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09/30/2017

For the week 9/25-9/29

[Posted 11:30 PM ET, Friday]

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Edition 964

Trump and Puerto Rico...Tax Reform...and the anthem controversy....

Last Friday night, I wrote the following:

“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... 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.”

So that was two days after Hurricane Maria hit, with the scope of the devastation becoming clearer.

Initially, President Trump and the administration took all the proper steps in those first 24-48 hours, but then the president and his team totally dropped the ball for four days, until Tuesday, and now he’s clearly more interested in how he looks in this unimaginable debacle than how the people of Puerto Rico get through it.

Yes, Puerto Rico should have been better prepared in some respects itself, but Trump, as opposed to his responses to Harvey and Irma, fumbled at a critical time.  Instead, we know what he was doing those four days.  He was more concerned attacking Kim Jong Un personally, and the NFL / anthem issue that he purposefully poured fire on.  Go back over the record, his tweets.  It was virtual ‘radio silence’ on the topic.

Even his new 3-star general on the scene, Lieutenant Gen. Jeffrey Buchanan, told CNN on Friday, “We’re certainly bringing in more (aid).  It’s not enough, but we’re bringing more in.”

But as San Juan Mayor Carmen Yulin Cruz went from being politically correct to reminding Trump and his idiotic Acting Department of Homeland Security Secretary Elaine Duke, “This is not a good news story,” as Duke had allowed.  “This is a ‘people are dying’ story.  This is a life-or-death story.”

Lt. Gen. Buchanan, when asked how long it would take for Puerto Rico to recover, said: “This is a very, very long duration (event).”

Only 54 percent of Americans know that people born in Puerto Rico, a commonwealth of the United States, are U.S. citizens, according to a survey I saw this week from Morning Consult, though they do not vote in presidential elections and send one nonvoting representative to Congress.

3.4 million residents lost power, with the electrical grid likely not fixed for months.  Food and water remains scarce, nine days into the crisis.

Trump, ever sensitive, started tweeting about Puerto Rico thusly:

“Texas & Florida are doing great but Puerto Rico, which was already suffering from broken infrastructure & massive debt, is in deep trouble.”

“It’s old electrical grid, which was in terrible shape, was devastated. Much of the island was destroyed, with billions of dollars...owed to Wall Street and the banks which, sadly, must be dealt with. Food, water and medical are top priorities – and doing well.  #FEMA”

Thousands and thousands of containers with both relief supplies and commercial cargo continue to sit at San Juan’s port.  Better conditions at the airports and seaports, though, have allowed more fuel and supplies to arrive, with diesel fuel a key to hospitals to keep the generators operating.

But when you hear stories that X number of hospitals are up and running, this is in no way a normal hospital, with records, for one, being hard to obtain, let alone medical supplies and staffing.

One key sector for Puerto Rico’s economy is the pharmaceutical industry, with nearly 50 plants on the island, all wiped out with the electrical grid.  Some of the plants would have backup generators, but they would face the same diesel issues everyone else has, let alone being able to get employees to come to work.

Pharmaceuticals represented 72% of Puerto Rico’s 2016 exports, valued at $14.5 billion, according to the U.S. Bureau of Labor Statistics.

President Trump tweeted: ”Locals trying really hard to help but many have lost their homes.”

Trump: “Puerto Rico Governor Ricardo Rossello just stated: ‘The Administration and the President, every time we’ve spoken, they’ve delivered’ ....The fact is that Puerto Rico has been destroyed by two hurricanes. Big decisions will have to be made as to the cost of its rebuilding!”

“Puerto Rico is devastated. Phone system, electric grid many roads, gone. FEMA and First Responders are amazing. Governor said ‘great job!’”

At least the administration finally suspended the ancient law known as the Jones Act, which requires that goods transported between U.S. ports be shipped on vessels built, majority-owned and manned by Americans.  As the Wall Street Journal describes it, “a legally sanctioned shakedown for U.S. shipping interests.”

The Journal editorializes further: “Puerto Ricans pay dearly for this protectionism, which reduces competition and raises costs.  A 2012 Federal Reserve Bank of New York report said the Jones Act helps explain why household and commercial goods cost roughly double to ship from the East Coast to Puerto Rico than to the nearby Dominican Republic or Jamaica. Food and energy costs are far higher than on the mainland.”

The Jones Act has been suspended in the past during previous emergencies, such as during Hurricane Katrina.  Obama did it during superstorm Sandy.

Trump suspended the Jones Act following Hurricanes Harvey and Irma, yet took a week to do so in the case of Puerto Rico.  Draw your own conclusions.

Meanwhile....

President Trump, in search of a win, badly needs a victory on tax reform, after a third attempt by Congressional Republicans to dismantle ObamaCare failed.  [Though now a bipartisan effort on the Affordable Care Act is back on.]

The administration rolled out its long-awaited tax plan and immediately, Republicans were forced to debate scaling back one of the largest and most controversial aspects to pay for lower rates: repeal of the individual deduction for state and local taxes, which, if it remained in its current form, would lead to the defection of Republicans in such high-tax states as New York and New Jersey.  But how to do so without giving up the lower tax rates they promised?

I mean it almost seems like a waste of time to discuss the rest without this issue, a huge one, being resolved.

As the Wall Street Journal reported, “The top nine states for the deduction, measured as a percentage of income, are represented by 33 House Republicans.  With one vacancy in the House, the party can lose no more than 22 GOP votes on legislation if all Democrats remain opposed.”

Going back to 1986, taxpayers can deduct their property taxes, along with either their income or sales taxes.

According to the Tax Policy Center, 90% of filers with incomes over $200,000 claim the deduction. Overall, 38% of the deduction’s value goes to California, New York and New Jersey, which have 21% of households, according to the center.

It just seems that right now, most who use the deduction would end up paying more taxes under the GOP plan, but we need to ferret out the details, and, of course, what was introduced isn’t what we’ll finally end up with.

But it’s just a fact that in high property tax states, like New Jersey, there’s no way you’d come out better. It would be the converse.

The broad-based framework calls for collapsing the number of individual tax brackets from seven to three, with rates at 12 percent, 25 percent and 35 percent.

However, lawmakers were given flexibility to add a fourth bracket at a higher level for ordinary income.

The top individual rate is currently at 39.6 percent. The bottom rate is currently 10 percent, but there is an increased standard deduction that benefits those at the bottom; the deduction nearly doubling to $12,000 for individuals and $24,000 for married couples.

The size of the child tax credit would be increased and a new $500 credit to help people care for those who aren’t dependents; i.e., the elderly.

Most itemized deductions would be eliminated, though tax incentives for the mortgage interest and charitable contributions would remain.  Retirement savings incentives were also to remain in place, ditto those for higher education.

The estate tax and the alternative minimum tax would be repealed, at a cost of about $1.069 trillion over ten years.  [$269 billion for the estate tax; $800 billion for the AMT.]

And the framework lowers the corporate tax rate from 35 percent to 20 percent.

The top rate on so-called pass-through businesses would be 25 percent.

The plan would also allow businesses to immediately write off the full costs of their capital investments for at least five years, what is known as “full expensing,” which many believe would help boost economic growth immediately.

Editorial / Wall Street Journal

“Republicans finally unveiled the party’s blueprint for tax reform on Wednesday, and Americans who want a faster-growing economy should be pleased.  The GOP has offered an outline that will enhance U.S. competitiveness and simplify the code – if the final product isn’t diluted by the class-warfare brigades and K Street lobbyists.”

But can Republicans sell it...and do so by year end?  They don’t have a good track record in this regard.

They did, however, take an important first step Friday in releasing their budget blueprint for fiscal year 2018, a necessary move to pass a rewrite of the tax code without Democratic support, using “reconciliation,” where Republicans can pass legislation with just 50 votes and Vice President Pence.

The new budget’s most important component is that it instructs the Senate Finance and House Ways and Means committees to come up with a package of tax changes and rate cuts that can add up to $1.5 trillion to the federal budget deficit over 10 years.

To be continued....

Trumpets....

--Senate Majority Leader Mitch McConnell, having abandoned the latest ObamaCare repeal effort, said, “We haven’t given up changing the American health care system,” but he admitted that isn’t going to happen soon so it was on to tax reform, this as House Republicans have lost faith in their Senate colleagues to do much of anything.

As for President Trump, he is working on an executive order to expand access to health insurance, one that would allow individuals to purchase insurance across state lines through so-called health associations, a measure advocated by Kentucky Republican Senator Rand Paul.

--The Senate Intelligence Committee said President Trump’s adviser and son-in-law Jared Kushner failed to disclose that he had used a private email address to conduct official White House business.

Kushner appeared before the committee in July in a closed session, as part of the committee’s probe into Russian meddling in the 2016 presidential election and possible collusion with Trump associates.

“As you are aware, this committee has previously requested that you preserve and produce certain documents related to the Russian inquiry – including, but not limited to, email communications,” says a letter sent to Kushner and his attorney, Abbe Lowell.

Lowell confirmed that Kushner used a private email address to conduct some official business, fewer than 100 emails from January through August.

--The administration will allow no more than 45,000 refugees into the United States next year officials said on Tuesday, in what would be the lowest admissions level in more than a decade.  [41,223 in 2006.]   Trump has until Sunday to determine how many to admit.

--Finally, I wrote in this space, after watching the president’s speech in Huntsville, Alabama, that I was the ‘wait 24 hours’ guy, and that I was biting my tongue over what I witnessed.  I said:

“I was beyond appalled at Trump’s speech for Alabama Sen. Luther Strange. It was embarrassing and deeply disturbing....

“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.”

You now probably know I was alluding to his comments on the NFL anthem controversy.

I have been commenting on this topic since Colin Kaepernick first took a knee in my “Bar Chat” column the past year, but I recently told my readers I was doing so sparingly and only to get some thoughts down for the archives.  The issue was also dying...certainly not heating up with only 6 players participating in Week Two, before Trump suddenly went off on the topic, which wasn’t the only issue he went off on in a rambling diatribe that night.  I was just as perplexed at his comments on the election and the Electoral College.

But I was “appalled” that Trump decided to fan the dying embers, strictly for political gain.

Look, I didn’t like when Kaepernick first took the knee, but as the weeks went by, and one or two other players joined in, and athletes like LeBron James used their platform to protest inequality in the justice system, I was like, ‘whatever.’  It’s just not a big deal...for “Bar Chat.”    They can do what they want, within the law.

Enter Trump.

Former Bills and Jets coach Rex Ryan, a Trump supporter, said this week, “I’m pissed off...it’s appalling to me.”

Former Steelers great Terry Bradshaw disagreed with the protests but added: “If our country stands for anything, folks – it’s freedom.  People die for that freedom.  I’m not sure if our president understands those rights, that every American has the right to speak out and also to protest.”

Tom Moran / Star-Ledger

“The Divider-in-Chief poured more salt into the nation’s racial wounds over the weekend by taking his poisonous act into the sanctuary of Sunday football, again seeking personal political advantage at the expense of the country he is charged with leading.

“Remember, when white supremacists marched in Charlottesville, with torches and semi-automatic weapons, chanting Nazi slogans, this president said that many of them were ‘very fine people.’

“But when African-American players in the NFL silently take a knee during the national anthem to peacefully protest the undeniable racism in our criminal justice system, he fumes, he rants, and he whips up hatred against them to fire up his base....

“This latest stunt was too much even for some Trump supporters, including team owners who collectively have donated $10 million on behalf of Trump.  One of Trump’s big cheerleaders, New England Patriots owner Robert Kraft, said he was ‘deeply disappointed by the tone’ of Trump’s comments, and that he supported the right of his players to take a knee during the anthem....

“Sports teams began playing the anthem before games in 1918, during World War I.  To many Americans, it remains a solemn moment, a time to offer gratitude to veterans, and to celebrate the freedoms we enjoy today.

“But others see it as a political expression, one that suggests support for America’s conduct, like the pledge of allegiance.  Jackie Robinson, a genuine hero who was booed and spit on by racist fans, never saluted the flag or sang the anthem.  ‘I am a black man in a white world,’ he said.

“I have no quarrel with that.  Nor for any player who quietly takes a knee in protest of racism, or the others who lock arms with them in solidarity.  These protests deserve respect, not scorn.

“For Trump to lecture these players is just infuriating. This is a man who encouraged police to rough up prisoners as they transport them to headquarters, a man whose Justice Department says it will no longer intervene when local police departments are found to mistreat African-Americans, a man who draws moral equivalence between white supremacists and the protesters that met them.

“Trump is the one who needs a lesson in patriotism.  He is...loyal only to himself, and blind to what makes this country great.”

Former NBA star and current analyst Charles Barkley, appearing on the “NFL Today” Sunday on CBS, said he was extremely displeased with Trump and just as much with the response to his words by Alabama residents, saying it was embarrassing.

“The president of the United States should never use the word SOB. That’s just 100 percent inappropriate.  I’m embarrassed because he said the speech in Alabama and got a rousing reception when he said those things.  So it hurts me that those ignorant folks in Alabama would applaud something so stupid.”

Bryant Gumbel closed this week’s “Real Sports” on HBO, which he hosts, by thanking Trump for causing athletes to “actually stand for something.”

“Finally tonight, a quick thanks to the current occupant of the White House for energizing the social conscience of the modern American athlete.

“That occupant’s weekend series of racist, churlish and childish comments drew a variety of stunning rebukes and actions, which suggests jocks may finally be realizing that apathy won’t cut it anymore. That, in conjunction with their fame, they have important civic roles to play – especially now.

“Those of us who have long focused on the intersection of sports and society have often wondered what it would take for today’s athletes to forsake the path of least resistance and actually stand for something and now we know.  Many suddenly seem not just willing, but also eager to follow in the giant footsteps of Muhammad Ali, Jim Brown, Bill Russell, Billie Jean King, Roberto Clemente, Arthur Ashe and many others who courageously used their athletic platforms to challenge authority in the pursuit of justice.

“Back in their day, Bob Dylan famously said: ‘The times they are a changin’, and that’s still true today...as is the sad reality that certain things haven’t really changed at all.”

Jon L. Christensen / USA TODAY

“In past years, I had a front-row seat on Sunday, Monday and Thursday nights in my living room, watching NFL football. I loved it!  Last year, I attended the Super Bowl in Houston and saw the game of all games with a Tom Brady, come-from-behind victory.  I am a football fan.

“However, President Trump said what millions of Americans, including myself, feel.  You may not like our president, but he doesn’t take a poll before he says what he believes. He doesn’t check with his ‘political correctness advisers’ like Barack Obama and Bill Clinton did before making a statement.  Donald J. Trump is a great leader and is earning my respect as president....

“When millionaire athletes refuse to honor America and pay homage to the men and women who died for our freedom, and instead, choose to use their field of occupation to make a statement, then I can choose to turn the channel. I will not give my time or attention to spoiled-brat, millionaire athletes. Their kneeling or fist-raising might be acceptable in some arenas, but not in my living room.

“The president was right; these athletes should be fired!”

[Christensen is a former congressman from Nebraska.]

Editorial / Wall Street Journal

“Healthy democracies have ample room for politics but leave a larger space for civil society and culture that unites more than divides.  With the politicization of the National Football League and the national anthem, the Divided States of America are exhibiting a very unhealthy level of polarization and mistrust.

“The progressive forces of identity politics started this poisoning of America’s favorite spectator sport last year by making a hero of Colin Kaepernick for refusing to stand for ‘The Star-Spangled Banner’ before games. They raised the stakes this year by turning him into a progressive martyr because no team had picked him up to play quarterback after he opted out of his contract with the San Francisco 49ers.

“The NFL is a meritocracy, and maybe coaches and general managers thought he wasn’t good enough for the divisions he might cause in a locker room or among fans. But the left said it was all about race and class.

“All of this is cultural catnip for Donald Trump, who pounced on Friday night at a rally and on the weekend on Twitter with his familiar combination of gut political instinct, rhetorical excess, and ignorance.  ‘Wouldn’t you love to see one of these NFL owners, when somebody disrespects our flag, to say, ‘Get that son of a bitch off the field right now, out, he’s fired.  He’s fired,’’ Mr. Trump said Friday.

“No doubt most Americans agree with Mr. Trump that they don’t want their flag disrespected, especially by millionaire athletes.  But Mr. Trump never stops at reasonable, and so he called for kneeling players to be fired or suspended, and if the league didn’t comply for fans to ‘boycott’ the NFL.

“He also plunged into the debate over head injuries without a speck of knowledge about the latest brain science, claiming that the NFL was ‘ruining the game’ by trying to stop dangerous physical hits. This is the kind of rant you’d hear in a lousy sports bar....

“Americans don’t begrudge athletes their free-speech rights – see the popularity of Charles Barkley – but disrespecting the national anthem puts partisanship above a symbol of nationhood that thousands have died for.  Players who chose to kneel shouldn’t be surprised that fans around the country booed them on Sunday. This is the patriotic sentiment that they are helping Mr. Trump exploit for what he no doubt thinks is his own political advantage.

“American democracy was healthier when politics at the ballpark was limited to fans booing politicians who threw out the first ball – almost as a bipartisan obligation.  This showed a healthy skepticism toward the political class.  But now the players want to be politicians and use their fame to lecture other Americans, the parsons of the press corps want to make them moral spokesmen, and the President wants to run against the players.

“The losers are the millions of Americans who would rather cheer for their teams on Sunday as a respite from work and the other divisions of American life.”

Editorial / USA TODAY

“The outpouring of defiance toward President Trump that spread across the National Football League on Sunday harkens to a single phrase directed at fear-mongering Sen. Joe McCarthy during a congressional hearing in 1954.

“ ‘Have you no sense of decency, sir?’ said an Army lawyer, crystallizing in a moment the politics of division behind McCarthyism and its persecution of innocents.

“Similarly, Trump’s ad hominem attacks against ‘son of a bitch’ players such as former San Francisco quarterback Colin Kaepernick, who sit or kneel during the national anthem to protest police brutality, had nothing to do with patriotism or love of country.  When he demanded NFL owners fire protesting players, it was vintage Trump stoking flames of anger and resentment.

“Why did the president do it now, when the #TakeTheKnee movement seemed to be waning? Who knows?  Maybe he was trying to whip up his core supporters. Or maybe it’s his latest effort to employ a weapon of mass distraction. Why focus on a likely loss on ObamaCare repeal, or a possible loss for your favored candidate in the Alabama Republican Senate runoff, when you can try to stir public resentment of a pampered athletic elite?

“The president, after all, has such a keen eye for ways to divide people, as he has demonstrated with the deadly white supremacist rally in Charlottesville, Va., his dissing of undocumented immigrants, his travel ban focused on Muslim-majority nations, and his effort to excise transgender troops from the military.

“Plus, this NFL controversy would be delicious payback.  Trump for decades tried to earn a seat at the NFL owners’ table, but his bids for the New England Patriots in 1988 and the Buffalo Bills in 2014 fell short.  The anthem protest issue was such a ripe wedge issue.  Nearly three in four Americans said they thought it was unpatriotic last year, and the protests led reasons why some viewers have stopped watching NFL games.

“The only problem is that professional athletes and team owners alike recognized Trump’s crude move for the ruse that it is: ‘With everything that’s going on in our country, why are YOU focused on who’s kneeling?’ NBA star Chris Paul tweeted....

“Allowing someone the right to dissent peacefully is part of the nation’s patriotic tradition. Using the bully pulpit of the presidency to rain aspersions down on someone who dares to do so is simply indecent.”

A Quinnipiac Poll conducted last October showed a majority of Americans disapprove of athletes who refuse to stand for the anthem. In a sign of the racial divide, however, three-quarters of African-American adults approve of the protests.

GOP strategist Austin Barbour said, “It is not a divisive statement to make to say Americans should stand during the national anthem. That’s not divisive.

“But it’s the way the president said it, using ‘SOB,’ it turned his comments into a divisive statement,’ he said.

“I have friends who voted for and love Trump but are furious at him,” said Barbour.  “These are Southern football fans. They don’t want anything screwing with their weekends, but now they can’t turn on the TV without a debate about it and the reactions from players and owners, and it’s all in your face.”

Trump supporter, New England Patriots quarterback Tom Brady, called Trump’s comments “divisive.”

Following the Dallas-Arizona game on Monday night, Trump tweeted:

“Ratings for NFL football are way down except before game starts, when people tune in to see whether or not our country will be disrespected!”

“The booing at the NFL football game last night, when the entire Dallas team dropped to its knees, was loudest I have ever heard. Great anger.

“But while Dallas dropped to its knees as a team, they all stood up for our National Anthem. Big progress being made-we all love our country!”

Friday afternoon, a new CNN poll was released on the topic.

Are athletes kneeling during the national anthem doing the right or wrong thing?  Right thing...43%; wrong thing...49%. 

Are athletes wrong for protesting during the anthem?  59% of whites think the athletes are wrong, 12% of blacks feel that way.

Is President Trump right or wrong for criticizing the NFL players?  34% right, 60% wrong.  51% of whites think he is wrong, 97% of blacks...and 61% of Independents.

