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10/21/2017

For the week 10/16-10/20

[Posted 11:30 PM ET]

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Edition 967

Trump World

I wrote the following in this space on 10/7/17:

Niger: Four American Green Berets were killed, two injured, in an ISIS, al-Qaida-inspired ambush in southwest Niger.  The soldiers were part of a training operation and are elements of a longstanding U.S. force of 800 in the country that is aiding the government, and others in the area, in the fight against al-Qaida and other militants, including Boko Harem.  The force is primarily providing training and security assistance, including heavy surveillance with drones.

“[At first, we heard three had been killed, not knowing the military was looking for a fourth who had gone missing and somehow wasn’t evacuated with the others initially.  After 48 hours of searching, Niger’s army found him.]”

---

The above, as you know is my routine 95% of the time, had a post date of Sat., Oct. 7, but I’m actually posting Friday evening, in this case Oct. 6.   That’s important.  I, we, learned of the deaths of three Green Berets on Wednesday, Oct. 4, but didn’t learn of Sgt. La David Johnson’s death until Friday, Oct. 6, which I then reported, seeing this before posting that evening.  As the ‘wait 24 hours’ guy, I didn’t speculate whatsoever.

Well now some very troubling issues have been raised, on what was clearly a gross intelligence failure, while questions on the mission and why we are in Niger in the first place dominate discussion as well.

So let me start with this.  I’ve known of the Niger mission, as noted above, to both train and conduct needed surveillance, for years.  I’ve written of the large French presence in that region, and the losses they have suffered.  This is the world we live in.  If we are to prevent future 9/11s, we can’t just sit back in our bunkers in America.  We must be proactive. That’s just my opinion.  As I note below, ISIS may no longer be able to create a caliphate in the Middle East, but they, and their ideals, or those of groups like them, are not likely to die in our lifetime.

That said, Sen. John McCain (R-AZ) is demanding more information on the ambush in Niger, saying the administration is not being forthright.  When asked if it was being upfront, McCain said “no.”  “We deserve to have all the information.”

The Department of Defense has launched an investigation.  McCain met with Defense Secretary Mattis today and Mattis agreed the Pentagon had to do a better job in providing information to the oversight committees.

Rhode Island Sen. Jack Reed, the top Democrat on the Senate Armed Services Committee, said, “I think the administration has to be more clear about our role in Niger and our role in Africa and other parts of the globe.”

Sgt. Johnson and the three other Special Forces / Green Beret (Staff Sgt. Bryan C. Black, Staff Sgt. Jeremiah Wayne Johnson, and Staff Sgt. Dustin M. Wright) will long be remembered.

But even I was writing late Oct. 6 about all four.  Days passed before the president said anything.

I understand that the administration didn’t want to come forward between the reporting of the deaths of the first three on Oct. 4, and Sgt. Johnson’s on Oct. 6, because for 48 hours there was a frantic search for him, Johnson having somehow been left behind in the initial evacuation of the dead and wounded.  You don’t want the enemy to know a search of any kind is being conducted.

But after I posted, I, like any other following this matter, began to ask questions.  Why did he get left behind?  Why were we hearing the French first came to disrupt the attack, but not until after 30 minutes, and with a flyby by fighter jets intended to scare the militants away, though they couldn’t bomb them?  Why was it a private contractor who ended up evacuating the remaining troops and the three bodies?  Why was everyone, once we knew Johnson’s fate, so quiet, including President Trump, who doesn’t wait a second to trumpet a success, even if before the facts come out (see his idiotic tweets on Britain this year, including this morning with his inane crime stat tweet), but now he was radio/Twitter silent?

So the president didn’t say anything for 12 days, at which time he then botched it.

Editorial / Washington Post

“Their lives, their brave service and the sacrifice of their grieving families should be discussed and honored.  Instead – thanks to a president with a compulsive need to be the center of attention – their deaths have been trivialized.  President Trump reduced condolences to a political competition and treated the grieving families who received them as pawns in a game.

“Having failed to publicly acknowledge the deaths for 12 days, Mr. Trump on Monday boasted about reaching out to family members of slain military personnel while falsely accusing his predecessors of not doing so.  His whining about how hard the calls are on him – and the apparent hash he made of a conversation in which he allegedly told one widow her husband ‘must have known what he signed up for’ – underscored his cluelessness about being commander in chief.

“Mr. Trump then worsened his offense by attempting to exploit the combat death of the son of his chief of staff, John F. Kelly, whom he suggested did not receive a condolence call from President Barack Obama. The president ought to have read the eulogy Mr. Kelly delivered for two other Marines four days after his son was killed in Afghanistan.  After asking the officer who introduced him, ‘Please don’t mention my son,’ he talked passionately – and sometimes angrily – about the sacrifices of the military. He never mentioned his son, later explaining to The Post’s Greg Jaffe, ‘The death of my boy simply cannot be made to seem any more tragic than the others.’

“Such grace and dignity in the face of unimaginable loss is the trademark of Gold Star families. It was on display in the days after the Niger attack when the families of the four men spoke with pride about their loved one.  ‘I know if you could ask him, he’d be glad that it was him,’ said Staff Sgt. Wright’s brother.  ‘He’d be glad he’s the one that went so somebody else’s son could come home.’  Those words, and not Mr. Trump’s, ought to be what we remember.”

But regarding Trump’s call to Sgt. Johnson’s widow, I give President Trump the benefit of the doubt in terms of the perceived tone of the call.  When I woke up the other morning to screaming headlines about it, I thought, as the ‘wait 24 hours’ guy, this was incredibly unfair to him.

So then Thursday, chief of staff John Kelly stepped forward in the White House press room and the following Journal piece sums it up better than I could (though for the record I watched it ‘live’.)

Editorial / Wall Street Journal

“Over the past nine months, Donald Trump’s cage match with the Washington press corps has turned into an unedifying national spectacle.  Too often, the serious business of the nation has been pushed aside so that the press and Mr. Trump could go tit for tat, like children on a schoolyard. On Thursday, an adult finally stepped into the room.

“John Kelly, Mr. Trump’s chief of staff and a retired four-star general, addressed White House reporters on this week’s dispute between the press and the President.  That is the controversy around Mr. Trump’s call to the mother of a U.S. soldier who was killed during an ambush in Niger recently.

“As anyone who follows media reports knows, the President’s call to this mother grew into a personal feud between Mr. Trump and a Democratic Congresswoman who disclosed what the President said.  It then produced long newspaper reports examining the President’s relationship with every identifiable Gold Star family during his term.

“It took awhile for Mr. Kelly to get around to talking about that phone call. Instead, he spent some time offering what we in journalism – or anyone purporting to be engaged in a serious line of work – would call context.  Mr. Kelly described what happens when a U.S. soldier or Marine – ‘the best 1% this country produces’ – gets killed in action.  What he described was a military process that is graphic, emotionally intense and, most of all, untouchable.

“Untouchable, as Mr. Kelly made clear, in the sense that what has happened is so grave, so personal and so difficult that the reality of pushing through it comes down to an encounter between the fallen soldier’s family, the officer who informs them and, in time, support from those who served alongside their son or daughter.

“Mr. Kelly explained that a personal call from the President is in fact not what families expect or want. But it has become something of a presidential tradition, and Mr. Trump asked Mr. Kelly what he should say.

“Mr. Kelly related what his friend an ‘my casualty officer,’ Marine General Joseph Dunford, told him when relating that Mr. Kelly’s own son had been killed in Afghanistan: ‘He said, Kel, he was doing exactly what he wanted to do when he was killed. He knew what he was getting into by joining that 1%.  He knew what the possibilities were because we’re at war.’

“That, essentially, is what Mr. Trump said to the Gold Star mother, no doubt less eloquently.  Standing in the White House press room, reflecting on a political spat over a dead soldier, Mr. Kelly said, ‘I thought at least that was sacred.’....

“John Kelly made a lot of people look small Thursday. The man who led soldiers in combat in Iraq described spending an hour this week walking in Arlington Cemetery, collecting his thoughts and looking at headstones, some with names of Marines who Mr. Kelly said were there because they did  what he had told them to do.

“Surely there is a sense in which the continuing political life of Washington is possible because of that sacrifice.  That was John Kelly’s point.  It would be nice to think the rest of the city could get it.”

This should have been the end of the story.  It isn’t. Not by a long shot.

It turns out the Orlando Sentinel had a videotape of Congresswoman Wilson’s nine-minute speech at the building dedication Kelly referred to when he dissed her, and Kelly misrepresented Wilson in his remarks Thursday.

Rep. Wilson then fought back Friday, and that’s when the White House machinery went into overdrive.

First off, going back to Wednesday, Trump had said Wilson lied about his comments to Sgt. Johnson’s widow, yet there was Kelly totally confirming them, explaining how it came about that Trump said what he did!

Now it was up to White House press secretary Sarah Sanders to defend the president. When veteran CBS reporter Chip Reid during Friday’s daily briefing, pointed out the discrepancy between what Kelly said Thursday, and the videotape of the actual event, Sanders characterized Wilson’s remarks in 2015 as “exactly” what Kelly had described.

“There was a lot of grandstanding,” Sanders said.  “He was stunned that she had taken the opportunity to make it about herself.”

But the facts were Wilson spent about two minutes of her speech recalling the effort that she led in Congress to name the building for the agents, praising the support of Republican Speaker John Boehner, as well as Obama, and she was effusive in her praise of the agents for whom the building was being named.

Reid asked, “Can he (Kelly) come out here and talk about this at some point?”

Sanders: “I think he addressed that pretty thoroughly yesterday.”

Reid: “Well, he was wrong yesterday in talking about [Wilson] getting the money.”

“If you want to go after General Kelly, that’s up to you,” Sanders said.  “I think that if you want to get into a debate with a four-star Marine general  - “

“That would be great if he would come out here and do it,” Reid interjected.

Sanders then finished her sentence, saying, “That’s highly inappropriate.”

Sorry, Miss Sanders, you’re wrong. Ret. Gen. Kelly, now a member of an administration and not serving in the military, made a mistake.  It’s on tape.

But for you to infer any American citizen can’t question a four-star general is beyond the pale.  I, for one, can question any damn general I please.

There is a reason why I have closed every column since 9/11 the same way, praying for the men and women in our armed forces.  I have nothing but love for the grunts.  But I’m too smart, and know too much history, to know that this country, and every other country in the world, has had its share of great military leaders, and incredibly bad ones.

I’ve written this a few times before, but there’s a reason why a study of the Civil War is so important (as any West Pointer would tell you, for example).  It is an outstanding conflict for studying the behavior of generals in what was the beginning of modern warfare.  Stonewall Jackson was a brilliant general in the Valley campaign.  Union General Hancock (to name a less famous one) was brilliant at Gettysburg.  But there were scores of bad ones.

And here many of us just watched Ken Burns’ brilliant series on the Vietnam War and as I wrote the other week, there was Gen. William Westmoreland, a freakin’ liar who gave the American people, and his president, one false narrative after another.

So John McCain is right.  We demand a full investigation of Niger.  We know thus far that the head of Africa Command had been requesting backup support, such as drone surveillance, for months and it wasn’t forthcoming.  Deadly mistakes were obviously made.  And you and I have the right to question our leaders (just as in the case of Benghazi), even if they do have four or five stars on their shoulders.

Tax Reform

The Senate took a major step forward in the GOP’s effort to enact tax cuts, passing a budget by a 51-49 vote, no Democrats, Rand Paul the lone Republican dissenter, meaning it now moves to the House.

Passage allows the GOP to use a procedural maneuver to pass tax legislation through the Senate with just 50 votes (and Vice President Pence), meaning no Democratic support is needed, though I would expect one or two like West Virginia Democratic Sen. Joe Manchin to perhaps climb onboard.

The budget is expected to expand the deficit by $1.5 trillion over 10 years, which is the size of the proposed tax cut.  Previously, the White House and House Republicans had vowed the tax cuts would be offset with new revenue from the elimination of deductions, but now that clearly is not the goal.

The story Friday is that the House will accept the language in the Senate budget resolution, allowing them to move on to the tax-cut negotiations, but here is where it’s going to be exceedingly difficult to please everyone in the Republican caucus, starting with two factions, the deficit hawks and those 33 House Republicans most impacted by the elimination of state and local tax deductions that I’ve been writing of.

Separately, Sen. John McCain (R-AZ), chairman of the Senate Armed Services Committee, offered an amendment to ensure increases in federal defense spending are prioritized over increases in spending in other areas.

“Defense and nondefense are not of the same urgency,” he said Thursday.  “We have men and women serving in the military today who are being wounded and killed because they’re not sufficiently funded, armed, trained and equipped.”

