it over. Thus far, however, there is nothing concrete and it’s just talk.

Afghanistan: Defense Secretary Jim Mattis said the United States would send over 3,000 troops to Afghanistan and that most were either on their way or had been notified of their deployment.

Russia: With all the other news of the week, including on the natural disaster front, there was little on the war games that Russia held, Zapad, including in neighboring Belarus.

The Wall Street Journal, though, reported that all is not well in the relationship between Minsk and the Kremlin, with Belarus not happy when Russia sought to move more of its soldiers into the county during the exercises.

Russia’s defense ministry, for example, said a premier tank unit and three Russian paratrooper divisions were to land on Belarusian soil, but none of it was agreed to with Belarus beforehand, according to Belarus.

It didn’t appear that Belarus President Alexander Lukashenko and Russian President Putin met during the exercises, a break with tradition.

The Kremlin denied there was a rift.

As for the number of soldiers involved, Western and Belarusian observers put the number at anywhere from 70,000 to 120,000, when Russia said it was going to be under 13,000.  Putin observed one of the drills from outside St. Petersburg.

But there was at least one accident during the exercises.  Two people suffered serious injuries after a helicopter gunship accidentally fired on bystanders, according to Russian news sources, near where Putin observed the drills on Monday.  A source told 66.ru that there was a technical glitch “and the missiles blasted off on their own.”

“At least two cars were destroyed, two people were seriously injured...The victims were most likely journalists.”

Boy, that would suck.

So now we wait to see an analysis of whether Russia has left large numbers of troops behind, Zapad wrapping up.

Separately, it appears that hackers based in Brussels have been responsible for the wave of bomb scares that have swept Russia for two weeks, an Interior Ministry source told RBC news on Tuesday.

More than 200,000 have been evacuated from malls, schools and public buildings following a spate of anonymous bomb threats, which were continuing at week’s end.

China: Last week as part of my discussion on “global pollution,” I noted millions die every year in China from inhaling fine particulate matter.  So the next day I see this piece in the South China Morning Post by Stephen Chen.

“China is investigating whether air pollution has played a part in the rapid increase in the number of people struck by lightning in some of its largest cities in recent decades, according to a scientist involved in the project.

“The investigation follows a discovery by U.S. scientists that fossil fuel exhaust fumes could double the lightning risk at sea, which raised concerns about the risk to vessels in some of the world’s busiest waters, including the South China Sea and the Malacca Strait.

“Lightning now kills or injures nearly 4,000 people in China annually, according to government statistics, but less than 20 years ago the reported casualties were only a tenth of the present level.”

Li Jingxiao, a researcher at Beijing Lightning Protection Center, said large quantities of polluting particles in the atmosphere could generate powerful electric fields due to friction.

“When the energy reaches ‘breakdown’ level it can be released suddenly in the form of a lightning bolt.”

Myanmar: Amid global condemnation at the U.N. this week, Nobel Peace Prize laureate Aung San Suu Kyi, who did not travel to New York due to the crisis in her country, finally spoke on the ethnic-cleansing of the Rohingya Muslims in her country. “We condemn all human rights violations,” and that action would be taken against those responsible.

But Suu Kyi did not directly condemn the military’s actions, nor did she characterize the displacement of over 400,000 as ethnic-cleansing.

Human rights group Amnesty International described her speech as “little more than a mix of untruths and victim-blaming,” saying she and her government were “burying their heads in the sand” for ignoring the army’s role in the violence.

Random Musings

--Presidential tracking polls....

Gallup: 37% approval for President Trump, 56% disapproval
Rasmussen:  43% approval, 55% disapproval

The latest Reuters/Ipsos tracking poll has Trump’s approval at 38%, 57% disapproval.

A new NBC News/Wall Street Journal survey had the president’s approval rating moving up to 43% from 40% last month, 52% disapproval, which the pollsters say was directly attributable to the efforts at bipartisanship on the debt ceiling, hurricane aid, and a short-term spending plan.

The survey found 71% of adults in the U.S. approved and 8% disapproved of Trump bypassing GOP leaders. 

Nearly six in ten registered Republicans are dissatisfied with the work of Sen. Majority Leader Mitch McConnell and House Speaker Paul Ryan.

41% of Independents, by the way, which I keep harping on, approve of the job Trump is doing, up from 32% in August.  Significant.

With Vermont Sen. Bernie Sanders bringing his universal health-care plan to the fore last week, in the NBC/WSJ survey, 47% said they favored a single-payer system, while 46% oppose it.

But among Democrats, 72% favor such a system; among Republicans, 74% are opposed.

In a new CNN poll, President Trump’s approval rating was 40% (up from 38% in August), 55% disapproval.  85% of Republicans approve of his job performance vs. only 9% of Democrats.

64% of Americans approve of how the Trump government reacted to the recent storms, including 2-in-3 independents.

50% of Americans now view North Korea as an immediate threat to the United States, up from 37% in April.  50% disapprove of Trump’s handling of North Korea, 41% approve.

--President Trump traveled to Alabama tonight to campaign for Sen. Luther Strange in the GOP runoff election for the state’s Senate seat.

Trump had endorsed Strange in the initial primary for Attorney General Jeff Sessions’ Senate seat, but Strange fell short of winning a majority of votes in the race against former state Supreme Court Justice Roy Moore, and Moore has a solid lead plus the backing of conservatives such as Sarah Palin, Steve Bannon and Freedom Caucus Chairman Mark Meadows (R-N.C.).

--According to a report from Fox News, former U.S. Ambassador to the UN, Samantha Power, averaged more than one “unmasking” request for every working day in 2016 – even going so far as to seek the names of Trump associates just before his inauguration.

The process is ultimately carried out when one wants to reveal the identity of an individual whose name surfaced in foreign intelligence documents.

Her lawyer, David Pressman, claimed Power did nothing wrong.

“While serving as our Permanent Representative to the United Nations, Ambassador Power was also a member of the National Security Council responsible for advising the President on the full-range of threats confronting the United States. Any insinuation that Ambassador Power was involved in leaking classified information is absolutely false.”

I’m reminded of the saying: “Absolute Power corrupts absolutely.”  [cough cough]

--According to a report from Reuters, President Trump is spending cash donated to his reelection campaign and the Republican National Committee to pay for his lawyers in the criminal probe of Russian interference in the election.

The Federal Election Commission does allow the use of private campaign funds to pay legal bills arising from being a candidate or elected official.

Previous presidential campaigns have used the funds to pay for routine legal matters such as ballot access and compliance requirements, but Trump would be the first in the modern campaign finance era to use such funds to cover the costs of defending himself in a criminal probe, according to election law experts.

--Trump tweets:

“The Russia hoax continues, now it’s ads on Facebook. What about the totally biased and dishonest Media coverage in favor of Crooked Hillary?”

“The greatest influence over our election was the Fake News Media ‘screaming’ for Crooked Hillary Clinton. Next, she was a bad candidate!”

These two came right after Trump called Lil’ Kim a “madman...who will be tested like never before!”

But remember, Mr. President.  Every one of your top intelligence chiefs said Russia meddled in the election.  Collusion?  We’re not sure.

--The World Health Organization said that the world is running out of antibiotics and this is “a global health emergency.”

Growing resistance to drugs that fight infections could “seriously jeopardize” progress made in modern medicine.

The new WHO report found a serious lack of new drugs in development to combat the threat.

Drug-resistant infections already kill 700,000 people a year globally.

--Editorial / Wall Street Journal

“ ‘Freedom of speech is a principal pillar of a free government,’ wrote Ben Franklin.  ‘When this support is taken away, the constitution of a free society is dissolved.’  Imagine what Franklin, James Madison and the other Founders would make of a new Brookings Institution survey showing that American college students have no clue what the First Amendment means.

“John Villasenor surveyed more than 1,500 undergraduates, and among the alarming findings: Most American college students do not know that even hate speech is constitutionally protected; half agree that it’s okay to shout down a speaker whose views they don’t agree with; and nearly one of five believe it is acceptable for a student group opposed to a speaker to use violence to keep him from speaking.  Some of the answers vary by political identification, but overall the findings suggest great confusion.

“Mr. Villasenor’s conclusion is blunt.  ‘Freedom of expression,’ he says, ‘is deeply imperiled on U.S. campuses.’ We’d take that further. Given that a functioning democracy rests on free expression, what do these results say about America’s future when these students leave school and begin to take their places in public life?

“It’s easy to mock the students for their ignorance. But what about the people responsible for teaching them?  These results suggest that the failures of our education system are beginning to have terrible consequences for America’s civic life.”

--I watched the first five episodes in Ken Burns’ epic documentary and I’ll have some personal observations when it concludes next week.  For now I don’t totally agree with the following, but I throw it out there.

Bing West / New York Post

“To understand Ken Burns’ 18-hour Vietnam documentary, listen to the music. The haunting score tells you: This will be a tale of misery. And indeed, Burns and his co-author Geoffrey C. Ward conclude their script by writing, ‘The Vietnam War was a tragedy, immeasurable and irredeemable. But meaning can be found in the individual stories...’

“The film is meticulous in the veracity of the hundreds of factoids that were elected. Everything depicted on the American side actually happened. But that the chosen facts re accurate doesn’t mean the film gets everything right.  Indeed, the brave American veterans are portrayed with a keen sense of regret and embarrassment about the war, a distortion that must not go unanswered. And the film implies an unearned moral equivalence between antiwar protesters and those who fought.

“Burns’ theme is clear: A resolute North Vietnam was predestined to defeat a delusional American that heedlessly sacrificed its soldiers.  The film follows a chronological progression, beginning in the ‘40s.  Right from the start, harrowing combat footage from the ‘60s is inserted to remind the audience that a blinkered America is doomed to repeat the mistakes of the French colonialists. The main focus of the documentary is the period of fierce fighting from late 1965 to 1972....

“We all know the story ends badly. But when it’s over, we aren’t told why we lost. The music is more memorable than the pictures, and the pictures are more compelling than the narration. We are deluged by sights and sounds but not enlightened as to cause and effect.

“An American lieutenant who fought there in 1965 is quoted at the end of the film saying, ‘We have learned a lesson...that we just can’t impose our will on others.’ While that summarizes the documentary, the opposite is true.  Wars are fought to impose your will upon the enemy. If you don’t intend to win, don’t fight.

“Our civilian and military leaders were grossly irresponsible. At the height of the war in 1968, Secretary of Defense Clark Clifford is quoted as telling President Lyndon Johnson, ‘We’re not out to win the war.  We’re out to win the peace.’

“The North Vietnamese were superb light infantry. The film points out that we grunts called the DMZ (Demilitarized Zone) the Dead Marine Zone because we were pounded from North  Vietnam and forbidden to attack.  The real lesson: Never fight on the enemy’s terms....

“This documentary succeeds in vividly evoking sadness and frustration. But that is not all there was to the story.  ‘The Vietnam War’ strives for a moral equivalence where there is none.  The veterans seem sad and detached for their experience, yet 90 percent of Vietnam War veterans are proud to have served. So there’s a large gap between what we see and the attitude of the vast majority of veterans.