Wall Street

On the economic front, a revised reading of second-quarter GDP came in at 3.1% vs. a first look of 3.0%, which the president was able to trumpet in a tweet.

“GDP was revised upward to 3.1 for last quarter.  Many people thought it would be years before that happened. We have just begun!”

Cue the Carpenters.

So the last four quarters, GDP, annualized....

Q3 2016...2.8
Q4 2016...1.8
Q1 2017...1.2
Q2 2017...3.1

The Atlanta Fed’s GDPNow indicator is at 2.3% today for the third quarter.

In other economic news, August new home sales came in less than expected at 560,000 annualized, while August durable goods rose a far better than expected 1.7%.

August personal income was in line, 0.2%, ditto consumption, 0.1%.

The key personal consumption expenditures index that is the Federal Reserve’s preferred inflation barometer, rose just 1.4% year-on-year, 1.3% on core, the lowest since Nov. 2015.

One more. The Chicago Purchasing Managers Index for September came in at a very robust 65.2, its highest reading in 29 years, though this is a most volatile barometer. Nonetheless it bodes well.

But speaking of the Federal Reserve, bond yields continued to rise as Chair Janet Yellen gave a speech saying the Fed planned to continue raising its benchmark interest rate despite some uncertainty about the reasons why inflation remains weak.

Yellen said the Fed still expects inflation to increase to its 2 percent annual goal, owing mainly to the dwindling supply of available workers that will force employers to raise wages.

“Given that monetary policy affects economic activity and inflation with a substantial lag, it would be imprudent to keep monetary policy on hold until inflation is back to 2 percent,” she told a business group.

The Fed has hiked its benchmark rate twice this year, March and June, and is now expected to do so again in December.

But the Fed isn’t without dissent, as Charles Evans, president of the Federal Reserve Bank of Chicago, said on Monday the Fed should wait for stronger inflation before raising interest rates.

“Inflation has been lower than the F.O.M.C.’s 2 percent target for too long, and there is little in the recent data to suggest that inflation will soon rise to target,” referring to the Federal Open Market Committee.

Europe and Asia

Little on the economic front for the eurozone, save for a flash estimate on inflation for September, 1.5%, same as August. The core rate, ex-food and energy, was also unchanged at 1.3%.

The euro currency had a rough week, including its worst day of the year against the dollar on Tuesday, on the heels of Angela Merkel’s poor performance, the surprisingly strong results from the far-right, and a move to the dollar as a safe haven after a North Korean official claimed the U.S. had effectively declared war on the hermit kingdom.  Plus, the U.S. Federal Reserve is clearly on a path to further rate hikes.

So on to....Eurobits....

--In the critical German elections, Angela Merkel’s Christian Democrats-Christian Social Union (CDU-CSU) coalition polled only 33% of the vote, down from 41% four years ago and the lowest since 1949, highly disappointing, though polling had it at around 34-35% for months.  Merkel’s sister CSU party in Bavaria received only 39% vs. 49% four year earlier.

The Socialists (SPD) finished far back, as expected, at 20.5%, the party’s worst result since 1933.

But the big story was really the performance of the far-right, anti-immigrant, anti-EU Alternative for Germany, AfD, which polled 12.6%, including 23% in the former communist East.

The Free Democrats, FDP, were fourth at 10.7%, followed by the Left at 9.2%, and the Greens at 8.9%, all above the 5% threshold for gaining seats in parliament.

So while Merkel won a fourth term, undoubtedly her last, as there is no way of repeating the current CDU-SPD coalition, Merkel needs an unprecedented three-way governing coalition with the FDP and the Greens, a “Jamaica tie-up,” so named for the island’s flag, whose colors – black, yellow, and green – represent the colors of the CDU, FDP and Greens.

It is not going to be an easy maneuver, as the FDP, free market disciples, are demanding the finance ministry portfolio for their cooperation, while the Greens favor liberal policies on immigration and European integration.  Working things out could take weeks.

Current Finance Minister Wolfgang Schauble, a fixture in politics for decades and finance minister the last eight years, a hawk on Greece and sharing German cash to help other eurozone nations, is going to become president of the lower house of parliament.

Friday, Merkel picked Peter Altmaier, currently the chancellor’s chief of staff, to take over at the Finance Ministry until the coalition is formed.  His selection is a signal of continuity and a pro-European outlook.

But back to the AfD, which has vowed to fight “an invasion of foreigners” into the country, there is a deep split in the leadership.  Co-leader Alexander Gauland is the hardliner, while the other leader, Frauke Petry, wants the AfD to take a more moderate tone, especially in terms of its nationalist rhetoric, for the purpose of broadening the party’s appeal.

Petry first declared that despite winning a seat in parliament, she wouldn’t take it due to a “disagreement over content,” criticizing Gauland for saying AfD would “hound” Mrs. Merkel.

Petry then announced the next day she was quitting the party, plunging it into crisis two days after its success.

German business leaders warned on Monday that the AfD’s rise could hurt the nation’s export-driven economy; Germans overall being sensitive to any revival of the extreme nationalism that led to the rise of Hitler 84 years ago.

There is strong evidence, by the way, that Russia, which had surprisingly stayed out of the German election campaign for the most part, got involved in the final hours, with online supporters of the AfD warning their base of election fraud, the alarms “driven by anonymous troll accounts and boosted by a Russian-language botnet,” according to the Atlantic Council’s Digital Forensic Research Lab.  Previously, trolls linked to Russia offered their support for the AfD’s anti-immigrant message.

--On the Brexit front, British Prime Minister Theresa May’s speech last Friday in Florence, spelling out the U.K.’s negotiating stance for exiting the European Union, did bear some fruit, with EU leaders considering going some way to meeting one of the U.K.’s demands, bringing forward talk of a transition period that would follow Brexit, March 2019.

The concession would make it easier for Mrs. May and her negotiating team to discuss the contentious divorce bill.  May, in her speech, pledged to continue paying into the EU’s budget for two years after leaving, while honoring Britain’s financial commitments more broadly.

But the two sides remain far apart on other key issues, including the role of the European Court of Justice, citizen’s rights and the Irish border.  British Brexit Secretary David Davis said this week that the jurisdiction of the ECJ would end when Britain exits the bloc in 2019, which blurred the lines with May’s statement a two-year transition period after would be subject to current rules and market access.  [Davis offered on the divorce bill that the U.K. would pay “roughly” $13.5 billion a year into the EU budget during the transition period.]

There are just 18 months left and it’s imperative the U.K. get the transition period issue straight quickly in order to lessen the uncertainty in Britain’s business community.  The prime minister wants a two-year period during which trading terms would remain unchanged.  But the tradeoff is that the U.K. would have to accept the EU’s rules.

So it’s up to EU leaders at their summit later in October.

Separately, Prime Minister May is guaranteeing her country’s security commitment to the other 27 European Union leaders even though the nation is leaving the bloc.

While visiting troops in Estonia close to the Russian border, Mrs. May said that “the United Kingdom is unconditionally committed to maintaining Europe’s security.”  She added that “we will continue to offer aid and assistance to EU member states that are the victims of armed aggression, terrorism and natural or man-made disasters.”

As for Merkel’s intra-party tussle with Foreign Secretary Boris Johnson, he is on board, with the Conservative Party conference beginning Sunday in Manchester.

Lastly, Mrs. May will face some heat at the party conference after the U.S. Commerce Department’s decision to impose punitive import duties on Bombardier Inc.’s new jetliner, which hurts the prime minister bigly.

First, 4,000 work for the company in Belfast, Northern Ireland, where the plane’s wings are built.

Second, Northern Ireland is sensitive in that May’s Conservatives have the support of 10 lawmakers from the region that are critical to her remaining in power.

Third, it’s a political embarrassment because she’s been talking to Donald Trump on the issue, with no obvious result.

One economic item on the U.K.  Second-quarter growth came in at 1.5 percent, year-on-year, down  from 1.8 percent in the first quarter, as reported by the Office for National Statistics.

--Catalonia is determined to hold an independence referendum Sunday, which will precipitate a constitutional crisis.

With the support of the Spanish judiciary, Madrid has shut down websites and advertising campaigns that have promoted the vote.  It has raided the offices of companies that would print paper ballots, and it has sent thousands of police officers from outside the region, threatening to block polling stations.

A dozen regional government officials were detained recently, and Spain’s attorney general has warned that scores more could be arrested.

Catalonia’s leader, Carles Puigdemont, said the other day, “We are witnessing the worst democratic regression since the death of Franco,” referring to the dictator’s death in 1975, which opened the way for democracy.

But here’s the thing, while the latest polls have showed only about 40% favoring independence, IF a legitimate referendum is held, they are the ones who will vote, not those in opposition, so it’s likely it would be approved.  At least that is the thinking Friday.

Needless to say, tensions on the streets have mounted. Massive protests were held in Barcelona.  Puigdemont said the conflict would not turn violent, but he warned Madrid it would be responsible if things got further out of hand.

--Italy’s opposition 5 Star Movement, which polls around 27% when Italians are asked whom they would support in an election, has selected a 31-year-old moderate, Luigi Di Maio, as its candidate for premier in Italy’s national elections, slated for next year.  Parliamentary elections must be held by May.

Currently, Di Maio is deputy speaker of Italy’s chamber of deputies. He was a 26-year-old university student when elected to parliament in 2013.

The 5 Star Movement, founded by comedian Beppe Grillo, advocates ideas such as minimum guaranteed income for all working age and retired Italians, tougher anticorruption laws and a renegotiation of the EU’s fiscal constraints, such as budget deficit targets that some see holding back growth.

But the party has also favored holding a referendum on Italy’s membership in the euro and Di Maio said such a move would come only as “a last result.”

--French President Emmanuel Macron detailed a wide range of proposals for future European policies including defense and migration in a two-hour major speech in Paris, as he said the eurozone is the core of the European project that offers its members economic power to rival China and the United States.

“The Europe we know is too weak, too slow, too ineffective,” Macron said. “Europe can assure real sovereignty, our ability to exist in the world of today.”

His speech drew mostly praise from across the continent, with European Commission President Jean-Claude Juncker tweeting, “Europe requires courage.  We now need a more closely united, stronger and democratic Europe.”

Macron’s speech came as Angela Merkel faces tricky talks on a new coalition to steer Europe’s biggest economy.  German Foreign Minister Sigmar Gabriel said the speech was a “bold, passionate plea against nationalism and for Europe,” adding that “we have to use this chance of a German-French initiative to together make Europe more democratic, involve its citizens and better prepare for the future.”  Macron, he said, “can count on us.”

Turning to Asia, nothing on China this week, beyond what I have below on its president.

But in Japan, Prime Minister Shinzo Abe called an election a year early and dissolved parliament, with a vote slated for October 22, as he seeks a fresh mandate to overcome “a national crisis” amid rising threats from North Korea.

Abe’s approval numbers have rebounded, and he wants to take advantage of an opposition in disarray.  The prime minister also announced a $17.8 billion stimulus package, focusing on education and social spending.

On the economic front, a flash reading on Japanese manufacturing for September came in at 52.6 vs. 52.2 in August, 50 being the dividing line between growth and contraction.

August inflation data remained low, with the core consumer price index up 0.7%, year over year, Japan’s “core” including oil but excluding fresh food.  If you exclude both food and energy, the reading is only 0.2%.  The Bank of Japan now says inflation won’t hit 2% until 2020.

Industrial production in August was up 2.1% over July, while household spending, a key, rose just 0.6% year-on-year, while retail sales fell 2.1% last month vs. a year ago, the sixth straight month it has declined.

Street Bytes

--Stocks closed out another strong quarter, with the S&P 500 and Dow Jones now up eight straight quarters, this last one, the S&P gaining 4% and the Dow 4.9%.

On the week, the Dow is just shy of its all-time high at 22405, up 0.3%, while the S&P rose 0.7% to a record 2519.  Nasdaq gained 1.1% to its own record, 6495.

The economy is strong, including globally; earnings are solid; and at least for the moment, investors see a glimmer of hope there could be tax cuts coming.

--U.S. Treasury Yields

6-mo. 1.19%  2-yr. 1.48%  10-yr. 2.33%  30-yr. 2.86%

The yield on the 10-year rose a third straight week to 2.33% from 2.05% on Sept. 8.

But we closed 2016 at 2.44%.  So like as former NBA star Derrick Coleman would say, “Whoopty-damn-do.”

--The U.S. exported a record 1.5 million barrels per day of crude oil last week, according to government figures, a sum larger than the output of some OPEC countries.  Volumes had dipped after Hurricane Harvey shut down ports in Texas last month, but have since rebounded.

Crude exports this year have been averaging 783,000 b/d, a 62 percent increase over the same period of 2016.

Crude oil inventories fell unexpectedly last week amid the restarts at the ports. Both items helped the price of West Texas Intermediate finish at its highest weekly close since April at $51.64.

--Separately, the recent jump in oil prices is big for Russia.  Its new three-year budget being submitted to parliament has a very conservative estimate of $46 for the average price of oil in 2017, $44 in 2018 and $42 in 2019 and 2020.

The problem is the Duma likes to generate “surplus” funds through conservative projections, with the extra cash then often fueling corruption as the surplus is assigned to pet projects.

While the share of oil revenues has fallen from half of total federal revenues to 25-30 percent, Russia is still heavily dependent on petromoney.

--Equifax CEO Richard Smith stepped down, three weeks after reporting the company was a victim of an embarrassing cyber-attack.

Smith, at the credit-monitoring company for 12 years, relinquished all claims to a 2017 bonus and $5.2 million in severance, but he will nonetheless receive a pension of about $18.4 million.

Sen. Elizabeth Warren (D-Mass.), one of his fiercest critics, said in a statement: “It’s not real accountability if the CEO resigns without giving back a nickel in pay and without publicly answering questions.”

Earlier, the board, scrambling to stabilize the situation, ousted the company’s chief information office and security boss, but Smith had to go as well.

Smith is still scheduled to appear before a Senate committee Oct. 4.

--Shares in Nike fell sharply after the company reported sales in North America declined 3 percent in the most recent quarter ended Aug. 31, the first time in more than 10 quarters that the sports apparel giant had failed to post gains in its largest sales region. 

But Nike did have a sales gain of 9 percent in China, while revenue from the Europe, the Middle East and Africa region climbed 4%.  Growth in China is expected to rise.

Meanwhile, Adidas, with its renewed emphasis on North America, has posted an average sales gain of nearly 26 percent over the past six quarters for the region.

In August, Adidas leapfrogged over Nike’s Air Jordan brand to become the No. 2 selling sneaker in the U.S.

Nike has been largely ignoring the growing “casual athletic” footwear market, which Adidas and others have been exploiting, as Nike sticks to selling performance.

Adidas worldwide sales reached $22.7 billion in 2016, while Nike’s were $34.4 billion in the 12 months ended May 31.

--Twitter, like Facebook, is being exploited by the Russian propaganda machine, with Russia seizing both sides of the NFL anthem controversy with hashtags such as #boycottnfl #standforouranthem and #takeaknee; all designed to sow division and discontent across America.

Facebook recently disclosed Russians used fake pages and ads to spread inflammatory messages during and since the presidential campaign.

As reported by the New York Times, researchers at a public policy research group in Washington, the Alliance for Securing Democracy, said it has been publicly tracking 600 Twitter accounts – human users and suspected bots – they have linked to Russian influence operations, pushing opposition messages on the NFL and the anthem.

This week, President Trump tweeted: “Facebook was always anti-Trump. Hence, Fake News, @nytimes(apologized) & @WaPo were anti-Trump. Collusion?

“...But the people were Pro-Trump! Virtually no President has accomplished what we have accomplished in the first 9 months-and economy roaring.”

Facebook founder Mark Zuckerberg dismissed Trump’s comments in a post, writing he was striving to make “a platform for all ideas,” and that aside from “problematic ads,” Facebook’s impact ranged from “giving people a voice, to enabling candidates to communicate directly, to helping millions of people vote.”

Zuckerberg noted that both ends of the political spectrum were upset about content they disliked, and that liberals in the U.S. had accused him of enabling Mr. Trump’s victory.

Meanwhile, Facebook is taking deserved heat for allowing so much fake news on its site, and Zuckerberg had to “come around to the idea that social media may not be the force for good in the world that he and other optimists always promised.”  [Farhad Manjoo / New York Times]

As Mr. Manjoo writes:

“Like all tech leaders, Mr. Zuckerberg is often hailed as a visionary, but his primary talent is as a reactor. His true skill is not in seeing ahead, but in looking back and fixing where Facebook has failed.  And what’s noteworthy is that when he marshals Facebook’s considerable resources to address a problem, Mr. Zuckerberg has a track record of making things right.”  [See the company’s success in mobile...starting from scratch.]

Maureen Dowd / New York Times

“The idea of Mark Zuckerberg running for president was always sort of scary.

“But now it’s really scary, given what we’ve discovered about the power of his little invention to warp democracy.

“All these years, the 33-year-old founder of Facebook has been dismissive of the idea that social media and A.I. could be used for global domination – or even that they should be regulated....

“But all the while, the company was piling up the rubles and turning a blind eye as the Kremlin’s cyber hit men weaponized anti-Hillary bots on Facebook to sway the U.S. election. Russian agents also used Facebook and Twitter trolls, less successfully, to try to upend the French election....

“Hillary is right that this $500 billion company has a lot to answer for in allowing the baby-photo-sharing site to be turned into what, with Twitter, The Times’ Scott Shane called ‘engines of deception and propaganda.’

“Robert Mueller’s team, as well as House and Senate investigators, are hotly pursuing the trail of Russian fake news....

“ProPublica broke the news that, until it asked about it recently, Facebook had ‘enabled advertisers to direct their pitches to the news feeds of almost 2,300 people who expressed interest in the topics of ‘Jew hater,’ ‘How to burn jews (sic),’ or ‘History of ‘why jews ruin the world.’’

“Sheryl Sandberg, Facebook’s C.O.O., apologized for this on Wednesday and promised to fix the ad-buying tools, noting, ‘We never intended or anticipated this functionality being used this way – and that is on us.’....

“The Sandberg admission was also game, set and match for Elon Musk, who has been sounding the alarm for years about the danger of Silicon Valley’s creations and A.I. mind children getting out of control and hurting humanity. His pleas for safeguards and regulations have been mocked as ‘hysterical’ and ‘pretty irresponsible’ by Zuckerberg.

“Zuckerberg, whose project last year was building a Jarvis-style A.I. butler for his home, likes to paint himself as an optimist and Musk as a doomsday prophet. But Sandberg’s comment shows that Musk is right: The digerati at Facebook and Google are either being naïve or cynical and greedy in thinking that it’s enough just to have a vague code of conduct that says ‘Don’t be evil,’ as Google does.

“As Musk told me when he sat for a Vanity Fair piece: ‘It’s great when the emperor is Marcus Aurelius. It’s not so great when the emperor is Caligula.’....

“Vladimir Putin has denied digital meddling in the U.S. elections. But he understands the possibilities and threat of A.I.  In a recent address, the Russian president told schoolchildren, ‘Whoever becomes the leader in this sphere will become the ruler of the world.’  Musk agreed on Twitter that competition for A.I. superiority would be the ‘most likely cause of WW3.’

“On Thursday, touring the Moscow tech firm Yandex, Putin asked the company’s chief how long it would be before superintendent robots ‘eat us.’

“Zuckerberg scoffs at such apocalyptic talk.  His project this year was visiting all 50 states, a trip designed by former Obama strategist David Plouffe, which sparked speculation that he might be the next billionaire to seek the Oval Office.

“As Bloomberg Businessweek wrote in a cover story a few days ago, Zuckerberg has hired Plouffe, other senior Obama officials and Hillary’s pollster. He has said he is no longer an atheist and he changed Facebook’s charter to allow him to maintain control in the hypothetical event he runs for office.

“Yep.  Very scary.”

As the Washington Post added this week, back on November 19, President Obama pulled Mark Zuckerberg aside at a meeting of world leaders in Lima, Peru, two months before Trump’s inauguration, and Obama made a personal appeal to Zuckerberg to take the threat of fake news and political disinformation seriously.  Zuckerberg told Obama those messages weren’t widespread on Facebook and that there was no easy fix.

As for the 3,000 ads Facebook has now identified that appear to have come from accounts associated with a Russian entity known as the Internet Research Agency, which has been publicly identified as a troll farm, one congressional investigator told the Washington Post this week, this is just “the tip of the iceberg.”

“Nobody really knows how many accounts are out there and how to prevent more of them from being created to shape the next election – and turn American society against itself,” The Post concludes.

Meanwhile, Twitter revealed it had shut down 201 accounts that were tied to the same Russian operatives who posted the ads on Facebook, but lawmakers argue the problem is far broader than the company appeared to know.

Sen. Mark Warner (D-Va.) questioned whether the company is doing enough to stop Russian operatives from using its platform, calling the company’s presentation to the Senate Intelligence Committee “very disappointing.”  “Their response was frankly inadequate on every level,” said Warner.