Republican Sen. Lindsey Graham (S.C.) warned that failure to pass any tax proposal “will be the end of us as a party.”

Treasury Secretary Steven Mnuchin said that failure to pass the Republican tax overhaul would trigger a “significant” drop in the stock market.  [I’m 50/50 on this.]

Mnuchin told Politico, “There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done.”

He added: “I think to the extent we get the tax deal done, the stock market will go up (further).”

ObamaCare Repeal and Replace

Trump tweet, Saturday AM: “Very proud of my Executive Order which will allow greatly expanded access and far lower costs for HealthCare. Millions of people benefit!”

Then Tuesday, a deal was hatched by Republican Sen. Lamar Alexander (Tenn.) and Democratic Sen. Patty Murray (Washington), the two having come close before, on a package that would fix parts of the Affordable Care Act, with the deal then being blessed by President Trump, though it reinstated federal payments to insurers that Trump had cut off just the week before, while offering some relief from rising premiums and shaky insurance markets.  In a nod to Republicans it gives states limited flexibility to offer cheaper, less generous health plans.

Alexander told senators the deal represents a modest fix, as the president wanted, and helps protect up to 16 million Americans who don’t get health coverage through an employer or through a government program such as Medicare or Medicaid.

Trump, in a speech that evening to the Heritage Foundation, took credit for the negotiations, saying that Democrats had “responded to [his] call for them to take responsibility for their ObamaCare disaster and work with Republicans to provide much-needed relief for the American people.”

But Senate Majority Leader Mitch McConnell was noncommittal and House Speaker Paul Ryan didn’t comment immediately.

Then the next day, Trump withdrew his support and conservative lawmakers said it didn’t do enough to roll back ObamaCare.

Trump tweeted Wednesday morning, he “can never support bailing out ins co’s who have made fortune w/O’Care.”

We’re not back to square one, but where it goes from here I haven’t a clue.

NAFTA....

Negotiations over the future of NAFTA were extended into the first quarter of 2018 in a bid to resolve differences after Canada and Mexico rejected what they see as hardline U.S. proposals. All three chief negotiators had major issues. Mexico will host the fifth round of talks on Nov. 17-21.

Trump at the White House on Tuesday decried “massive trade deficits” with trading partners.

“Companies are leaving and they’re firing the people and the product is made elsewhere and then it’s sold back into the United States,” he said.  “I’m not going to be allowing that, so I can understand how certain countries and the leaders of certain countries may feel. But we’re just not going to allow the United States to be taken advantage of by other countries anymore.”

Editorial / Wall Street Journal

“Donald Trump is threatening again to terminate the North American Free Trade Agreement if Canada and Mexico don’t agree to his ultimatums. If this is a negotiating tactic of making extreme demands only to settle for much less and claim victory, maybe it will work. Otherwise Mr. Trump is playing a game of chicken he can’t win.

“Trump’s obsession with undoing NAFTA threatens the economy he has so far managed rather well.  The roaring stock market, rising GDP and tight job market are signs that deregulation and the promise of tax reform are restoring business and consumer confidence.  Blowing up NAFTA would blow up all that too.  It could be the worst economic mistake by a U.S. president since Richard Nixon trashed Bretton-Woods and imposed wage and price controls.

“U.S. demands in the NAFTA renegotiations – which returned to Washington last week – are growing more bizarre.  U.S. Trade Representative Robert Ligthhizer now wants to add a sunset clause, which would automatically kill it in five years unless all three governments agree to keep it. In other words, the U.S. proposes to increase economic uncertainty and raise the incentive for businesses to deploy capital to more reliable investment climates.

“The U.S. also wants to change NAFTA’s ‘rules of origin’ for autos.  Cars now made in North America can cross all three borders duty-free if 62.5% of their content is NAFTA-made. Mr. Lighthizer wants to raise that to 85% and add a subclause requiring 50% be made in the U.S.

“Mr. Lighthizer needs to get out more. NAFTA’s current rules-of-origin for autos are already the highest of any trade agreement in the world, says John Murphy of the U.S. Chamber of Commerce.  Raising them would give car makers an incentive to source components from Asia and pay America’s low 2.5% most-favored-nation tariff.  A higher-content rule would hurt Mexico, but it won’t bring jobs to the U.S.

“Adding a domestic content requirement also would violate World Trade Organization rules, so neither Mexico nor Canada are likely to agree.  And if they did, it would harm U.S. workers. Auto companies that now make cars for export in the U.S., using NAFTA-made components, would simply move abroad more of their manufacturing....

“Ending NAFTA would be even more painful for U.S. agriculture, whose exports to Canada and Mexico have quadrupled under NAFTA to $38 billion in 2016.  Reverting to Mexico’s pre-NAFTA tariff schedule, duties would rise to 75% on American chicken...45% on turkey, potatoes and various dairy products, and 15% on wheat.  Mexico doesn’t have to buy American, and last week it made its first wheat purchase from Argentina – 30,000 tons for December delivery....

“Mr. Trump can hurt our neighbors if he wants, but the biggest victims will be Mr. Trump’s voters.”

Trumpets....

--In an appearance with Puerto Rican Gov. Ricardo Rossello at the White House Thursday, President Trump said of the recovery efforts on the island, “I give ourselves a 10,” in acknowledging the devastation the island suffered this summer from two hurricanes was “in many ways worse than anything people have ever seen.”

“Did we do a great job?” Trump asked the governor.

“You responded immediately, sir,” Rosello replied.

“The response is there,” Rosello added.  “Do we need to do a lot more?  Of course we do...But with your leadership, sir, and with everybody over here, we’re committed to achieving that in the long run.”

More than three-quarters of Puerto Rico lacks electric power and has limited access to health care and other basic needs.  This is not a ’10,’ Mr. President.

--President Trump’s third attempt to ban travel from several predominantly Muslim nations met the same fate Tuesday as the first two: It was blocked nationwide by a federal judge in Hawaii.  The ban was to go into effect Wednesday.  Judge Derrick Watson wrote the ban “plainly discriminates based on nationality,” and “It lacks sufficient findings that the entry of more than 150 million nationals from six specified countries would be ‘detrimental to the interests of the United States.”

--From John Solomon and Alison Spann / The Hill

“Before the Obama administration approved a controversial deal in 2010 giving Moscow control of a large swath of American uranium, the FBI had gathered substantial evidence that Russian nuclear industry officials were engaged in bribery, kickbacks, extortion and money laundering designed to grow Vladimir Putin’s atomic energy business inside the United States, according to government documents and interviews.

“Federal agents used a confidential U.S. witness working inside the Russian nuclear industry to gather extensive financial records, make secret recordings and intercept emails as early as 2009 that showed Moscow had compromised an American uranium trucking firm with bribes and kickbacks in violation of the Foreign Corrupt Practices Act, FBI and court documents show.

“They also obtained an eyewitness account – backed by documents – indicating Russian nuclear officials had routed millions of dollars to the U.S. designed to benefit former President Bill Clinton’s charitable foundation during the time Secretary of State Hillary Clinton served on a government body that provided a favorable decision to Moscow, sources told The Hill.

“The racketeering scheme was conducted ‘with the consent of higher level officials’ in Russia who ‘shared the proceeds’ from the kickbacks, one agent declared in an affidavit years later.

“Rather than bring immediate charges in 2010, however, the Department of Justice continued investigating the matter for nearly four more years, essentially leaving the American public and Congress in the dark about Russian nuclear corruption on U.S. soil during a period when the Obama administration made two major decisions benefiting Putin’s commercial nuclear ambitions.

“The first decision occurred in October 2010, when the State Department and government agencies on the Committee on Foreign Investment in the United States unanimously approved the partial sale of Canadian mining company Uranium One to the Russian nuclear giant Rosatom, giving Moscow control of more than 20 percent of America’s uranium supply....

“In 2011, the administration gave approval for Rosatom’s Tenex subsidiary to sell commercial uranium to U.S. nuclear power plants in a partnership with the United States Enrichment Corp.”

It was in 2015 that author Peter Schweitzer and the New York Times documented how Bill Clinton collected hundreds of thousands of dollars in Russian speaking fees and his charitable foundation collected millions in donations from parties interested in the deal while Hillary Clinton presided on the Committee on Foreign Investment in the United States.

“The Obama administration and the Clintons defended their actions at the time, insisting there was no evidence that any Russians or donors engaged in wrongdoing and there was no national security reason for any member of the committee to oppose the Uranium One deal.

“But FBI, Energy Department and court documents reviewed by The Hill show the FBI in fact had gathered substantial evidence well before the committee’s decision that Vadim Mikerin – the main Russian overseeing Putin’s nuclear expansion inside the United States – was engaged in wrongdoing starting in 2009.”

Wall Street

The Dow Jones crossed the 23000 level and finished the week at another record high, 23328, today’s 165-point gain powered by the expectation that tax cuts may actually come to fruition after all.  Earnings continue to generally be OK, though I’d say far from spectacular.

As reported by CNBC, data via Thomson Reuters, following is the earnings growth in past quarters and the forecast looking ahead for the S&P 500.

Q1 2017...15.3%
Q2 2017... 12.3
Q3 2017...4.9 est.
Q4 2017...12.3 est.
Q1 2018...10.3 est.

If we come in with those kinds of numbers going through early next year, in a perfect world (which it sure isn’t), coupled with a sizable tax cut package, there would be little cause the market is going to correct in any meaningful way.  The Federal Reserve will hike rates again in December, but this has already been well-telegraphed, and you still have synchronized global growth across the 25 most developed nations.  Aside from the usual litany of geopolitical issues, relax. 

The issue will be going forward the rate of growth, inflation, and just how much further the Fed is forced to act. 

Speaking of the Fed, Chair Janet Yellen said on Sunday that the outlook was bright for both the economy and inflation prospects in coming months, saying the impact of the recent hurricanes will be muted and otherwise the economy is fine into year end.

Yellen, addressing an international banking conference, acknowledged the persistence of low inflation has been a surprise, but she said she expected it to start picking up.

“Economic activity in the United States has been growing moderately so far this year, and the labor market has continued to strengthen.”

There was some economic news of note this week.  September housing starts came in less than expected, while existing-home sales for the month were a little better than forecast at an annualized pace of 5.39 million, down 1.5% year-on-year.  The median home price at $245,100 is still a solid 4.2% above the level of Sept. 2016.

The Atlanta Fed’s GDPNow indicator for the third quarter is still at 2.7%.

Europe and Asia

Catalonia: Catalonia had a Monday deadline to clarify to Madrid whether it sought independence or not.

In a letter, Catalan leader Carles Puigdemont instead called for negotiations over the next two months.

Spain’s Deputy Prime Minister Soraya Saenz de Santamaria said Puigdemont had until Thursday to clarify his position, the Spanish government continuing to warn Catalonia that it must revoke the declaration or face direct rule from Madrid.

So with the Thursday deadline, Puigdemont once again failed to renounce independence, further escalating the crisis. 

He issued another letter urging dialogue, but threatened to have regional lawmakers vote on an explicit declaration of independence if Madrid does not agree to talks.

The office of Spanish Prime Minister Mariano Rajoy responded by saying the Cabinet would meet in special session Saturday, tomorrow, to trigger Article 155 of the Constitution, allowing the government to impose direct rule in a crisis, which has never been invoked in democratic Spain.  4,000 national police, who were dispatched to Catalonia at the time of the referendum have remained there since.

“The objective is to restore legality in Catalonia,” said a government spokesman, in reply to Puigdemont’s letter.

What happens tomorrow is potentially very dangerous.  Madrid shows every sign of enforcing the rule of law and taking over the running of Catalonia, probably including the arrest of Puigdemont and charging him with sedition, which would lead to massive demonstrations in the streets of Barcelona and elsewhere that no doubt will turn even more violent than the violence we saw surrounding the referendum.

It is also possible Rajoy will propose to his cabinet Saturday that pressure continue to be applied but gradually in an attempt to splinter the fragile coalition from which Puigdemont gains his power.

Politicians in Madrid are demanding Catalonia hold regional elections as early as January, but Puigdemont has made no mention of this.  Remember, while 90% voted for independence in the referendum, turnout was only 40%, the same number that favored independence in opinion polls prior to the vote. The numbers favoring an exit from Spain have been declining since regional elections in 2015 had separatist parties gaining a collective 48%.

For their part, the separatists are divided in their leadership, with most wanting to create more time for a negotiated settlement. Catalonia is facing major financial harm, amid a surge in corporate flight from the region that began after the Oct. 1 vote.