“Their sense of pride – so vital for national unity – is absent from the documentary.  And that’s a glaring omission.”

George Will / Washington Post...on the same topic.

“Weary of hearing the prudence that was so painfully learned in Indochina derided as the ‘Vietnam syndrome,’ (Karl) Marlantes (Ed. a Rhodes Scholar from Yale University who voluntarily left Oxford for Marine service in Vietnam) says (in his Wall Street Journal review of Mark Bowden’s book ‘Hue 1968’): ‘If by Vietnam syndrome we mean the belief that the U.S. should never again engage in (a) military interventions in foreign civil wars without clear objectives and a clear exit strategy, (b) ‘nation building’ in countries about whose history and culture we are ignorant, and (c) sacrificing our children when our lives, way of life, or ‘government of, by, and for the people’ are not directly threatened, then we should never get over Vietnam syndrome. It’s not an illness; it’s a vaccination.’  The Burns / Novick masterpiece is, in Marlantes’s words about Bowden’s book, ‘a powerful booster shot.’”

--About two months ago I wrote of how no one was talking, then, about the looming Winter Olympics in PyeongChang, South Korea, and how this was nuts given the current state of affairs in the region.

This week, France became the first to say it will not go unless there are specific security guarantees.

--Sign of the Apocalypse...Colin Campbell / Baltimore Sun:

“A Good Samaritan who pressure-washed paint off the vandalized Francis Scott Key monument in Bolton Hill inadvertently damaged the monument further by blasting off some of the deteriorated marble, art conservators said Friday.

“The pressure-washing also appeared to have driven the spray-paint on the monument’s fountain pool deeper into the granite, according to Diane Fullick, a Baltimore-based art conservator hired by the city to inspect and scrub away the vandalism.

“ ‘You never want to pressure-wash marble,’ Fullick said.”

Free tip from moi, sports fans.

--Robert Lee Hotz / Wall Street Journal

“The most severe hurricane season in almost a decade is stoked by warmer-than-average Atlantic Ocean currents, weak westerly Pacific winds and turbulent hot tropical air over the Indian Ocean, with no sign conditions will slacken soon, climate analysts and meteorologists say.

“ ‘It’s the trifecta,’ said atmospheric scientist Jeff Weber, who studies tropical meteorology and climate change at the University Corporation for Atmospheric Research in Boulder, Colo.  ‘The atmospheric conditions are ideal for hurricane formations.’”

The weakening winds from the Pacific are huge as this reduces the wind shear we normally hear about in Atlantic storms.

The United States had never seen two Category-4 hurricanes (Harvey and Irma) slam into the United States the same year in recorded history dating to 1851.  Maria is three, if you count U.S. territories.  We don’t need any more.

---

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

Pray for the first responders...and the victims of nature’s wrath.

God bless America.

---

Gold $1300
Oil $50.66  [first weekly close over $50 since 5/19]

Returns for the week 9/18-9/22

Dow Jones  +0.4%  [22349]
S&P 500  +0.1%  [2502]
S&P MidCap  +0.8%
Russell 2000  +1.3%
Nasdaq  -0.3%  [6426]

Returns for the period 1/1/17-9/22/17

Dow Jones  +13.1%
S&P 500  +11.8%
S&P MidCap  +6.5%
Russell 2000  +6.9%
Nasdaq  +19.4%

Bulls 50.5
Bears 19.0 [Source: Investors Intelligence]

Have a great week. 

Brian Trumbore



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Week in Review

09/23/2017

For the week 9/18-9/22

[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 a check to PO Box 990, New Providence, NJ 07974.

Edition 963

The way this column works, I normally have it basically finished by 4:00 p.m. or so, then I immediately start proofing, which takes forever, make the changes, fill in market returns, and now it’s about 9:00 p.m., after which I add a little more and try to post by 11:30 p.m.

The column was thus largely complete when President Trump took the stage in Huntsville, Alabama tonight, around 8:00 p.m. ET, and I had to watch it.  It’s what I do.

I can’t rewrite what follows, nor would I, but being the ‘wait 24 hours’ guy, had I been posting tomorrow night, some of it would be.

I was beyond appalled at Trump’s speech for Alabama Sen. Luther Strange.  It was embarrassing, and deeply disturbing.  I had the Fox News channel on and when Trump finally wrapped up around 9:30, I had to catch the initial commentary from “The Five” crew and of course they were fawning all over the president.

Because I don’t like to make snap judgments, I’ll move on for now.  Let me just say that Trump had some good moments this week, but this was one of the worst of his presidency.  And I just bit my tongue straight through.

---

This has been an awful time for Planet Earth, and with the war of words between the United States and North Korea it could easily get far worse.

But I can’t help but start with the devastation wrought by Hurricane Maria on parts of the Caribbean, specifically Dominica, St. Croix and Puerto Rico.  Coupled with the destruction from Hurricane Irma just two week earlier, and before that, Hurricane Harvey, and one can’t help but get depressed when you look at the millions of lives that have been changed forever.

Where do you even begin to rebuild Puerto Rico?  There are zero resources there to draw on, like the citizens of Key West or Houston have in the United States.  If Puerto Rico was attached to us by a causeway, you could at least feel like, ‘they’ll get through this.’

But sitting where they are, and already being bankrupt, and with America being stretched to the max when it comes to emergency resources and response teams, it is beyond overwhelming.

And as for the likes of Dominica, and Barbuda before it, it’s over.  I got a kick out of some on the news this week talking about so-and-so is going to rebuild their bar, like you or I will jump at the opportunity to head on down to party.  You kidding me?

The United States has to do all it can to help these people, especially those that are formally part of us.  But we have to be smart.  Some of these places are gone forever.  Accept it.

I would be in favor, though, of some kind of Peace Corps concept for our young people; give them an opportunity to help rebuild some of the islands.  Yes, it’s going to cost a ton of money, whether it’s Houston or Puerto Rico.  We’re going to have to spend it, with hopefully the world’s greatest watchdog overseeing it all because this is when corruption can be rampant.

For now, you still have 66,000 living in FEMA hotels in Houston, scores doing the same in Florida, and millions without hope in the Caribbean.  Between the three storms, well over 200 have lost their lives. 

And then there is the earthquake in Mexico City, whose toll is undoubtedly 2 or 3 times the official tally thus far.

But we move on.  There’s a certain guy in Pyongyang demanding our attention.

Trump...the UN...North Korea

Over the weekend, North Korea said it was seeking military “equilibrium” with the United States, and Pyongyang would continue to run “full speed and straight” toward achieving this goal, Kim Jong Un told his top missile unit, according to the state news agency.  Last Friday, the North launched its second ballistic missile over Japanese airspace in a month.

On the Sunday news shows, U.N. Ambassador Nikki Haley said that if diplomatic measures with North Korea continue to fail, Defense Secretary James Mattis is ready to “take care” of the situation.

Appearing on CNN’s “State of the Union,” Haley said: “If North Korea keeps on with this reckless behavior, the United States has to defend itself or defend its allies...North Korea will be destroyed, and we know that and none of us want that.  None of us want war,” she said.

President Trump then gave his first speech to the U.N. General Assembly on Tuesday and said America would destroy North Korea if forced to defend itself or its allies.  Trump mocked Kim Jong Un, saying: “Rocket man is on a suicide mission.”

Trump and his administration have repeatedly warned North Korea over its weapons tests, which violate U.N. Security Council resolutions.

“If [the U.S.] is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea,” Trump said.

Just before Trump spoke, U.N. Secretary General Antonio Guterres had urged statesmanship, saying: “We must not sleepwalk our way into war.”

North Korean Foreign Minister Ri Yong-ho said after Trump’s speech: “There is a saying that goes: ‘Even when dogs bark, the parade goes on.’  If [Trump] was thinking about surprising us with the sound of a barking dog then he is clearly dreaming.”

Thursday, Trump announced he would sign an executive order imposing new sanctions on Pyongyang “that significantly expands authority to target individuals, companies, and financial institutions that finance and facilitate trade with North Korea.”  Trump also met with Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in.

In a statement following Trump’s speech, President Moon said: “We view the speech as portraying a firm and specific stance on the key issues regarding keeping peace and safety that the international community and the United Nations are faced with.

“It clearly showed how seriously the United States government views North Korea’s nuclear program as the president spent an unusual amount of time discussing the issue,” the statement read.  [Trump’s speech] “reaffirmed that North Korea should be made to realize denuclearization is the only way to the future through utmost sanctions and pressure.”

But German Chancellor Angela Merkel condemned Trump’s threat to “totally destroy” North Korea, saying sanctions and diplomacy were the only way to get Pyongyang to the negotiating table.  “I am against such threats.”

Friday, Kim Jong Un made an unprecedented televised statement, personally addressing Trump for the first time and accusing him of being “mentally deranged.”

Kim said that Trump would “pay dearly” for the threats, and that North Korea “will consider with seriousness exercising of a corresponding, highest level of hardline countermeasure in history.”

“I am now thinking hard about what response he could have expected when he allowed such eccentric words to trip off his tongue,” Kim said. “I will surely and definitely tame the mentally deranged U.S. dotard with fire.”

Hours later, Pyongyang’s foreign minister told reporters in New York that North Korea could launch a nuclear missile test in response.  “This could probably mean the strongest hydrogen bomb test over the Pacific Ocean,” said Ri Yong Ho.

Trump tweeted: “Kim Jong Un of North Korea who is obviously a madman who doesn’t mind starving or killing his people, will be tested like never before!”

Opinion....

Daniel Henninger / Wall Street Journal

“On July 28 this year, North Korea’s Kim Jong Un tested an intercontinental ballistic missile.  Analysts said its potential flight path on an optimum trajectory could travel some 6,400 miles. We can’t help but notice that most of the commentators who are dumping condescension on President Trump for threatening to ‘totally destroy North Korea’ live in New York or Washington rather than Seattle or San Francisco.  Or Seoul or Tokyo or anywhere people live who no longer see Kim’s 250-kiloton bomb – about 17 times as big as what hit Hiroshima in 1945 – as an intellectual or journalistic abstraction.

“Mr. Trump violated foreign-policy sensibilities on the Eastern Seaboard by saying out loud what has been an implicit reality of U.S. strategic policy since the dawn of the nuclear age: We reserve the right to use nuclear weapons to pre-empt a first strike from an adversary, and that includes an enemy’s nuclear, chemical or biological weapons.  The reason resided in one simple Cold-War word: deterrence.

“Toward the end of the Obama presidency, concerns emerged that Mr. Obama would adopt the ‘no first use’ doctrine on nuclear weapons long favored by progressive arms-control activists. He did not.  Also worth keeping in mind amid the outcry that Mr. Trump’s speech violated some sort of international gentlemen’s agreement is that NATO has refused for 70 years to adopt no first use.