--Separately, Twitter announced it was testing extending the text limit on a post to 280 characters from 140.  The company said it wanted to eliminate what it viewed as constraints that kept people from tweeting more frequently.

I’ve always felt it just needed an extra 10-20.

--In a big announcement, China said it would force automakers to accelerate their production of electric vehicles by 2019.  The plan calls for gradually escalating quotas for pure-electric cars, plug-in hybrids and fuel-cell cars, as Beijing tries to curb air pollution.

While the announcement was long-awaited, and Ford, Renault-Nissan and Volkswagen have all set up new joint ventures with local car makers that would specialize in pure-electric vehicles, with GM having announced it would build 10 electric vehicle or plug-in models in China by 2020, the target of 10% of all vehicles they produce in China in 2019 and import into the country, was a little greater than most had expected.  That rises to 12% in 2020.

Auto makers have said they would be hard-pressed to build the needed manufacturing infrastructure by next year.

But the Ministry of Industry and Information Technology, which oversees the auto industry, said if targets aren’t met in 2019, the auto makers won’t be punished.  Actual enforcement begins by the end of 2020.

Bottom line, it’s a daunting timetable, especially when compared with earlier announcements by the U.K. and France aiming to end sales of gasoline and diesel vehicles by 2040.

--Shares in Darden Restaurants fell after the owner of Olive Garden and other casual dining outlets delivered fiscal first-quarter same-store sales that failed to meet expectations.

For the three months to end of August, Darden said comp sales, which measure how well a store open at least a year did, rose 1.7%, which is actually pretty good these days, but the Street was looking for over 2%, and 1.7% was slower than the 3.3% growth of the prior quarter.

Olive Garden itself, the largest chain by stores and revenue under the Darden umbrella, saw its same-store sales rise 1.9%.

--Carnival Cruise Lines reported better than expected results for its last quarter, but guided lower for the current one.

Revenue rose to $5.52 billion from $5.1 billion, topping estimates.

But everyone wants to know how Carnival and the competition are doing after Hurricanes Maria and Irma and a Carnival spokeswoman said that while there is no sailing to the Virgin Islands ports of St. Thomas, St. Maarten, and Tortola, as well as Puerto Rico and a few others, the impact on earnings will be just 10 to 12 cents a share, after it earned $2.29 last quarter.

Actual cancellations are running at just 1%.

--Ryanair continues to be rocked by its scheduling issues, self-inflicted, and now Ireland’s Civil Aviation Authority is launching “enforcement action” against the airline for failing to give customers accurate information about their rights following a wave of flight cancellations.

Aside from the airline claiming it didn’t have to re-route passengers on other airlines, it failed to provide details on its obligations to refund various expenses incurred by passengers as a result of a cancellation, such as meals, hotels and transfer costs.

Ryanair has grounded 2,000 flights thus far after miscalculating pilot leave, and it has since cancelled an extra 18,000 flights for the winter season in a move impacting 400,000 passengers.

[I’m going to be posting a special article on becoming a pilot, courtesy of Bobby C., on my “Wall Street History” link shortly and will let you know when I do.]

--Target announced it is raising its minimum wage to $11 an hour starting next month and to $15 an hour within three years, as Target competes to fill low-wage jobs in a tighter labor market.

--Unsealed documents in a lawsuit against Johnson & Johnson purport to show that J&J knew its talcum powder contained asbestos, the exposure to which can cause cancer.

The company is defending itself from more than 5,000 suits across the U.S. blaming its baby powder products for causing women to develop ovarian cancer.

The documents provided by J&J show tests of its talc stretching back to at least 1972 found no traces of asbestos, though a document unsealed from 1974 shows an official at J&J’s Windsor mine in Vermont recommended “the use of citric acid in the depression of chrysotile asbestos” from talc extracted from the site.

J&J countered, through a spokesman, “The U.S. Food and Drug Administration requires specific testing to ensure that cosmetic talcum powder is free of asbestos. We are confident that our talc products are, and always have been, free of asbestos, based on decades of monitoring, testing and regulation.”

At first I sloughed off the reports of the lawsuit against J&J.  Now I’m not so sure, being a heavy user of their product.

--Morgan Stanley CEO James Gorman has a different view of bitcoin than JPMorgan Chase CEO Jamie Dimon, who earlier this month called the cryptocurrency “a fraud” that’s in a speculative bubble worse than tulip bulbs.

Gorman said bitcoin is “certainly something more than just a fad.  The concept of anonymous currency is a very interesting concept – interesting for the privacy protections it gives people, interesting because of what it says to the central banking system about controlling that.”

Gorman added, “It’s obviously highly speculative but it’s not something that’s inherently bad.”

So I found Gorman’s comment rather humorous.  Days earlier I saw the following in the South China Morning Post.

“A multibillion-dollar cryptocurrency ‘share’ offer by a Macau gaming company has the backing of one of Asia’s most notorious former gangland bosses – ‘Broken Tooth’ Wan Kuok-koi.

“The initial coin offering (ICO) planned for Hong Kong next month hopes to raise $500 million to bring blockchain technology to the world’s most cash-rich gambling hub and is closely connected to casino junket operators [Ed. read Mob] in the former Portuguese enclave.”

It turns out another notorious mobster, ‘Wan’, who was just released after 14 years in jail for a variety of gangland crimes including money laundering, was seen at a ceremony inking the new deal, which is between Macau Dragon Group and Thailand-based Wi Holding Company Ltd.

Ergo, with folks like this in the industry, be my guest, Mr. Gorman.  I’ll go with Jamie Dimon’s opinion.

--The average number of network news viewers for the 2016-17 season that ended last week,  was down 4% from 2015-16 to 23.1 million each night, while in the morning, the three networks’ total was 12.2 million viewers, a decline of 5%.

--I did not see any of Megyn Kelly’s new show on NBC, but she told her first-day audience she’s “not a political animal and I never have been.” She also announced the show would avoid politics entirely (although it will include some news coverage).

One industry insider told the New York Post, “They spent all that money on this great political anchor and journalist.  If you take those things away, what are you paying for?”

It has to flop.

--Finally, we note the passing of an American legend, Hugh Hefner, 91.  Born in Chicago on April 9, 1926, at age 8, he started a school newspaper called The Pepper, despite a warning from a concerned teacher that “if he continues to waste time on this, he will never amount to anything.”

“But I was a smart little boy,” Hefner told the Chicago Tribune in 1999.

Later at the University of Illinois, after serving in the Army during World War II, he edited the campus humor magazine, Shaft, and introduced a feature he called “Coed of the Month.”  At the time, he began to develop a philosophy that linked freedom of speech and the press with individual rights and a rejection of what he called “our legacy of puritan repression.”

From college he got a job as copywriter for Esquire magazine.  Then he borrowed money from friends and relatives to start Playboy. 

The first issue came out in December 1953. There was no date because he wasn’t sure there would be a second.  But he had smartly rented a naked picture of Marilyn Monroe from the Baumgarth Calendar Co. for $200, which he used as the centerfold spread, and within two weeks, he had sold out his 70,000 copies.  The rest is history.

“I really wanted to focus on the good-life concept.  A lifestyle.  A point of view we were trying to express,” Hefner once said.  “And we hit a nerve.”

By the early 1960s, Playboy’s circulation peaked at more than 8 million.

By 1971, when Playboy Enterprises went public, the magazine was selling 7 million copies a month, there were 23 Playboy clubs, resorts, hotels and casinos, along with ventures in book publishing, merchandizing, modeling, records, TV, movies and a limousine company.  There were 5,000 employees, including 1,000 waitresses, dressed in their skimpy black silk costumes, the Bunnies.

Hefner is being buried in a mausoleum in Westwood Memorial Park, where, in the mid-1990s, he bought the drawer next to that of Marilyn Monroe, his first cover girl, for his final resting place.  [Rick Kogan / Chicago Tribune]

I’ll have much more on Hef in my next Bar Chat column.

Foreign Affairs

North Korea: Saturday, North Korea’s foreign minister unleashed a torrent of criticism at the United Nations General Assembly in response to President Donald Trump’s speech at the same venue, saying Pyongyang is ready for a preemptive nuclear attack if needed.

“The very reason the DPRK had to possess nuclear weapons is because of the U.S.,” Ri Yong Ho said.  “The U.S. hostile policy and nuclear threats have continued over 70 years, and these have led the situation on the Korean peninsula to a touch-and-go point.”

Ri added: “None other than Trump himself is on a suicide mission.  In case innocent lives of the U.S. are lost because of this suicide attack, Trump will be held totally responsible.”

Saturday night, Trump tweeted: “Just heard Foreign Minister of North Korea speak at U.N. If he echoes thoughts of Little Rocket Man, they won’t be around much longer!”

Monday, Ri Yong Ho said that President Trump had declared war on his country, and that Pyongyang had the right to shoot down U.S. bombers even if they were not in the nation’s airspace.

“The whole world should clearly remember it was the U.S. who first declared war on our country,” Ri told reporters in New York.

“Since the United States declared war on our country, we will have every right to make countermeasures, including the right to shoot down United States strategic bombers even when they are not inside the airspace border of our country.”

White House press secretary Sarah Sanders said, “We’ve not declared war on North Korea.  And frankly the suggestion of that is absurd. We continue to seek the peaceful denuclearization of the Korean Peninsula.”

Tuesday, in a joint news conference at the White House with Spain’s Prime Minister Mariano Rajoy, President Trump said the U.S. is prepared to use “devastating” military force against North Korea but encouraged the world to work together to end the country’s nuclear program.

“We are totally prepared for the second option – not a preferred option – but if we take that option it will be devastating I can tell you that,” Trump said.  “For North Korea that is called the military option.  If we have to take it we will.”

The United Nations nuclear watchdog’s chief said on Friday that North Korea’s sixth nuclear test conducted Sept. 3, showed the country has made rapid progress on weapons development that posed a new, global threat.  International Atomic Energy Agency Director Yukiya Amano told reporters in Seoul, “Combined with other elements, this is a new threat and this is a global threat,’ as he called on the international community to unite.

A report for Britain’s Royal United Services Institute, a defense think tank, concluded that tensions between the U.S. and North Korea are so high that war is “a real possibility” for which the world must prepare.

Such a conflict would result in “hundreds of thousands” of casualties, severely disrupt the global economy, and have profound implications for the political and diplomatic landscape of East Asia.

South Korea is preparing for more provocative acts by Pyongyang in October, coinciding with the anniversary of the founding of the North Korean Communist Party and China’s all-important Communist Party Congress.

A new Washington Post-ABC News poll finds that 37 percent of Americans trust Trump either “a great deal” or “a good amount” to responsibly handle the situation with North Korea, while 42 percent trust the commander in chief “not at all.”  By comparison, 72 percent trust U.S. military leaders.

Only 8 percent of Americans surveyed believe Kim Jong Un can act responsibly.

Meanwhile, China has vowed to uphold U.N. sanctions against North Korea, besides seeking to get talks with Pyongyang restarted.

Last weekend, China announced it would ban exports of some petroleum products in North Korea, as well as imports of textiles.

Thursday, China’s commerce ministry said North Korean firms or joint ventures in China would be shut within 120 days of the latest U.N. Security Council sanctions, passed on Sept. 12.

Overseas Chinese joint ventures with North Korean entities or individuals are also to be closed, the ministry said in a statement on its website, though no timeframe was provided.

But here’s the thing. China has issued similar statements in the past when the UN levies new sanctions and then we learn later there has been little follow-up.

Like China’s agricultural exports to North Korea rose sharply in July and August, amid rising tensions and at a time of year when the country’s food supply is at its lowest.

Rice exports increased 79%, while exports of wheat flour surged more than elevenfold, according to China’s Customs data.

The data also showed an uptick in exports of coal to North Korea in August, ahead of a UN ban on Pyongyang’s coal trade that was to have taken effect Sept. 5.

Bottom line, China doesn’t want North Korea to collapse.

David Ignatius / Washington Post

“Top U.S. officials have said repeatedly that America is seeking a diplomatic solution to the nuclear crisis with North Korea. But President Trump’s insulting comments toward North Korean leader Kim Jong Un appear to have made such a negotiated settlement more difficult.

“In the chaotic government-by-Twitter atmosphere of the Trump administration, no senior leader has publicly questioned whether the president’s trash talk about ‘Rocket Man’ and his threat to ‘totally destroy’ North Korea have undermined his own strategy. But there’s growing concern that, as former U.S. diplomat and North Korea expert Joseph DeThomas wrote Monday on the 38 North blog, Trump’s comments ‘may have closed any remaining doors’ to a quick diplomatic resolution of the standoff.

“Experienced Korea watchers believe that Trump’s threats have deepened Kim’s resistance to concessions and that the North Korean leader is unlikely to back down in the face-off with Washington. By responding personally to Trump’s bluster and issuing his own counterthreats, Kim has attached his personal prestige and his family’s demigod status to the confrontation.

“Trump’s disruptive comments have doubtless caused some head-scratching in Pyongyang, as leaders there try to discern the signal from the noise. But any benefits of Trump’s unpredictability were probably erased by threats to obliterate North Korea and its leaders if they remain defiant.

“Officials who appeared hopeful about diplomatic prospects just a few weeks ago now seem concerned that Kim may seek another round of escalation....

“The first steps away from confrontation will have to be small. Trump’s rhetoric has probably torched the big bargain, for now. An initial statement to reduce tensions could be followed by other confidence-building measures, and then, eventually, by talks about denuclearization and reduction of U.S. forces in the region.

“The humbling lesson that Trump must learn: He has blustered his way to the edge of a cliff. Now he must stop fulminating and start dealing.”

China: Editorial / Wall Street Journal

“The 19th Congress of the Chinese Communist Party, set to open in Beijing on Oct. 18, is worth watching for two reasons. General Secretary Xi Jinping is bidding to become China’s most powerful leader since Mao Zedong, and he may stake his legitimacy on the country’s growing influence abroad. Both suggest an expansion of China’s political oppression at home and assertiveness abroad.

“Mr. Xi may defy Party tradition at this Congress, which falls halfway through his 10-year term in office, and seek to extend his tenure beyond 2022. The last two leaders, Jiang Zemin and Hu Jintao, allowed a successor from a rival political faction to join the Politburo Standing Committee at this stage to prepare a smooth succession.  If this Congress fails to put forward a younger cadre or elevates an inexperienced candidate loyal to Mr. Xi, it will confirm that he has rejected the consensus leadership the Party established after the death of Mao.

“Mr. Xi may also signal his pre-eminence by rewriting the Party charter. In recent weeks key publications have promoted the importance of ‘Xi Jinping Thought.’  Adding that phrase to the charter would put Mr. Xi on the level of Mao, whose thought is second only to Marxist ideology in the Party’s guiding principles.

“The Congress is also expected to emphasize Mr. Xi’s efforts to restore China as a global power as part of his ‘China Dream’ strategy. A new propaganda campaign is praising ‘Xi Jinping Diplomatic Thought.’  State television aired a six-part documentary called ‘Great Power Diplomacy’ that showed Mr. Xi being given red carpet treatment in London and Mar-a-Lago, receiving foreign leaders in Beijing, and being praised by foreign intellectuals for his deep thoughts.  Foreign Minister Wang Yi says Mr. Xi’s thought ‘transcends centuries of Western international relations theory.’

“Mr. Xi has consolidated his control over the armed forces in the past year, purging senior generals for corruption and promoting others.  At this summer’s Army Day parade, he reviewed the troops alone instead of with other senior leaders, as was the norm.  At that event a general introduced him as lingxiu, a term for a supreme leader that has not been used since the Mao era....

“This consolidation of power means that China’s immediate future will increasingly depend on the choices of one leader. This suggests that the Party’s crackdown on political dissent, which has become ever harsher, is unlikely to ease.  Hong Kong can also expect more aggressive control from Beijing.

“The question for the world is what consolidated one-man authoritarian rule would mean for China’s actions abroad....

“Mr. Xi is changing that policy to assert Chinese dominance in the Asia-Pacific, and authoritarian rulers tend to stoke nationalism to create political legitimacy. The growing cult of Xi could shake the world order.”

I hope you found the above familiar, because I have been writing for a year that Xi will seek to go beyond the traditional 10-year term.

I’ve also written that he will play the nationalism card at any moment when politics demand it.  Yes, Hong Kong will be an increasing target, but I would have added Taiwan to the Journal’s editorial, which China can take in about 12 hours any time it wants to.

What would the West do in response?  Nothing.

President Trump is headed to China in November, post-Communist Party Congress and Xi’s new titles, Nov. 3-14, a trip including summits in Vietnam and the Philippines, as well as stops in Japan and South Korea.  At his Tuesday news conference, Trump said of China’s role in North Korea:

“I applaud China’s recent action to restrict its trade with North Korea. In particular I applaud China for breaking all banking relationships with North Korea. I want to thank President Xi.”

Trump will be (already is) jealous of all the power Xi has been accumulating.  It’s a guarantee our president will say some incredibly stupid things in this regard when he’s there.  But that’s down the road.  For now, we have to get through October.

Iraq / Syria: Islamic State released an audio recording of its leader Abu Bakr Al-Baghdadi on Thursday, the first communication from him in almost a year.

The date of the 46-minute recording, released via a news organization linked to ISIS, was not clear.  But Baghdadi does make reference to North Korean threats against Japan and the United States.

But the biggest news on the week was the referendum for independence held by Iraqi Kurds, with 93% of voters backing a breakup with Baghdad.  Much of the West, let alone Baghdad, is not pleased, though for different reasons.  The referendum, though, is not binding, but it is designed to give Masoud Barzani, who heads the Kurdistan Regional Government (KRG), a mandate to negotiate the secession of the oil-producing region.

Baghdad ordered the KRG to hand over control of its airports in retaliation, as demanded by Prime Minister Haider al-Abadi

Baghdad previously asked foreign countries to stop direct flights to the international airports of Erbil and Sulaimaniya, in KRG territory, but only Iran declared such an air embargo, halting direct flights to and from Iraqi Kurdistan.

Ankara and Tehran are vehemently against Kurdish independence, fearing it will lead to unrest among their own populations of Kurds.   President Barzani said the referendum was not a threat to Ankara.

“The referendum does not mean independence will happen tomorrow, nor are we redrawing borders...we will resolve our issues with Baghdad peacefully.”

And Turkish President Erdogan threatened to freeze his country’s normalization of relations with Israel if the latter did not end its support for an independent Kurdish state.

Two weeks ago, Prime Minister Netanyahu announced that Israel “supports the legitimate efforts of the Kurdish people to achieve a state of their own.”

One reason why the United States is among those who weren’t pleased with the referendum is because the focus still needs to be on battling ISIS, and on Friday we learned that the militants had killed 58 Syrian government troops and militia in fierce resistance to a Russian-backed offensive against some of its last strongholds, according to the Syrian Observatory for Human Rights.  ISIS is still potent.

Iran: Tehran announced it had successfully tested a new medium-range missile, in defiance of President Trump.

The launch of the Khoramshahr missile, with a range of 1,240 miles, was shown on state TV, though it wasn’t clear when the test took place.

In his UN General Assembly speech, Trump criticized Iran’s missile program and the 2015 nuclear deal with the country.

The Khoramshahr missile was first displayed at a military parade last Friday, and the announcement of the test was the next day.

President Trump is due to tell Congress on October 15 if he believes that Iran has complied with the nuclear deal and if he thinks the U.S. should continue to abide by it.

John Bolton / Wall Street Journal

“(Regarding the Iran deal), Mr. Trump’s real decision is whether to fulfill his campaign promise to extricate America from this strategic debacle.  Last week at the United Nations General Assembly, he lacerated the deal as an ‘embarrassment,’ ‘one of the worst and most one-sided transactions the United States has ever entered into.’

“Fearing the worst, however, the deal’s acolytes are actively obscuring this central issue, arguing that it is too arduous and too complex to withdraw cleanly. They have seized instead on a statutory requirement that every 90 days the president must certify, among other things, that adhering to the agreement is in America’s national-security interest. They argue the president should stay in the deal but not make the next certification, due in October.

“This morganatic strategy is a poorly concealed ploy to block withdrawal, limp through Mr. Trump’s presidency, and resurrect the deal later. Paradoxically, supporters are not now asserting that the deal is beneficial.  Instead, they concede its innumerable faults but argue that it can be made tougher, more verifiable and more strictly enforced.  Or, if you want more, it can be extended, kicked to Congress, or deferred during the North Korea crisis. Whatever.

“As Richard Nixon said during Watergate: ‘I want you to stonewall it, let them plead the Fifth Amendment, cover up, or anything else if it’ll save it – save the plan.’

“Mr. Trump should not be deceived. The issue is not certification. The issue is whether we will protect U.S. interests and shatter the illusion that Mr. Obama’s deal is achieving its stated goals, or instead timidly hope for the best while trading with the enemy, as the Europeans are doing. It is too cute by half to employ pettifoggery to evade this reality....