Brexit: In a bit of a surprise, EU leaders wrapped up their long-anticipated summit this week and agreed to start preparing for trade talks with the U.K. – though British Prime Minister Theresa May admitted there is “some way to go” in negotiations.

May’s 27 EU counterparts agreed in Brussels that enough progress had not been made on other issues, such as the divorce bill, to begin formal trade talks, but in starting internal talks, they are paving the way for them to begin, hopefully in December, which to me seems to be about the drop-dead date.  The March 2019 exit date is not that far away for such complicated negotiations.

As for the divorce bill, the major sticking point, Mrs. May said she had given a “firm commitment” on Britain’s financial obligations, but a “final settlement” would come as part of a “final agreement” with the EU.

The prime minister still hasn’t discussed any figures, but she also didn’t deny she told other EU leaders that Britain would shell out in excess of $30 billion.

“I have said that nobody need be concerned for the current budget plan, that they would have to either pay in more or receive less as a result of the U.K. leaving and that we will honor the commitments that we have made during our membership.”

But these commitments are being analyzed “line by line,” adding: “British taxpayers wouldn’t expect its government to do anything else.”

The prime minister said the two sides were making progress on the issue of citizens’ rights.

So the government is not where it wanted to be, by any stretch, at this point in time, but if May can show substantive progress in December, there then would be hope of an orderly Brexit.

This week’s summit and the conclusions reached also buys time for Mrs. May within her own fractious Conservative Party.

For his part, European Council president Donald Tusk said as the summit wrapped up that they had given the green light to preparations for the “second phase” of Brexit talks, dealing with trade.

“My impression is that the reports of the deadlock between the EU and the U.K. have been exaggerated. While progress is not sufficient, it does not mean there is no progress at all.  I hope we will be able to move to the second phase of our talks in December,” he said.

One thing seems clear. German Chancellor Angela Merkel, who has been a hardliner on how the Brexit negotiations should proceed in the past, softened her tone this week and said there were “encouraging” signs of progress, “step by step” despite the media reports to the contrary. Merkel added, “From my side there are no indications at all that we won’t succeed.”

So I am going to choose to be optimistic myself, until December.  Prime Minister May must return then with new proposals for the EU and final agreement on the financial tab.

Austrian Election: Right-wing parties made strong gains in parliamentary elections on Sunday, with the conservative People’s Party, led by 31-year-old Sebastian Kurz, winning 31.7% of the vote, while the far-right Freedom Party won 26%, close to the party’s best result ever in 1999.

The left-leaning Social Democrats, who led the outgoing government in a coalition with conservatives, won 27%.

Kurz is now the favorite to form a new government, and could do it possibly in coalition with the Freedom Party.  Kurz called for a crackdown on immigration during the campaign (co-opting the FP’s message), while cutting social benefits for refugees, and restricting access to the welfare state from other European Union countries.

The Freedom Party improved from its 20.5% share of the vote in the last elections in 2013.  It was as high as 35% in polls earlier in the year before Kurz took over the conservatives and stole the message.

Kurz thus becomes the world’s youngest leader (if you don’t include some 28-year-old who is regent of San Marino). Kurz is eight years younger than France’s Emmanuel Macron.  [Kim Jong Un is said to be 33.]

As for the far-right across Europe, what a turn of events after it was felt that following Marine Le Pen’s sound defeat in the French elections in the  spring that the movement had peaked.

Then the anti-immigration Alternative for Germany scored its unprecedented 13% in Bundestag elections, scooping up 92 of the 709 seats in parliament, and now this development in Austria.

Eurobits....

Eurostat reported that inflation for the eurozone (EA19) was 1.5% annualized in September, same as August, and up from 0.4% Sept. 2016.

Germany is at 1.8% ann., Spain 1.8%, France 1.1%, Italy 1.3% and Greece 1.0%.

The U.K., though, came in at 3%, the highest since April 2012, though pensioners are celebrating because they will receive a 3% increase next April as a result.  That said, wages are increasing less than the inflation rate, 2.1%, which isn’t good.

The falling pound in Britain is leading to higher costs for imported goods, and the Bank of England, with an inflation target of 2%, is on track to raise rates next month despite all the Brexit uncertainty.

September retail sales, for example, fell 0.8%, according to the Office for National Statistics.  Third-quarter retail growth was thus just 1.5% year-on-year, the slowest pace in four years.

--Spain cut its 2018 GDP forecast to 2.3% from 2.8% owing to the uncertainty in Catalonia, a region that makes up about 20% of the overall economy.

--Regarding the terror threat in the U.K., Andrew Parker, director-general of MI5, said that seven plots by Islamic extremists have been foiled since March and police have arrested record numbers on terrorist offenses in response to a threat that is “coming at us more quickly, and it can be harder to detect.”

“The scale at which we are operating is greater than ever before,” he said.  “We are now running well over 500 live operations involving around 3,000 individuals known to be currently involved in extremist activity in some way.”

--German Chancellor Merkel started her coalition talks with the pro-business Free Democrats (FDP) and the Greens (the “Jamaica coalition” after the colors of their party flags), and these could drag on for months.  Because the conservatives want to stick to budgets that do not add to the debt, there are limited future funds to be spent on new projects, which is the kind of sticking point you have when forming a coalition.  “We aren’t joining, Angela, unless we get 20bn euros for X,Y, and Z.  We might do better being in the opposition,” something like that.  We already know that for their part, the FDP is demanding the powerful Finance Ministry post.

Turning to Asia, I get into the important Chinese Communist Party gathering down below, but there was a slew of economic data on China for everyone to chew on, starting with the report on third-quarter GDP, 6.8%, after a second-quarter reading of 6.9%. The government had forecast 6.5% for the full year so this will be exceeded.

President Xi Jinping put heavy pressure on every government ministry to make sure he didn’t look bad and it’s funny how easy it is to comply.  “Boss, my numbers say 6.3%.”  “No they don’t.  Just change that 3 to an 8 by closing the circles.” 

Industrial production for September was up 6.6%, year-over-year, while fixed-asset investment for the first nine months grew 7.5%.  Retail sales grew 10.3% last month.  All the preceding from the National Bureau of Statistics.

The General Administration on Customs reported that Chinese exports rose 8.1% in September, largely on the strength of electronics and the roll outs of new smartphones from Apple and Samsung with imports up 18.7%, this latter figure good for Asia’s exporters.

An important figure for China, the percentage of the economy attributable to household consumption, has this at 39.3%, which is up from 36.7% in 2012 when Xi took control, but still far below most other industrialized nations, while debt to GDP in China is now 257.8%, up from 187.5% five years ago.  That is also part of Xi’s economic legacy thus far.

In Japan, September exports were up 14.1%, down from 18.1% in August, with imports up 12%.

Street Bytes

--The Dow Jones finished up a whopping 2% this week, its sixth consecutive week of gains, now at the aforementioned record level of 23328, while the S&P 500 rose 0.9% to its new record of 2575, and Nasdaq is at a new peak of 6629 after a gain of 0.3%.  The earnings crush continues this coming week.

--U.S. Treasury Yields

6-mo. 1.24%  2-yr. 1.49%  10-yr. 2.27%  30-yr. 2.81%

--As oil was bottoming in the winter of 2016, BP’s CEO Bob Dudley said that traders would start filling swimming polls with crude.  The other day at a conference in London, Dudley said, “The swimming pools are draining. Stock levels are just heading down, for both crude and products. So it does seem we’re heading towards the targets that were set by OPEC.”

Dudley said inventories were heading towards the five-year average range.  And he added, “I think the world has put aside geopolitical risk for a few years now. We’re starting to see that again effective in the price.  But if you look just at the balance of supply and demand I think it [the oil price] is about in the right place.”

--Goldman Sachs’ investment banking unit bailed out the traders this past quarter, as Goldman blew away Wall Street’s expectations on both earnings and revenues, the latter up 2% over a year ago. 

But revenues from fixed-income, currencies and commodities (FICC) declined 26%, this unit having long been the driver of Goldman’s results. The firm countered that with big gains in financial advisory, up 38%, and investing and lending, up more than 33%.

--Morgan Stanley reported net income of $5.5 billion for the first nine months of the year, its best showing since 2007.  In the third quarter, earnings were 93 cents a share on revenue of $9.2 billion, both handily beating expectations.

Summarizing the big banks’ quarterly earnings, the Wall Street Journal’s Liz Hoffman summed it up well.

“The five biggest Wall Street firms all improved from a year earlier, each relying on a different cocktail to overcome continued torpor in the once-lucrative securities business.  JPMorgan Chase and Citigroup leaned on corporate banking and credit cards.  Bank of America Corp. was aided by lending and expense discipline, while investment gains and merger fees helped Goldman.”  Morgan Stanley benefited from its wealth management unit – the army of brokers in 600 offices across the U.S.

The wealth-management business oversees $2.3 trillion for 3.5 million Americans and is the centerpiece of CEO James Gorman’s effort to create a steadier firm in terms of the P&L.  Morgan Stanley’s purchase of brokerage Smith Barney from Citigroup is now fully integrated and the wealth-management business had a profit margin of 26.5% in the quarter.  Profitability improves as assets increase.

Of Morgan Stanley’s assets, $1 trillion is now in flat fee-based portfolios.  Bank of America (read Merrill Lynch) also surpassed the $1 trillion in fee-based assets this quarter.

Amidst the good news, Morgan Stanley’s trading revenue fell 8%, similar to the others in the group, with fixed-income down 21% from a year ago.  It was down 27% at JP Morgan, and the above-noted 26% at Goldman.

--Shares in IBM soared 9% on Wednesday (the prime driver of that day’s solid Dow advance), after the company reported earnings after the market close on Tuesday.  The advance was bogus. 

Overall profit and sales declined, the latter down 0.4% from a year earlier, which while a minor slide was nonetheless the 22nd consecutive quarter of year-over-year declines.  Profit fell 4.5% to $2.73 billion.

But the Street seemed to take solace in the company’s announcement that the fourth quarter looks solid, with the transition the company has been undertaking from older, shrinking businesses to higher-growth opportunities finally beginning to bear fruit.

IBM has placed big bets on emerging technologies such as its Watson AI platform and blockchain, the networked ledger at the heart of digital currencies like bitcoin.

The company calls the newer opportunities strategic imperatives, including cloud computing, and this unit saw revenues grow 11% to $8.8 billion from a year earlier. Cloud revenue rose 20% to $4.1 billion.

But while strategic imperatives now account for 45% of total revenues, the growth rate in same has been slowing.

-Netflix Inc.’s wagers on original programming and international expansion are paying off, as the company ended its third quarter with 104 million paid streaming subscribers globally. It added 5.3 million streaming users in total, outpacing the 4.4 million the company had projected. [850,000 U.S. subscribers, and 4.45 million international subs.]

Netflix continues to pour money into original programs such as “Stranger Things” and “The Crown” to fend off the competition and attract new subscribers.  The company said it plans to spend as much as $8 billion on content next year – far outstripping the investments from Hulu, Amazon.com and HBO.

Revenue increased 30% to $2.99 billion in the third quarter.

But the company said it now has $17 billion in streaming-content obligations, a measure of current and future costs, up $2.6bn from the same quarter last year.

Netflix is showing this kind of growth while traditional pay-television distributors continue to feel the impact of cord-cutting, AT&T recently warning it had lost an estimated 390,000 traditional TV customers in the quarter.

The impact of Netflix’s recently announced price increase won’t be realized until the fourth quarter.  It does expect subscriber growth in the U.S. to decline as a result, but that is still growth.

--Verizon said on Thursday it added 603,000 wireless customers in the third quarter – a better-than-expected total propelled by the offer of unlimited data.

Third quarter revenue of $31.7 billion was a smidge higher than the Street’s forecasts, ditto earnings.  78 percent of Verizon’s wireless customers are now on unsubsidized plans – compared to 60 percent a year ago.

--Concerns over weak demand for the new iPhone 8 sent Apple shares down by the most in two months on Thursday, after Taiwan’s Economic Daily News said Apple has reportedly asked its suppliers to reduce iPhone 8 and iPhone 8 Plus production by nearly 50 percent in November and December.

Canada’s largest mobile network Rogers Communication said appetite for the latest iPhone had been “anemic.”

--Consumer Reports found that Toyota, Lexus and Kia are the top brands when it comes to reliability, while three domestic brands, Cadillac, GMC and Ram, are the worst.

Chrysler jumped up 10 to 17, from 27 (last), while Acura fell from 12 to 19.

Honda is 9, Hyundai 10, Ford 15.  Tesla is 21.