“Until recently, no American president needed to make such threats in public.  An assumption of the Cold War was that the Soviet Union’s leadership ultimately was rational, and so we negotiated nuclear agreements with them.  Some similar baseline of assumed rationality attached to dealing with each subsequent nuclear power, such as China, India and even Pakistan.

“Pakistan and India – estimated to have more than 100 nuclear warheads each – rattled the world’s nerves as recently as 2002, when the two countries massed armies along their 2,000-mile border after a terrorist attack on the Indian Parliament.

“Whether Iran’s revolutionary and messianic religious leadership is ‘rational’ in the Cold War meaning lies at the heart of the disagreement over the Obama nuclear deal with Tehran.  The Iranians understood this requirement, and so they put forth as their negotiator Foreign Minister Javad Zarif, a ‘rational man’ from Hollywood central casting, unlike the evil-eye mullahs who actually decide Iranian nuclear strategy, which looks a lot like North Korea’s nuclear strategy.  Yet another of Mr. Trump’s violations of Eastern Seaboard sensibilities is to suggest the Iranians are less trustworthy on nukes than, say, Mikhail Gorbachev.

“Since 1993, the U.S. has pursued the standard model of rational-man arms control negotiations with North Korea.  This false, 25-year-long presumption now has brought us to within perhaps one year of Kim being able to attach a miniaturized nuclear bomb to the cone of an ICBM.

“The day that happens, the world will have crossed a Rubicon into a nuclear reality incomparably more dangerous than anything in the previous seven decades.  On Tuesday, a U.S. president spoke truth to nuclear power.  Eastern punditry will never recover from the way Mr. Trump said it, but the rest of the rational world will adapt.”

David Ignatius / Washington Post

“When you discount the rhetorical overkill, the most surprising thing about President Trump’s address to the United Nations on Tuesday was how conventional it was. He supported human rights and democracy; he opposed rogue regimes; he espoused a global community of strong, sovereign nations.  Pretty shocking stuff. Because he’s Trump, the zingers got the headlines: He repeated his childish, snarky (but sort of funny) playground denunciation of North Korean leader Kim Jong Un: ‘Rocket Man is on a suicide mission.’ And he offered a bombastic threat that if North Korea attacks the United States or its allies, ‘we will have no choice but to totally destroy’ it.

“Okay, got that: It’s a restatement of the existing U.S. policy of nuclear deterrence.  Trump also thanked China and Russia for their diplomatic help and pushed them to do more. He said the Iran nuclear deal was ‘an embarrassment’ and Iran’s regional actions were a ‘scourge,’ but he didn’t say he would tear up the deal.  He appealed to the Iranian people, without exactly calling for regime change.  He checked all the hard-liner boxes, in other words, without making any new commitments.

“It was a well-cooked pudding, the sort of speech Trump might have given at his inauguration back in January if he hadn’t been so angry.  Back then, he spoke like a wrecker (raging about ‘American carnage’).  Now he’s using the alliterative phrases that are speechwriters’ earwigs, as in calling for ‘a renewal of will, a rediscovery of resolve and a rebirth of devotion.’  Stirring, pleasant to hear, otherwise incomprehensible.

“Trump even had one of those JFK-style false-dichotomy ‘ask not...but what...’ passages when he talked about the choice between lifting the world to a new height or letting it fall into a ‘valley of disrepair.’

“The speech was reportedly written by Stephen Miller, a.k.a. Darth Vader to many in the mainstream media, but this seemed to be Miller 2.0, and perhaps the language left his now-deposed mentor Stephen K. Bannon gnashing his teeth: What happened to the insurgent populist Trump who talked a year ago as if he wanted to topple the global order?  On Tuesday, Trump seemed instead to embrace an updated version of it.

“Trump’s address offered a heavier dose of nationalism and self-interest: he wanted to root collective action in sovereignty and reciprocity, rather than a vaguer ‘globalism.’  He spoke about righteousness defeating evil, a ‘great reawakening of nations’ and other fuzzy Reaganisms.  But at its core, this was a speech that any president since Harry S. Truman probably could have delivered.  (Interestingly, Trump twice favorably mentioned Truman, the haberdasher from Kansas City whose stubborn common sense shaped the liberal order.)....

“So what worries me about Trump’s speech? Oddly, it’s precisely that it was so conventional.  If Trump is going to deal successfully with North Korea, he’ll truly have to think outside the box.  If he wants a better, longer-lasting deal with Iran, he needs in some way to engage that nation and its people.

“And most of all, Trump needs to bring America with him in making a reformed United Nations a place that actually solves problems. The Great Disrupter says he wants to revive the global community and make it work better.  Okay, Mr. President, let’s see what you’ve got.”

Editorial / Wall Street Journal

“Donald Trump’s method has been to use his speeches on the world stage to roil diplomatic convention, and he did it again Tuesday in his address to the United Nations.  No coterie of complacency deserves candor more, and perhaps Mr. Trump’s definition of ‘America First’ is even evolving to recognize the necessity of American global leadership.

“The President abandoned any nuance, even by his standards, in denouncing the ‘rogue regimes’ in North Korea and Iran.  He was especially unabashed in describing North Korea’s offenses, calling it a ‘depraved regime.’  These aren’t words typically heard at Turtle Bay, where others among the depraved sit on the Human Rights Council, as Mr. Trump also had the effrontery to point out.

“But he really rattled the seats with his threat to act against North Korea if the U.N. fails to do so.  ‘No nation on Earth has an interest in seeing this band of criminals arm itself with nuclear weapons and missiles,’ Mr. Trump said.  ‘The United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea.  Rocket Man is on a suicide mission for himself and for his regime.’

“The threat to destroy the North offended the foreign affairs cognoscenti, who view Mr. Trump as a barbarian. And at first hearing the ‘Rocket Man’ reference to dictator Kim Jong Un does sound like an insult better left to teenagers in the school yard.

“Then again, Mr. Trump inherited the North Korean nuclear crisis, and he is trying to get a cynical world’s attention that he intends to do something about it. Traditional diplomacy isn’t getting through to Mr. Kim and his entourage, or to their patrons in Beijing. After years of Barack Obama’s diplomatic niceties that ducked the problem, maybe the world needs to be told some unpleasant truths about an evil regime with a weapon of mass murder and the means to deliver it.

“Mr. Trump added a challenge that most of the media ignored: ‘The United States is ready, willing, and able, but hopefully this will not be necessary. That’s what the United Nations is all about. That’s what the United Nations is for.  Let’s see how they do.’

“This is another hard truth. The U.N. was founded on the promise to provide what Mr. Obama often called ‘collective security.’  But the U.N. has nearly always failed in that duty amid Russian vetoes at the Security Council, as during the Cold War and this decade in Syria, or out of indifference as in the Rwanda genocide of the 1990s.

“The great exception was the first Iraq war, after the fall of the Berlin Wall, when George H.W. Bush rallied the U.N. to resist Saddam Hussein’s invasion of Kuwait. The U.S. provided the military muscle to enforce the U.N.’s will, but at least the U.N. wasn’t an obstacle.  Alas, Turtle Bay has since returned to its previous habit of abetting the world’s rogues by preventing collective security....

“Mr. Trump is right to challenge the U.N., but the hard truth he may be learning is that there is no substitute for U.S. leadership on behalf of American values and interests if he wants to build a more peaceful world.”

Benny Avni / New York Post

“For 50 minutes on Tuesday, President Trump dazzled, and appalled, U.N. denizens in a speech that was the most detailed and reasoned defense to date of his ‘America First’ ideology.  The nationalism was still there, but any hint of isolationism was absent.

“If ‘Rocket Man’ Kim Jong Un refuses to end his missile and nuclear programs and keeps up his ‘suicide mission,’ Trump said, and if countries fail to isolate him despite the U.N.’s own resolutions, America ‘will have no choice but to totally destroy North Korea.’

And he didn’t shy away from attacking several other sacred cows of Turtle Bay. He chastised the U.N. bureaucracy and hinted America won’t continue blindly pouring cash into it.  He asked other countries to shoulder more responsibility in maintaining global peace and prosperity.

“And then there was this: The nuclear deal with Iran is ‘one of the worst and most one-sided transactions the United States has ever entered into,’ Trump said.  ‘Frankly, that deal is an embarrassment to the United States, and I don’t think you’ve heard the last of it – believe me.’

“The usual suspects were appalled.  ‘It was the wrong speech, at the wrong time, to the wrong audience,’ Swedish Foreign Minister Margot Wallstrom told the BBC.

“In reality, it was a more-refined and a better-reasoned version of the worldview Trump’s been proclaiming since the campaign. It was a defense of the role national interests play in facilitating global cooperation.

“He talked about three principles – ‘sovereignty, security and prosperity.’ But the speech might as well have been titled ‘sovereignty, sovereignty and sovereignty.’....

“Trump also brandished his gift for branding. Like other childish, though perfectly pitched, Trump taunts – Lyin’ Ted, Crooked Hillary – Kim of North Korea will forever be known from now as ‘Rocket Man.’  More important, Trump’s vow that ‘our military will soon be the strongest it has ever been’ will – if brought to fruition – warm the hearts of Asian allies who have been less than assured of late about America’s commitment to global protection and defense agreements.

“And as one Arab diplomat observed, Western Europeans, Chinese and Russians may be stunned by Trump’s style, but many Middle Easterners, especially those fearing Iran’s rise, will understand the appeal. 

“Like Israeli Prime Minister Benjamin Netanyahu, who is often criticized in public by world leaders but lauded in private by those very same leaders.  He found a kindred spirit in Trump.  ‘In over 30 years in my experience with the U.N., I never heard a bolder or more courageous speech,’ Bibi tweeted.

“Some U.N. traditionalists heard in Trump’s ‘sovereignty’ approach echoes of the world body’s early years, in the 1940s, when the global governing structure was young and concerns about trampling national boundaries were de rigueur.  But Trump seems intent on bringing it back into fashion.

“So if they want America as an ally, they better get used to it.”

Claudia Rosett / Wall Street Journal

“Since the U.N.’s founding in 1945, no member state has ever been expelled.  The U.N. charter does, however, provide for eviction: ‘A Member of the United Nations which has persistently violated the Principles in the present Charter may be expelled from the Organization by the General Assembly upon the recommendation of the Security Council.’

“North Korea never met the U.N. membership requirements to begin with. The charter says membership is open only to ‘peace-loving states’ that promote ‘respect for human rights and for fundamental freedoms.’ North Korea was admitted in tandem with South Korea on Sept. 17, 1991.  At the time, with the Soviet Union in the process of collapse, the rationalization was that finally bringing North Korea into the U.N. fold might induce it to give up its brutal and predatory ways.

“Instead, the legitimacy and perquisites conferred by U.N. membership might have helped the regime survive. Expelling North Korea now could undermine Mr. Kim domestically.  His regime would lose the international respect that accompanies a U.N. seat.  North Korean diplomats would be forced to give up access to lavishly appointed U.N. offices and soirees in New York, Rome and Vienna.  The U.S. and its allies pay most of the tab for these amenities, while Pyongyang avails itself of opportunities for spying, money laundering and illicit procurement.