“The ayatollahs have neither the desire nor the incentive to renegotiate even a comma of the agreement. Why should they, when it is entirely to their advantage? Both Resolution 2231 and the statement, for example, ‘call upon’ Iran to forgo activity regarding ‘ballistic missiles designed to be capable of delivering nuclear weapons.’  The U.N. secretary-general recently reported that Iran is violating this provision and implicitly lying about it. But the deal’s language allows Iran to claim solemnly that its missiles are not ‘designed’ to carry nuclear warheads, an assertion whose verification would require polygraphs and psychologists, not weapons inspectors.  This is one of many textual loopholes.

“If the deal is vitiated, Tehran would not be freer than it is now to pursue nuclear weapons and ballistic missiles.  Not only is the international compliance regime a far cry from Mr. Obama’s promised ‘anytime, anywhere’ inspections, crucial language is vague and ambiguous.  Mr. Obama’s negotiators crippled real international verification by pre-emptively surrendering on what were delicately termed ‘possible military dimensions’ of Iran’s nuclear program.

“Moreover, simple economic logic suggests that Tehran’s scientists are probably enjoying Pyongyang’s hospitality, well beyond the International Atomic Energy Agency’s limited capability to detect.  Even U.S. intelligence could be in the dark if Iran is renting a uranium enrichment facility under a North Korean mountain.  It is specious to assert that the North Korean nuclear crisis should lead to deferring action on the Iran deal.  The conclusion should be precisely the opposite: Failure to act decisively on Iran now worsens the global proliferation threat.”

Mark Dubowitz and David Albright / Wall Street Journal

“Decertifying doesn’t mean breaking the deal. That happens only if the U.S. reimposes sanctions that have been lifted or suspended under the JCPOA (Joint Comprehensive Plan of Action...the deal)....

“Mr. Trump...should designate the Revolutionary Guards a terrorist organization, as Congress has required he do by Oct. 31. He should also instruct the  Treasury to blacklist companies with Revolutionary Guard and military ownership, which represents about 20% of the total market capitalization of the Tehran Stock Exchange.  He should redesignate Iran Air (which is buying planes from Boeing and Airbus) as a terrorist entity for airlifting weapons and fighters to Syria. All these measures are consistent with the JCPOA.

“We propose the president ‘fix’ U.S. policy by making it clear he does not accept the Iran deal’s dangerous flaws.  He should insist on conditions making permanent the current restrictions on Iran’s nuclear program and the testing of advanced centrifuges and nuclear-capable ballistic missiles, as well as the buying and transferring of conventional weaponry.  He must insist on unfettered access for U.N. weapons inspectors to Iranian military sites....

“The Europeans are already responding to Mr. Trump’s threats to walk away from the deal.  French President Emmanuel Macron has said he’s willing to consider supplementing the agreement to address the sunset provisions and missiles. European leaders who want to preserve the accord are now working on a U.S.-EU consensus on ways to fix it.  They should outline conditions under which trans-Atlantic sanctions would be reinstated if Iran doesn’t play ball.  Otherwise, they can watch Mr. Trump exit the deal and use the considerable financial power of the U.S. to force European banks and companies to choose between America’s $19 trillion market and Iran’s $400 billion one.

“Decertification is the critical first step of a strategy to prevent the Islamic Republic of Iran from becoming a nuclear state. The famously blunt Mr. Trump must send an unambiguous message to Tehran’s clerics: His administration will not tolerate a nuclear Iran, nor can it abide by the agreement as it stands.  But the strategy doesn’t depend on Iranian acquiescence. It gives the Europeans a chance to come on board to fix the deal in order to save it.

“If they don’t, the consequences could be severe.”

Afghanistan: U.S. Defense Secretary Jim Mattis criticized Iran and Russia for their support of the Taliban, which he says provides the group with both arms and legitimacy.

Mattis made his first visit to Kabul since President Trump spelled out a new strategy for the region last month, and in a sign of the challenges faced in Afghanistan, the Taliban struck Kabul’s international airport, an attack apparently timed to coincide with Mattis’ arrival, though he had already left.  [ISIS also claimed responsibility.]

Russia has acknowledged it shares information with the Taliban in an effort to combat ISIS, but denies it is sending weapons.  They are lying, per usual.

Israel: A Palestinian gunman killed three members of Israel’s security forces at a West Bank settlement. The attacker approached a checkpoint at the settlement of Har Adar, northwest of Jerusalem on Tuesday morning, drawing a pistol and firing on the forces at close range, police said.  Israeli forces returned fire and killed the attacker.

Saudi Arabia: Saudi King Salman on Tuesday ordered that women be allowed to drive cars, ending a conservative tradition seen by rights activists as an emblem of the Islamic kingdom’s repression of women.  The order is to be implemented June 24, 2018.  Women would not need permission from their male guardians to get a license or have a guardian in the car and would be allowed to drive anywhere.

Conservative clerics are none too pleased.

Russia: Opposition politician Alexei Navalny was detained outside his home Friday ahead of a rally in central Russia.  Officials in the city of Nizhny Novgorod last week refused to authorize Navalny’s rally planned for Sept. 29, saying another event had been planned at the same location on the same day.

Local police and prosecutors had said the rally would be quashed if people chose to attend.

“Oh, how old man Putin doesn’t want me to make it to the demonstration,” Navalny wrote on Instagram today.

Cuba: The United States ordered 60 percent of its staff to leave the American Embassy in Havana because of “specific attacks’ on diplomats and will warn American tourists that some attacks have occurred in Cuban hotels. The embassy will stop processing visas and will issue a new travel warning on Friday.

Brazil: Talk about poor job approval numbers, in Brazil, a poll released Thursday shows that President Michel Temer has a 3% approval rating, 77% disapproval, while 92% of Brazilians do not trust him.  New corruption charges against him were recently brought.

Yes, that was 3.

Random Musings

--Presidential tracking polls....

Gallup:  37% approval for President Trump, 59% disapproval
Rasmussen: 45% approval, 54% disapproval

A new Washington Post-ABC News poll gave Trump a 39% approval rating, 57% disapproval. His approval number was 36% in July in this one.

--A new Fox News poll said 56 percent of voters say things are “going to hell in a handbasket.”  This is compared with 57 percent a year ago.  70 percent of Democrats agree with the statement, vs. 42 percent of Republicans.

55 percent of voters see kneeling during the national anthem as inappropriate. That’s down six percentage points from 61 percent in 2016.

--Karl Rove / Wall Street Journal

“It was a disastrous day for the whole GOP – President Trump, congressional Republicans, grass-roots activists and anyone who wants progress on the party’s agenda.  On Tuesday, for a second time this  year, Senate Republicans failed to repeal and replace ObamaCare, announcing they would not vote on the Graham-Cassidy bill after all. At least six GOP senators either opposed the legislation or expressed grave doubts about it.

“Meanwhile in Alabama, the conservative crusader Roy Moore won a Republican runoff and is now the favorite for election to the U.S. Senate in December. When Jeff Sessions resigned the seat to join the Trump administration, the state attorney general, Luther Strange, was appointed as his temporary replacement.  Mr. Trump endorsed Mr. Strange and appeared Friday at his rally in Huntsville.  Yet Mr. Moore, a former chief justice of the state Supreme Court, won anyway – and by nine points [Ed. 54.6 to 45.4.]

“These two events will have severe consequences. The Republican grass roots were already angry at the Senate’s failure in July to pass an ObamaCare repeal bill that had cleared the House.  This week’s disappointment will only deepen their distress, GOP voters could end up expressing their displeasure indiscriminately, making no distinction between lawmakers who supported the repeal attempts and those who didn’t....

“The Alabama runoff result is likely to spur new challenges by alt-right-backed populists to more-conventional Republican incumbents.  Mr. Moore’s looming victory (in the December special election) probably played a role in the Tuesday announcement that Tennessee’s respected Sen. Bob Corker, the chairman of the Foreign Relations Committee, will not run for re-election next year....

“While copycat challengers may not have Mr. Moore’s advantages, tough primary contests next year will certainly drain GOP funds and divert focus that might otherwise be used to defeat Democrats in the fall. They will also add to the growing sense of a Republican civil war, which complicates the coalition-building needed to pass the party’s agenda.

“Republicans must hope Tuesday’s events are sobering to Mr. Trump and party leaders in Congress. Voters are understandably restive because they gave the GOP control of the White House and both legislative chambers but haven’t seen much in the way of accomplishments.  Passing tax reform has now become an existential imperative. The electoral disaster that might visit Republicans if they can’t get tax reform done ought to galvanize leaders at each end of Pennsylvania Avenue and reinforce a bit of old wisdom: that the perfect should not be allowed to be the enemy of the good.”

--The announcement of Sen. Corker not running for reelection is indeed a big blow to the Republican establishment, and whereas his reelection would have been virtually assured, it now creates what is likely to be a hotly contested primary, as well as a vacuum among Senate Republicans for leaders on foreign policy and national security.

Corker said in part: “When I ran for the Senate in 2006, I told people that I couldn’t imagine serving for more than two terms. Understandably, as we have gained influence, that decision has become more difficult. But I have always been drawn to the citizen legislator model, and while I realize it is not for everyone, I believe with the kind of service I provide, it is the right one for me.”

--California Gov. Jerry Brown signed a bill moving the state’s primary elections to early March, March 3, 2020, specifically.

This is big.  Obviously it gives California a bigger share of the attention in the election cycle.  It also makes it more difficult for the candidates, as under the current schedule, California’s primary would come fourth after elections in Iowa, New Hampshire and South Carolina.

The Democratic National Committee may not like the state moving its election up to such an early date, and it could still involve itself in a final decision over the coming few years.

--Meghan McCain blasted President Trump in response to a report that he has been “physically mocking” her father, Sen. John McCain.

“What more must my family be put through right now?” she tweeted.  “This is abhorrent.”

Axios reported that Trump has been mocking both McCain and Senate Majority Leader Mitch McConnell in private, with Trump apparently mimicking McCain’s dramatic thumbs down on the Senate floor that killed Republicans’ best shot at repealing ObamaCare.

--Trump showed his true colors when he deleted his tweets pumping up Luther Strange’s candidacy after he lost to Roy Moore.

--President Trump said he was looking “very closely” at whether to dismiss embattled Health and Human Services Secretary Tom Price over his excessive use of private jets.  “I am not happy with him,” Trump said Wednesday.

The House Committee on Oversight and Government Reform released a letter asking Price for details on his use of “government-owned aircraft for personal travel or private non-commercial aircraft for official travel.”

Price then announced Thursday he was reimbursing the government for a fraction of the costs of his flights.  “The taxpayers won’t pay a dime for my seat on those planes.  No exceptions.”

It was too late.  Price was forced to resign today.  Trump had said earlier this afternoon, “I certainly don’t like the optics.  I’m not happy, I can tell you that.”

We learned Price blew through more than $1 million of taxpayers’ cash for his government and chartered private jets.  He repaid about $52,000 of this, the cost of his seat.

EPA Administrator Scott Pruitt has also taken at least four noncommercial and military flights since mid-February, according to congressional oversight records, costing taxpayers more than $58,000.

Interior Secretary Ryan Zinke took one that cost taxpayers $12,375, according to a department spokesman.  And you’ve had the issues with Treasury Secretary Mnuchin and his flights.

--House Majority Whip Steve Scalise returned to the Capitol Thursday after 15 weeks in the hospital and rehab, following the shooting at a Virginia baseball field by a domestic terrorist targeting congressional Republicans.  It was dramatic, and deeply moving, with Scalise leaning on crutches while addressing Congress.

“You have no idea how great this feels to be back here at work in the people’s House,” he started out.

Some say we were looking at the future Speaker of the House.

--A Manhattan federal appeals court Tuesday overturned the 2015 corruption convictions of former New York state Senate Majority Leader Dean Skelos and his son, Adam Skelos.

The panel cited last year’s U.S. Supreme Court ruling that limited the legal definition of corruption.

It all goes back to the corruption case of former Virginia governor Bob McDonnell, whose conviction was thrown out by the Supreme Court as it narrowed the definition of “official action,” which the High Court ruled was so broad that it could include “nearly anything a public official does.”

This really sucks.  The Skelos ruling came less than three months after the conviction of former longtime Democratic Assembly Speaker Sheldon Silver was also tossed out on the same grounds. Both cases were prosecuted by former U.S. Attorney Preet Bharara, who in a tweet Tuesday said: “As with Sheldon Silver, SDNY will retry Dean and Adam Skelos,” referring to the Southern District of New York. “SCOTUS made it harder to punish corruption, but justice should prevail here.”

--Former congressman Anthony Weiner was sentenced to 21 months in prison Monday for convincing a high school student to undress and touch herself via Skype in 2016. Weiner had faced as much as 10 years after pleading guilty to one count of transferring obscene material to a minor.

--The FBI released its official crime tally for 2016 on Monday, and violent crime has now risen two consecutive years, but this is off a historically low base.*  Nonetheless the increase is related to some police backing off proactive policing in high-crime minority neighborhoods.

*In 1991, for example, the violent crime rate was 758.2 per 100,000 people.  Last year, it was 386.3, up from 373.7 a year earlier.

The murder and non-negligent manslaughter rate was up 8.6 percent over 2015, the FBI data show, and the murder rate increased to 5.3 per 100,000, the highest that figure has been since 2008, and it’s almost solely the result of increased violence in some major cities, with a surge in 2015 attributable almost solely to just three – Chicago, Baltimore and Washington, while last year, the New York-based Brennan Center for Justice, reported that the increase was in large part due to Chicago, as it was responsible for nearly half of the increase.  [Chicago had 762 homicides in 2016, up from 482 in 2015.  Early this week, it had No. 500 for 2017.]

As for New York, last year it had 335 murders, down from 352 a year earlier, and less than half the 672 reported in 2000.

Separately, there were nearly 900 additional blacks killed in 2016 nationwide compared with 2015, the total being 7,881.

The Washington Post reported that police fatally shot 233 blacks, with only 16 black male victims of police shootings categorized as “unarmed.”  That classification masks assaults against officers and violent resistance to arrest.

So who is killing all the blacks?  Not whites (243 of the 7,881), and not the police.

--Daniel Henninger / Wall Street Journal

“We’ve arrived at a moment when some choices have to be made. After a lifetime watching America’s three main professional sports – baseball, football and basketball – I’ve decided I prefer baseball....

“Set to one side that the reason most Americans can sing the words to their national anthem is that for generations, every American attending a professional baseball game has stood to look at the flag while someone sings ‘The Star-Spangled Banner.’  Many Americans think the last words of the national anthem are ‘Play ball!’

“Baseball is about baseball. The NFL and NBA seem to be about more things than I can process – some of them political, some of them personal.

“Baseball has an informal code of on-field conduct, which has held for a hundred years. The NFL doesn’t seem to have an enforceable code of anything.

“Last Sunday, after the New York Giants’ wide receiver Odell Beckham Jr. caught a touchdown pass, Mr. Beckham got down in the end zone and imitated a dog urinating on a fire hydrant, which the opposing Philadelphia Eagles (who won) took as mockery of their team.

“From Babe Ruth 90 years ago to Aaron Judge now, when you hit a home run, you run around the bases and into the dugout. That’s it.  No end-zone antics that suggest the sport itself takes a back seat to a personality.

“After the Yankees Mr. Judge hit his 50th home run this week, a record for a rookie, his teammates had to force him out of the dugout to wave to the cheering crowd.

“For some years, the parsons of the sports press have pushed the idea that demonstrations of high-level athletic skill, the result of uncountable hours of practice, were morally insufficient. Athletes, the parsons intoned, had to ‘give back’ by dedicating their status to solving the nation’s endlessly unresolved issues of race, gender and – the inevitable guilt trip they laid on pro athletes – income inequality.

“And so last September, Colin Kaepernick, the San Francisco 49ers backup quarterback, reduced the parsonage’s moralistic hectoring of professional athletes to its absurd end by deciding that the pregame national anthem was the place to raise the issue of inner-city policing.

“Only the innocent could feign shock that eventually Donald Trump, in his capacity as president of the United States, would go after the kneeling players about the same way you’d hear from a guy sitting in the high seats at a New York Jets game, who by the third quarter is on fumes: ‘Get that son of a bitch off the field!’

“Stepping down to the Trumpian moment, LeBron James tweeted, ‘U bum!’

“Sportswriters sometimes use the phrase ‘lunch bucket’ about a player who is mainly interested in doing his job well without drawing attention to himself. Other than someone like Kawhi Leonard of the San Antonio Spurts, you don’t see too many stars in the NFL or NBA described as lunch-bucket guys anymore.

“Most future stars of basketball and football are identified while they’re in high school. They often play in special leagues and receive constant visits from coaches at Division I universities.

“Once inside the university, these players live and practice in gold-plated facilities.  They play on national TV and are talked about nonstop by analysts and the political commentators at ESPN.  They get famous young....

“The road up in baseball is different.  Promising teenagers go from high school into baseball’s minor leagues...They travel by bus and play before crowds not much bigger than what they had in Little League. They rise from A ball to AA then AAA teams....

“Years spent competing and surviving against other skilled players teaches them they have to learn to be a member of a team before anyone calls them a star.

“Some might say baseball isn’t political because so many players are from Latin America.  But maybe the Latin players are mostly bemused at what the U.S. considers social problems, compared with escaping from Cuba across shark-infested waters or getting out of a dirt-road slum in Nicaragua or the Dominican Republic.

“There is an expression in sports: Don’t leave it in the locker room. It means you are supposed to save your best performers for the game.  With baseball, that’s still what you get.

“We live in a highly polarized country. If people want their sport and its performers to be an affirmation of their politics, feel free. I don’t.”

--Finally, I watched all ten episodes of Ken Burns’ and Lynn Novick’s “Vietnam” and I thought it was superb.  It brought back memories.

I’ve written often in the past of how I was such a newshound as a youth, devouring everything, reading the paper each morning before I went off to school, and not just the sports. I mean I was doing that when I was nine and ten years old.

I also had the advantage of having gone to Europe three times by age 15, including the Soviet Union, Czechoslovakia and Hungary in the dark days of 1973.

So as I’ve written I’d lie awake on Sunday nights, listening to the newscasts on WABC-AM, which was otherwise the oldies station of Cousin Brucie et al, and I’d wonder when I’d hear the weekly roundup on the action in Vietnam, via the Pentagon, how the United States wasn’t winning when we were ‘only’ losing 200 men a week and the Viet Cong and North Vietnamese were losing 2,000.

When “The Pentagon Papers” was released in 1971, I poured through that, age 13, but then we didn’t have smartphones and video games to distract us...Praise God! 

I vividly remember the “Convoy of Tears” reports on the nightly news in 1974, and the fall of Saigon the next year.

But  in Ken Burns’ retelling of this tragic chapter in our nation’s history, one story will stick out that I didn’t know before...the ambush of Alpha Company in which 173 American soldiers were killed but we could only find nine North Vietnamese bodies.  Yet Commanding General William Westmoreland, deeply concerned over perception and keeping up his kill ratio, insisted it be reported as 475 dead Viet Cong. What a goddamned bastard.

That single battle sums it all up. The lies we were continually told.

Watching “Vietnam,” I kept thinking of the lessons for today, including of the “war profiteers.” No doubt we’ll fail to learn from them.  And that sucks.

But I must close by going back to the Facebook / Twitter fake news story.  I’ve been meaning to get this off my chest for some time now.

I have been fed hundreds...hundreds...of fake news stories over the years, especially in the two years leading up to the November presidential election.  Many of my best friends, including some of my former Wall Street colleagues who have held very senior positions over the years, would pass stuff on, saying, “You see this? Is it true?”

The telltale sign for those who sent it was I never responded to them.  My attitude was, “You think I’m going to run this?”  Zero backup?  Knowing that the source has no one of credibility standing behind them?  Who the hell are these people?

Never....NEVER...did I run a single one of these in “Week in Review.”

I have treated this column, and this running history, with the utmost respect.  I am not a tool for anyone.  No doubt it has cost me.  It’s not an exciting site.  I don’t have the traffic of a Breitbart, or Huffington Post.

So be it.  I’ll carry on as long as I can. 

I’ve told some of my friends, I recognized years ago I’m Van Gogh.  I’ll be discovered when I’m dead.

---

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

Go to the Vietnam Wall.

God bless America.

---

Gold $1282
Oil $51.64

Returns for the week 9/25-9/29

Dow Jones  +0.25%  [22405]
S&P 500  +0.7%  [2519]
S&P MidCap  +1.5%
Russell 2000  +2.8%
Nasdaq  +1.1%  [6495]

Returns for the period 1/1/17-9/29/17

Dow Jones +13.4%
S&P 500  +12.5%
S&P MidCap  +8.2%
Russell 2000  +9.9%
Nasdaq  +20.7%

Bulls 54.3
Bears 17.1  [Source: Investors Intelligence]

Have a great week.

*Dr. Bortrum had back-to-back birdies at the world famous Summit Municipal Golf Course the other day!  As Ronald Reagan would have said of the soon-to-be 90-year-old, “Not bad, not bad at all.”