--American Express reported earnings that beat expectations with revenue up 9% from year ago levels, also beating the Street, plus the company guided higher for full year 2017.

But the stock fell a bit on the news that long-time CEO Kenneth Chenault is stepping down after a 16-year run.  The 66-year-old is being succeeded by Stephen Squeri, a three-decade AmEx veteran who previously ran the corporate card division.  Chenault is one of the country’s most prominent African-American corporate leaders.

--United Continental shares plunged 12 percent Thursday as the airline admitted it had dug itself a hole years ago and it would take some time to dig out of. CEO Oscar Munoz said, “We have dug ourselves in a hole from a competitive perspective,” and “it’s about regaining our competitive advantage,” vs. the likes of Delta.

Investors haven’t liked the airline slashing fares and the increase in supply of flights and seats, while from a public relations standpoint, United seems to stumble one time after another with passenger issues.

--SeaWorld Entertainment Inc. continues to struggle mightily, attendance declining, so it announced it was laying off another 350 workers, this time primarily at its corporate headquarters in Orlando, Fla., as well as the parks in Orlando and San Diego.

But the company said  it was not abandoning its animal rescue and rehabilitation operations.

The company simply has never recovered from the CNN documentary “Blackfish” and the resultant backlash.

In August, SeaWorld disclosed that its attendance dropped by 353,000 visitors in the first half of 2017 compared with 2016.

--China’s electric vehicle production could touch 1 million units next year and 3 million units by 2020, said Xu Heyi, chairman of carmaker BAIC Group, which would exceed current government targets.

China is looking to produce 2 million EVs a year by 2020 and 7 million by 2025.  The country produced 424,000 in the first three quarters of this year, according to the China Association of Automobile Manufacturers.

--Johnson & Johnson raised its full-year guidance after posting third quarter profit that topped analysts’ estimates, bolstered by double-digit sales growth at its pharmaceutical businesses and recent acquisitions.

Revenue was $19.65 billion in the quarter, up from $17.82bn in the corresponding quarter of the prior year and well ahead of the Street’s estimate.

Pharmaceutical sales were $9.7 billion, up 15.4%, the figure including the impact of the first full quarter of the acquisition of Swiss pharm and biotech company, Actelion, which contributed 7.9% to worldwide sales growth.

--Japan’s Kobe Steel said it increased the number of firms it says have been affected by its data fabrication scandal from 200 to 500. Earlier, Kobe admitted to falsifying quality data on some of its products for up to a decade.

Manufacturers such as General Motors, Boeing and Toyota have been investigating whether they have used sub-standard materials from Japan’s third-largest steel maker.

Boeing has already announced it does not consider their use of Kobe products a safety issue.

Central Japan Railway said some Kobe Steel parts for its bullet trains were substandard, but no safety problems.

--Carnival’s cruises are fully booked through the fourth quarter, as noted this week by CEO Arnold Donald (if he had bad news, he could have changed his name to Donald Arnold to throw people off).

Q4 is ahead of last year on cruise pricing.  With much of the Caribbean still a shambles, it seems like all the ships would be lining up at the same places.

--General Electric missed badly with its third-quarter earnings report and then the company guided sharply lower for the year to $1.05 to $1.10 a share, from a previous range of $1.60 to $1.70.  The stock initially tanked in pre-market trading Friday morning, following the release, but rallied back on blunt talk from new CEO John Flannery, who promised “sweeping change” in delivering a brutal assessment of the 125-year-old manufacturer.

Flannery said, “We need to make some major changes with urgency and a depth of purpose.”

He is seeking deep cost cuts and targeting $20 billion of asset divestitures within two years.

“Everything is on the table,” Flannery said on his first earnings call as CEO.  “Things will not stay the same at GE.”

For this past quarter, the maker of jet engines and gas turbines reported earnings of 29 cents a share, vs. an expectation of 50 cents.  GE hadn’t missed estimates by more than a penny in over nine years.

Investors are now bracing for a possible dividend cut, which it seems could be announced in mid-November, if the company decides to go that route.

--Procter & Gamble said it beat Nelson Peltz by 6.15 million votes, only 0.2% of its shares outstanding, meaning there will be a weekslong recount to determine the final outcome of the most-expensive proxy fight in history.

--Regarding the horrific fires in Napa and Sonoma counties in California, as the Los Angeles Times reported:

“For all their viticultural fame, Napa and Sonoma counties don’t dominate grape growing. That distinction is held by the Central Valley, which grew 70% of the state’s wine grapes last year, according to UC Davis.

“Only about 10% of either county is planted in grapes, according to wine growing associations. Most of it is in low-lying valleys that did not burn.”

But it may take until spring to know how many vines were damaged from heat.  New vines that needed to be planted wouldn’t be involved in wine-making for five years or more, according to growers.

Also, an estimated 85%-90% of grapes had already been picked when the fires broke out.

“Vintners can filter and blend wines to eliminate the smoky taste, but those grapes won’t be available for the higher-priced estate wines.”

As for when tourists will return, that’s a different story.  24 million visit the region each year.

--According to Forbes magazine’s annual list of the wealthiest Americans, President Trump fell to 248 from 156 in 2016, the president’s net worth falling from $3.7 billion to $3.1 billion, the magazine saying it arrived at that figure after “months of digging through financial disclosures and public property records and conducting dozens of interviews.”

One aspect of the Trump portfolio that is suffering is the golf division, with fewer people visiting courses in Miami, Ireland and Scotland.

Some of Trump’s properties rose in value in the past year, including a hotel-condo tower in Las Vegas, and his minority stake in a downtown San Francisco office building.

The top four on Forbes’ list remained unchanged from 2016, with Bill Gates topping it a 24th straight year at $89 billion.  Jeff Bezos is next at $81.5bn, followed by Warren Buffett ($78bn) and Mark Zuckerberg ($71bn...the Facebook founder’s wealth increasing $15.5bn from 2016 to ’17).

--George Soros, 29th on the Forbes’ list of billionaires, has turned over nearly $18 billion to Open Society Foundation, a move that puts it in the top ranks of philanthropic organizations, number two in the U.S. by assets after the Bill and Melinda Gates Foundation.

A new chief investment officer at Soros Fund Management LLC is less a trader than an allocator of capital to various asset managers, including in-house.

Soros won’t trade the billions now at Open Society.

--The Harvey Weinstein situation got worse with further allegations from leading actresses of  sexual harassment and assault. But brother Bob Weinstein came under fire himself this week, as stories began to emerge of what an amazing dirtball he was in his own right.

Jeffrey Katzenberg, who ran Walt Disney Co.’s  movie studio for a period when it owned the brothers’ former studio Miramax, said it was Bob Weinstein who caused problems for Disney executives.  “Bob Weinstein was genuinely abusive to people in my company,” Katzenberg said in an interview with the Wall Street Journal.  “The one person who revealed himself in a way that was unacceptable to me was, in fact, Bob.”

Last weekend, Harvey Weinstein was expelled from the Academy of Motion Picture Arts and Sciences, the 54-member board of governors including the likes of Steven Spielberg and Tom Hanks.  21 of the 54 are women.

Other controversial members of the academy remain in good standing, however, such as Bill Cosby and Roman Polanski.

Tom Hanks, known for never saying anything bad about anyone, told the New York Times that he had never worked with Weinstein. “But, aah, it all just sort of fits, doesn’t it? ...I’m not the first person to say Harvey’s a bit of an ass.”

Foreign Affairs

Iraq / Syria: U.S.-backed militias have completely taken Syria’s Raqqa from Islamic State, the fall of ISIS’ de facto capital a potent symbol of their overall collapse; Raqqa also being the city from which many of the international attacks were planned.

The Syrian Democratic Forces (SDF), an alliance of Kurdish and Arab militias backed by a U.S.-led international alliance, has been fighting ISIS inside Raqqa since June.

But who now fills the vacuum?  The region is being swept up in all manner of conflicts.  One analyst in Qatar told the Wall Street Journal’s Yaroslav Trofimov, “The next conflict in Syria will be between the forces of the Syrian regime and the Syrian Kurds.  These are the two major military powers left in the country now,” a repetition of Kirkuk  And what will the Americans now do?

As for the remaining ISIS threat, intelligence agencies around the world are on high alert, as ISIS attempts to prove it is still relevant.  But the group is no longer able to reshape the Muslim world.

Anshel Pfeffer / Haaretz

“The group will probably take a time-out as it evolves from a political organization back to a more traditional jihadist terrorist outfit.  But this is nowhere near the end of Islamic State.

“For a start, they still have bases further afield – Libya, Sinai and Yemen, and other locations in the wider region where a vacuum in governance allow them space. But they are unlikely to establish another caliphate in the foreseeable future.

“The next incarnation of Islamic State will not be a geographical entity.  It’s likely to build up its online global franchise, using social media to maintain contact among thousands of scattered and isolated alumni and to keep up recruitment.  Those who make it to a sanctuary will serve as clandestine coaches and sources of inspiration for thousands more wannabe jihadists who failed to make it to the caliphate on time.  Aspiring soldiers will still be able to enlist online or by voice recording before carrying out suicide missions.

“And there will be no lack of targets.  In the Middle East, where there was a very brief period of consensus during which everyone wanted to get rid of Islamic State, there will be plenty of fissures to exploit.  This is especially true in Sunni communities, where resentment to Iran’s resurgent Shia proxies will boil over, and in the more faraway countries that sent warplanes to bomb the caliphate. The World Cup next summer in Russia is about to be the most threatened sports tournament in history.”

Meanwhile, Iraqi forces suddenly overran the oil rich province of Kirkuk, seizing it in battles with Kurdish forces who had been deployed there since 2014, in a most troubling escalation of tensions following a nonbinding referendum Sept. 25 on independence by the Kurds that was favored by 92%.  Baghdad wasn’t happy.  President Trump said the U.S. wouldn’t take sides, even as we’ve offered major support for the Kurds in the fight against ISIS

Kirkuk, which includes ethnically mixed Kirkuk city, is claimed by both the central government in Baghdad and the Kurdistan Region of Iraq (KRI).

By week’s end, 100,000 Kurds had fled Kirkuk, fearing unrest, many taking refuge in Irbil and Sulaimaniya. There were reports Kurdish forces have not withdrawn from a large oil field northwest of Kirkuk, Khurmala, which had been developed by the Kurdistan Regional Government.

The biggest blow to the Kurds was the loss of two other major oil fields that produced 300,000 barrels a day, or nearly half the total output of the Kurdish region. The KRI government had been extracting and selling its own oil and gas.

Major fighting has taken place throughout the week, but no reports on casualties.

Editorial / Wall Street Journal

“A central tenet of the Trump foreign policy, a work in progress, has been that the U.S. would rebuild its relationship with America’s allies.  That commitment is being put to the test in northern Iraq....

“Across the length of America’s recent history with Iraq, we have had no more reliable ally than Iraq’s Kurds and their fighting force, the Peshmerga.

“So far the Trump Administration has said little about the attack on the Kurds.  ‘We’re not taking sides, but we don’t like the fact that they’re clashing,’ President Trump told reporters at the White House Monday....

“But if the U.S. allows one of its most visible allies to be defeated in the Middle East, make no mistake: Other allies in the region will notice and start to recalculate their relationship with the Trump Administration....

“(The) strategic details of this attack on the Kurds are important.  Iraq’s offensive includes Iran.  According to the Washington-based Institute for the Study of War, Iranian-backed militias and the 9th Iraqi Armored Division moved toward Kirkuk last week to support the Iraqi army.

“The Abadi government in Baghdad is under constant pressure from Shiite Iran to align itself against the interest of Iraq’s Sunni populations in the north and west.  It follows that after Iraq’s progress on the battlefield against Islamic State, Iran would encourage the Iraqis to drive the Kurds out of Kirkuk.

“Notice this is all happening within days of President Trump decertifying the Iran nuclear deal, based in part on the assumption that Europe will support U.S. efforts to resist Iran’s ballistic-missile program and its penetrations across the Middle East. But what will the Europeans or our allies in the Middle East conclude if we abandon one of our oldest regional allies, the Iraqi Kurds?....

“The U.S. owes a debt to the Kurds.  Abandoning them now would damage America’s credibility, and not least Mr. Trump’s ability to enlist allies against Iran’s expansion across the Middle East. The assault on Kirkuk matters.”

Israel: Russian Defense Minister Segei Shoigu assured Israel that Moscow has agreed to expand a buffer zone between Israel and Syria, where Iranian and Hizbullah forces will not be allowed to enter, Arab media and the Jerusalem Post reported Wednesday, though Russia did not acquiesce to Israel’s request for a 25 mile off-limits zone. 