“From the start North Korea was intent on causing trouble for the U.N.  As early as 1993 the Security Council was expressing ‘concern’ that Pyongyang was out of compliance with U.N. nuclear safeguards.  North Korea is now in violation of nine Security Council resolutions, after developing intercontinental ballistic missiles and carrying out six nuclear tests....

“A bid to toss North Korea out of the U.N. would need strong U.S. leadership, and it could fail. China and Russia could block it with their Security Council vetoes. The despot-packed General Assembly, wary of setting a precedent, could balk.

“It’s still worth a try. Even failure would better illuminate the perils of relying on a U.N. that values North Korea’s company above its own charter.  Success could help undercut the Kim regime, and confer a measure of badly needed redemption on the U.N. itself.”

Trumpets....

--Senate Republicans were preparing today to try to repeal ObamaCare for a second time next week as they face an end-of-the-month deadline.

It is expected that Graham-Cassidy will hit the floor for a vote and as of now, Republicans do not have 50 votes, which would allow Vice President Mike Pence to break a tie and pass a bill.

GOP Sens. Lisa Murkowski (Alaska), John McCain (Ariz.) and Susan Collins (Maine) were undecided, while Sen. Rand Paul (Ky.) was a definite ‘no.’

Graham-Cassidy, named after Sens. Lindsey Graham (S.C.) and Bill Cassidy (La.) would repeal much of ObamaCare, ending funding for Medicaid’s expansion and the healthcare law’s subsidies that help some people buy insurance.  In their place, block grants would be given to the states.

As for how those with pre-existing conditions would be handled, Graham-Cassidy would allow states to waive regulations protecting people with them from being charged higher premiums, a provision that moderate Republicans have opposed in the past.

The White House and House GOP leadership have thrown their weight behind the legislation, but some Republican governors are adamantly opposed as they would lose money on the trade.

But a more flexible system would give them more latitude to pursue programs that are a better fit for their populations. Every one has its own demographics and health challenges.

Alas, John McCain announced this afternoon that he would vote against the proposal, in all likelihood dooming the bill and, with it, the GOP’s last shot at passing health care overhaul this year.

“I cannot in good conscience vote for the Graham-Cassidy proposal.  I believe we could do better working together, Republicans and Democrats, and have not yet really tried,” he said in a statement.

Earlier Susan Collins said she was “leaning against it.”  Lisa Murkowski was on the fence.

One of McCain’s big objections was he hadn’t seen a CBO score, and the Congressional Budget Office said its analysis wouldn’t be ready until next month.

Needless to say, late-night comedian Jimmy Kimmel, who has been waging a crusade against Graham-Cassidy, hailed McCain as a hero.

So is there still a shot at a bipartisan fix to make repairs to the insurance markets for 2018?

Editorial / Wall Street Journal

“Tennessee Senator Lamar Alexander...took up (an) offer and negotiated in good faith with Democrat Patty Murray to make modest repairs to insurance markets for 2018. There were hearings. There were meetings. Yet this week Mr. Alexander pulled the plug because they had ‘not found the necessary consensus.’  Democrats claim Mr. Alexander was coerced by GOP leaders and the White House, but in our experience the Tennessean doesn’t give up easily or on anyone’s orders. Senate Democrats refused in the talks to make more than de minimis changes to ObamaCare’s waiver process to give states more regulatory flexibility.

“Mr. Schumer is never going to let Ms. Murray make concessions beyond an insurer bailout because he figures he can blame Republicans for higher premiums going into the 2018 election.  He also won’t buck Bernie Sanders or his more than 15 other Members who recently endorsed single-payer health care.  Democrats are moving left on health care, not to the center.  ‘Process’ is beside the point.

“The shame is that many Democrats once liked a federalist solution to health care, and Lindsey Graham was one of those who worked with them.  In 2007 he and Wisconsin Democrat Russ Feingold proposed the State-Based Health Reform Act that would have given states even more freedom than Graham-Cassidy.  But these days Democrats fear that state laboratories would discredit the command and control approach to health care that they hope will lead to single-payer.

“The choice Republicans face isn’t between Graham-Cassidy or some bipartisan beau ideal.  Their choice is to pass their own bill, which now means Graham-Cassidy, or fail again and cede the health-care advantage to the single-payer wing of the Democratic Party.”

--Kind of ironic how I led my column last week with my thoughts on climate change, “global pollution,” and how it was idiotic for President Trump to withdraw from the Paris Climate Accord, and about 12 hours later, we learned the administration is reconsidering and wants to re-engage in reviewing the terms of its participation.

In June, Trump said the U.S. would withdraw unless it could find more favorable terms.

Deputy White House press secretary Lindsay Walters, though, said, “There has been no change in the U.S.’s position on the Paris agreement. As the president has made abundantly clear, the U.S. is withdrawing unless we can re-enter on terms that are more favorable to our country.”

It’s true that under the agreement, the U.S. couldn’t fully withdraw for almost four years, and some now believe Trump has a little wiggle room, where he can declare he had withdrawn, only to renegotiate terms that he would portray as being more favorable to the U.S.

But China’s special representative for climate change affairs said, “The Paris agreement should not be renegotiated.”

Renegotiation will be very difficult.

For his part, French President Emmanuel Macron strongly defended the accord in his speech to the General Assembly, with Macron, I’m guessing, having some influence on Trump’s decision.

--Federal agents wiretapped the phone of former Trump campaign chair Paul Manafort before and after the 2016 election – capturing conversations between the two, according to a CNN report.  The wiretaps are now part of special counsel Robert Mueller’s intensive probe.

Investigators are looking into whether Manafort had encouraged Russian operatives to aid Trump’s campaign.

Manafort had been a target of the FBI in 2014 over his lobbying efforts on behalf of Ukraine, but the surveillance ended for lack of evidence.  Then the FBI launched a new probe once Manafort became aligned with the Trump campaign.

According to reports, Manafort has been told by Mueller’s investigators that he’ll be indicted.

Separately, former Utah Governor Jon Huntsman, President Trump’s nominee to be ambassador to Russia, said on Tuesday there was “no question” that Moscow meddled in the 2016 election, and pledged to bring up the issue with the Russian government.  Huntsman was testifying before his Senate confirmation hearing.

“Moscow continues to meddle in the democratic processes of our friends and allies,” he added.

Wall Street and the Fed

The Federal Reserve, as expected, opted to hold the line on interest rates at its Open Market Committee meeting on Tuesday and Wednesday, but it seems clear another rate hike is looming come December’s confab, as 11 of 16 Fed officials favor a boost before year end, while the forecast is for three rate increases in 2018.

But, the Fed, also as expected, announced it would initiate its long-telegraphed plan to shrink its $4.5 trillion balance sheet, beginning in October, slowly, but building up to $600 billion a year.  That’s the Fed allowing its Treasury and mortgage securities holdings to roll off, initially at a level of $10 billion, then increasing $10 billion each quarter to a maximum of $50 billion from October next year.  This is a rate hike of a different order, as the Fed is no longer an active buyer.

In her press conference after, Chair Janet Yellen said there is now “a somewhat high bar to resume reinvestments,” and only “a material deterioration in the economic outlook” would prompt the Fed to consider such a move.

“We’re working down our balance sheet because we think in some sense it’s no longer needed. We feel the U.S. economy is performing well,” said Yellen.

The Fed issued its latest GDP forecast, 2.4% for this year vs. its earlier forecast of 2.2%.  2.1% in 2018.  Unemployment is seen at 4.1% in 2018.

Inflation is now not expected to hit 2% until 2019, rather than 2018.  It’s currently at 1.6%.

As for the impact of the storms on economic activity, the Fed said in a statement: “Storm-related disruptions and rebuilding will affect economic activity in the near-term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term.”

[In the third quarter, the Atlanta Fed’s GDPNow indicator has third-quarter GDP at 2.2%.  Had there been no Hurricane Harvey or Irma, that number would be more like 2.7%.]

Chair Janet Yellen didn’t get roped into dropping any hints as to her future, with her term expiring next February.  All she said was she will serve out her term.  She did allow that she hasn’t had a meeting with President Trump since the early days of his presidency.

The OECD (Organization for Cooperation and Development) issued its latest economic forecast and it is calling for global growth of 3.5% this year, 3.7% next (after 3.1% in 2016).

The United States is seen at 2.1% by its forecast for 2017, 2.4% in 2018.

[Solid, consistent growth across the developed world is a major reason for the equity rally.]

Separately, August housing starts fell 0.8%, while August existing home sales fell to 5.35 million on an annualized basis, worse than expected, with the median price down 1.8% to $253,500 over July, though this is normal in the summertime, prices normally peaking in June.

Editorial / Wall Street Journal

“Whether or not you think its post-2008 exertions succeeded, they have taken the Fed far from its legal mandate.

“Its purchase of mortgage securities in particular are a form of credit allocation that distorts financial markets and investment decisions.  Its meddling in the long bond market abetted federal government borrowing by disguising the long-term cost of debt repayment. The Fed offered a free lunch for the Obama Administration with the bill presented to future Presidents and taxpayers.”

Europe and Asia

First, some economic news from the eurozone (EA19).

IHS Markit released its flash readings on the economy for September.

The flash Eurozone Composite reading was 56.7 (50 being the dividing line between growth and contraction), vs. 55.7 in August. 

Manufacturing was at 58.2, vs. 57.4 last month, a 79-month high. 

Services came in at 55.6 vs. 54.7.

Germany: Manufacturing 61.8, up from 60.1 in August, 77-month high.  Services 55.6, 6-mo. high.
France: Manufacturing 56.0, 77-month high. Services 57.1, up from 54.9 in August.

Chris Williamson / Chief Economist at Markit:

“The eurozone economy ended the summer with a burst of activity, with the PMI signaling renewed impetus to already-impressive rates of growth of output, order books and employment during September.

“The survey data point to 0.7% GDP growth for the third quarter, with accelerating momentum boding well for a buoyant end to the year.

“The stronger euro was cited as a concern among manufacturers, but as yet appears to have had only a modest impact on exports.”

Eurostat reported that August inflation in the EA19 was 1.5%, annualized, up from 1.3% in July, and 0.2% ann., August 2016.  Still well below the European Central Bank’s 2% target.

Germany came in at 1.8%, France 1.0%, Italy 1.4% (vs. -0.1% Aug. 2016) and Spain 2.0% (vs. -0.3% Aug. 2016).

The OECD raised its outlook on eurozone growth for 2017 to 2.1%, up from 1.8% in its June forecast, and 1.9% in 2018.  The U.K. is forecast to grow 1.6% this year, and still just 1.0% in 2018, owing to ongoing uncertainty over Brexit.

But August retail sales in the U.K. surged 1.0% month-on-month, up 1.2% for the rolling three months vs. the previous three.