Brian Trumbore



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Week in Review

09/30/2017

For the week 9/25-9/29

[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 964

Trump and Puerto Rico...Tax Reform...and the anthem controversy....

Last Friday night, I wrote the following:

“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... 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.”

So that was two days after Hurricane Maria hit, with the scope of the devastation becoming clearer.

Initially, President Trump and the administration took all the proper steps in those first 24-48 hours, but then the president and his team totally dropped the ball for four days, until Tuesday, and now he’s clearly more interested in how he looks in this unimaginable debacle than how the people of Puerto Rico get through it.

Yes, Puerto Rico should have been better prepared in some respects itself, but Trump, as opposed to his responses to Harvey and Irma, fumbled at a critical time.  Instead, we know what he was doing those four days.  He was more concerned attacking Kim Jong Un personally, and the NFL / anthem issue that he purposefully poured fire on.  Go back over the record, his tweets.  It was virtual ‘radio silence’ on the topic.

Even his new 3-star general on the scene, Lieutenant Gen. Jeffrey Buchanan, told CNN on Friday, “We’re certainly bringing in more (aid).  It’s not enough, but we’re bringing more in.”

But as San Juan Mayor Carmen Yulin Cruz went from being politically correct to reminding Trump and his idiotic Acting Department of Homeland Security Secretary Elaine Duke, “This is not a good news story,” as Duke had allowed.  “This is a ‘people are dying’ story.  This is a life-or-death story.”

Lt. Gen. Buchanan, when asked how long it would take for Puerto Rico to recover, said: “This is a very, very long duration (event).”

Only 54 percent of Americans know that people born in Puerto Rico, a commonwealth of the United States, are U.S. citizens, according to a survey I saw this week from Morning Consult, though they do not vote in presidential elections and send one nonvoting representative to Congress.

3.4 million residents lost power, with the electrical grid likely not fixed for months.  Food and water remains scarce, nine days into the crisis.

Trump, ever sensitive, started tweeting about Puerto Rico thusly:

“Texas & Florida are doing great but Puerto Rico, which was already suffering from broken infrastructure & massive debt, is in deep trouble.”

“It’s old electrical grid, which was in terrible shape, was devastated. Much of the island was destroyed, with billions of dollars...owed to Wall Street and the banks which, sadly, must be dealt with. Food, water and medical are top priorities – and doing well.  #FEMA”

Thousands and thousands of containers with both relief supplies and commercial cargo continue to sit at San Juan’s port.  Better conditions at the airports and seaports, though, have allowed more fuel and supplies to arrive, with diesel fuel a key to hospitals to keep the generators operating.

But when you hear stories that X number of hospitals are up and running, this is in no way a normal hospital, with records, for one, being hard to obtain, let alone medical supplies and staffing.

One key sector for Puerto Rico’s economy is the pharmaceutical industry, with nearly 50 plants on the island, all wiped out with the electrical grid.  Some of the plants would have backup generators, but they would face the same diesel issues everyone else has, let alone being able to get employees to come to work.

Pharmaceuticals represented 72% of Puerto Rico’s 2016 exports, valued at $14.5 billion, according to the U.S. Bureau of Labor Statistics.

President Trump tweeted: ”Locals trying really hard to help but many have lost their homes.”

Trump: “Puerto Rico Governor Ricardo Rossello just stated: ‘The Administration and the President, every time we’ve spoken, they’ve delivered’ ....The fact is that Puerto Rico has been destroyed by two hurricanes. Big decisions will have to be made as to the cost of its rebuilding!”

“Puerto Rico is devastated. Phone system, electric grid many roads, gone. FEMA and First Responders are amazing. Governor said ‘great job!’”

At least the administration finally suspended the ancient law known as the Jones Act, which requires that goods transported between U.S. ports be shipped on vessels built, majority-owned and manned by Americans.  As the Wall Street Journal describes it, “a legally sanctioned shakedown for U.S. shipping interests.”

The Journal editorializes further: “Puerto Ricans pay dearly for this protectionism, which reduces competition and raises costs.  A 2012 Federal Reserve Bank of New York report said the Jones Act helps explain why household and commercial goods cost roughly double to ship from the East Coast to Puerto Rico than to the nearby Dominican Republic or Jamaica. Food and energy costs are far higher than on the mainland.”

The Jones Act has been suspended in the past during previous emergencies, such as during Hurricane Katrina.  Obama did it during superstorm Sandy.

Trump suspended the Jones Act following Hurricanes Harvey and Irma, yet took a week to do so in the case of Puerto Rico.  Draw your own conclusions.

Meanwhile....

President Trump, in search of a win, badly needs a victory on tax reform, after a third attempt by Congressional Republicans to dismantle ObamaCare failed.  [Though now a bipartisan effort on the Affordable Care Act is back on.]

The administration rolled out its long-awaited tax plan and immediately, Republicans were forced to debate scaling back one of the largest and most controversial aspects to pay for lower rates: repeal of the individual deduction for state and local taxes, which, if it remained in its current form, would lead to the defection of Republicans in such high-tax states as New York and New Jersey.  But how to do so without giving up the lower tax rates they promised?

I mean it almost seems like a waste of time to discuss the rest without this issue, a huge one, being resolved.

As the Wall Street Journal reported, “The top nine states for the deduction, measured as a percentage of income, are represented by 33 House Republicans.  With one vacancy in the House, the party can lose no more than 22 GOP votes on legislation if all Democrats remain opposed.”

Going back to 1986, taxpayers can deduct their property taxes, along with either their income or sales taxes.

According to the Tax Policy Center, 90% of filers with incomes over $200,000 claim the deduction. Overall, 38% of the deduction’s value goes to California, New York and New Jersey, which have 21% of households, according to the center.

It just seems that right now, most who use the deduction would end up paying more taxes under the GOP plan, but we need to ferret out the details, and, of course, what was introduced isn’t what we’ll finally end up with.

But it’s just a fact that in high property tax states, like New Jersey, there’s no way you’d come out better. It would be the converse.

The broad-based framework calls for collapsing the number of individual tax brackets from seven to three, with rates at 12 percent, 25 percent and 35 percent.

However, lawmakers were given flexibility to add a fourth bracket at a higher level for ordinary income.

The top individual rate is currently at 39.6 percent. The bottom rate is currently 10 percent, but there is an increased standard deduction that benefits those at the bottom; the deduction nearly doubling to $12,000 for individuals and $24,000 for married couples.

The size of the child tax credit would be increased and a new $500 credit to help people care for those who aren’t dependents; i.e., the elderly.

Most itemized deductions would be eliminated, though tax incentives for the mortgage interest and charitable contributions would remain.  Retirement savings incentives were also to remain in place, ditto those for higher education.

The estate tax and the alternative minimum tax would be repealed, at a cost of about $1.069 trillion over ten years.  [$269 billion for the estate tax; $800 billion for the AMT.]

And the framework lowers the corporate tax rate from 35 percent to 20 percent.

The top rate on so-called pass-through businesses would be 25 percent.

The plan would also allow businesses to immediately write off the full costs of their capital investments for at least five years, what is known as “full expensing,” which many believe would help boost economic growth immediately.

Editorial / Wall Street Journal

“Republicans finally unveiled the party’s blueprint for tax reform on Wednesday, and Americans who want a faster-growing economy should be pleased.  The GOP has offered an outline that will enhance U.S. competitiveness and simplify the code – if the final product isn’t diluted by the class-warfare brigades and K Street lobbyists.”

But can Republicans sell it...and do so by year end?  They don’t have a good track record in this regard.

They did, however, take an important first step Friday in releasing their budget blueprint for fiscal year 2018, a necessary move to pass a rewrite of the tax code without Democratic support, using “reconciliation,” where Republicans can pass legislation with just 50 votes and Vice President Pence.

The new budget’s most important component is that it instructs the Senate Finance and House Ways and Means committees to come up with a package of tax changes and rate cuts that can add up to $1.5 trillion to the federal budget deficit over 10 years.

To be continued....

Trumpets....

--Senate Majority Leader Mitch McConnell, having abandoned the latest ObamaCare repeal effort, said, “We haven’t given up changing the American health care system,” but he admitted that isn’t going to happen soon so it was on to tax reform, this as House Republicans have lost faith in their Senate colleagues to do much of anything.

As for President Trump, he is working on an executive order to expand access to health insurance, one that would allow individuals to purchase insurance across state lines through so-called health associations, a measure advocated by Kentucky Republican Senator Rand Paul.

--The Senate Intelligence Committee said President Trump’s adviser and son-in-law Jared Kushner failed to disclose that he had used a private email address to conduct official White House business.

Kushner appeared before the committee in July in a closed session, as part of the committee’s probe into Russian meddling in the 2016 presidential election and possible collusion with Trump associates.

“As you are aware, this committee has previously requested that you preserve and produce certain documents related to the Russian inquiry – including, but not limited to, email communications,” says a letter sent to Kushner and his attorney, Abbe Lowell.

Lowell confirmed that Kushner used a private email address to conduct some official business, fewer than 100 emails from January through August.

--The administration will allow no more than 45,000 refugees into the United States next year officials said on Tuesday, in what would be the lowest admissions level in more than a decade.  [41,223 in 2006.]   Trump has until Sunday to determine how many to admit.

--Finally, I wrote in this space, after watching the president’s speech in Huntsville, Alabama, that I was the ‘wait 24 hours’ guy, and that I was biting my tongue over what I witnessed.  I said:

“I was beyond appalled at Trump’s speech for Alabama Sen. Luther Strange. It was embarrassing and deeply disturbing....

“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.”

You now probably know I was alluding to his comments on the NFL anthem controversy.

I have been commenting on this topic since Colin Kaepernick first took a knee in my “Bar Chat” column the past year, but I recently told my readers I was doing so sparingly and only to get some thoughts down for the archives.  The issue was also dying...certainly not heating up with only 6 players participating in Week Two, before Trump suddenly went off on the topic, which wasn’t the only issue he went off on in a rambling diatribe that night.  I was just as perplexed at his comments on the election and the Electoral College.

But I was “appalled” that Trump decided to fan the dying embers, strictly for political gain.

Look, I didn’t like when Kaepernick first took the knee, but as the weeks went by, and one or two other players joined in, and athletes like LeBron James used their platform to protest inequality in the justice system, I was like, ‘whatever.’  It’s just not a big deal...for “Bar Chat.”    They can do what they want, within the law.

Enter Trump.

Former Bills and Jets coach Rex Ryan, a Trump supporter, said this week, “I’m pissed off...it’s appalling to me.”

Former Steelers great Terry Bradshaw disagreed with the protests but added: “If our country stands for anything, folks – it’s freedom.  People die for that freedom.  I’m not sure if our president understands those rights, that every American has the right to speak out and also to protest.”

Tom Moran / Star-Ledger

“The Divider-in-Chief poured more salt into the nation’s racial wounds over the weekend by taking his poisonous act into the sanctuary of Sunday football, again seeking personal political advantage at the expense of the country he is charged with leading.

“Remember, when white supremacists marched in Charlottesville, with torches and semi-automatic weapons, chanting Nazi slogans, this president said that many of them were ‘very fine people.’

“But when African-American players in the NFL silently take a knee during the national anthem to peacefully protest the undeniable racism in our criminal justice system, he fumes, he rants, and he whips up hatred against them to fire up his base....

“This latest stunt was too much even for some Trump supporters, including team owners who collectively have donated $10 million on behalf of Trump.  One of Trump’s big cheerleaders, New England Patriots owner Robert Kraft, said he was ‘deeply disappointed by the tone’ of Trump’s comments, and that he supported the right of his players to take a knee during the anthem....

“Sports teams began playing the anthem before games in 1918, during World War I.  To many Americans, it remains a solemn moment, a time to offer gratitude to veterans, and to celebrate the freedoms we enjoy today.

“But others see it as a political expression, one that suggests support for America’s conduct, like the pledge of allegiance.  Jackie Robinson, a genuine hero who was booed and spit on by racist fans, never saluted the flag or sang the anthem.  ‘I am a black man in a white world,’ he said.

“I have no quarrel with that.  Nor for any player who quietly takes a knee in protest of racism, or the others who lock arms with them in solidarity.  These protests deserve respect, not scorn.

“For Trump to lecture these players is just infuriating. This is a man who encouraged police to rough up prisoners as they transport them to headquarters, a man whose Justice Department says it will no longer intervene when local police departments are found to mistreat African-Americans, a man who draws moral equivalence between white supremacists and the protesters that met them.

“Trump is the one who needs a lesson in patriotism.  He is...loyal only to himself, and blind to what makes this country great.”

Former NBA star and current analyst Charles Barkley, appearing on the “NFL Today” Sunday on CBS, said he was extremely displeased with Trump and just as much with the response to his words by Alabama residents, saying it was embarrassing.

“The president of the United States should never use the word SOB. That’s just 100 percent inappropriate.  I’m embarrassed because he said the speech in Alabama and got a rousing reception when he said those things.  So it hurts me that those ignorant folks in Alabama would applaud something so stupid.”

Bryant Gumbel closed this week’s “Real Sports” on HBO, which he hosts, by thanking Trump for causing athletes to “actually stand for something.”

“Finally tonight, a quick thanks to the current occupant of the White House for energizing the social conscience of the modern American athlete.

“That occupant’s weekend series of racist, churlish and childish comments drew a variety of stunning rebukes and actions, which suggests jocks may finally be realizing that apathy won’t cut it anymore. That, in conjunction with their fame, they have important civic roles to play – especially now.

“Those of us who have long focused on the intersection of sports and society have often wondered what it would take for today’s athletes to forsake the path of least resistance and actually stand for something and now we know.  Many suddenly seem not just willing, but also eager to follow in the giant footsteps of Muhammad Ali, Jim Brown, Bill Russell, Billie Jean King, Roberto Clemente, Arthur Ashe and many others who courageously used their athletic platforms to challenge authority in the pursuit of justice.

“Back in their day, Bob Dylan famously said: ‘The times they are a changin’, and that’s still true today...as is the sad reality that certain things haven’t really changed at all.”

Jon L. Christensen / USA TODAY

“In past years, I had a front-row seat on Sunday, Monday and Thursday nights in my living room, watching NFL football. I loved it!  Last year, I attended the Super Bowl in Houston and saw the game of all games with a Tom Brady, come-from-behind victory.  I am a football fan.

“However, President Trump said what millions of Americans, including myself, feel.  You may not like our president, but he doesn’t take a poll before he says what he believes. He doesn’t check with his ‘political correctness advisers’ like Barack Obama and Bill Clinton did before making a statement.  Donald J. Trump is a great leader and is earning my respect as president....

“When millionaire athletes refuse to honor America and pay homage to the men and women who died for our freedom, and instead, choose to use their field of occupation to make a statement, then I can choose to turn the channel. I will not give my time or attention to spoiled-brat, millionaire athletes. Their kneeling or fist-raising might be acceptable in some arenas, but not in my living room.

“The president was right; these athletes should be fired!”

[Christensen is a former congressman from Nebraska.]

Editorial / Wall Street Journal

“Healthy democracies have ample room for politics but leave a larger space for civil society and culture that unites more than divides.  With the politicization of the National Football League and the national anthem, the Divided States of America are exhibiting a very unhealthy level of polarization and mistrust.

“The progressive forces of identity politics started this poisoning of America’s favorite spectator sport last year by making a hero of Colin Kaepernick for refusing to stand for ‘The Star-Spangled Banner’ before games. They raised the stakes this year by turning him into a progressive martyr because no team had picked him up to play quarterback after he opted out of his contract with the San Francisco 49ers.

“The NFL is a meritocracy, and maybe coaches and general managers thought he wasn’t good enough for the divisions he might cause in a locker room or among fans. But the left said it was all about race and class.

“All of this is cultural catnip for Donald Trump, who pounced on Friday night at a rally and on the weekend on Twitter with his familiar combination of gut political instinct, rhetorical excess, and ignorance.  ‘Wouldn’t you love to see one of these NFL owners, when somebody disrespects our flag, to say, ‘Get that son of a bitch off the field right now, out, he’s fired.  He’s fired,’’ Mr. Trump said Friday.

“No doubt most Americans agree with Mr. Trump that they don’t want their flag disrespected, especially by millionaire athletes.  But Mr. Trump never stops at reasonable, and so he called for kneeling players to be fired or suspended, and if the league didn’t comply for fans to ‘boycott’ the NFL.

“He also plunged into the debate over head injuries without a speck of knowledge about the latest brain science, claiming that the NFL was ‘ruining the game’ by trying to stop dangerous physical hits. This is the kind of rant you’d hear in a lousy sports bar....

“Americans don’t begrudge athletes their free-speech rights – see the popularity of Charles Barkley – but disrespecting the national anthem puts partisanship above a symbol of nationhood that thousands have died for.  Players who chose to kneel shouldn’t be surprised that fans around the country booed them on Sunday. This is the patriotic sentiment that they are helping Mr. Trump exploit for what he no doubt thinks is his own political advantage.

“American democracy was healthier when politics at the ballpark was limited to fans booing politicians who threw out the first ball – almost as a bipartisan obligation.  This showed a healthy skepticism toward the political class.  But now the players want to be politicians and use their fame to lecture other Americans, the parsons of the press corps want to make them moral spokesmen, and the President wants to run against the players.

“The losers are the millions of Americans who would rather cheer for their teams on Sunday as a respite from work and the other divisions of American life.”

Editorial / USA TODAY

“The outpouring of defiance toward President Trump that spread across the National Football League on Sunday harkens to a single phrase directed at fear-mongering Sen. Joe McCarthy during a congressional hearing in 1954.

“ ‘Have you no sense of decency, sir?’ said an Army lawyer, crystallizing in a moment the politics of division behind McCarthyism and its persecution of innocents.

“Similarly, Trump’s ad hominem attacks against ‘son of a bitch’ players such as former San Francisco quarterback Colin Kaepernick, who sit or kneel during the national anthem to protest police brutality, had nothing to do with patriotism or love of country.  When he demanded NFL owners fire protesting players, it was vintage Trump stoking flames of anger and resentment.

“Why did the president do it now, when the #TakeTheKnee movement seemed to be waning? Who knows?  Maybe he was trying to whip up his core supporters. Or maybe it’s his latest effort to employ a weapon of mass distraction. Why focus on a likely loss on ObamaCare repeal, or a possible loss for your favored candidate in the Alabama Republican Senate runoff, when you can try to stir public resentment of a pampered athletic elite?

“The president, after all, has such a keen eye for ways to divide people, as he has demonstrated with the deadly white supremacist rally in Charlottesville, Va., his dissing of undocumented immigrants, his travel ban focused on Muslim-majority nations, and his effort to excise transgender troops from the military.

“Plus, this NFL controversy would be delicious payback.  Trump for decades tried to earn a seat at the NFL owners’ table, but his bids for the New England Patriots in 1988 and the Buffalo Bills in 2014 fell short.  The anthem protest issue was such a ripe wedge issue.  Nearly three in four Americans said they thought it was unpatriotic last year, and the protests led reasons why some viewers have stopped watching NFL games.

“The only problem is that professional athletes and team owners alike recognized Trump’s crude move for the ruse that it is: ‘With everything that’s going on in our country, why are YOU focused on who’s kneeling?’ NBA star Chris Paul tweeted....

“Allowing someone the right to dissent peacefully is part of the nation’s patriotic tradition. Using the bully pulpit of the presidency to rain aspersions down on someone who dares to do so is simply indecent.”

A Quinnipiac Poll conducted last October showed a majority of Americans disapprove of athletes who refuse to stand for the anthem. In a sign of the racial divide, however, three-quarters of African-American adults approve of the protests.

GOP strategist Austin Barbour said, “It is not a divisive statement to make to say Americans should stand during the national anthem. That’s not divisive.

“But it’s the way the president said it, using ‘SOB,’ it turned his comments into a divisive statement,’ he said.

“I have friends who voted for and love Trump but are furious at him,” said Barbour.  “These are Southern football fans. They don’t want anything screwing with their weekends, but now they can’t turn on the TV without a debate about it and the reactions from players and owners, and it’s all in your face.”

Trump supporter, New England Patriots quarterback Tom Brady, called Trump’s comments “divisive.”

Following the Dallas-Arizona game on Monday night, Trump tweeted:

“Ratings for NFL football are way down except before game starts, when people tune in to see whether or not our country will be disrespected!”

“The booing at the NFL football game last night, when the entire Dallas team dropped to its knees, was loudest I have ever heard. Great anger.

“But while Dallas dropped to its knees as a team, they all stood up for our National Anthem. Big progress being made-we all love our country!”

Friday afternoon, a new CNN poll was released on the topic.

Are athletes kneeling during the national anthem doing the right or wrong thing?  Right thing...43%; wrong thing...49%. 

Are athletes wrong for protesting during the anthem?  59% of whites think the athletes are wrong, 12% of blacks feel that way.

Is President Trump right or wrong for criticizing the NFL players?  34% right, 60% wrong.  51% of whites think he is wrong, 97% of blacks...and 61% of Independents.