With the war in Syria winding down, Israel is rightfully concerned Iran will help Hizbullah produce more accurate precision-guided missiles and aid them in strengthening their foothold in the Golan Heights.

Which leads to the next topic....

Iran: To repeat, last Friday, President Trump declared the Iran nuclear deal is no longer in the national security interest of the United States, though he stopped short of withdrawing from the Obama-era pact and demanded reforms.

“I am announcing today that we cannot and will not make this certification. We will not continue down a path whose predictable conclusion is more violence, more terror and the very real threat of Iran’s nuclear breakout.”

On the Sunday talk shows, Secretary of State Rex Tillerson said he believes staying in the Iran nuclear deal is in the best interest of the U.S., and that both he and Defense Secretary James Mattis do not want Congress to immediately impose sanctions that would end the multilateral deal.

The goal, said Tillerson, is to see if the U.S. can address the flaws in the accord by staying within the agreement and working with the country’s friends and allies.

National security adviser H.R. McMaster said on “Fox News Sunday,”:

“What the president has done is, he has set out a marker, a marker to Iran, our allies and our partners that we have to fix fundamental flaws in this deal.... It is a weak deal that is being weakly monitored, and so the president has made clear he will not permit this deal to provide cover for what we know is a horrible regime to develop a nuclear weapon.”

Iranian Foreign Minister Javad Zarif said on CBS’ “Face the Nation”:

“None of us ever trusted the United States.  This deal was not based on trust. It was based on mutual mistrust....The U.S. is no longer not just unpredictable but unreliable.”

German Foreign Minister Sigmar Gabriel said: “My big concern is that what is happening in Iran or with Iran from the U.S. perspective will not remain an Iranian issue but many others in the world will consider whether they themselves should acquire nuclear weapons too given that such agreements are being destroyed.”

Gabriel said if the United States terminated the deal or if sanctions were reimposed on Tehran, it would give Iranian hardliners, who are against negotiations with the West, the upper hand.

“Then they might revert to developing nuclear weapons,” Gabriel said, adding Israel would not tolerate that and “then we will be back where we were 10, 12 years ago with the danger of war relatively close to Europe.”

Russian Deputy Foreign Minister Sergei Ryabkov told his Iranian counterpart that Moscow remains committed to the Iran deal, Russia’s Foreign Ministry said in a statement on Thursday.

Earlier, Saudi King Salman praised Trump in a phone call for his “firm strategy” against “Iranian aggression and its support for terrorism in the region.”

Josh Roggin / Washington Post

“(The) administration’s convoluted strategy virtually assures that Congress won’t succeed – foreshadowing yet another crisis over the deal and perhaps a U.S. withdrawal in just three months’ time.

“In a sense, the move was classic Trump. As with other campaign promises, including on health care and immigration, the president combined tough-sounding rhetoric about reversing part of President Barack Obama’s legacy with a too-clever-by-half plan to avoid doing the heavy lifting himself.  Now Congress is left to deal with the mess while the international community scratches its head.”

Israeli Prime Minister Benjamin Netanyahu, in an interview on CBS’ “Face the Nation” with moderator John Dickerson.

Q: Why do you think what the president has done is going to lead to a better situation (re Trump’s move on the Iran deal)?

Netanyahu: Well, I’m focused on the result.  And I think that right now the deal, as it stands, guarantees that Iran will have not a single nuclear bomb, but an entire nuclear arsenal within ten years. And I think the president was very courageous in saying, I’m not going to kick this can down the road, I’m not going to say, well, it’s going to be on somebody else’s watch. I’m going to stop this from happening because, remember, we cannot allow Iran, the world’s foremost terrorist regime, that hangs gays, kills protesters, jails journalists and foments aggression throughout the region and the world.  We cannot allow this rogue regime 30 times the size of North Korea’s economy to have a nuclear arsenal. It’s a very brave decision and I think it’s the right decision for the world....

“And...you should know that in the Middle East something very historic is happening. I mean it’s not just Israel that is supporting the president.  It’s key Arab states like Saudi Arabia and the Emirates. And I suggest that, you know, when Israel and the key Arab states agree on something, you know, you should pay attention.  We’re close to – with our ears to the ground. We live right here next to Iran. We see what it’s doing.  And I think that what the president has done has created new space to prevent a very bad deal from materializing and to fix it. Everybody should join forces in doing just that.

Q: What’s your response to those, including the signatories to this agreement, who say that Iran has been abiding by the agreement and that while ten years is a deadline you pick, that, in fact, there are longer deadlines where Iran will be monitored and if they break and try to move back to a nuclear capability, the entire world will see and jump on them right away?

Netanyahu: John, I’ve always said that the greatest danger of this deal is not that Iran will violate it, but that Iran will keep it, because under the deal, in a few years’ time, Iran is guaranteed to have as many as 100 nuclear bombs. That’s folly.  And kicking the can down the road is not wise policy.

So whether or not they keep it or violate it is not the point. The point is they have a highway right now to – assuming they keep the deal, to get to that point where they become a terrorist rogue regime with a vast nuclear arsenal.  So that really has to be stopped.  And I don’t think the issue right now is whether to keep it or whether they violate it.  The issue right now is, we’ve got to change the destination to which they’re heading.

Amir Handjani / Bloomberg

“Trump’s action doesn’t in and of itself shred the nuclear pact: Congress now has 60 days to vote on that step, and the White House is asking it instead to set up a number of ‘trigger points’ that would result in re-imposition of sanctions.

“But don’t be fooled: By decertifying in the face of all evidence that Iran is complying, Trump is in effect going rogue, and the consequences will be felt across the globe.

“The U.S. and Europe brought Iran to the negotiating table after 10 years of coordinated and painstaking sanctions that targeted all aspects of Iran’s economy, including banking, energy and trade.  Over two administrations (those of George W. Bush and Obama), Washington, in close cooperation with the EU effectively cut Tehran off from the global economy.

“This was a remarkable act by the Europeans. Tehran, despite the 1979 Islamic Revolution, had robust commercial relationships with Europe. Iranians could travel with relative ease to Europe and, despite being isolated from the U.S., were getting essential goods and services such as medicine and technology from the EU....

“In the last two years since the deal was signed, Europe has slowly regained its access to the Iranian market.  Iran’s economy is rebounding.  EU foreign policy chief Frederica Mogherini has called the nuclear deal vital to international peace and security. French President Emmanuel Macron and U.K. Prime Minister Theresa May have gone on record saying the deal is doing what it was intended to do, prevent Iran from developing a nuclear weapon.....

“Trump’s actions, and any new sanctions from Congress, will drive a wedge between Washington and Europe on Iran.  It would be virtually impossible to reconstitute that sanctions regime that was in place before the nuclear deal came into effect. Trump’s decision will be viewed as callous disregard for multilateral negotiations and norms.  It will reinforce the image that Iran often portrays the U.S. as being a bully on the world stage that does what it wants with reckless abandon – alliances and commitments notwithstanding.  It’s an image that Trump embraces in both style and substance.

“The implications for Europe go well beyond the Iran deal. With Trump’s precedent of shunning the global security architecture that the U.S. has led for 75 years now in question, Europeans will be left wondering if the U.S. would really live up to its security commitments if, say, Russia became more aggressive in the Baltic states or Eastern Europe.”

Afghanistan: It was an awful week here, and with all the other news of the week severely underreported, but the Taliban wiped out an entire Afghan army post, killing 43 (of 60) soldiers, when they stormed the base with suicide bombers in the southern province of Kandahar.  The battle ended with U.S. airstrikes.

This attack was Wednesday night. Wednesday morning, 12 police officers died in two smaller Taliban strikes.

Earlier in the week, a string of Taliban attacks in three separate provinces killed 74 people.

But wait...there’s more!  Friday, at least 60 people were killed in two separate attacks on mosques in Afghanistan, including a gunman entering a Shia mosque in Kabul before opening fire and detonating an explosive, killing at least 39 worshippers.

An attack on a Sunni Muslim mosque in Ghor province killed another 20.

ISIS had previously targeted Shia mosques across Afghanistan.

The situation here is grim.

North Korea: Saying Pyongyang does not plan to hold any talks with Washington about its nuclear program, and that possessing nuclear weapons was a matter of life and death, the leader of the North American department of North Korea’s foreign ministry, Choe Son-hui, told a non-proliferation conference in Moscow on Friday. 

“This is a matter of life and death for us. The current situation deepens our understanding that we need nuclear weapons to repel a potential attack....We will respond to fire with fire.”

Robert Samuelson / Washington Post

“It turns out that North Korea isn’t just a nuclear threat. It’s also a cyberthreat, and in some ways, this may be more frightening.  Launched largely anonymously, cyberattacks can cripple essential infrastructure – power grids, financial networks, transportation systems – and inflict social disorder and political anarchy.  Immediate retaliation is difficult.

“All this now seems plausible.

“Until recently, cybersecurity experts dismissed North Korea’s attack capabilities. It was too backward to pose a serious threat. No more.  In a lengthy front-page story on Oct. 16, the New York Times reported that cybersecurity experts admit that they underestimated North Korea, which has now been tied to some major cyberattacks.  This includes the heist of an estimated $81 million of funds from the central bank of Bangladesh....

“North Korea ‘can hold large swaths of nation-state infrastructure and private-sector infrastructure at risk,’ said former deputy director of the National Security Agency Chris Inglis.  In part, the North Koreans were instructed and encouraged by Iran, the Times said.  But mostly their gains reflected persistence....

“Just how the United States can react to North Korea’s cyber prowess is unclear.  According to the Times, ‘Hundreds, if not thousands, of American cyberwarriors spend each day mapping the North’s few networks, looking for vulnerabilities that could be activated in time of crisis.’  By some accounts, the United States has planted sleeper cells in North Korea’s networks.

“But the United States is constrained by its huge commitment to the Internet. We are more dependent on the Web than the North Koreans. In practice, this means that we are more vulnerable to attacks on it.  More systems can be shut down and crippled than in North Korea.   Americans think that technological superiority works to our benefit. Here, the opposite may be true.”

China: In a nearly 3 ½-hour speech Wednesday before the 19th Communist Party Congress, President Xi Jinping warned of “severe” challenges while laying out a road map to China becoming a leading power by 2050.

In the long anticipated speech and Congress, which is just a twice-a-decade event and is usually meant, after the first five years of a president’s term, to confirm the second term, Xi clearly dropped hints he wants to continue beyond 2022, as I’ve written for over a year now.

I have also written numerous times that Xi is dangerous. He is not a smart guy, though obviously very shrewd.  He has not traveled widely (except now on government business), he is a princeling and former party hack (governor of the province where my failed investment was and I know he knew the CEO), and he has a very closed inner circle, receives little outside advice of any kind.  Outsiders are threats to his authority, and especially the last two years, any threat has been dealt with harshly.

And for the people, the liberalization of society of the roughly 20-year period until he took over in 2012 is long gone.  There is no Internet freedom.  Xi is slamming the doors all over. And any talk of seeking foreign investment is total bunk.

Hong Kong and Taiwan, I also hasten to add, are screwed.

“Chinese people will enjoy greater happiness and well-being, and the Chinese nation will stand taller and firmer in the world,” Xi said of his vision for 2050.  Hardly, regarding the first half of that statement.

Of the modernization of the People’s Liberation Army into one of the world’s top militaries by 2050, Xi said, “A military is built to fight.”

Xi is emerging as one of the country’s top three leaders along with Deng Xiaoping and Mao Zedong.

Some of the major takeaways of his report to the Congress:

A new name for Xi’s political philosophy.  Xi said China has formed “socialism with Chinese characteristics for a new era.” The idea will be the guiding principle for the country’s development in the coming years.

Xi said the dream of national rejuvenation would only be a fantasy without the leadership of China’s Communist Party. The party should lead in all areas and the authority of the party central leadership should be respected, he said.

“The party resolutely opposes all attempts that will weaken, distort or reject the leadership of the party and the implementation of socialism.”

Keeping up with the “irreversible” momentum of anti-corruption campaign and maintaining the rule of law.

Protecting national sovereignty.

The Chinese military will embark on a massive hardware upgrade and top leadership shakeup under President Xi’s orders, as he lays out his ambitious plan for the People’s Liberation Army, as noted in the report to the Party Congress on Wednesday. Xi said the PLA must modernize by 2035.

Xi said technology was at the core of combat strength and the PLA needed to apply information technology and modern warfare strategies to advance.

Upholding central government authority over Hong Kong and Macau and opposing Taiwan independence.