Eurobits....

Speaking of Brexit, Prime Minister Theresa May gave her key speech on Britain’s plans for exiting the EU on Friday, from Florence, with Mrs. May talking of a transitional period of two years from the formal date of withdrawal in March 2019, during which trade should continue on current terms.

“So during the implementation period access to one another’s markets should continue on current terms and Britain also should continue to take part in existing security measures.”

May spoke of the historic ties between Britain and the E.U., and that European leaders had a “profound sense of responsibility” to agree to good terms.

EU migrants will still be able to live and work in the UK, but they will have to register with the authorities, under her proposals.

And the UK will pay into the EU budget.

While her pitch was to European leaders, in the hopes of unblocking Brexit talks, it was really to her own citizens, with the latest opinion poll showing 52% of Britons favor staying in the European Union.

The prime minister also proposed a “bold new security agreement” and said the UK would be the EU’s “strongest partner and friend.”

On trade, Mrs. May said there was “no need to impose tariffs where there are none now.”

While May didn’t specify an exit bill, it is believed to be at least 20bn euros, or $24 billion.

In her speech, the prime minister said Britain would “honor commitments” made while it had been a member to avoid creating “uncertainty for the remaining member states.”

The EU’s chief Brexit negotiator Michel Barnier described the speech as “constructive” and said the prime minister had shown “a willingness to move forward, as time is of the essence.”

Indeed it is.  A key EU summit is October 19-20.

Meanwhile, it has been a tension convention between Mrs. May and her foreign secretary, Boris Johnson, a chief party rival.  For a while, it looked as if Boris, as he’s known in Britain, was about to resign or get fired for speaking out of turn on Brexit.  Last weekend, he dropped a lengthy opinion piece in the Daily Telegraph that challenged May’s leadership and strategy just days before her speech in Florence.

Johnson had been the figurehead of last year’s Brexit campaign and he urged Mrs. May to stick with her strategy for exiting the bloc that she outlined in January.

“Before the referendum, we all agreed on what leaving the EU logically must entail: leaving the customs union and the single market, leaving the penumbra of the European Court of Justice; taking back control of our borders, cash, laws,” Johnson wrote.  “That is what she and her government will deliver.”

He also declared that the U.K. should not pay access to Europe’s single market for goods and services after Brexit.  Johnson said quitting the EU would allow the government to strike new trade deals, revamp the tax system, reboot infrastructure projects, advance science and improve access to housing.

Johnson said earlier this year that EU officials could “go whistle” if they expected a large financial settlement, although he subsequently conceded some money would be paid.

You have to picture the two were at the United Nations together for the General Assembly, staying in the same hotel, but in the end, Johnson hitched a ride on May’s plane back home to the U.K. on Thursday, in time for a Cabinet meeting.

Now, we look to see what happens at the Conservative Party annual conference in October and whether Johnson mounts a challenge to May.  The Sun newspaper reported that Johnson has told friends he believes Brexit negotiations will fail and end up with May being humiliated.  I tend to agree.

--Germany’s big national election is Sunday, and Chancellor Angela Merkel’s Christian Democrats will win comfortably, setting Merkel up for a fourth term.  But the issue is who can Merkel and her center-right Christian Democrats form a coalition with.  So we’ll see how the lesser parties do.

What we do know today is that the far-right, anti-immigrant AfD, (Alternative For Germany) is polling third at around 10%, which is significant because you need 5% for parliamentary seats and at 10%, they’d pick up quite a few, pretty astonishing for a four-year-old party. 

Far more next time.  The results could be fascinating.

Meanwhile, whereas it was once feared Russia would be meddling in the vote, it seems right-wing groups in the U.S. are behind materials popping up on YouTube, message boards and other platforms.

--Police in Spain raided Catalan government offices and arrested officials on Wednesday to halt a banned referendum on independence slated for Oct. 1.  But Catalan President Carles Puigdemont said in a televised address, “The Spanish state has by all rights intervened in Catalonia’s government and has established emergency rule. We condemn and reject the anti-democratic and totalitarian actions of the Spanish state.”

The FC Barcelona soccer club said in a statement: “FC Barcelona, in remaining faithful to its historic commitment to the defense of the nation, to democracy, to freedom of speech, and to self-determination, condemns any act that may impede the free exercise of these rights.”

Protests will be held this weekend.  It could get ugly.

--Marine Le Pen’s top aide, Florian Philippot, the National Front’s vice president in charge of communications and strategy since 2012, said he was leaving after weeks of tensions with other party officials over the reasons for Le Pen’s defeat in the presidential election and the strategy going forward.  [Le Pen actually canned him.]

It seems Le Pen wants to go back to her anti-EU hardline stance that the party softened in an attempt to get crossover votes in the election vs. Emmanuel Macron.  Philippot had been the architect of the so-called undemonization strategy that aimed to attract voters from the mainstream.

--Portuguese bonds staged their sharpest rally in 1 ½ years as S&P upgraded its credit rating, with the yield on the 10-year bond tumbling from 2.75% last Friday to 2.35% on Wednesday, before finishing the week at 2.38%.  The yield was 4% last February.

S&P applauded the “solid progress [Portugal] has made in reducing its budget deficit and the receded risk of a marked deterioration in external financing conditions.”

Turning to Asia, the OECD pegs China’s growth at 6.8% this year, 6.6% next, after 6.7% in 2016.

Average new home prices rose in August at the slowest pace in seven months, up 0.2%, 8.3% year-over-year.  Of the 70 cities in the major cities index, as reported by the National Bureau of Statistics, 52 showed an increase.

But Shenzhen, across from Hong Kong, has seen prices fall 1.9% year on year, while Shanghai is up just 2.8% and Beijing 5.2%, yoy.

Separately, Standard & Poor’s downgraded China’s sovereign debt rating a notch for the first time in nearly two decades.  Fitch and Moody’s had done so earlier, but the downgrade comes at a sensitive time as the Chinese Communist Party is holding its 19th National Congress in a  few weeks; the gathering where President Xi Jinping is going to further consolidate his power.

It’s nothing new, but S&P cited China’s fast-accumulating debt load, which is raising financial and economic risks.

China’s finance ministry hit back on Friday, calling it a “wrong decision.”  The ratings agency was “neglecting China’s sound economic fundamentals and development potential,” the ministry said in a statement on its website, calling the decision “perplexing.”

In Japan, the OECD forecasts 1.6% growth in 2017, 1.2% in 2018, after 1.0% last year.

August exports soared 18.1%, year over year, owing largely to cars and electronics amid the solid global economy, the fastest pace since Nov. 2013, after July’s 13.4% pace.

Exports to the U.S. rose 21.8%; 25.8% to China, year on year, thanks to sales of screen panels in the latter.

Imports rose 15.2%.

Meanwhile, the Bank of Japan left policy unchanged Thursday, sticking with its aggressive monetary stimulus measures that have left the target yield on the 10-year government bond at zero.  The BOJ continues to point to stagnant inflation, which remains far from the central bank’s 2% target despite pretty solid growth.

The bank also reiterated its pledge to continue buying government paper at an annual rate of $713 billion.

There are zero signs the BOJ will change policy any time soon, unlike our Fed.

Street Bytes

--Stocks finished mixed, with the Dow Jones adding 0.4% to 22331, having hit an all-time high on Wednesday, 22411.  The S&P 500 tacked on 0.8%, while Nasdaq lost 0.3%.  Both of these also hit record highs before losing a little ground late.

--U.S. Treasury Yields

6-mo. 1.18%  2-yr. 1.43% 10-yr. 2.25%  30-yr. 2.78%

The yield on the two-year is at its highest level since 2008 on the prospects for further action at the Fed on rates.

--We learned this week that hackers roamed undetected in Equifax Inc.’s computer network for more than four months before its security team identified the massive data breach.

FireEye’s Mandiant group, which has been hired by Equifax to investigate the hack, said the first evidence of the hackers’ activity occurred on March 10, according to a confidential memo the company sent to some of its customers this week, as first reported by the Wall Street Journal.

Equifax has been telling us the intrusion took place in May, which it then didn’t discover until July 29.  It didn’t disclose the breach to the public until Sept. 7.

Equifax said the March breach was different from the May one, claiming Mandiant “has investigated both events and found no evidence that these two separate events or the attackers were related,” according to the company.  I find this doubtful.

This whole thing is a massive debacle.

Mandiant, in a report earlier in the year prior to the Equifax attack, said it takes companies 100 days to discover they have been hacked.  In Equifax’s case, it took 141 days.

--We learned this week that the Securities and Exchange Commission’s web site was hacked back in 2016.  The SEC’s new chairman, Jay Clayton, uncovered the extent of the hack only after he launched a review of the agency’s cybersecurity vulnerabilities in the spring.  Some of the SEC’s commissioners didn’t learn of the hack until this week, and the SEC didn’t say exactly when the hack occurred and what information was accessed. The agency is investigating whether illegal trading occurred as a result of the breach.

--Shares in Apple Inc. slid 2% on Wednesday after reports that the company admitted it had connectivity issues with its latest smartwatch, and, as the Wall Street Journal’s Joanna Stern wrote: “You’re lucky if the battery allows you to roam on cellular for longer than half a day, especially if you’re making calls.”

As for the launch of the IPhone X and iPhone 8, it’s already clear the X is cutting into interest for the 8, and while the profit margin for the $999, retail, X is estimated at 59 percent, that’s down from 70%+ with the iPhone 6S and the 66 percent from the iPhone 7, according to Chinese analysts, the X and iPhone 8 being introduced at the same time there as the U.S.  [South China Morning Post]

Apple shares then slid further on Thursday after Google announced it was spending $1.1 billion to hire a team of engineers from the smartphone business of struggling Taiwanese manufacturer HTC as Google seeks to bring in more expertise for its own mobile technology operations.

HTC said many of the estimated 2,000 employees were already working with Google on smartphones, and it is working with the company to produce the next version of its Pixel smartphone, which is to be announced first week in October.

So this is a big bet on hardware by Google and further competition for Apple.

Friday, Apple shares fell further, for its worst week in 17 months, as there was a tepid response to the launch of the iPhone 8 in the U.S.

--The total net worth of U.S. households rose by $1.7 trillion in the second quarter to a record $96.2 trillion, according to a report from the Federal Reserve.  This is the seventh straight quarter overall wealth rose in the U.S.

Household wealth in the stock market climbed by $1.1 trillion in Q2.  The value of real estate rose by $564 billion.

--A first look at holiday sales from Deloitte pegs them at 4 to 4.5 percent. Others also have it at 4 percent, with the National Retail Federation yet to weigh in. The NRF said holiday sales grew 4 percent last year.

--Toys R Us said it will continue to keep operating as usual and continue getting toys from suppliers as the critical holiday season approaches, even as the company declared Chapter 11.  The retailer said it had obtained $3 billion in bankruptcy financing and by week’s end the company’s stores showed no signs of the parent being sick.