Wall Street

On the economic front, a revised reading of second-quarter GDP came in at 3.1% vs. a first look of 3.0%, which the president was able to trumpet in a tweet.

“GDP was revised upward to 3.1 for last quarter.  Many people thought it would be years before that happened. We have just begun!”

Cue the Carpenters.

So the last four quarters, GDP, annualized....

Q3 2016...2.8
Q4 2016...1.8
Q1 2017...1.2
Q2 2017...3.1

The Atlanta Fed’s GDPNow indicator is at 2.3% today for the third quarter.

In other economic news, August new home sales came in less than expected at 560,000 annualized, while August durable goods rose a far better than expected 1.7%.

August personal income was in line, 0.2%, ditto consumption, 0.1%.

The key personal consumption expenditures index that is the Federal Reserve’s preferred inflation barometer, rose just 1.4% year-on-year, 1.3% on core, the lowest since Nov. 2015.

One more. The Chicago Purchasing Managers Index for September came in at a very robust 65.2, its highest reading in 29 years, though this is a most volatile barometer. Nonetheless it bodes well.

But speaking of the Federal Reserve, bond yields continued to rise as Chair Janet Yellen gave a speech saying the Fed planned to continue raising its benchmark interest rate despite some uncertainty about the reasons why inflation remains weak.

Yellen said the Fed still expects inflation to increase to its 2 percent annual goal, owing mainly to the dwindling supply of available workers that will force employers to raise wages.

“Given that monetary policy affects economic activity and inflation with a substantial lag, it would be imprudent to keep monetary policy on hold until inflation is back to 2 percent,” she told a business group.

The Fed has hiked its benchmark rate twice this year, March and June, and is now expected to do so again in December.

But the Fed isn’t without dissent, as Charles Evans, president of the Federal Reserve Bank of Chicago, said on Monday the Fed should wait for stronger inflation before raising interest rates.

“Inflation has been lower than the F.O.M.C.’s 2 percent target for too long, and there is little in the recent data to suggest that inflation will soon rise to target,” referring to the Federal Open Market Committee.

Europe and Asia

Little on the economic front for the eurozone, save for a flash estimate on inflation for September, 1.5%, same as August. The core rate, ex-food and energy, was also unchanged at 1.3%.

The euro currency had a rough week, including its worst day of the year against the dollar on Tuesday, on the heels of Angela Merkel’s poor performance, the surprisingly strong results from the far-right, and a move to the dollar as a safe haven after a North Korean official claimed the U.S. had effectively declared war on the hermit kingdom.  Plus, the U.S. Federal Reserve is clearly on a path to further rate hikes.

So on to....Eurobits....

--In the critical German elections, Angela Merkel’s Christian Democrats-Christian Social Union (CDU-CSU) coalition polled only 33% of the vote, down from 41% four years ago and the lowest since 1949, highly disappointing, though polling had it at around 34-35% for months.  Merkel’s sister CSU party in Bavaria received only 39% vs. 49% four year earlier.

The Socialists (SPD) finished far back, as expected, at 20.5%, the party’s worst result since 1933.

But the big story was really the performance of the far-right, anti-immigrant, anti-EU Alternative for Germany, AfD, which polled 12.6%, including 23% in the former communist East.

The Free Democrats, FDP, were fourth at 10.7%, followed by the Left at 9.2%, and the Greens at 8.9%, all above the 5% threshold for gaining seats in parliament.

So while Merkel won a fourth term, undoubtedly her last, as there is no way of repeating the current CDU-SPD coalition, Merkel needs an unprecedented three-way governing coalition with the FDP and the Greens, a “Jamaica tie-up,” so named for the island’s flag, whose colors – black, yellow, and green – represent the colors of the CDU, FDP and Greens.

It is not going to be an easy maneuver, as the FDP, free market disciples, are demanding the finance ministry portfolio for their cooperation, while the Greens favor liberal policies on immigration and European integration.  Working things out could take weeks.

Current Finance Minister Wolfgang Schauble, a fixture in politics for decades and finance minister the last eight years, a hawk on Greece and sharing German cash to help other eurozone nations, is going to become president of the lower house of parliament.

Friday, Merkel picked Peter Altmaier, currently the chancellor’s chief of staff, to take over at the Finance Ministry until the coalition is formed.  His selection is a signal of continuity and a pro-European outlook.

But back to the AfD, which has vowed to fight “an invasion of foreigners” into the country, there is a deep split in the leadership.  Co-leader Alexander Gauland is the hardliner, while the other leader, Frauke Petry, wants the AfD to take a more moderate tone, especially in terms of its nationalist rhetoric, for the purpose of broadening the party’s appeal.

Petry first declared that despite winning a seat in parliament, she wouldn’t take it due to a “disagreement over content,” criticizing Gauland for saying AfD would “hound” Mrs. Merkel.

Petry then announced the next day she was quitting the party, plunging it into crisis two days after its success.

German business leaders warned on Monday that the AfD’s rise could hurt the nation’s export-driven economy; Germans overall being sensitive to any revival of the extreme nationalism that led to the rise of Hitler 84 years ago.

There is strong evidence, by the way, that Russia, which had surprisingly stayed out of the German election campaign for the most part, got involved in the final hours, with online supporters of the AfD warning their base of election fraud, the alarms “driven by anonymous troll accounts and boosted by a Russian-language botnet,” according to the Atlantic Council’s Digital Forensic Research Lab.  Previously, trolls linked to Russia offered their support for the AfD’s anti-immigrant message.

--On the Brexit front, British Prime Minister Theresa May’s speech last Friday in Florence, spelling out the U.K.’s negotiating stance for exiting the European Union, did bear some fruit, with EU leaders considering going some way to meeting one of the U.K.’s demands, bringing forward talk of a transition period that would follow Brexit, March 2019.

The concession would make it easier for Mrs. May and her negotiating team to discuss the contentious divorce bill.  May, in her speech, pledged to continue paying into the EU’s budget for two years after leaving, while honoring Britain’s financial commitments more broadly.

But the two sides remain far apart on other key issues, including the role of the European Court of Justice, citizen’s rights and the Irish border.  British Brexit Secretary David Davis said this week that the jurisdiction of the ECJ would end when Britain exits the bloc in 2019, which blurred the lines with May’s statement a two-year transition period after would be subject to current rules and market access.  [Davis offered on the divorce bill that the U.K. would pay “roughly” $13.5 billion a year into the EU budget during the transition period.]

There are just 18 months left and it’s imperative the U.K. get the transition period issue straight quickly in order to lessen the uncertainty in Britain’s business community.  The prime minister wants a two-year period during which trading terms would remain unchanged.  But the tradeoff is that the U.K. would have to accept the EU’s rules.

So it’s up to EU leaders at their summit later in October.

Separately, Prime Minister May is guaranteeing her country’s security commitment to the other 27 European Union leaders even though the nation is leaving the bloc.

While visiting troops in Estonia close to the Russian border, Mrs. May said that “the United Kingdom is unconditionally committed to maintaining Europe’s security.”  She added that “we will continue to offer aid and assistance to EU member states that are the victims of armed aggression, terrorism and natural or man-made disasters.”

As for Merkel’s intra-party tussle with Foreign Secretary Boris Johnson, he is on board, with the Conservative Party conference beginning Sunday in Manchester.

Lastly, Mrs. May will face some heat at the party conference after the U.S. Commerce Department’s decision to impose punitive import duties on Bombardier Inc.’s new jetliner, which hurts the prime minister bigly.

First, 4,000 work for the company in Belfast, Northern Ireland, where the plane’s wings are built.

Second, Northern Ireland is sensitive in that May’s Conservatives have the support of 10 lawmakers from the region that are critical to her remaining in power.

Third, it’s a political embarrassment because she’s been talking to Donald Trump on the issue, with no obvious result.

One economic item on the U.K.  Second-quarter growth came in at 1.5 percent, year-on-year, down  from 1.8 percent in the first quarter, as reported by the Office for National Statistics.

--Catalonia is determined to hold an independence referendum Sunday, which will precipitate a constitutional crisis.

With the support of the Spanish judiciary, Madrid has shut down websites and advertising campaigns that have promoted the vote.  It has raided the offices of companies that would print paper ballots, and it has sent thousands of police officers from outside the region, threatening to block polling stations.

A dozen regional government officials were detained recently, and Spain’s attorney general has warned that scores more could be arrested.

Catalonia’s leader, Carles Puigdemont, said the other day, “We are witnessing the worst democratic regression since the death of Franco,” referring to the dictator’s death in 1975, which opened the way for democracy.

But here’s the thing, while the latest polls have showed only about 40% favoring independence, IF a legitimate referendum is held, they are the ones who will vote, not those in opposition, so it’s likely it would be approved.  At least that is the thinking Friday.

Needless to say, tensions on the streets have mounted. Massive protests were held in Barcelona.  Puigdemont said the conflict would not turn violent, but he warned Madrid it would be responsible if things got further out of hand.

--Italy’s opposition 5 Star Movement, which polls around 27% when Italians are asked whom they would support in an election, has selected a 31-year-old moderate, Luigi Di Maio, as its candidate for premier in Italy’s national elections, slated for next year.  Parliamentary elections must be held by May.

Currently, Di Maio is deputy speaker of Italy’s chamber of deputies. He was a 26-year-old university student when elected to parliament in 2013.

The 5 Star Movement, founded by comedian Beppe Grillo, advocates ideas such as minimum guaranteed income for all working age and retired Italians, tougher anticorruption laws and a renegotiation of the EU’s fiscal constraints, such as budget deficit targets that some see holding back growth.

But the party has also favored holding a referendum on Italy’s membership in the euro and Di Maio said such a move would come only as “a last result.”

--French President Emmanuel Macron detailed a wide range of proposals for future European policies including defense and migration in a two-hour major speech in Paris, as he said the eurozone is the core of the European project that offers its members economic power to rival China and the United States.

“The Europe we know is too weak, too slow, too ineffective,” Macron said. “Europe can assure real sovereignty, our ability to exist in the world of today.”

His speech drew mostly praise from across the continent, with European Commission President Jean-Claude Juncker tweeting, “Europe requires courage.  We now need a more closely united, stronger and democratic Europe.”

Macron’s speech came as Angela Merkel faces tricky talks on a new coalition to steer Europe’s biggest economy.  German Foreign Minister Sigmar Gabriel said the speech was a “bold, passionate plea against nationalism and for Europe,” adding that “we have to use this chance of a German-French initiative to together make Europe more democratic, involve its citizens and better prepare for the future.”  Macron, he said, “can count on us.”

Turning to Asia, nothing on China this week, beyond what I have below on its president.

But in Japan, Prime Minister Shinzo Abe called an election a year early and dissolved parliament, with a vote slated for October 22, as he seeks a fresh mandate to overcome “a national crisis” amid rising threats from North Korea.

Abe’s approval numbers have rebounded, and he wants to take advantage of an opposition in disarray.  The prime minister also announced a $17.8 billion stimulus package, focusing on education and social spending.

On the economic front, a flash reading on Japanese manufacturing for September came in at 52.6 vs. 52.2 in August, 50 being the dividing line between growth and contraction.

August inflation data remained low, with the core consumer price index up 0.7%, year over year, Japan’s “core” including oil but excluding fresh food.  If you exclude both food and energy, the reading is only 0.2%.  The Bank of Japan now says inflation won’t hit 2% until 2020.

Industrial production in August was up 2.1% over July, while household spending, a key, rose just 0.6% year-on-year, while retail sales fell 2.1% last month vs. a year ago, the sixth straight month it has declined.

Street Bytes

--Stocks closed out another strong quarter, with the S&P 500 and Dow Jones now up eight straight quarters, this last one, the S&P gaining 4% and the Dow 4.9%.

On the week, the Dow is just shy of its all-time high at 22405, up 0.3%, while the S&P rose 0.7% to a record 2519.  Nasdaq gained 1.1% to its own record, 6495.

The economy is strong, including globally; earnings are solid; and at least for the moment, investors see a glimmer of hope there could be tax cuts coming.

--U.S. Treasury Yields

6-mo. 1.19%  2-yr. 1.48%  10-yr. 2.33%  30-yr. 2.86%

The yield on the 10-year rose a third straight week to 2.33% from 2.05% on Sept. 8.

But we closed 2016 at 2.44%.  So like as former NBA star Derrick Coleman would say, “Whoopty-damn-do.”

--The U.S. exported a record 1.5 million barrels per day of crude oil last week, according to government figures, a sum larger than the output of some OPEC countries.  Volumes had dipped after Hurricane Harvey shut down ports in Texas last month, but have since rebounded.

Crude exports this year have been averaging 783,000 b/d, a 62 percent increase over the same period of 2016.

Crude oil inventories fell unexpectedly last week amid the restarts at the ports. Both items helped the price of West Texas Intermediate finish at its highest weekly close since April at $51.64.

--Separately, the recent jump in oil prices is big for Russia.  Its new three-year budget being submitted to parliament has a very conservative estimate of $46 for the average price of oil in 2017, $44 in 2018 and $42 in 2019 and 2020.

The problem is the Duma likes to generate “surplus” funds through conservative projections, with the extra cash then often fueling corruption as the surplus is assigned to pet projects.

While the share of oil revenues has fallen from half of total federal revenues to 25-30 percent, Russia is still heavily dependent on petromoney.

--Equifax CEO Richard Smith stepped down, three weeks after reporting the company was a victim of an embarrassing cyber-attack.

Smith, at the credit-monitoring company for 12 years, relinquished all claims to a 2017 bonus and $5.2 million in severance, but he will nonetheless receive a pension of about $18.4 million.

Sen. Elizabeth Warren (D-Mass.), one of his fiercest critics, said in a statement: “It’s not real accountability if the CEO resigns without giving back a nickel in pay and without publicly answering questions.”

Earlier, the board, scrambling to stabilize the situation, ousted the company’s chief information office and security boss, but Smith had to go as well.

Smith is still scheduled to appear before a Senate committee Oct. 4.

--Shares in Nike fell sharply after the company reported sales in North America declined 3 percent in the most recent quarter ended Aug. 31, the first time in more than 10 quarters that the sports apparel giant had failed to post gains in its largest sales region. 

But Nike did have a sales gain of 9 percent in China, while revenue from the Europe, the Middle East and Africa region climbed 4%.  Growth in China is expected to rise.

Meanwhile, Adidas, with its renewed emphasis on North America, has posted an average sales gain of nearly 26 percent over the past six quarters for the region.

In August, Adidas leapfrogged over Nike’s Air Jordan brand to become the No. 2 selling sneaker in the U.S.

Nike has been largely ignoring the growing “casual athletic” footwear market, which Adidas and others have been exploiting, as Nike sticks to selling performance.

Adidas worldwide sales reached $22.7 billion in 2016, while Nike’s were $34.4 billion in the 12 months ended May 31.

--Twitter, like Facebook, is being exploited by the Russian propaganda machine, with Russia seizing both sides of the NFL anthem controversy with hashtags such as #boycottnfl #standforouranthem and #takeaknee; all designed to sow division and discontent across America.

Facebook recently disclosed Russians used fake pages and ads to spread inflammatory messages during and since the presidential campaign.

As reported by the New York Times, researchers at a public policy research group in Washington, the Alliance for Securing Democracy, said it has been publicly tracking 600 Twitter accounts – human users and suspected bots – they have linked to Russian influence operations, pushing opposition messages on the NFL and the anthem.

This week, President Trump tweeted: “Facebook was always anti-Trump. Hence, Fake News, @nytimes(apologized) & @WaPo were anti-Trump. Collusion?

“...But the people were Pro-Trump! Virtually no President has accomplished what we have accomplished in the first 9 months-and economy roaring.”

Facebook founder Mark Zuckerberg dismissed Trump’s comments in a post, writing he was striving to make “a platform for all ideas,” and that aside from “problematic ads,” Facebook’s impact ranged from “giving people a voice, to enabling candidates to communicate directly, to helping millions of people vote.”

Zuckerberg noted that both ends of the political spectrum were upset about content they disliked, and that liberals in the U.S. had accused him of enabling Mr. Trump’s victory.

Meanwhile, Facebook is taking deserved heat for allowing so much fake news on its site, and Zuckerberg had to “come around to the idea that social media may not be the force for good in the world that he and other optimists always promised.”  [Farhad Manjoo / New York Times]

As Mr. Manjoo writes:

“Like all tech leaders, Mr. Zuckerberg is often hailed as a visionary, but his primary talent is as a reactor. His true skill is not in seeing ahead, but in looking back and fixing where Facebook has failed.  And what’s noteworthy is that when he marshals Facebook’s considerable resources to address a problem, Mr. Zuckerberg has a track record of making things right.”  [See the company’s success in mobile...starting from scratch.]

Maureen Dowd / New York Times

“The idea of Mark Zuckerberg running for president was always sort of scary.

“But now it’s really scary, given what we’ve discovered about the power of his little invention to warp democracy.

“All these years, the 33-year-old founder of Facebook has been dismissive of the idea that social media and A.I. could be used for global domination – or even that they should be regulated....

“But all the while, the company was piling up the rubles and turning a blind eye as the Kremlin’s cyber hit men weaponized anti-Hillary bots on Facebook to sway the U.S. election. Russian agents also used Facebook and Twitter trolls, less successfully, to try to upend the French election....

“Hillary is right that this $500 billion company has a lot to answer for in allowing the baby-photo-sharing site to be turned into what, with Twitter, The Times’ Scott Shane called ‘engines of deception and propaganda.’

“Robert Mueller’s team, as well as House and Senate investigators, are hotly pursuing the trail of Russian fake news....

“ProPublica broke the news that, until it asked about it recently, Facebook had ‘enabled advertisers to direct their pitches to the news feeds of almost 2,300 people who expressed interest in the topics of ‘Jew hater,’ ‘How to burn jews (sic),’ or ‘History of ‘why jews ruin the world.’’

“Sheryl Sandberg, Facebook’s C.O.O., apologized for this on Wednesday and promised to fix the ad-buying tools, noting, ‘We never intended or anticipated this functionality being used this way – and that is on us.’....

“The Sandberg admission was also game, set and match for Elon Musk, who has been sounding the alarm for years about the danger of Silicon Valley’s creations and A.I. mind children getting out of control and hurting humanity. His pleas for safeguards and regulations have been mocked as ‘hysterical’ and ‘pretty irresponsible’ by Zuckerberg.

“Zuckerberg, whose project last year was building a Jarvis-style A.I. butler for his home, likes to paint himself as an optimist and Musk as a doomsday prophet. But Sandberg’s comment shows that Musk is right: The digerati at Facebook and Google are either being naïve or cynical and greedy in thinking that it’s enough just to have a vague code of conduct that says ‘Don’t be evil,’ as Google does.

“As Musk told me when he sat for a Vanity Fair piece: ‘It’s great when the emperor is Marcus Aurelius. It’s not so great when the emperor is Caligula.’....

“Vladimir Putin has denied digital meddling in the U.S. elections. But he understands the possibilities and threat of A.I.  In a recent address, the Russian president told schoolchildren, ‘Whoever becomes the leader in this sphere will become the ruler of the world.’  Musk agreed on Twitter that competition for A.I. superiority would be the ‘most likely cause of WW3.’

“On Thursday, touring the Moscow tech firm Yandex, Putin asked the company’s chief how long it would be before superintendent robots ‘eat us.’

“Zuckerberg scoffs at such apocalyptic talk.  His project this year was visiting all 50 states, a trip designed by former Obama strategist David Plouffe, which sparked speculation that he might be the next billionaire to seek the Oval Office.

“As Bloomberg Businessweek wrote in a cover story a few days ago, Zuckerberg has hired Plouffe, other senior Obama officials and Hillary’s pollster. He has said he is no longer an atheist and he changed Facebook’s charter to allow him to maintain control in the hypothetical event he runs for office.

“Yep.  Very scary.”

As the Washington Post added this week, back on November 19, President Obama pulled Mark Zuckerberg aside at a meeting of world leaders in Lima, Peru, two months before Trump’s inauguration, and Obama made a personal appeal to Zuckerberg to take the threat of fake news and political disinformation seriously.  Zuckerberg told Obama those messages weren’t widespread on Facebook and that there was no easy fix.

As for the 3,000 ads Facebook has now identified that appear to have come from accounts associated with a Russian entity known as the Internet Research Agency, which has been publicly identified as a troll farm, one congressional investigator told the Washington Post this week, this is just “the tip of the iceberg.”

“Nobody really knows how many accounts are out there and how to prevent more of them from being created to shape the next election – and turn American society against itself,” The Post concludes.

Meanwhile, Twitter revealed it had shut down 201 accounts that were tied to the same Russian operatives who posted the ads on Facebook, but lawmakers argue the problem is far broader than the company appeared to know.

Sen. Mark Warner (D-Va.) questioned whether the company is doing enough to stop Russian operatives from using its platform, calling the company’s presentation to the Senate Intelligence Committee “very disappointing.”  “Their response was frankly inadequate on every level,” said Warner.