Xi said the “one country, two systems” principle will not be changed nor distorted in Hong Kong.

On Taiwan, Xi said Beijing will continue to resolutely oppose any move to seek independence for Taiwan.

Creating a level playing field for foreign businesses.

Xi said China would give equal treatment to all businesses. “The China which has opened up will not close, but will open wider and wider,” he said. This a total crock of merde.

Next week we’ll get the announcement on the makeup of the new 25-member Politburo and the seven-member Politburo Standing Committee, the latter which runs the country, which will comprised of Xi loyalists.

Editorial / Washington Post

“In perhaps the most important speech of his career, Chinese leader Xi Jinping on Wednesday promised ‘a new era’ that ‘sees China moving closer to center stage’ as ‘a leading global power’ with a ‘world-class’ military. Given how else he described the regime he intends to fashion over the next few years, that prediction ought to concern the world’s democratic nations.

“A decade and more ago, the United States and other Western leaders were urging China to become a global ‘stakeholder.’  But the superpower that Mr. Xi intends to lead doesn’t look like the cooperative partner and gradually liberalizing society they imagined.

“Instead, China’s 64-year-old ruler, having concentrated power in his own hands, now seeks to reinforce the authority of the Communist Party in all areas of life, at the expense of the rule of law, political dissent, private enterprise and even privacy itself: A new system of social monitoring will minutely record and rate the activities of every citizen, while storing their facial images for easy recognition.

“While offering token mentions of markets, private enterprise and openness to foreign investment, Mr. Xi promised to help state companies become ‘stronger’ and ‘bigger.’  He touted his ‘belt and road’ initiative, a centrally directed project to pour hundreds of billions of dollars of infrastructure investments into countries across Eurasia.

“Most of all, his vision of China as a superpower was infused by a nationalist agenda....Mr. Xi intoned the phrase ‘strong power’ or ‘great power’ 26 times, according to a New York Times count.  Mr. Xi boasted that one of his regime’s most internationally controversial actions, the fortification of islets in the South China Sea, was a highlight of his first five years in office, even though an international tribunal found Beijing to be acting contrary to international law.

“Mr. Xi’s biggest applause line was a vow to ‘never allow anyone...at any time or in any form, to separate any part of Chinese territory from China.’ That would include Hong Kong and Taiwan, along with those disputed rocks.  But he said nothing about North Korea or its manic pursuit of a nuclear arsenal, the crisis that most demands China’s responsible cooperation....

“The question of whether Mr. Xi’s strategy of party and state dominance can succeed in making China the world’s leading power will take far longer to play out... But China’s ambitious ruler does have one big advantage. Thanks to the disarray of the U.S. political system and the retreat by two successive presidents from America’s global role, an ambitious regime may find a vacuum to fill.”

Editorial / The Economist

“Unlike Vladimir Putin, Russia’s president, Mr. Xi is not a global troublemaker who seeks to subvert democracy and destabilize the West.  Still, he is too tolerant of troublemaking by his nuke-brandishing ally, North Korea.  And some of China’s military behavior alarms its neighbors, not only in Southeast Asia but also in India and Japan.

“At home, Mr. Xi’s instincts are at least as illiberal as those of his Russian counterpart.  He believes that even a little political permissiveness could prove not only his own undoing, but that of his regime. The fate of the Soviet Union haunts him, and that insecurity has consequences. He mistrusts not only his enemies his purges have created but also China’s fast-growing, smartphone-wielding middle class, and the shoots of civil society that were sprouting when he took over. He seems determined to tighten control over Chinese society, not least by enhancing the state’s powers of surveillance, and to keep the commanding heights of the economy firmly under the party’s thumb.  All this will make China less rich than it should be, and a more stifling place to live.  Human-rights abuses have grown worse under Mr. Xi, with barely a murmur of complaint from other world leaders....

“Mr. Xi may think that concentrating more or less unchecked power over 1.4bn Chinese in the hands of one man is, to borrow one of his favorite terms, the ‘new normal’ of Chinese politics.  But it is not normal; it is dangerous.  No one should have that much power.  One-man rule is ultimately a recipe for instability in China, as it has been in the past – think Mao and his Cultural Revolution.  It is also a recipe for arbitrary behavior abroad, which is especially worrying at a time when Mr. Trump’s America is pulling back and creating a power vacuum. The world does not want an isolationist United States or a dictatorship in China. Alas, it may get both.”

Somalia: Sunday morning I saw the first news headlines of the horrific twin-bombing in Somalia, and the initial death toll was about 20. But in looking at the massive devastation in the capital of Mogadishu, you couldn’t help but think, boy,  that will rise.  And it did, to 86. And then over 100.  And then over 200.  At last word tonight the tally is 358 dead, 300 injured.  You can imagine the poor healthcare structure there and how the severely stressed system is beyond overwhelmed, including in the need for blood. 

Al-Qaeda-linked al-Shabab is presumed to be responsible.

Malta: For those of us who viewed Malta as some peaceful little country in the Mediterranean, such thoughts were shattered this week when Daphne Caruana Galiza, 53, died in an explosion shortly after she left her home near Mosta in a car bomb attack.  She was known for her blog attacking political corruption.

Her son, Matthew, who was close by and attempted to save her from the burning vehicle, said, “My mother was assassinated because she stood between the rule of law and those who sought to violate it....

“When the institutions of the state are incapacitated, the last person left standing is often a journalist,” he wrote in a Facebook post.

Matthew took aim at Malta’s projected image as a liberal Western nation.

“Yes, this is where we are: a mafia state where you will be blown to pieces for exercising your basic freedoms.”  [BBC News]

Caruana Galiza was a harsh critic of the government and effectively triggered an early election this year by publishing allegations linking Prime Minister Joseph Muscat to the Panama Papers scandal. Muscat and his wife denied they used secret offshore bank accounts to hide payments from Azerbaijan’s ruling family.

Venezuela: The opposition is in shambles after last Sunday’s elections for provincial governors.  Polls had showed the opposition would win up to two-thirds of the races, which made sense since few actually support the government.  But the results had 17 of the 23 governorships being awarded to President Nicolas Maduro’s party, which was said to have collected 54% of the vote.

What stunned the opposition is that there was no outright evidence of fraud in the vote count, though as the Washington Post pointed out, in the province covering greater Caracas, the opposition was ahead by nine points in the polling prior to the vote, but lost by six.

Oh, there was chicanery, like moving polling places from anti-government neighborhoods to those in regime-friendly areas, and the results were condemned by the U.S. State Department, but Maduro can claim he has a democratic mandate.  By week’s end, there was no unified opposition against him.

Random Musings

--Presidential tracking polls....

Gallup: 35% approval for President Trump, 60% disapproval
Rasmussen: 43% approval, 55% disapproval

A new CNN poll conducted by SSRS found that 37% of Americans approve of the way Trump is handling the presidency, 57% disapprove.

32% approve of the way the President is handling his relationship with Republicans in Congress while 54% disapprove.  Among Republicans, 68% say they approve of the way Trump is handling it. When asked if they trust Trump or the congressional Republicans to handle major issues facing the country, 63% of Republicans choose Trump, 29% said Republicans in Congress.

In a generic congressional ballot – Democrats trounced Republicans 51% to 37% overall, driven by a unified base of Democrats. Nearly all self-identified Democrats (98%) say they prefer the Democratic candidate in their congressional district, compared to 88% of Republicans who prefer the GOP candidate in theirs.  But among independents, Democrats have an edge of just four points, within the margin of sampling error for that group.

Meanwhile, in the same poll, 52% opposed Trump’s recent tax reform proposals, while only 34% say they support the Trump plan.  81% of Democrats oppose, 70% of Republicans support them.  Independents are 50% opposed, 35% in favor.

--Sen. John McCain, remarks at the 2017 Liberty Medal ceremony, Oct. 16:

“We are blessed, and we have been a blessing to humanity in turn.  The international order we helped build from the ashes of world war, and that we defend to this day, has liberated more people from tyranny and poverty than ever before in history. This wondrous land has shared its treasures and ideals and shed the blood of its finest patriots to help make another, better world.

“And as we did so, we made our own civilization more just, freer, more accomplished and prosperous than the America that existed when I watched my father go off to war on December 7, 1941

“To fear the world we have organized and led for three-quarters of a century, to abandon the ideals we have advanced around the globe, to refuse the obligations of international leadership and our duty to remain ‘the last best of hope of earth’ for the sake of some half-baked, spurious nationalism cooked up by people who would rather find scapegoats than solve problems is as unpatriotic as an attachment to any other tired dogma of the past that Americans consigned to the ash heap of history.

“We live in a land made of ideals, not blood and soil.  We are the custodians of those ideals at home, and their champion abroad.  We have done great good in the world.  That leadership has had its costs, but we have become incomparably powerful and wealthy as we did.  We have a moral obligation to continue in our just cause, and we would bring more than shame on ourselves if we don’t.  We will not thrive in a world where our leadership and ideals are absent. We wouldn’t deserve to.”

Trump, in a radio interview the next day with host Chris Plante, was asked if he had heard McCain’s comments from the night before.

“Yeah well, I hear it,” Trump said.  “People have to be careful because at some point, I fight back.  I’m being nice. I’m being very, very nice.  But at some point I fight back, and it won’t be pretty.”

McCain, asked to respond to Trump, said, “I’ve faced far greater challenges than this.”

--On Thursday, former President George W. Bush warned that “bigotry seems emboldened” in the U.S., and that Americans need to reject “white supremacy.”

“Bigotry seems emboldened.  Our politics seem more vulnerable to conspiracy theories and outright fabrication.”

“Bigotry or white supremacy in any form is blasphemy against the American creed.”

Bush also warned against “a new era of cyber threats” including Russia’s attempt to influence the 2016 presidential election.

While Bush didn’t mention Trump by name, there is no doubt who he was going after.

But, the former president also said in the same speech:

“(For years), challenges have been gathering to the principles we hold dear. And, we must take them seriously. Some of these problems are external and obvious.  Here in New York City, you know the threat of terrorism all too well.  It is being fought even now on distant frontiers and in the hidden world of intelligence and surveillance.  There is the frightening, evolving threat of nuclear proliferation and outlaw regimes.  And there is an aggressive challenge by Russia and China to the norms and rules of the global order – proposed revisions that always seem to involve less respect for the rights of free nations and less freedom for the individual.

“These matters would be difficult under any circumstances.  They are further complicated by a trend in western countries away from global engagement and democratic confidence.  Parts of Europe have developed an identity crisis.  We have seen insolvency, economic stagnation, youth unemployment, anger about immigration, resurgent ethno-nationalism, and deep questions about the meaning and durability of the European Union.

“America is not immune from these trends.  In recent decades, public confidence in our institutions has declined.  Our governing class has often been paralyzed in the face of obvious and pressing needs....

“There are some signs that the intensity of support for democracy itself has waned, especially among the young, who never experienced the galvanizing moral clarity of the Cold War, or never focused on the ruin of entire nations by socialist central planning. Some have called this ‘democratic deconsolidation.’  Really, it seems to be a combination of weariness, frayed tempers, and forgetfulness.”

--A new poll by Politico and Morning Consult shows that 46% of voters believe that major news organizations fabricate stories about the president and his administration.  37% believe the media doesn’t fabricate stories about Trump and 17% were undecided.

76% of Republicans believe the media makes up news about the president, 65% of Democrats “think they do not.”

Only 28% of voters believe the government should yank the broadcasting license of news organizations.

--During an impromptu session with reporters at a Cabinet meeting this week, I was startled when President Trump asserted that he had heard Ireland was going to cut its already low corporate tax rate.  “I hear that Ireland is going to be reducing their corporate rates down to 8 percent from 12.”  I follow Ireland closely and I immediately thought, ‘What the heck is he talking about?  The European Commission has been applying non-stop pressure on Ireland over the years to raise it.’

So Irish Prime Minister Leo Vradkar said this was “fake news.”  “I can confirm that President Trump’s claim that we are proposing to reduce our corporation profit tax to 8 percent is indeed fake news. There is no such plan to do so.”  The rate, long at 12.5 percent, is remaining at that level.

--Rep. Tom Marino (R-Pa.) withdrew his name from consideration as the nation’s drug czar following a blistering Washington Post-60 Minutes joint investigation that highlighted his support for legislation that weakened the government’s ability to go after drug companies that critics said contributed to the nation’s opioid crisis.

It was Marino who spearheaded legislation that made it tougher for the Drug Enforcement Administration to stop suspicious shipments of drugs.