But while Toys R Us, which operates 1,695 stores, including the Babies R Us store in the U.S., it did not as yet announce any store closures, though clearly they are coming.  The company employs 65,000 and said it planned to still hire thousands of additional seasonal workers.

Forget the competition from the likes of Amazon.com, Toys R Us has been suffering for years from pricing pressure from the likes of Wal-Mart and Target, which carry all the popular toys, often at lower prices.

The company has long-term debt of more than $5 billion, much of it the legacy of a $7.5 billion leveraged buyout in 2005 in which Bain Capital, KKR and Vornado Realty Trust loaded it up with debt to take it private.  It now looks to restructure same.

Toys R Us hasn’t shown an annual profit since 2013.

--London’s transport authority said Friday it won’t renew Uber’s license to operate in the British capital, arguing it demonstrates a lack of corporate responsibility with implications in public safety and security.

Uber is appealing and will continue to operate while the appeal is being heard.

--UPS said it expects to hire about 95,000 seasonal employees for the upcoming holiday season, Black Friday after Thanksgiving through early January, until ‘return’ season wears down.  The number of seasonal workers has not changed for UPS since 2014.  The company has about 355,000 permanent employees in the U.S.

Up to 35 percent of seasonably hired employees over the last three years have become full-time employees.

On some days during last year’s holiday season, UPS’s average daily volume surpassed 30 million packages, vs. normal daily volume of more than 19 million.

--As for competitor FedEx, it said it would hire 50,000 people this holiday season, also same as last year.

FedEx reported earnings and revenue that failed to match Wall Street’s expectations, as the company said it was hurt by a June cyberattack at its TNT Express business that caused shipping delays in Europe, as well as service disruptions related to Hurricane Harvey.  And the company cut its profit outlook for the year.

So the shares fell initially on all this, but then rallied when investors looked beyond immediate concerns (those from the cyberattack were already rectified) and to 2018, with FedEx slated to participate in the ongoing global rebound. The shares thus rallied back to a new all-time high before finishing the week a few $s below it at $220.

--Ireland’s discount air carrier, Ryanair, has had a chaotic week, and it’s just the beginning.  The company first said it was preparing to take a charge of nearly $24 million in compensation claims and $5 million in lost fares as it dealt with a wave of cancellations.

The cancellations, the airline said, were due to a shortage of pilots, and it will need to cancel 40-50 flights every day for the next six weeks, after it admitted it had “messed up” the planning of pilot holidays. An internal memo, obtained by the BBC, suggested the shortage could extend until year end.

In a letter to pilots, Sept. 13, chief operations officer Michael Hickey said the firm’s crewing forecast to the end of December was “for tighter pilot numbers.”

But the pilots were just learning of this, while it seems Hickey knew last year they may face a leave backlog.

What happened is the company changed its “holiday year,” currently April to March, to January to December, which had large numbers of the staff taking holidays in September and October.

The pilots are now demanding improved working conditions and pay.  By Wednesday, they threatened to go on strike. The company then offered senior pilots who agree to work an additional 10 days a bonus of up to $14,000 in a bid to avoid additional passenger disruption.

As of Wednesday, 400,000 passengers have been affected by the flight cancellations.

The pilot situation is so bad for Ryanair that it has been forced to scour Brazil in an effort to recruit more to get out of its scheduling issues.

CEO Michael O’Leary said he had “no difficulty in getting captains,” with a “waiting list” of 2,500 pilots who want to join the company, but he needs flight officers.  [Bobby C., weigh in if you can.]

At the same time, Ryanair has denied it lost 140 pilots to new rival Norwegian Air, but Norwegian Air confirmed the figures to the Irish Independent.

Norwegian Air also announced this week it had formed a flight connection agreement with EasyJet, not Ryanair, despite its conversations with the latter.

Ergo, the high-flying Michael O’Leary, always a highly cocky, and entertaining, sort, has been brought down to earth and with the change in the holiday period, you can see how it was all self-inflicted.

Thursday, which happened to be the airline’s annual meeting, O’Leary apologized, blaming “a failure within its pilot rostering function” for the cancellations, and said 95 percent of its customers impacted would have new travel arrangements, or refunds approved, by the end of the week.

O’Leary insisted there would be no issues with staff.  But the chaos could impact Ryanair’s potential acquisition of Italy’s troubled flag carrier, Alitalia.

Italy’s competition authority has already said that it will open an investigation into whether Ryanair violated the country’s consumer code over the cancellations.

--Travelers who check at least one bag when flying domestically are paying more overall to fly than they did before airlines began unbundling fares in 2008 and charging them separately for checked baggage.

A study by the Government Accountability Office shows that charging separately for bags reduced fares by less than the new bag fee itself.

One of the studies the GAO looked at found that airlines with bag fees lowered fares to appear more competitive and then made up the lost revenue in those fees.

Airlines collected $7.1 billion in revenue from checked bag and changed reservations fees in the federal budget year that ended Sept. 30, 2016, the GAO said.  The Department of Transportation said this week that airlines collected nearly $1.2 billion in checked bag fees alone during the second quarter, a record.

--Staying on the airline theme, Stewart International Airport, which is north of New York City, near West Point, has seen its traffic increase 45% this year after a decade in decline, owing largely to the impact of Norwegian Air’s Shuttle ASA, which launched international flights from Stewart in June.

It’s anticipated 400,000 will go through the airport this year, but I forgot this place once took in 900,000 a decade ago.

Passengers love that the immigration and baggage claim experience is much quicker than, say, Newark or JFK, and then you can hop on a bus to New York City’s Port Authority Bus Terminal in midtown for $20, about 90 minutes. 

Thanks to Norwegian Air, flights to the likes of Dublin are far cheaper than the alternatives.  But then you can tack on fees.

--Facebook handed over detailed records about the Russian ad purchases on its platform to special counsel Robert Mueller that go beyond what it shared with Congress recently.

Mueller’s office now has copies of the ads and details about the accounts that bought them and the targeting criteria, as part of the special counsel’s probe into how Russia used social media to meddle in the presidential election.

Liberal groups are upset with Facebook, and the top Democrat on the Senate Intelligence Committee, Sen. Mark Warner (Va.), has said Facebook has to be more forthcoming about the full extent of the buys.

Rep. Adam Schiff (D-Calif.) suggested Facebook has been slow to release details because “it’s against their economic interest to be advertising problems about how a foreign government was exploiting their technologies.”

So Thursday, Facebook pledged a sweeping overhaul of  political advertising and said it will give Congress all the evidence it has on the campaigns.

CEO Mark Zuckerberg said in a video yesterday: “I don’t want anyone to use our tools to undermine democracy. That’s not what we stand for. The integrity of elections is fundamental to democracy around the world.”

Zuckerberg said he will add 250 employees to work on election integrity and make political ads on Facebook  more transparent.

--It’s the end of an era as Cisco Systems Inc. Executive Chairman John Chambers announced he was stepping down in December, after a two-decade+ career in which he was in charge of the network-equipment maker at its most volatile time.  Current CEO Chuck Robbins is taking over, completely, a la Xi Jinping, wrote the editor, mischievously.  Clearly, Robbins and Chambers didn’t see eye-to-eye.

Chambers joined Cisco in 1991, the year after its initial public offering.  He started out in charge of sales and then became CEO as the company rapidly grew during the dot-com era.

At one point, Cisco’s market value exceeded $500 billion, and he delivered a return 17 times over to shareholders.  Based mostly on this, Harvard Business Review in 2015 named Chambers the second-best performing CEO in the world out of 907 executives.

--Bitcoin miners in China are scared about losing their line of work as the government crackdown on the cryptocurrency plays out.  Nearly 70 percent of all new bitcoin are mined there – miners using computer hardware to find bitcoin by creating new links in its blockchain, which is essentially a huge digital ledger.

You need massive amounts of computer power, i.e., server farms, and miners have picked out some of the poorer provinces in China, where costs are lower for setting up a warehouse, for example, than elsewhere.

--Hewlett Packard Enterprise Co. is planning to cut at least 5,000 workers as part of a broader effort to reduce costs amid mounting competition.

--Amazon.com plans to open an office on the far West Side of Manhattan (450 W. 33rd St.) and create more than 2,000 jobs in New York City.

--Needless to say, the U.S. cruise industry is in a state of flux these days after Hurricanes Irma and Maria.  As of early this week, about 150,000 vacationers on 51 cruises have been affected by cancellations, delays and route changes, and this figure will only grow.  After Maria, between the two storms, there really isn’t a Caribbean destination that has been untouched.

One destination that could benefit, though, is something like Cozumel, but now every cruise line operator will want to go there, and that’s just not possible.  [Plus as a tourist that would suck.]

Heck, since Greenland’s ice sheet has been melting, this could be the new Caribbean. #GreenlandIsGreening

--New York City taxi medallions, which you need to operate a taxi, were sold for $186,000 recently, when they had fetched $965,000 in early 2014, after topping $1 million in 2013, before Uber and other ride-hailing companies began taking business away from yellow cabs in late 2014.

The 46 recently scarfed up in an auction this past Monday by MGPE, Inc., a hedge fund, were purchased from Evgeny Freidman, who had acquired them in the 2000s, only to have them foreclosed upon by Citibank.

But hedge funds see these as distressed assets.

As reported by Matthew Flamm of Crain’s New York Business, Freidman once managed 800 medallions and was accused of bidding up the prices to increase the value of his own assets.  He then declared bankruptcy and the 46 are part of a court order to turn them over to pay creditors.

--“Saturday Night Live” won nine Emmys the other day, including for outstanding variety series, and Season 43 premieres on Sept. 30, with Jay-Z as musical guest.  NBC announced the show will once again air live in all time zones, just as it did for last season’s final four episodes.

NBC said last season’s live cost-to-coast airings resulted in an 11 percent jump in average viewers compared to earlier in the season.

The issue when you air at 8:30 p.m. Pacific, 9:30 p.m. Mountain, is that you are outside the FCC’s “safe harbor” period between 10:00 p.m. and 6 a.m. local time, in which stations can air “indecent and/or profane material.”

--As I wrote was rumored last week, Fox News channel did hire Laura Ingraham for the 10:00 p.m. hour, shifting Sean Hannity to 9:00 p.m., sending him head-to-head with MSNBC’s Rachel Maddow.

The network is adding a new live show for 11:00 p.m. anchored by Shannon Bream.

But Fox was beset by further sexual harassment allegations, this one by former guest commentator Scottie Nell Hughes, who sued Fox News and Fox Business Network host Charles Payne, accusing him of rape, after which she says the network retaliated against her when she came forward with the allegation.

Payne, who hosts one of Fox Business’ shows, recently returned to the air after he was suspended in July while the company investigated sexual harassment allegations.

--Megyn Kelly is launching her morning show on NBC Monday.  Yawn.

--The audience for last Sunday’s “Emmy Awards” was the same as last year, which hit a new low, as the show not only had to compete with “Sunday Night Football,” but also the PBS premiere of Ken Burns’ “Vietnam,” which is truly outstanding (more below). 