--Separately, Twitter announced it was testing extending the text limit on a post to 280 characters from 140.  The company said it wanted to eliminate what it viewed as constraints that kept people from tweeting more frequently.

I’ve always felt it just needed an extra 10-20.

--In a big announcement, China said it would force automakers to accelerate their production of electric vehicles by 2019.  The plan calls for gradually escalating quotas for pure-electric cars, plug-in hybrids and fuel-cell cars, as Beijing tries to curb air pollution.

While the announcement was long-awaited, and Ford, Renault-Nissan and Volkswagen have all set up new joint ventures with local car makers that would specialize in pure-electric vehicles, with GM having announced it would build 10 electric vehicle or plug-in models in China by 2020, the target of 10% of all vehicles they produce in China in 2019 and import into the country, was a little greater than most had expected.  That rises to 12% in 2020.

Auto makers have said they would be hard-pressed to build the needed manufacturing infrastructure by next year.

But the Ministry of Industry and Information Technology, which oversees the auto industry, said if targets aren’t met in 2019, the auto makers won’t be punished.  Actual enforcement begins by the end of 2020.

Bottom line, it’s a daunting timetable, especially when compared with earlier announcements by the U.K. and France aiming to end sales of gasoline and diesel vehicles by 2040.

--Shares in Darden Restaurants fell after the owner of Olive Garden and other casual dining outlets delivered fiscal first-quarter same-store sales that failed to meet expectations.

For the three months to end of August, Darden said comp sales, which measure how well a store open at least a year did, rose 1.7%, which is actually pretty good these days, but the Street was looking for over 2%, and 1.7% was slower than the 3.3% growth of the prior quarter.

Olive Garden itself, the largest chain by stores and revenue under the Darden umbrella, saw its same-store sales rise 1.9%.

--Carnival Cruise Lines reported better than expected results for its last quarter, but guided lower for the current one.

Revenue rose to $5.52 billion from $5.1 billion, topping estimates.

But everyone wants to know how Carnival and the competition are doing after Hurricanes Maria and Irma and a Carnival spokeswoman said that while there is no sailing to the Virgin Islands ports of St. Thomas, St. Maarten, and Tortola, as well as Puerto Rico and a few others, the impact on earnings will be just 10 to 12 cents a share, after it earned $2.29 last quarter.

Actual cancellations are running at just 1%.

--Ryanair continues to be rocked by its scheduling issues, self-inflicted, and now Ireland’s Civil Aviation Authority is launching “enforcement action” against the airline for failing to give customers accurate information about their rights following a wave of flight cancellations.

Aside from the airline claiming it didn’t have to re-route passengers on other airlines, it failed to provide details on its obligations to refund various expenses incurred by passengers as a result of a cancellation, such as meals, hotels and transfer costs.

Ryanair has grounded 2,000 flights thus far after miscalculating pilot leave, and it has since cancelled an extra 18,000 flights for the winter season in a move impacting 400,000 passengers.

[I’m going to be posting a special article on becoming a pilot, courtesy of Bobby C., on my “Wall Street History” link shortly and will let you know when I do.]

--Target announced it is raising its minimum wage to $11 an hour starting next month and to $15 an hour within three years, as Target competes to fill low-wage jobs in a tighter labor market.

--Unsealed documents in a lawsuit against Johnson & Johnson purport to show that J&J knew its talcum powder contained asbestos, the exposure to which can cause cancer.

The company is defending itself from more than 5,000 suits across the U.S. blaming its baby powder products for causing women to develop ovarian cancer.

The documents provided by J&J show tests of its talc stretching back to at least 1972 found no traces of asbestos, though a document unsealed from 1974 shows an official at J&J’s Windsor mine in Vermont recommended “the use of citric acid in the depression of chrysotile asbestos” from talc extracted from the site.

J&J countered, through a spokesman, “The U.S. Food and Drug Administration requires specific testing to ensure that cosmetic talcum powder is free of asbestos. We are confident that our talc products are, and always have been, free of asbestos, based on decades of monitoring, testing and regulation.”

At first I sloughed off the reports of the lawsuit against J&J.  Now I’m not so sure, being a heavy user of their product.

--Morgan Stanley CEO James Gorman has a different view of bitcoin than JPMorgan Chase CEO Jamie Dimon, who earlier this month called the cryptocurrency “a fraud” that’s in a speculative bubble worse than tulip bulbs.

Gorman said bitcoin is “certainly something more than just a fad.  The concept of anonymous currency is a very interesting concept – interesting for the privacy protections it gives people, interesting because of what it says to the central banking system about controlling that.”

Gorman added, “It’s obviously highly speculative but it’s not something that’s inherently bad.”

So I found Gorman’s comment rather humorous.  Days earlier I saw the following in the South China Morning Post.

“A multibillion-dollar cryptocurrency ‘share’ offer by a Macau gaming company has the backing of one of Asia’s most notorious former gangland bosses – ‘Broken Tooth’ Wan Kuok-koi.

“The initial coin offering (ICO) planned for Hong Kong next month hopes to raise $500 million to bring blockchain technology to the world’s most cash-rich gambling hub and is closely connected to casino junket operators [Ed. read Mob] in the former Portuguese enclave.”

It turns out another notorious mobster, ‘Wan’, who was just released after 14 years in jail for a variety of gangland crimes including money laundering, was seen at a ceremony inking the new deal, which is between Macau Dragon Group and Thailand-based Wi Holding Company Ltd.

Ergo, with folks like this in the industry, be my guest, Mr. Gorman.  I’ll go with Jamie Dimon’s opinion.

--The average number of network news viewers for the 2016-17 season that ended last week,  was down 4% from 2015-16 to 23.1 million each night, while in the morning, the three networks’ total was 12.2 million viewers, a decline of 5%.

--I did not see any of Megyn Kelly’s new show on NBC, but she told her first-day audience she’s “not a political animal and I never have been.” She also announced the show would avoid politics entirely (although it will include some news coverage).

One industry insider told the New York Post, “They spent all that money on this great political anchor and journalist.  If you take those things away, what are you paying for?”

It has to flop.

--Finally, we note the passing of an American legend, Hugh Hefner, 91.  Born in Chicago on April 9, 1926, at age 8, he started a school newspaper called The Pepper, despite a warning from a concerned teacher that “if he continues to waste time on this, he will never amount to anything.”

“But I was a smart little boy,” Hefner told the Chicago Tribune in 1999.

Later at the University of Illinois, after serving in the Army during World War II, he edited the campus humor magazine, Shaft, and introduced a feature he called “Coed of the Month.”  At the time, he began to develop a philosophy that linked freedom of speech and the press with individual rights and a rejection of what he called “our legacy of puritan repression.”

From college he got a job as copywriter for Esquire magazine.  Then he borrowed money from friends and relatives to start Playboy. 

The first issue came out in December 1953. There was no date because he wasn’t sure there would be a second.  But he had smartly rented a naked picture of Marilyn Monroe from the Baumgarth Calendar Co. for $200, which he used as the centerfold spread, and within two weeks, he had sold out his 70,000 copies.  The rest is history.

“I really wanted to focus on the good-life concept.  A lifestyle.  A point of view we were trying to express,” Hefner once said.  “And we hit a nerve.”

By the early 1960s, Playboy’s circulation peaked at more than 8 million.

By 1971, when Playboy Enterprises went public, the magazine was selling 7 million copies a month, there were 23 Playboy clubs, resorts, hotels and casinos, along with ventures in book publishing, merchandizing, modeling, records, TV, movies and a limousine company.  There were 5,000 employees, including 1,000 waitresses, dressed in their skimpy black silk costumes, the Bunnies.

Hefner is being buried in a mausoleum in Westwood Memorial Park, where, in the mid-1990s, he bought the drawer next to that of Marilyn Monroe, his first cover girl, for his final resting place.  [Rick Kogan / Chicago Tribune]

I’ll have much more on Hef in my next Bar Chat column.

Foreign Affairs

North Korea: Saturday, North Korea’s foreign minister unleashed a torrent of criticism at the United Nations General Assembly in response to President Donald Trump’s speech at the same venue, saying Pyongyang is ready for a preemptive nuclear attack if needed.

“The very reason the DPRK had to possess nuclear weapons is because of the U.S.,” Ri Yong Ho said.  “The U.S. hostile policy and nuclear threats have continued over 70 years, and these have led the situation on the Korean peninsula to a touch-and-go point.”

Ri added: “None other than Trump himself is on a suicide mission.  In case innocent lives of the U.S. are lost because of this suicide attack, Trump will be held totally responsible.”

Saturday night, Trump tweeted: “Just heard Foreign Minister of North Korea speak at U.N. If he echoes thoughts of Little Rocket Man, they won’t be around much longer!”

Monday, Ri Yong Ho said that President Trump had declared war on his country, and that Pyongyang had the right to shoot down U.S. bombers even if they were not in the nation’s airspace.

“The whole world should clearly remember it was the U.S. who first declared war on our country,” Ri told reporters in New York.

“Since the United States declared war on our country, we will have every right to make countermeasures, including the right to shoot down United States strategic bombers even when they are not inside the airspace border of our country.”

White House press secretary Sarah Sanders said, “We’ve not declared war on North Korea.  And frankly the suggestion of that is absurd. We continue to seek the peaceful denuclearization of the Korean Peninsula.”

Tuesday, in a joint news conference at the White House with Spain’s Prime Minister Mariano Rajoy, President Trump said the U.S. is prepared to use “devastating” military force against North Korea but encouraged the world to work together to end the country’s nuclear program.

“We are totally prepared for the second option – not a preferred option – but if we take that option it will be devastating I can tell you that,” Trump said.  “For North Korea that is called the military option.  If we have to take it we will.”

The United Nations nuclear watchdog’s chief said on Friday that North Korea’s sixth nuclear test conducted Sept. 3, showed the country has made rapid progress on weapons development that posed a new, global threat.  International Atomic Energy Agency Director Yukiya Amano told reporters in Seoul, “Combined with other elements, this is a new threat and this is a global threat,’ as he called on the international community to unite.

A report for Britain’s Royal United Services Institute, a defense think tank, concluded that tensions between the U.S. and North Korea are so high that war is “a real possibility” for which the world must prepare.

Such a conflict would result in “hundreds of thousands” of casualties, severely disrupt the global economy, and have profound implications for the political and diplomatic landscape of East Asia.

South Korea is preparing for more provocative acts by Pyongyang in October, coinciding with the anniversary of the founding of the North Korean Communist Party and China’s all-important Communist Party Congress.

A new Washington Post-ABC News poll finds that 37 percent of Americans trust Trump either “a great deal” or “a good amount” to responsibly handle the situation with North Korea, while 42 percent trust the commander in chief “not at all.”  By comparison, 72 percent trust U.S. military leaders.

Only 8 percent of Americans surveyed believe Kim Jong Un can act responsibly.

Meanwhile, China has vowed to uphold U.N. sanctions against North Korea, besides seeking to get talks with Pyongyang restarted.

Last weekend, China announced it would ban exports of some petroleum products in North Korea, as well as imports of textiles.

Thursday, China’s commerce ministry said North Korean firms or joint ventures in China would be shut within 120 days of the latest U.N. Security Council sanctions, passed on Sept. 12.

Overseas Chinese joint ventures with North Korean entities or individuals are also to be closed, the ministry said in a statement on its website, though no timeframe was provided.

But here’s the thing. China has issued similar statements in the past when the UN levies new sanctions and then we learn later there has been little follow-up.

Like China’s agricultural exports to North Korea rose sharply in July and August, amid rising tensions and at a time of year when the country’s food supply is at its lowest.

Rice exports increased 79%, while exports of wheat flour surged more than elevenfold, according to China’s Customs data.

The data also showed an uptick in exports of coal to North Korea in August, ahead of a UN ban on Pyongyang’s coal trade that was to have taken effect Sept. 5.

Bottom line, China doesn’t want North Korea to collapse.

David Ignatius / Washington Post

“Top U.S. officials have said repeatedly that America is seeking a diplomatic solution to the nuclear crisis with North Korea. But President Trump’s insulting comments toward North Korean leader Kim Jong Un appear to have made such a negotiated settlement more difficult.

“In the chaotic government-by-Twitter atmosphere of the Trump administration, no senior leader has publicly questioned whether the president’s trash talk about ‘Rocket Man’ and his threat to ‘totally destroy’ North Korea have undermined his own strategy. But there’s growing concern that, as former U.S. diplomat and North Korea expert Joseph DeThomas wrote Monday on the 38 North blog, Trump’s comments ‘may have closed any remaining doors’ to a quick diplomatic resolution of the standoff.

“Experienced Korea watchers believe that Trump’s threats have deepened Kim’s resistance to concessions and that the North Korean leader is unlikely to back down in the face-off with Washington. By responding personally to Trump’s bluster and issuing his own counterthreats, Kim has attached his personal prestige and his family’s demigod status to the confrontation.

“Trump’s disruptive comments have doubtless caused some head-scratching in Pyongyang, as leaders there try to discern the signal from the noise. But any benefits of Trump’s unpredictability were probably erased by threats to obliterate North Korea and its leaders if they remain defiant.

“Officials who appeared hopeful about diplomatic prospects just a few weeks ago now seem concerned that Kim may seek another round of escalation....

“The first steps away from confrontation will have to be small. Trump’s rhetoric has probably torched the big bargain, for now. An initial statement to reduce tensions could be followed by other confidence-building measures, and then, eventually, by talks about denuclearization and reduction of U.S. forces in the region.

“The humbling lesson that Trump must learn: He has blustered his way to the edge of a cliff. Now he must stop fulminating and start dealing.”

China: Editorial / Wall Street Journal

“The 19th Congress of the Chinese Communist Party, set to open in Beijing on Oct. 18, is worth watching for two reasons. General Secretary Xi Jinping is bidding to become China’s most powerful leader since Mao Zedong, and he may stake his legitimacy on the country’s growing influence abroad. Both suggest an expansion of China’s political oppression at home and assertiveness abroad.

“Mr. Xi may defy Party tradition at this Congress, which falls halfway through his 10-year term in office, and seek to extend his tenure beyond 2022. The last two leaders, Jiang Zemin and Hu Jintao, allowed a successor from a rival political faction to join the Politburo Standing Committee at this stage to prepare a smooth succession.  If this Congress fails to put forward a younger cadre or elevates an inexperienced candidate loyal to Mr. Xi, it will confirm that he has rejected the consensus leadership the Party established after the death of Mao.

“Mr. Xi may also signal his pre-eminence by rewriting the Party charter. In recent weeks key publications have promoted the importance of ‘Xi Jinping Thought.’  Adding that phrase to the charter would put Mr. Xi on the level of Mao, whose thought is second only to Marxist ideology in the Party’s guiding principles.

“The Congress is also expected to emphasize Mr. Xi’s efforts to restore China as a global power as part of his ‘China Dream’ strategy. A new propaganda campaign is praising ‘Xi Jinping Diplomatic Thought.’  State television aired a six-part documentary called ‘Great Power Diplomacy’ that showed Mr. Xi being given red carpet treatment in London and Mar-a-Lago, receiving foreign leaders in Beijing, and being praised by foreign intellectuals for his deep thoughts.  Foreign Minister Wang Yi says Mr. Xi’s thought ‘transcends centuries of Western international relations theory.’

“Mr. Xi has consolidated his control over the armed forces in the past year, purging senior generals for corruption and promoting others.  At this summer’s Army Day parade, he reviewed the troops alone instead of with other senior leaders, as was the norm.  At that event a general introduced him as lingxiu, a term for a supreme leader that has not been used since the Mao era....

“This consolidation of power means that China’s immediate future will increasingly depend on the choices of one leader. This suggests that the Party’s crackdown on political dissent, which has become ever harsher, is unlikely to ease.  Hong Kong can also expect more aggressive control from Beijing.

“The question for the world is what consolidated one-man authoritarian rule would mean for China’s actions abroad....

“Mr. Xi is changing that policy to assert Chinese dominance in the Asia-Pacific, and authoritarian rulers tend to stoke nationalism to create political legitimacy. The growing cult of Xi could shake the world order.”

I hope you found the above familiar, because I have been writing for a year that Xi will seek to go beyond the traditional 10-year term.

I’ve also written that he will play the nationalism card at any moment when politics demand it.  Yes, Hong Kong will be an increasing target, but I would have added Taiwan to the Journal’s editorial, which China can take in about 12 hours any time it wants to.

What would the West do in response?  Nothing.

President Trump is headed to China in November, post-Communist Party Congress and Xi’s new titles, Nov. 3-14, a trip including summits in Vietnam and the Philippines, as well as stops in Japan and South Korea.  At his Tuesday news conference, Trump said of China’s role in North Korea:

“I applaud China’s recent action to restrict its trade with North Korea. In particular I applaud China for breaking all banking relationships with North Korea. I want to thank President Xi.”

Trump will be (already is) jealous of all the power Xi has been accumulating.  It’s a guarantee our president will say some incredibly stupid things in this regard when he’s there.  But that’s down the road.  For now, we have to get through October.

Iraq / Syria: Islamic State released an audio recording of its leader Abu Bakr Al-Baghdadi on Thursday, the first communication from him in almost a year.

The date of the 46-minute recording, released via a news organization linked to ISIS, was not clear.  But Baghdadi does make reference to North Korean threats against Japan and the United States.

But the biggest news on the week was the referendum for independence held by Iraqi Kurds, with 93% of voters backing a breakup with Baghdad.  Much of the West, let alone Baghdad, is not pleased, though for different reasons.  The referendum, though, is not binding, but it is designed to give Masoud Barzani, who heads the Kurdistan Regional Government (KRG), a mandate to negotiate the secession of the oil-producing region.

Baghdad ordered the KRG to hand over control of its airports in retaliation, as demanded by Prime Minister Haider al-Abadi

Baghdad previously asked foreign countries to stop direct flights to the international airports of Erbil and Sulaimaniya, in KRG territory, but only Iran declared such an air embargo, halting direct flights to and from Iraqi Kurdistan.

Ankara and Tehran are vehemently against Kurdish independence, fearing it will lead to unrest among their own populations of Kurds.   President Barzani said the referendum was not a threat to Ankara.

“The referendum does not mean independence will happen tomorrow, nor are we redrawing borders...we will resolve our issues with Baghdad peacefully.”

And Turkish President Erdogan threatened to freeze his country’s normalization of relations with Israel if the latter did not end its support for an independent Kurdish state.

Two weeks ago, Prime Minister Netanyahu announced that Israel “supports the legitimate efforts of the Kurdish people to achieve a state of their own.”

One reason why the United States is among those who weren’t pleased with the referendum is because the focus still needs to be on battling ISIS, and on Friday we learned that the militants had killed 58 Syrian government troops and militia in fierce resistance to a Russian-backed offensive against some of its last strongholds, according to the Syrian Observatory for Human Rights.  ISIS is still potent.

Iran: Tehran announced it had successfully tested a new medium-range missile, in defiance of President Trump.

The launch of the Khoramshahr missile, with a range of 1,240 miles, was shown on state TV, though it wasn’t clear when the test took place.

In his UN General Assembly speech, Trump criticized Iran’s missile program and the 2015 nuclear deal with the country.

The Khoramshahr missile was first displayed at a military parade last Friday, and the announcement of the test was the next day.

President Trump is due to tell Congress on October 15 if he believes that Iran has complied with the nuclear deal and if he thinks the U.S. should continue to abide by it.

John Bolton / Wall Street Journal

“(Regarding the Iran deal), Mr. Trump’s real decision is whether to fulfill his campaign promise to extricate America from this strategic debacle.  Last week at the United Nations General Assembly, he lacerated the deal as an ‘embarrassment,’ ‘one of the worst and most one-sided transactions the United States has ever entered into.’

“Fearing the worst, however, the deal’s acolytes are actively obscuring this central issue, arguing that it is too arduous and too complex to withdraw cleanly. They have seized instead on a statutory requirement that every 90 days the president must certify, among other things, that adhering to the agreement is in America’s national-security interest. They argue the president should stay in the deal but not make the next certification, due in October.

“This morganatic strategy is a poorly concealed ploy to block withdrawal, limp through Mr. Trump’s presidency, and resurrect the deal later. Paradoxically, supporters are not now asserting that the deal is beneficial.  Instead, they concede its innumerable faults but argue that it can be made tougher, more verifiable and more strictly enforced.  Or, if you want more, it can be extended, kicked to Congress, or deferred during the North Korea crisis. Whatever.

“As Richard Nixon said during Watergate: ‘I want you to stonewall it, let them plead the Fifth Amendment, cover up, or anything else if it’ll save it – save the plan.’

“Mr. Trump should not be deceived. The issue is not certification. The issue is whether we will protect U.S. interests and shatter the illusion that Mr. Obama’s deal is achieving its stated goals, or instead timidly hope for the best while trading with the enemy, as the Europeans are doing. It is too cute by half to employ pettifoggery to evade this reality....