--U.S. Army Sgt. Bowe Bergdahl, who walked off his post in Afghanistan and was captured by the Taliban, pleaded guilty on Monday to desertion, and other charges of misbehavior.

Bergdahl, captured in 2009, remained in captivity until 2014, when he was freed in a controversial prisoner exchange.

Bergdahl’s admission makes the move by President Obama to exchange five Taliban detainees for this now admitted traitor abominable.

--Over the past two years, after decades of declining deaths on the road, U.S. traffic fatalities surged by 14.4 percent.  In 2016 alone, more than 100 people died every day in or near vehicles in America, the first time the country has passed that grim toll in a decade.  Regulators, meanwhile, still have no good idea why crash-related deaths are spiking. People are driving longer distances but not much more.  Drinking and speeding may be up a bit, but not more than usual.

What’s clear is the spike is due to distracted driving.

Last year, 5,987 pedestrians were killed by cars in the U.S., almost 1,100 more than in 2014 – a staggering 22% increase.

But as Kyle Stock, Lance Lambert and David Ingold note in an extensive report  for Bloomberg News, the data that would confirm everyone’s suspicions isn’t easily obtained.

“Out of NHTSA’s full 2015 dataset, only 448 deaths were linked to mobile phones – that’s just 1.4 percent of all traffic fatalities. By that measure, drunk driving is 23 times more deadly than using a phone while driving, though studies have shown that both activities behind the wheel constitute (on average) a similar level of impairment.  NHTSA has yet to fully crunch its 2016 data, but the agency said deaths tied to distraction actually declined last year.

“There are many reasons to believe mobile phones are far deadlier than NHTSA spreadsheets suggest. Some of the biggest indicators are within the data itself. In more than half of 2015 fatal crashes, motorists were simply going straight down the road – no crossing traffic, rainstorms, or blowouts.  Meanwhile, drivers involved in accidents increasingly mowed down things smaller than a Honda Accord, such as pedestrians or cyclists, many of whom occupy the side of the road or the sidewalk next to it.  Fatalities increased inordinately among motorcyclists (up 6.2 percent in 2016) and pedestrians (up 9 percent).”

The nonprofit National Safety Council found only about half of fatal crashes tied to known mobile phone use were coded as such in NHTSA databases.

But police departments largely focus on drinking or drug use when first investigating a crash, while proving a mobile phone was in use at the time of one is getting trickier every day.

The problem is, lawmakers, investigators and prosecutors won’t prioritize the danger of mobile phones in vehicles “until they are seen as a sizable problem – as big as drinking, say.  Yet, it won’t be measured as such until it’s a priority for these same folks.

“ ‘That’s the catch-22 here,’ said the mother of a victim of distracted driving.  ‘We all know what’s going on, but we don’t have a breathalyzer for a phone.’”

Jonathan Adkins, executive director of the Governors Highway Safety Association, told Bloomberg:

“I use the cocktail party example,” he explained. “If you’re at a cocktail party and say, ‘I was so hammered the other day, and I got behind the wheel,’ people will be outraged. But if you say the same thing about using a cell phone, it won’t be a big deal.  It is still acceptable, and that’s the problem.”

Damn right.  I swear to God, I haven’t used a phone while driving in years.

---

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

God bless America.

---

Gold $1281
Oil $51.66

Returns for the week 10/16-10/20

Dow Jones  +2.0%  [23328]
S&P 500  +0.9% [2575]
S&P MidCap  +0.8%
Russell 2000  +0.4%
Nasdaq  +0.3%  [6629]

Returns for the period 1/1/17-10/20/17

Dow Jones +18.0%
S&P 500  +15.0%
S&P MidCap  +10.5%
Russell 2000  +11.2%
Nasdaq  +23.1%

Bulls 60.0...high level still doesn’t matter
Bears 15.2 [Source: Investors Intelligence]

Have a great week.

Brian Trumbore



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Week in Review

10/21/2017

For the week 10/16-10/20

[Posted 11:30 PM ET]

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 967

Trump World

I wrote the following in this space on 10/7/17:

Niger: Four American Green Berets were killed, two injured, in an ISIS, al-Qaida-inspired ambush in southwest Niger.  The soldiers were part of a training operation and are elements of a longstanding U.S. force of 800 in the country that is aiding the government, and others in the area, in the fight against al-Qaida and other militants, including Boko Harem.  The force is primarily providing training and security assistance, including heavy surveillance with drones.

“[At first, we heard three had been killed, not knowing the military was looking for a fourth who had gone missing and somehow wasn’t evacuated with the others initially.  After 48 hours of searching, Niger’s army found him.]”

---

The above, as you know is my routine 95% of the time, had a post date of Sat., Oct. 7, but I’m actually posting Friday evening, in this case Oct. 6.   That’s important.  I, we, learned of the deaths of three Green Berets on Wednesday, Oct. 4, but didn’t learn of Sgt. La David Johnson’s death until Friday, Oct. 6, which I then reported, seeing this before posting that evening.  As the ‘wait 24 hours’ guy, I didn’t speculate whatsoever.

Well now some very troubling issues have been raised, on what was clearly a gross intelligence failure, while questions on the mission and why we are in Niger in the first place dominate discussion as well.

So let me start with this.  I’ve known of the Niger mission, as noted above, to both train and conduct needed surveillance, for years.  I’ve written of the large French presence in that region, and the losses they have suffered.  This is the world we live in.  If we are to prevent future 9/11s, we can’t just sit back in our bunkers in America.  We must be proactive. That’s just my opinion.  As I note below, ISIS may no longer be able to create a caliphate in the Middle East, but they, and their ideals, or those of groups like them, are not likely to die in our lifetime.

That said, Sen. John McCain (R-AZ) is demanding more information on the ambush in Niger, saying the administration is not being forthright.  When asked if it was being upfront, McCain said “no.”  “We deserve to have all the information.”

The Department of Defense has launched an investigation.  McCain met with Defense Secretary Mattis today and Mattis agreed the Pentagon had to do a better job in providing information to the oversight committees.

Rhode Island Sen. Jack Reed, the top Democrat on the Senate Armed Services Committee, said, “I think the administration has to be more clear about our role in Niger and our role in Africa and other parts of the globe.”

Sgt. Johnson and the three other Special Forces / Green Beret (Staff Sgt. Bryan C. Black, Staff Sgt. Jeremiah Wayne Johnson, and Staff Sgt. Dustin M. Wright) will long be remembered.

But even I was writing late Oct. 6 about all four.  Days passed before the president said anything.

I understand that the administration didn’t want to come forward between the reporting of the deaths of the first three on Oct. 4, and Sgt. Johnson’s on Oct. 6, because for 48 hours there was a frantic search for him, Johnson having somehow been left behind in the initial evacuation of the dead and wounded.  You don’t want the enemy to know a search of any kind is being conducted.

But after I posted, I, like any other following this matter, began to ask questions.  Why did he get left behind?  Why were we hearing the French first came to disrupt the attack, but not until after 30 minutes, and with a flyby by fighter jets intended to scare the militants away, though they couldn’t bomb them?  Why was it a private contractor who ended up evacuating the remaining troops and the three bodies?  Why was everyone, once we knew Johnson’s fate, so quiet, including President Trump, who doesn’t wait a second to trumpet a success, even if before the facts come out (see his idiotic tweets on Britain this year, including this morning with his inane crime stat tweet), but now he was radio/Twitter silent?

So the president didn’t say anything for 12 days, at which time he then botched it.

Editorial / Washington Post

“Their lives, their brave service and the sacrifice of their grieving families should be discussed and honored.  Instead – thanks to a president with a compulsive need to be the center of attention – their deaths have been trivialized.  President Trump reduced condolences to a political competition and treated the grieving families who received them as pawns in a game.

“Having failed to publicly acknowledge the deaths for 12 days, Mr. Trump on Monday boasted about reaching out to family members of slain military personnel while falsely accusing his predecessors of not doing so.  His whining about how hard the calls are on him – and the apparent hash he made of a conversation in which he allegedly told one widow her husband ‘must have known what he signed up for’ – underscored his cluelessness about being commander in chief.

“Mr. Trump then worsened his offense by attempting to exploit the combat death of the son of his chief of staff, John F. Kelly, whom he suggested did not receive a condolence call from President Barack Obama. The president ought to have read the eulogy Mr. Kelly delivered for two other Marines four days after his son was killed in Afghanistan.  After asking the officer who introduced him, ‘Please don’t mention my son,’ he talked passionately – and sometimes angrily – about the sacrifices of the military. He never mentioned his son, later explaining to The Post’s Greg Jaffe, ‘The death of my boy simply cannot be made to seem any more tragic than the others.’

“Such grace and dignity in the face of unimaginable loss is the trademark of Gold Star families. It was on display in the days after the Niger attack when the families of the four men spoke with pride about their loved one.  ‘I know if you could ask him, he’d be glad that it was him,’ said Staff Sgt. Wright’s brother.  ‘He’d be glad he’s the one that went so somebody else’s son could come home.’  Those words, and not Mr. Trump’s, ought to be what we remember.”

But regarding Trump’s call to Sgt. Johnson’s widow, I give President Trump the benefit of the doubt in terms of the perceived tone of the call.  When I woke up the other morning to screaming headlines about it, I thought, as the ‘wait 24 hours’ guy, this was incredibly unfair to him.

So then Thursday, chief of staff John Kelly stepped forward in the White House press room and the following Journal piece sums it up better than I could (though for the record I watched it ‘live’.)

Editorial / Wall Street Journal

“Over the past nine months, Donald Trump’s cage match with the Washington press corps has turned into an unedifying national spectacle.  Too often, the serious business of the nation has been pushed aside so that the press and Mr. Trump could go tit for tat, like children on a schoolyard. On Thursday, an adult finally stepped into the room.

“John Kelly, Mr. Trump’s chief of staff and a retired four-star general, addressed White House reporters on this week’s dispute between the press and the President.  That is the controversy around Mr. Trump’s call to the mother of a U.S. soldier who was killed during an ambush in Niger recently.

“As anyone who follows media reports knows, the President’s call to this mother grew into a personal feud between Mr. Trump and a Democratic Congresswoman who disclosed what the President said.  It then produced long newspaper reports examining the President’s relationship with every identifiable Gold Star family during his term.

“It took awhile for Mr. Kelly to get around to talking about that phone call. Instead, he spent some time offering what we in journalism – or anyone purporting to be engaged in a serious line of work – would call context.  Mr. Kelly described what happens when a U.S. soldier or Marine – ‘the best 1% this country produces’ – gets killed in action.  What he described was a military process that is graphic, emotionally intense and, most of all, untouchable.

“Untouchable, as Mr. Kelly made clear, in the sense that what has happened is so grave, so personal and so difficult that the reality of pushing through it comes down to an encounter between the fallen soldier’s family, the officer who informs them and, in time, support from those who served alongside their son or daughter.

“Mr. Kelly explained that a personal call from the President is in fact not what families expect or want. But it has become something of a presidential tradition, and Mr. Trump asked Mr. Kelly what he should say.

“Mr. Kelly related what his friend an ‘my casualty officer,’ Marine General Joseph Dunford, told him when relating that Mr. Kelly’s own son had been killed in Afghanistan: ‘He said, Kel, he was doing exactly what he wanted to do when he was killed. He knew what he was getting into by joining that 1%.  He knew what the possibilities were because we’re at war.’

“That, essentially, is what Mr. Trump said to the Gold Star mother, no doubt less eloquently.  Standing in the White House press room, reflecting on a political spat over a dead soldier, Mr. Kelly said, ‘I thought at least that was sacred.’....

“John Kelly made a lot of people look small Thursday. The man who led soldiers in combat in Iraq described spending an hour this week walking in Arlington Cemetery, collecting his thoughts and looking at headstones, some with names of Marines who Mr. Kelly said were there because they did  what he had told them to do.

“Surely there is a sense in which the continuing political life of Washington is possible because of that sacrifice.  That was John Kelly’s point.  It would be nice to think the rest of the city could get it.”

This should have been the end of the story.  It isn’t. Not by a long shot.

It turns out the Orlando Sentinel had a videotape of Congresswoman Wilson’s nine-minute speech at the building dedication Kelly referred to when he dissed her, and Kelly misrepresented Wilson in his remarks Thursday.

Rep. Wilson then fought back Friday, and that’s when the White House machinery went into overdrive.

First off, going back to Wednesday, Trump had said Wilson lied about his comments to Sgt. Johnson’s widow, yet there was Kelly totally confirming them, explaining how it came about that Trump said what he did!