The audience of 11.3 million for the Emmys, as reported by Nielsen, compares with 2014’s 15.6 million on a football-less Monday night in August.

Foreign Affairs

Iran: As alluded to above, in his U.N. General Assembly speech, President Trump attacked Iran, saying it was a “corrupt dictatorship” intent on destabilizing the Middle East.

He called on Tehran to cease supporting terrorism and again criticized the nuclear deal, which he called an embarrassment.  Iran’s government, Trump said, was bent on “death and destruction,” while its people wanted change.

Iranian President Hassan Rouhani said the next day: “The ignorant, absurd and hateful rhetoric, filled with ridiculously baseless allegations, that was uttered before this august body yesterday, was not only unfit” for U.N. ears, but also slows everyone’s attempt “together to combat war and terror,” he said.

Rouhani warned that renegotiation of the nuclear deal was out of the question.

“Iran will not be the first country to violate the agreement, but it will respond decisively and resolutely to its violation by any party,” he told the General Assembly.  The accord should not be “destroyed by rogue newcomers to the world of politics,” attacking as “ignorant” President Trump’s criticisms of the agreement.

Iranian Foreign Minister Javad Zarif commented on Twitter that “Trump’s ignorant hate speech” belonged “in medieval times – not the 21st Century UN.”

Trump said on Wednesday that he had made a decision about the future of the Iran deal, but, “I’ll let you know what the decision is.” 

Oct. 15 is the next deadline for the Administration to certify Iranian compliance to Congress.  If Trump fails to do so, Congress will receive a 60-day window in which it may re-impose the sanctions that were lifted under the deal.  If lawmakers do that, the U.S. will directly violate its obligations for sanctions relief, and virtually guarantee the deal’s collapse.

Secretary of State Rex Tillerson has said the United States wants to renegotiate the deal’s sunset clauses, that relieve Iran of certain restrictions starting in 2025.

French President Macron defended the nuke deal: “Renouncing it would be a grave error.” But he said talks for a new agreement to take over in 2025 are possible.  “We need to start discussions on what happens afterwards,” said Macron.

“If there are some concerns about Iran we need to work together...and ensure [the deal’s] full implementation.”

Israeli Prime Minister Benjamin Netanyahu sided with Trump, saying the nuclear deal should be amended or scrapped altogether, and warned against the spread of Iranian influence in the Middle East.

Netanyahu also warned Iran was spreading a “curtain of tyranny and terror” across the region, and that Israel would defend itself.

“We will act to prevent Iran from establishing permanent military bases in Syria for its air, sea and ground forces.  We will act to prevent Iran from producing deadly weapons in Syria or in Lebanon for use against us. And we will act to prevent Iran from opening new terror fronts against Israel along our northern border,” he said in his U.N. address.

[Israeli Intelligence Minister Yisrael Katz said this week at a security conference that Iran and Syria are working on an agreement that could bring an Iranian naval base, airport or army bases to Israel’s doorstep, a major boost for Hizbullah.]

Friday, President Hassan Rouhani vowed that Iran would boost its missile capabilities despite warnings from Washington that it is ready to ditch the nuclear accord.

Iran displayed a new missile at a military parade marking the anniversary of the outbreak of the 1980-88 war with Saddam’s Iraq.

“Whether you like it or not, we are going to strengthen our military capabilities which are necessary for deterrence,” Rouhani said.  “We will strengthen not only our missiles but also our air, land and sea forces... When it comes to defending our country, we will ask nobody for their permission.” 

Rouhani hit out at those who “create problems for the peoples of our region every day and boast of selling arms to the bloodthirsty Zionist regime which has been attacking the peoples of our region for 70 years like a cancerous tumor.”  [Agence France Presse]

The new missile, named Khoramshahr, has a range of 1,250 miles and can carry multiple warheads, as reported by the official IRNA news agency.  The distance is long enough to reach Israel or U.S. bases in the Gulf.

Benny Avni / New York Post

“Iranian President Hassan Rouhani suffers, or benefits, from what the shrinks call ‘projection’ – seeing in other people one’s own faults.

“ ‘Moderation is the inclination as well as the chosen path of the great Iranian people,’ Rouhani told the U.N. General Assembly Wednesday.

“This from a man who told supporters back in May, after winning an election that included only mullah-approved candidates, ‘We are proud of our armed forces, the Revolutionary Guards, the Basij and the security forces.’

“These thugs are the skullcrushers of regime opponents at home and exporters of the Islamic Revolution abroad, where they create proxy armies like Hizbullah. Rouhani’s Iran also sends weapons to the Houthis in Yemen, Hamas in Gaza and Shiite proxy gangs from Afghanistan to Africa.  Its troops and militias help keep Syrian butcher Bashar al-Assad in power.

“Yet, Rouhani told the United Nations, his Iran is the same country that once defended Jews and now defends the people of Palestine.  It’s ‘supporting justice and seeking tranquility,’ he said. And ‘our ambassadors are our poets, our mystics and our philosophers.’

“The real threat, as he sees it, to that tranquility? You can probably guess.

“ ‘It is reprehensible that the rogue Zionist regime that threatens regional and global security with its nuclear arsenal and is not committed to any international instrument or safeguard has the audacity to preach to peaceful nations,’ said the man Obama officials swore was a ‘moderate.’

“Which may explain why his regime annually celebrates the future erasure of those Zionists from the map, while chanting ‘death to America.’”

Iraq / Syria / Russia / Turkey: President Tayyip Erdogan said Turkey will deploy troops in Syria’s northern Idlib region as part of a “de-escalation” agreement brokered by Russia last month.  In New York, he also said the United States, as a strategic partner, should extradite U.S.-based cleric Fethullah Gulen, whom Erdogan accuses of orchestrating a coup that failed in 2015.

And Erdogan warned the U.S. that a decision to arm YPG Kurdish forces fighting Islamic State in Syria could end up hurting Washington and its allies.  Turkey views the YPG as the Syrian extension of the outlawed Kurdistan Workers Party (PKK).

Russia’s Interfax news agency reported that Russia’s air force had killed about 850 militants in the above-referenced zone of de-escalation in Idlib in 24 hours.  I have not seen any confirmation of this. 

In Iraq, tensions are high in the city of Kirkuk, ahead of a Sept. 25 referendum on Kurdish independence that Baghdad has warned is illegal, saying the Kurds are “playing with fire,” while the U.S. said the move could undermine the fight against Islamic State forces. Iraq’s high court declared the referendum must be suspended.

The referendum doesn’t immediately mean a declaration of independence, but would prompt negotiations with Baghdad, or so supporters of independence hope.

But in the key oil city of Kirkuk, the Kurds vie with Turkmen and Arabs for power.  President Erdogan declared Kirkuk could not be a Kurdish city.  Turkish soldiers are based nearby. But at the same time, Turkey doesn’t want to disrupt the oil business in the region.

Late Friday, Turkey made a direct appeal to the Kurdish government not to go forward with the vote.

Israel: The Palestinian Authority’s Fatah movement and its militant rival, Hamas, appear to be moving toward ending a 10-year split after Hamas vowed to accept conditions for a unity government and general elections in the West Bank and Gaza.

Hamas took control of Gaza in 2007, and by abandoning its hold on the Strip, Hamas would be accepting conditions called for by Palestinian Authority President Mahmoud Abbas, whose internationally recognized government is in the West Bank city of Ramallah.

Fatah had been expelled from Gaza when Hamas took it over. Thus far, however, there is nothing concrete and it’s just talk.

Afghanistan: Defense Secretary Jim Mattis said the United States would send over 3,000 troops to Afghanistan and that most were either on their way or had been notified of their deployment.

Russia: With all the other news of the week, including on the natural disaster front, there was little on the war games that Russia held, Zapad, including in neighboring Belarus.

The Wall Street Journal, though, reported that all is not well in the relationship between Minsk and the Kremlin, with Belarus not happy when Russia sought to move more of its soldiers into the county during the exercises.

Russia’s defense ministry, for example, said a premier tank unit and three Russian paratrooper divisions were to land on Belarusian soil, but none of it was agreed to with Belarus beforehand, according to Belarus.

It didn’t appear that Belarus President Alexander Lukashenko and Russian President Putin met during the exercises, a break with tradition.

The Kremlin denied there was a rift.

As for the number of soldiers involved, Western and Belarusian observers put the number at anywhere from 70,000 to 120,000, when Russia said it was going to be under 13,000.  Putin observed one of the drills from outside St. Petersburg.

But there was at least one accident during the exercises.  Two people suffered serious injuries after a helicopter gunship accidentally fired on bystanders, according to Russian news sources, near where Putin observed the drills on Monday.  A source told 66.ru that there was a technical glitch “and the missiles blasted off on their own.”

“At least two cars were destroyed, two people were seriously injured...The victims were most likely journalists.”

Boy, that would suck.

So now we wait to see an analysis of whether Russia has left large numbers of troops behind, Zapad wrapping up.

Separately, it appears that hackers based in Brussels have been responsible for the wave of bomb scares that have swept Russia for two weeks, an Interior Ministry source told RBC news on Tuesday.

More than 200,000 have been evacuated from malls, schools and public buildings following a spate of anonymous bomb threats, which were continuing at week’s end.

China: Last week as part of my discussion on “global pollution,” I noted millions die every year in China from inhaling fine particulate matter.  So the next day I see this piece in the South China Morning Post by Stephen Chen.

“China is investigating whether air pollution has played a part in the rapid increase in the number of people struck by lightning in some of its largest cities in recent decades, according to a scientist involved in the project.

“The investigation follows a discovery by U.S. scientists that fossil fuel exhaust fumes could double the lightning risk at sea, which raised concerns about the risk to vessels in some of the world’s busiest waters, including the South China Sea and the Malacca Strait.

“Lightning now kills or injures nearly 4,000 people in China annually, according to government statistics, but less than 20 years ago the reported casualties were only a tenth of the present level.”

Li Jingxiao, a researcher at Beijing Lightning Protection Center, said large quantities of polluting particles in the atmosphere could generate powerful electric fields due to friction.

“When the energy reaches ‘breakdown’ level it can be released suddenly in the form of a lightning bolt.”

Myanmar: Amid global condemnation at the U.N. this week, Nobel Peace Prize laureate Aung San Suu Kyi, who did not travel to New York due to the crisis in her country, finally spoke on the ethnic-cleansing of the Rohingya Muslims in her country. “We condemn all human rights violations,” and that action would be taken against those responsible.

But Suu Kyi did not directly condemn the military’s actions, nor did she characterize the displacement of over 400,000 as ethnic-cleansing.

Human rights group Amnesty International described her speech as “little more than a mix of untruths and victim-blaming,” saying she and her government were “burying their heads in the sand” for ignoring the army’s role in the violence.

Random Musings

--Presidential tracking polls....