“The ayatollahs have neither the desire nor the incentive to renegotiate even a comma of the agreement. Why should they, when it is entirely to their advantage? Both Resolution 2231 and the statement, for example, ‘call upon’ Iran to forgo activity regarding ‘ballistic missiles designed to be capable of delivering nuclear weapons.’  The U.N. secretary-general recently reported that Iran is violating this provision and implicitly lying about it. But the deal’s language allows Iran to claim solemnly that its missiles are not ‘designed’ to carry nuclear warheads, an assertion whose verification would require polygraphs and psychologists, not weapons inspectors.  This is one of many textual loopholes.

“If the deal is vitiated, Tehran would not be freer than it is now to pursue nuclear weapons and ballistic missiles.  Not only is the international compliance regime a far cry from Mr. Obama’s promised ‘anytime, anywhere’ inspections, crucial language is vague and ambiguous.  Mr. Obama’s negotiators crippled real international verification by pre-emptively surrendering on what were delicately termed ‘possible military dimensions’ of Iran’s nuclear program.

“Moreover, simple economic logic suggests that Tehran’s scientists are probably enjoying Pyongyang’s hospitality, well beyond the International Atomic Energy Agency’s limited capability to detect.  Even U.S. intelligence could be in the dark if Iran is renting a uranium enrichment facility under a North Korean mountain.  It is specious to assert that the North Korean nuclear crisis should lead to deferring action on the Iran deal.  The conclusion should be precisely the opposite: Failure to act decisively on Iran now worsens the global proliferation threat.”

Mark Dubowitz and David Albright / Wall Street Journal

“Decertifying doesn’t mean breaking the deal. That happens only if the U.S. reimposes sanctions that have been lifted or suspended under the JCPOA (Joint Comprehensive Plan of Action...the deal)....

“Mr. Trump...should designate the Revolutionary Guards a terrorist organization, as Congress has required he do by Oct. 31. He should also instruct the  Treasury to blacklist companies with Revolutionary Guard and military ownership, which represents about 20% of the total market capitalization of the Tehran Stock Exchange.  He should redesignate Iran Air (which is buying planes from Boeing and Airbus) as a terrorist entity for airlifting weapons and fighters to Syria. All these measures are consistent with the JCPOA.

“We propose the president ‘fix’ U.S. policy by making it clear he does not accept the Iran deal’s dangerous flaws.  He should insist on conditions making permanent the current restrictions on Iran’s nuclear program and the testing of advanced centrifuges and nuclear-capable ballistic missiles, as well as the buying and transferring of conventional weaponry.  He must insist on unfettered access for U.N. weapons inspectors to Iranian military sites....

“The Europeans are already responding to Mr. Trump’s threats to walk away from the deal.  French President Emmanuel Macron has said he’s willing to consider supplementing the agreement to address the sunset provisions and missiles. European leaders who want to preserve the accord are now working on a U.S.-EU consensus on ways to fix it.  They should outline conditions under which trans-Atlantic sanctions would be reinstated if Iran doesn’t play ball.  Otherwise, they can watch Mr. Trump exit the deal and use the considerable financial power of the U.S. to force European banks and companies to choose between America’s $19 trillion market and Iran’s $400 billion one.

“Decertification is the critical first step of a strategy to prevent the Islamic Republic of Iran from becoming a nuclear state. The famously blunt Mr. Trump must send an unambiguous message to Tehran’s clerics: His administration will not tolerate a nuclear Iran, nor can it abide by the agreement as it stands.  But the strategy doesn’t depend on Iranian acquiescence. It gives the Europeans a chance to come on board to fix the deal in order to save it.

“If they don’t, the consequences could be severe.”

Afghanistan: U.S. Defense Secretary Jim Mattis criticized Iran and Russia for their support of the Taliban, which he says provides the group with both arms and legitimacy.

Mattis made his first visit to Kabul since President Trump spelled out a new strategy for the region last month, and in a sign of the challenges faced in Afghanistan, the Taliban struck Kabul’s international airport, an attack apparently timed to coincide with Mattis’ arrival, though he had already left.  [ISIS also claimed responsibility.]

Russia has acknowledged it shares information with the Taliban in an effort to combat ISIS, but denies it is sending weapons.  They are lying, per usual.

Israel: A Palestinian gunman killed three members of Israel’s security forces at a West Bank settlement. The attacker approached a checkpoint at the settlement of Har Adar, northwest of Jerusalem on Tuesday morning, drawing a pistol and firing on the forces at close range, police said.  Israeli forces returned fire and killed the attacker.

Saudi Arabia: Saudi King Salman on Tuesday ordered that women be allowed to drive cars, ending a conservative tradition seen by rights activists as an emblem of the Islamic kingdom’s repression of women.  The order is to be implemented June 24, 2018.  Women would not need permission from their male guardians to get a license or have a guardian in the car and would be allowed to drive anywhere.

Conservative clerics are none too pleased.

Russia: Opposition politician Alexei Navalny was detained outside his home Friday ahead of a rally in central Russia.  Officials in the city of Nizhny Novgorod last week refused to authorize Navalny’s rally planned for Sept. 29, saying another event had been planned at the same location on the same day.

Local police and prosecutors had said the rally would be quashed if people chose to attend.

“Oh, how old man Putin doesn’t want me to make it to the demonstration,” Navalny wrote on Instagram today.

Cuba: The United States ordered 60 percent of its staff to leave the American Embassy in Havana because of “specific attacks’ on diplomats and will warn American tourists that some attacks have occurred in Cuban hotels. The embassy will stop processing visas and will issue a new travel warning on Friday.

Brazil: Talk about poor job approval numbers, in Brazil, a poll released Thursday shows that President Michel Temer has a 3% approval rating, 77% disapproval, while 92% of Brazilians do not trust him.  New corruption charges against him were recently brought.

Yes, that was 3.

Random Musings

--Presidential tracking polls....

Gallup:  37% approval for President Trump, 59% disapproval
Rasmussen: 45% approval, 54% disapproval

A new Washington Post-ABC News poll gave Trump a 39% approval rating, 57% disapproval. His approval number was 36% in July in this one.

--A new Fox News poll said 56 percent of voters say things are “going to hell in a handbasket.”  This is compared with 57 percent a year ago.  70 percent of Democrats agree with the statement, vs. 42 percent of Republicans.

55 percent of voters see kneeling during the national anthem as inappropriate. That’s down six percentage points from 61 percent in 2016.

--Karl Rove / Wall Street Journal

“It was a disastrous day for the whole GOP – President Trump, congressional Republicans, grass-roots activists and anyone who wants progress on the party’s agenda.  On Tuesday, for a second time this  year, Senate Republicans failed to repeal and replace ObamaCare, announcing they would not vote on the Graham-Cassidy bill after all. At least six GOP senators either opposed the legislation or expressed grave doubts about it.

“Meanwhile in Alabama, the conservative crusader Roy Moore won a Republican runoff and is now the favorite for election to the U.S. Senate in December. When Jeff Sessions resigned the seat to join the Trump administration, the state attorney general, Luther Strange, was appointed as his temporary replacement.  Mr. Trump endorsed Mr. Strange and appeared Friday at his rally in Huntsville.  Yet Mr. Moore, a former chief justice of the state Supreme Court, won anyway – and by nine points [Ed. 54.6 to 45.4.]

“These two events will have severe consequences. The Republican grass roots were already angry at the Senate’s failure in July to pass an ObamaCare repeal bill that had cleared the House.  This week’s disappointment will only deepen their distress, GOP voters could end up expressing their displeasure indiscriminately, making no distinction between lawmakers who supported the repeal attempts and those who didn’t....

“The Alabama runoff result is likely to spur new challenges by alt-right-backed populists to more-conventional Republican incumbents.  Mr. Moore’s looming victory (in the December special election) probably played a role in the Tuesday announcement that Tennessee’s respected Sen. Bob Corker, the chairman of the Foreign Relations Committee, will not run for re-election next year....

“While copycat challengers may not have Mr. Moore’s advantages, tough primary contests next year will certainly drain GOP funds and divert focus that might otherwise be used to defeat Democrats in the fall. They will also add to the growing sense of a Republican civil war, which complicates the coalition-building needed to pass the party’s agenda.

“Republicans must hope Tuesday’s events are sobering to Mr. Trump and party leaders in Congress. Voters are understandably restive because they gave the GOP control of the White House and both legislative chambers but haven’t seen much in the way of accomplishments.  Passing tax reform has now become an existential imperative. The electoral disaster that might visit Republicans if they can’t get tax reform done ought to galvanize leaders at each end of Pennsylvania Avenue and reinforce a bit of old wisdom: that the perfect should not be allowed to be the enemy of the good.”

--The announcement of Sen. Corker not running for reelection is indeed a big blow to the Republican establishment, and whereas his reelection would have been virtually assured, it now creates what is likely to be a hotly contested primary, as well as a vacuum among Senate Republicans for leaders on foreign policy and national security.

Corker said in part: “When I ran for the Senate in 2006, I told people that I couldn’t imagine serving for more than two terms. Understandably, as we have gained influence, that decision has become more difficult. But I have always been drawn to the citizen legislator model, and while I realize it is not for everyone, I believe with the kind of service I provide, it is the right one for me.”

--California Gov. Jerry Brown signed a bill moving the state’s primary elections to early March, March 3, 2020, specifically.

This is big.  Obviously it gives California a bigger share of the attention in the election cycle.  It also makes it more difficult for the candidates, as under the current schedule, California’s primary would come fourth after elections in Iowa, New Hampshire and South Carolina.

The Democratic National Committee may not like the state moving its election up to such an early date, and it could still involve itself in a final decision over the coming few years.

--Meghan McCain blasted President Trump in response to a report that he has been “physically mocking” her father, Sen. John McCain.

“What more must my family be put through right now?” she tweeted.  “This is abhorrent.”

Axios reported that Trump has been mocking both McCain and Senate Majority Leader Mitch McConnell in private, with Trump apparently mimicking McCain’s dramatic thumbs down on the Senate floor that killed Republicans’ best shot at repealing ObamaCare.

--Trump showed his true colors when he deleted his tweets pumping up Luther Strange’s candidacy after he lost to Roy Moore.

--President Trump said he was looking “very closely” at whether to dismiss embattled Health and Human Services Secretary Tom Price over his excessive use of private jets.  “I am not happy with him,” Trump said Wednesday.

The House Committee on Oversight and Government Reform released a letter asking Price for details on his use of “government-owned aircraft for personal travel or private non-commercial aircraft for official travel.”

Price then announced Thursday he was reimbursing the government for a fraction of the costs of his flights.  “The taxpayers won’t pay a dime for my seat on those planes.  No exceptions.”

It was too late.  Price was forced to resign today.  Trump had said earlier this afternoon, “I certainly don’t like the optics.  I’m not happy, I can tell you that.”

We learned Price blew through more than $1 million of taxpayers’ cash for his government and chartered private jets.  He repaid about $52,000 of this, the cost of his seat.

EPA Administrator Scott Pruitt has also taken at least four noncommercial and military flights since mid-February, according to congressional oversight records, costing taxpayers more than $58,000.

Interior Secretary Ryan Zinke took one that cost taxpayers $12,375, according to a department spokesman.  And you’ve had the issues with Treasury Secretary Mnuchin and his flights.

--House Majority Whip Steve Scalise returned to the Capitol Thursday after 15 weeks in the hospital and rehab, following the shooting at a Virginia baseball field by a domestic terrorist targeting congressional Republicans.  It was dramatic, and deeply moving, with Scalise leaning on crutches while addressing Congress.

“You have no idea how great this feels to be back here at work in the people’s House,” he started out.

Some say we were looking at the future Speaker of the House.

--A Manhattan federal appeals court Tuesday overturned the 2015 corruption convictions of former New York state Senate Majority Leader Dean Skelos and his son, Adam Skelos.

The panel cited last year’s U.S. Supreme Court ruling that limited the legal definition of corruption.

It all goes back to the corruption case of former Virginia governor Bob McDonnell, whose conviction was thrown out by the Supreme Court as it narrowed the definition of “official action,” which the High Court ruled was so broad that it could include “nearly anything a public official does.”

This really sucks.  The Skelos ruling came less than three months after the conviction of former longtime Democratic Assembly Speaker Sheldon Silver was also tossed out on the same grounds. Both cases were prosecuted by former U.S. Attorney Preet Bharara, who in a tweet Tuesday said: “As with Sheldon Silver, SDNY will retry Dean and Adam Skelos,” referring to the Southern District of New York. “SCOTUS made it harder to punish corruption, but justice should prevail here.”

--Former congressman Anthony Weiner was sentenced to 21 months in prison Monday for convincing a high school student to undress and touch herself via Skype in 2016. Weiner had faced as much as 10 years after pleading guilty to one count of transferring obscene material to a minor.

--The FBI released its official crime tally for 2016 on Monday, and violent crime has now risen two consecutive years, but this is off a historically low base.*  Nonetheless the increase is related to some police backing off proactive policing in high-crime minority neighborhoods.

*In 1991, for example, the violent crime rate was 758.2 per 100,000 people.  Last year, it was 386.3, up from 373.7 a year earlier.

The murder and non-negligent manslaughter rate was up 8.6 percent over 2015, the FBI data show, and the murder rate increased to 5.3 per 100,000, the highest that figure has been since 2008, and it’s almost solely the result of increased violence in some major cities, with a surge in 2015 attributable almost solely to just three – Chicago, Baltimore and Washington, while last year, the New York-based Brennan Center for Justice, reported that the increase was in large part due to Chicago, as it was responsible for nearly half of the increase.  [Chicago had 762 homicides in 2016, up from 482 in 2015.  Early this week, it had No. 500 for 2017.]

As for New York, last year it had 335 murders, down from 352 a year earlier, and less than half the 672 reported in 2000.

Separately, there were nearly 900 additional blacks killed in 2016 nationwide compared with 2015, the total being 7,881.

The Washington Post reported that police fatally shot 233 blacks, with only 16 black male victims of police shootings categorized as “unarmed.”  That classification masks assaults against officers and violent resistance to arrest.

So who is killing all the blacks?  Not whites (243 of the 7,881), and not the police.

--Daniel Henninger / Wall Street Journal

“We’ve arrived at a moment when some choices have to be made. After a lifetime watching America’s three main professional sports – baseball, football and basketball – I’ve decided I prefer baseball....

“Set to one side that the reason most Americans can sing the words to their national anthem is that for generations, every American attending a professional baseball game has stood to look at the flag while someone sings ‘The Star-Spangled Banner.’  Many Americans think the last words of the national anthem are ‘Play ball!’

“Baseball is about baseball. The NFL and NBA seem to be about more things than I can process – some of them political, some of them personal.

“Baseball has an informal code of on-field conduct, which has held for a hundred years. The NFL doesn’t seem to have an enforceable code of anything.

“Last Sunday, after the New York Giants’ wide receiver Odell Beckham Jr. caught a touchdown pass, Mr. Beckham got down in the end zone and imitated a dog urinating on a fire hydrant, which the opposing Philadelphia Eagles (who won) took as mockery of their team.

“From Babe Ruth 90 years ago to Aaron Judge now, when you hit a home run, you run around the bases and into the dugout. That’s it.  No end-zone antics that suggest the sport itself takes a back seat to a personality.

“After the Yankees Mr. Judge hit his 50th home run this week, a record for a rookie, his teammates had to force him out of the dugout to wave to the cheering crowd.

“For some years, the parsons of the sports press have pushed the idea that demonstrations of high-level athletic skill, the result of uncountable hours of practice, were morally insufficient. Athletes, the parsons intoned, had to ‘give back’ by dedicating their status to solving the nation’s endlessly unresolved issues of race, gender and – the inevitable guilt trip they laid on pro athletes – income inequality.

“And so last September, Colin Kaepernick, the San Francisco 49ers backup quarterback, reduced the parsonage’s moralistic hectoring of professional athletes to its absurd end by deciding that the pregame national anthem was the place to raise the issue of inner-city policing.

“Only the innocent could feign shock that eventually Donald Trump, in his capacity as president of the United States, would go after the kneeling players about the same way you’d hear from a guy sitting in the high seats at a New York Jets game, who by the third quarter is on fumes: ‘Get that son of a bitch off the field!’

“Stepping down to the Trumpian moment, LeBron James tweeted, ‘U bum!’

“Sportswriters sometimes use the phrase ‘lunch bucket’ about a player who is mainly interested in doing his job well without drawing attention to himself. Other than someone like Kawhi Leonard of the San Antonio Spurts, you don’t see too many stars in the NFL or NBA described as lunch-bucket guys anymore.

“Most future stars of basketball and football are identified while they’re in high school. They often play in special leagues and receive constant visits from coaches at Division I universities.

“Once inside the university, these players live and practice in gold-plated facilities.  They play on national TV and are talked about nonstop by analysts and the political commentators at ESPN.  They get famous young....

“The road up in baseball is different.  Promising teenagers go from high school into baseball’s minor leagues...They travel by bus and play before crowds not much bigger than what they had in Little League. They rise from A ball to AA then AAA teams....

“Years spent competing and surviving against other skilled players teaches them they have to learn to be a member of a team before anyone calls them a star.

“Some might say baseball isn’t political because so many players are from Latin America.  But maybe the Latin players are mostly bemused at what the U.S. considers social problems, compared with escaping from Cuba across shark-infested waters or getting out of a dirt-road slum in Nicaragua or the Dominican Republic.

“There is an expression in sports: Don’t leave it in the locker room. It means you are supposed to save your best performers for the game.  With baseball, that’s still what you get.

“We live in a highly polarized country. If people want their sport and its performers to be an affirmation of their politics, feel free. I don’t.”

--Finally, I watched all ten episodes of Ken Burns’ and Lynn Novick’s “Vietnam” and I thought it was superb.  It brought back memories.

I’ve written often in the past of how I was such a newshound as a youth, devouring everything, reading the paper each morning before I went off to school, and not just the sports. I mean I was doing that when I was nine and ten years old.

I also had the advantage of having gone to Europe three times by age 15, including the Soviet Union, Czechoslovakia and Hungary in the dark days of 1973.

So as I’ve written I’d lie awake on Sunday nights, listening to the newscasts on WABC-AM, which was otherwise the oldies station of Cousin Brucie et al, and I’d wonder when I’d hear the weekly roundup on the action in Vietnam, via the Pentagon, how the United States wasn’t winning when we were ‘only’ losing 200 men a week and the Viet Cong and North Vietnamese were losing 2,000.

When “The Pentagon Papers” was released in 1971, I poured through that, age 13, but then we didn’t have smartphones and video games to distract us...Praise God! 

I vividly remember the “Convoy of Tears” reports on the nightly news in 1974, and the fall of Saigon the next year.

But  in Ken Burns’ retelling of this tragic chapter in our nation’s history, one story will stick out that I didn’t know before...the ambush of Alpha Company in which 173 American soldiers were killed but we could only find nine North Vietnamese bodies.  Yet Commanding General William Westmoreland, deeply concerned over perception and keeping up his kill ratio, insisted it be reported as 475 dead Viet Cong. What a goddamned bastard.

That single battle sums it all up. The lies we were continually told.

Watching “Vietnam,” I kept thinking of the lessons for today, including of the “war profiteers.” No doubt we’ll fail to learn from them.  And that sucks.

But I must close by going back to the Facebook / Twitter fake news story.  I’ve been meaning to get this off my chest for some time now.

I have been fed hundreds...hundreds...of fake news stories over the years, especially in the two years leading up to the November presidential election.  Many of my best friends, including some of my former Wall Street colleagues who have held very senior positions over the years, would pass stuff on, saying, “You see this? Is it true?”

The telltale sign for those who sent it was I never responded to them.  My attitude was, “You think I’m going to run this?”  Zero backup?  Knowing that the source has no one of credibility standing behind them?  Who the hell are these people?

Never....NEVER...did I run a single one of these in “Week in Review.”

I have treated this column, and this running history, with the utmost respect.  I am not a tool for anyone.  No doubt it has cost me.  It’s not an exciting site.  I don’t have the traffic of a Breitbart, or Huffington Post.

So be it.  I’ll carry on as long as I can. 

I’ve told some of my friends, I recognized years ago I’m Van Gogh.  I’ll be discovered when I’m dead.

---

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

Go to the Vietnam Wall.

God bless America.

---

Gold $1282
Oil $51.64

Returns for the week 9/25-9/29

Dow Jones  +0.25%  [22405]
S&P 500  +0.7%  [2519]
S&P MidCap  +1.5%
Russell 2000  +2.8%
Nasdaq  +1.1%  [6495]

Returns for the period 1/1/17-9/29/17

Dow Jones +13.4%
S&P 500  +12.5%
S&P MidCap  +8.2%
Russell 2000  +9.9%
Nasdaq  +20.7%

Bulls 54.3
Bears 17.1  [Source: Investors Intelligence]

Have a great week.

*Dr. Bortrum had back-to-back birdies at the world famous Summit Municipal Golf Course the other day!  As Ronald Reagan would have said of the soon-to-be 90-year-old, “Not bad, not bad at all.”

Brian Trumbore