Gallup: 37% approval for President Trump, 56% disapproval
Rasmussen:  43% approval, 55% disapproval

The latest Reuters/Ipsos tracking poll has Trump’s approval at 38%, 57% disapproval.

A new NBC News/Wall Street Journal survey had the president’s approval rating moving up to 43% from 40% last month, 52% disapproval, which the pollsters say was directly attributable to the efforts at bipartisanship on the debt ceiling, hurricane aid, and a short-term spending plan.

The survey found 71% of adults in the U.S. approved and 8% disapproved of Trump bypassing GOP leaders. 

Nearly six in ten registered Republicans are dissatisfied with the work of Sen. Majority Leader Mitch McConnell and House Speaker Paul Ryan.

41% of Independents, by the way, which I keep harping on, approve of the job Trump is doing, up from 32% in August.  Significant.

With Vermont Sen. Bernie Sanders bringing his universal health-care plan to the fore last week, in the NBC/WSJ survey, 47% said they favored a single-payer system, while 46% oppose it.

But among Democrats, 72% favor such a system; among Republicans, 74% are opposed.

In a new CNN poll, President Trump’s approval rating was 40% (up from 38% in August), 55% disapproval.  85% of Republicans approve of his job performance vs. only 9% of Democrats.

64% of Americans approve of how the Trump government reacted to the recent storms, including 2-in-3 independents.

50% of Americans now view North Korea as an immediate threat to the United States, up from 37% in April.  50% disapprove of Trump’s handling of North Korea, 41% approve.

--President Trump traveled to Alabama tonight to campaign for Sen. Luther Strange in the GOP runoff election for the state’s Senate seat.

Trump had endorsed Strange in the initial primary for Attorney General Jeff Sessions’ Senate seat, but Strange fell short of winning a majority of votes in the race against former state Supreme Court Justice Roy Moore, and Moore has a solid lead plus the backing of conservatives such as Sarah Palin, Steve Bannon and Freedom Caucus Chairman Mark Meadows (R-N.C.).

--According to a report from Fox News, former U.S. Ambassador to the UN, Samantha Power, averaged more than one “unmasking” request for every working day in 2016 – even going so far as to seek the names of Trump associates just before his inauguration.

The process is ultimately carried out when one wants to reveal the identity of an individual whose name surfaced in foreign intelligence documents.

Her lawyer, David Pressman, claimed Power did nothing wrong.

“While serving as our Permanent Representative to the United Nations, Ambassador Power was also a member of the National Security Council responsible for advising the President on the full-range of threats confronting the United States. Any insinuation that Ambassador Power was involved in leaking classified information is absolutely false.”

I’m reminded of the saying: “Absolute Power corrupts absolutely.”  [cough cough]

--According to a report from Reuters, President Trump is spending cash donated to his reelection campaign and the Republican National Committee to pay for his lawyers in the criminal probe of Russian interference in the election.

The Federal Election Commission does allow the use of private campaign funds to pay legal bills arising from being a candidate or elected official.

Previous presidential campaigns have used the funds to pay for routine legal matters such as ballot access and compliance requirements, but Trump would be the first in the modern campaign finance era to use such funds to cover the costs of defending himself in a criminal probe, according to election law experts.

--Trump tweets:

“The Russia hoax continues, now it’s ads on Facebook. What about the totally biased and dishonest Media coverage in favor of Crooked Hillary?”

“The greatest influence over our election was the Fake News Media ‘screaming’ for Crooked Hillary Clinton. Next, she was a bad candidate!”

These two came right after Trump called Lil’ Kim a “madman...who will be tested like never before!”

But remember, Mr. President.  Every one of your top intelligence chiefs said Russia meddled in the election.  Collusion?  We’re not sure.

--The World Health Organization said that the world is running out of antibiotics and this is “a global health emergency.”

Growing resistance to drugs that fight infections could “seriously jeopardize” progress made in modern medicine.

The new WHO report found a serious lack of new drugs in development to combat the threat.

Drug-resistant infections already kill 700,000 people a year globally.

--Editorial / Wall Street Journal

“ ‘Freedom of speech is a principal pillar of a free government,’ wrote Ben Franklin.  ‘When this support is taken away, the constitution of a free society is dissolved.’  Imagine what Franklin, James Madison and the other Founders would make of a new Brookings Institution survey showing that American college students have no clue what the First Amendment means.

“John Villasenor surveyed more than 1,500 undergraduates, and among the alarming findings: Most American college students do not know that even hate speech is constitutionally protected; half agree that it’s okay to shout down a speaker whose views they don’t agree with; and nearly one of five believe it is acceptable for a student group opposed to a speaker to use violence to keep him from speaking.  Some of the answers vary by political identification, but overall the findings suggest great confusion.

“Mr. Villasenor’s conclusion is blunt.  ‘Freedom of expression,’ he says, ‘is deeply imperiled on U.S. campuses.’ We’d take that further. Given that a functioning democracy rests on free expression, what do these results say about America’s future when these students leave school and begin to take their places in public life?

“It’s easy to mock the students for their ignorance. But what about the people responsible for teaching them?  These results suggest that the failures of our education system are beginning to have terrible consequences for America’s civic life.”

--I watched the first five episodes in Ken Burns’ epic documentary and I’ll have some personal observations when it concludes next week.  For now I don’t totally agree with the following, but I throw it out there.

Bing West / New York Post

“To understand Ken Burns’ 18-hour Vietnam documentary, listen to the music. The haunting score tells you: This will be a tale of misery. And indeed, Burns and his co-author Geoffrey C. Ward conclude their script by writing, ‘The Vietnam War was a tragedy, immeasurable and irredeemable. But meaning can be found in the individual stories...’

“The film is meticulous in the veracity of the hundreds of factoids that were elected. Everything depicted on the American side actually happened. But that the chosen facts re accurate doesn’t mean the film gets everything right.  Indeed, the brave American veterans are portrayed with a keen sense of regret and embarrassment about the war, a distortion that must not go unanswered. And the film implies an unearned moral equivalence between antiwar protesters and those who fought.

“Burns’ theme is clear: A resolute North Vietnam was predestined to defeat a delusional American that heedlessly sacrificed its soldiers.  The film follows a chronological progression, beginning in the ‘40s.  Right from the start, harrowing combat footage from the ‘60s is inserted to remind the audience that a blinkered America is doomed to repeat the mistakes of the French colonialists. The main focus of the documentary is the period of fierce fighting from late 1965 to 1972....

“We all know the story ends badly. But when it’s over, we aren’t told why we lost. The music is more memorable than the pictures, and the pictures are more compelling than the narration. We are deluged by sights and sounds but not enlightened as to cause and effect.

“An American lieutenant who fought there in 1965 is quoted at the end of the film saying, ‘We have learned a lesson...that we just can’t impose our will on others.’ While that summarizes the documentary, the opposite is true.  Wars are fought to impose your will upon the enemy. If you don’t intend to win, don’t fight.

“Our civilian and military leaders were grossly irresponsible. At the height of the war in 1968, Secretary of Defense Clark Clifford is quoted as telling President Lyndon Johnson, ‘We’re not out to win the war.  We’re out to win the peace.’

“The North Vietnamese were superb light infantry. The film points out that we grunts called the DMZ (Demilitarized Zone) the Dead Marine Zone because we were pounded from North  Vietnam and forbidden to attack.  The real lesson: Never fight on the enemy’s terms....

“This documentary succeeds in vividly evoking sadness and frustration. But that is not all there was to the story.  ‘The Vietnam War’ strives for a moral equivalence where there is none.  The veterans seem sad and detached for their experience, yet 90 percent of Vietnam War veterans are proud to have served. So there’s a large gap between what we see and the attitude of the vast majority of veterans.

“Their sense of pride – so vital for national unity – is absent from the documentary.  And that’s a glaring omission.”

George Will / Washington Post...on the same topic.

“Weary of hearing the prudence that was so painfully learned in Indochina derided as the ‘Vietnam syndrome,’ (Karl) Marlantes (Ed. a Rhodes Scholar from Yale University who voluntarily left Oxford for Marine service in Vietnam) says (in his Wall Street Journal review of Mark Bowden’s book ‘Hue 1968’): ‘If by Vietnam syndrome we mean the belief that the U.S. should never again engage in (a) military interventions in foreign civil wars without clear objectives and a clear exit strategy, (b) ‘nation building’ in countries about whose history and culture we are ignorant, and (c) sacrificing our children when our lives, way of life, or ‘government of, by, and for the people’ are not directly threatened, then we should never get over Vietnam syndrome. It’s not an illness; it’s a vaccination.’  The Burns / Novick masterpiece is, in Marlantes’s words about Bowden’s book, ‘a powerful booster shot.’”

--About two months ago I wrote of how no one was talking, then, about the looming Winter Olympics in PyeongChang, South Korea, and how this was nuts given the current state of affairs in the region.

This week, France became the first to say it will not go unless there are specific security guarantees.

--Sign of the Apocalypse...Colin Campbell / Baltimore Sun:

“A Good Samaritan who pressure-washed paint off the vandalized Francis Scott Key monument in Bolton Hill inadvertently damaged the monument further by blasting off some of the deteriorated marble, art conservators said Friday.

“The pressure-washing also appeared to have driven the spray-paint on the monument’s fountain pool deeper into the granite, according to Diane Fullick, a Baltimore-based art conservator hired by the city to inspect and scrub away the vandalism.

“ ‘You never want to pressure-wash marble,’ Fullick said.”

Free tip from moi, sports fans.

--Robert Lee Hotz / Wall Street Journal

“The most severe hurricane season in almost a decade is stoked by warmer-than-average Atlantic Ocean currents, weak westerly Pacific winds and turbulent hot tropical air over the Indian Ocean, with no sign conditions will slacken soon, climate analysts and meteorologists say.

“ ‘It’s the trifecta,’ said atmospheric scientist Jeff Weber, who studies tropical meteorology and climate change at the University Corporation for Atmospheric Research in Boulder, Colo.  ‘The atmospheric conditions are ideal for hurricane formations.’”

The weakening winds from the Pacific are huge as this reduces the wind shear we normally hear about in Atlantic storms.

The United States had never seen two Category-4 hurricanes (Harvey and Irma) slam into the United States the same year in recorded history dating to 1851.  Maria is three, if you count U.S. territories.  We don’t need any more.

---

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

Pray for the first responders...and the victims of nature’s wrath.

God bless America.

---

Gold $1300
Oil $50.66  [first weekly close over $50 since 5/19]

Returns for the week 9/18-9/22

Dow Jones  +0.4%  [22349]
S&P 500  +0.1%  [2502]
S&P MidCap  +0.8%
Russell 2000  +1.3%
Nasdaq  -0.3%  [6426]

Returns for the period 1/1/17-9/22/17

Dow Jones  +13.1%
S&P 500  +11.8%
S&P MidCap  +6.5%
Russell 2000  +6.9%
Nasdaq  +19.4%

Bulls 50.5
Bears 19.0 [Source: Investors Intelligence]

Have a great week. 

Brian Trumbore