Now it was up to White House press secretary Sarah Sanders to defend the president. When veteran CBS reporter Chip Reid during Friday’s daily briefing, pointed out the discrepancy between what Kelly said Thursday, and the videotape of the actual event, Sanders characterized Wilson’s remarks in 2015 as “exactly” what Kelly had described.

“There was a lot of grandstanding,” Sanders said.  “He was stunned that she had taken the opportunity to make it about herself.”

But the facts were Wilson spent about two minutes of her speech recalling the effort that she led in Congress to name the building for the agents, praising the support of Republican Speaker John Boehner, as well as Obama, and she was effusive in her praise of the agents for whom the building was being named.

Reid asked, “Can he (Kelly) come out here and talk about this at some point?”

Sanders: “I think he addressed that pretty thoroughly yesterday.”

Reid: “Well, he was wrong yesterday in talking about [Wilson] getting the money.”

“If you want to go after General Kelly, that’s up to you,” Sanders said.  “I think that if you want to get into a debate with a four-star Marine general  - “

“That would be great if he would come out here and do it,” Reid interjected.

Sanders then finished her sentence, saying, “That’s highly inappropriate.”

Sorry, Miss Sanders, you’re wrong. Ret. Gen. Kelly, now a member of an administration and not serving in the military, made a mistake.  It’s on tape.

But for you to infer any American citizen can’t question a four-star general is beyond the pale.  I, for one, can question any damn general I please.

There is a reason why I have closed every column since 9/11 the same way, praying for the men and women in our armed forces.  I have nothing but love for the grunts.  But I’m too smart, and know too much history, to know that this country, and every other country in the world, has had its share of great military leaders, and incredibly bad ones.

I’ve written this a few times before, but there’s a reason why a study of the Civil War is so important (as any West Pointer would tell you, for example).  It is an outstanding conflict for studying the behavior of generals in what was the beginning of modern warfare.  Stonewall Jackson was a brilliant general in the Valley campaign.  Union General Hancock (to name a less famous one) was brilliant at Gettysburg.  But there were scores of bad ones.

And here many of us just watched Ken Burns’ brilliant series on the Vietnam War and as I wrote the other week, there was Gen. William Westmoreland, a freakin’ liar who gave the American people, and his president, one false narrative after another.

So John McCain is right.  We demand a full investigation of Niger.  We know thus far that the head of Africa Command had been requesting backup support, such as drone surveillance, for months and it wasn’t forthcoming.  Deadly mistakes were obviously made.  And you and I have the right to question our leaders (just as in the case of Benghazi), even if they do have four or five stars on their shoulders.

Tax Reform

The Senate took a major step forward in the GOP’s effort to enact tax cuts, passing a budget by a 51-49 vote, no Democrats, Rand Paul the lone Republican dissenter, meaning it now moves to the House.

Passage allows the GOP to use a procedural maneuver to pass tax legislation through the Senate with just 50 votes (and Vice President Pence), meaning no Democratic support is needed, though I would expect one or two like West Virginia Democratic Sen. Joe Manchin to perhaps climb onboard.

The budget is expected to expand the deficit by $1.5 trillion over 10 years, which is the size of the proposed tax cut.  Previously, the White House and House Republicans had vowed the tax cuts would be offset with new revenue from the elimination of deductions, but now that clearly is not the goal.

The story Friday is that the House will accept the language in the Senate budget resolution, allowing them to move on to the tax-cut negotiations, but here is where it’s going to be exceedingly difficult to please everyone in the Republican caucus, starting with two factions, the deficit hawks and those 33 House Republicans most impacted by the elimination of state and local tax deductions that I’ve been writing of.

Separately, Sen. John McCain (R-AZ), chairman of the Senate Armed Services Committee, offered an amendment to ensure increases in federal defense spending are prioritized over increases in spending in other areas.

“Defense and nondefense are not of the same urgency,” he said Thursday.  “We have men and women serving in the military today who are being wounded and killed because they’re not sufficiently funded, armed, trained and equipped.”

Republican Sen. Lindsey Graham (S.C.) warned that failure to pass any tax proposal “will be the end of us as a party.”

Treasury Secretary Steven Mnuchin said that failure to pass the Republican tax overhaul would trigger a “significant” drop in the stock market.  [I’m 50/50 on this.]

Mnuchin told Politico, “There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done.”

He added: “I think to the extent we get the tax deal done, the stock market will go up (further).”

ObamaCare Repeal and Replace

Trump tweet, Saturday AM: “Very proud of my Executive Order which will allow greatly expanded access and far lower costs for HealthCare. Millions of people benefit!”

Then Tuesday, a deal was hatched by Republican Sen. Lamar Alexander (Tenn.) and Democratic Sen. Patty Murray (Washington), the two having come close before, on a package that would fix parts of the Affordable Care Act, with the deal then being blessed by President Trump, though it reinstated federal payments to insurers that Trump had cut off just the week before, while offering some relief from rising premiums and shaky insurance markets.  In a nod to Republicans it gives states limited flexibility to offer cheaper, less generous health plans.

Alexander told senators the deal represents a modest fix, as the president wanted, and helps protect up to 16 million Americans who don’t get health coverage through an employer or through a government program such as Medicare or Medicaid.

Trump, in a speech that evening to the Heritage Foundation, took credit for the negotiations, saying that Democrats had “responded to [his] call for them to take responsibility for their ObamaCare disaster and work with Republicans to provide much-needed relief for the American people.”

But Senate Majority Leader Mitch McConnell was noncommittal and House Speaker Paul Ryan didn’t comment immediately.

Then the next day, Trump withdrew his support and conservative lawmakers said it didn’t do enough to roll back ObamaCare.

Trump tweeted Wednesday morning, he “can never support bailing out ins co’s who have made fortune w/O’Care.”

We’re not back to square one, but where it goes from here I haven’t a clue.

NAFTA....

Negotiations over the future of NAFTA were extended into the first quarter of 2018 in a bid to resolve differences after Canada and Mexico rejected what they see as hardline U.S. proposals. All three chief negotiators had major issues. Mexico will host the fifth round of talks on Nov. 17-21.

Trump at the White House on Tuesday decried “massive trade deficits” with trading partners.

“Companies are leaving and they’re firing the people and the product is made elsewhere and then it’s sold back into the United States,” he said.  “I’m not going to be allowing that, so I can understand how certain countries and the leaders of certain countries may feel. But we’re just not going to allow the United States to be taken advantage of by other countries anymore.”

Editorial / Wall Street Journal

“Donald Trump is threatening again to terminate the North American Free Trade Agreement if Canada and Mexico don’t agree to his ultimatums. If this is a negotiating tactic of making extreme demands only to settle for much less and claim victory, maybe it will work. Otherwise Mr. Trump is playing a game of chicken he can’t win.

“Trump’s obsession with undoing NAFTA threatens the economy he has so far managed rather well.  The roaring stock market, rising GDP and tight job market are signs that deregulation and the promise of tax reform are restoring business and consumer confidence.  Blowing up NAFTA would blow up all that too.  It could be the worst economic mistake by a U.S. president since Richard Nixon trashed Bretton-Woods and imposed wage and price controls.

“U.S. demands in the NAFTA renegotiations – which returned to Washington last week – are growing more bizarre.  U.S. Trade Representative Robert Ligthhizer now wants to add a sunset clause, which would automatically kill it in five years unless all three governments agree to keep it. In other words, the U.S. proposes to increase economic uncertainty and raise the incentive for businesses to deploy capital to more reliable investment climates.

“The U.S. also wants to change NAFTA’s ‘rules of origin’ for autos.  Cars now made in North America can cross all three borders duty-free if 62.5% of their content is NAFTA-made. Mr. Lighthizer wants to raise that to 85% and add a subclause requiring 50% be made in the U.S.

“Mr. Lighthizer needs to get out more. NAFTA’s current rules-of-origin for autos are already the highest of any trade agreement in the world, says John Murphy of the U.S. Chamber of Commerce.  Raising them would give car makers an incentive to source components from Asia and pay America’s low 2.5% most-favored-nation tariff.  A higher-content rule would hurt Mexico, but it won’t bring jobs to the U.S.

“Adding a domestic content requirement also would violate World Trade Organization rules, so neither Mexico nor Canada are likely to agree.  And if they did, it would harm U.S. workers. Auto companies that now make cars for export in the U.S., using NAFTA-made components, would simply move abroad more of their manufacturing....

“Ending NAFTA would be even more painful for U.S. agriculture, whose exports to Canada and Mexico have quadrupled under NAFTA to $38 billion in 2016.  Reverting to Mexico’s pre-NAFTA tariff schedule, duties would rise to 75% on American chicken...45% on turkey, potatoes and various dairy products, and 15% on wheat.  Mexico doesn’t have to buy American, and last week it made its first wheat purchase from Argentina – 30,000 tons for December delivery....

“Mr. Trump can hurt our neighbors if he wants, but the biggest victims will be Mr. Trump’s voters.”

Trumpets....

--In an appearance with Puerto Rican Gov. Ricardo Rossello at the White House Thursday, President Trump said of the recovery efforts on the island, “I give ourselves a 10,” in acknowledging the devastation the island suffered this summer from two hurricanes was “in many ways worse than anything people have ever seen.”

“Did we do a great job?” Trump asked the governor.

“You responded immediately, sir,” Rosello replied.

“The response is there,” Rosello added.  “Do we need to do a lot more?  Of course we do...But with your leadership, sir, and with everybody over here, we’re committed to achieving that in the long run.”

More than three-quarters of Puerto Rico lacks electric power and has limited access to health care and other basic needs.  This is not a ’10,’ Mr. President.

--President Trump’s third attempt to ban travel from several predominantly Muslim nations met the same fate Tuesday as the first two: It was blocked nationwide by a federal judge in Hawaii.  The ban was to go into effect Wednesday.  Judge Derrick Watson wrote the ban “plainly discriminates based on nationality,” and “It lacks sufficient findings that the entry of more than 150 million nationals from six specified countries would be ‘detrimental to the interests of the United States.”

--From John Solomon and Alison Spann / The Hill

“Before the Obama administration approved a controversial deal in 2010 giving Moscow control of a large swath of American uranium, the FBI had gathered substantial evidence that Russian nuclear industry officials were engaged in bribery, kickbacks, extortion and money laundering designed to grow Vladimir Putin’s atomic energy business inside the United States, according to government documents and interviews.

“Federal agents used a confidential U.S. witness working inside the Russian nuclear industry to gather extensive financial records, make secret recordings and intercept emails as early as 2009 that showed Moscow had compromised an American uranium trucking firm with bribes and kickbacks in violation of the Foreign Corrupt Practices Act, FBI and court documents show.

“They also obtained an eyewitness account – backed by documents – indicating Russian nuclear officials had routed millions of dollars to the U.S. designed to benefit former President Bill Clinton’s charitable foundation during the time Secretary of State Hillary Clinton served on a government body that provided a favorable decision to Moscow, sources told The Hill.

“The racketeering scheme was conducted ‘with the consent of higher level officials’ in Russia who ‘shared the proceeds’ from the kickbacks, one agent declared in an affidavit years later.

“Rather than bring immediate charges in 2010, however, the Department of Justice continued investigating the matter for nearly four more years, essentially leaving the American public and Congress in the dark about Russian nuclear corruption on U.S. soil during a period when the Obama administration made two major decisions benefiting Putin’s commercial nuclear ambitions.

“The first decision occurred in October 2010, when the State Department and government agencies on the Committee on Foreign Investment in the United States unanimously approved the partial sale of Canadian mining company Uranium One to the Russian nuclear giant Rosatom, giving Moscow control of more than 20 percent of America’s uranium supply....

“In 2011, the administration gave approval for Rosatom’s Tenex subsidiary to sell commercial uranium to U.S. nuclear power plants in a partnership with the United States Enrichment Corp.”

It was in 2015 that author Peter Schweitzer and the New York Times documented how Bill Clinton collected hundreds of thousands of dollars in Russian speaking fees and his charitable foundation collected millions in donations from parties interested in the deal while Hillary Clinton presided on the Committee on Foreign Investment in the United States.

“The Obama administration and the Clintons defended their actions at the time, insisting there was no evidence that any Russians or donors engaged in wrongdoing and there was no national security reason for any member of the committee to oppose the Uranium One deal.

“But FBI, Energy Department and court documents reviewed by The Hill show the FBI in fact had gathered substantial evidence well before the committee’s decision that Vadim Mikerin – the main Russian overseeing Putin’s nuclear expansion inside the United States – was engaged in wrongdoing starting in 2009.”

Wall Street

The Dow Jones crossed the 23000 level and finished the week at another record high, 23328, today’s 165-point gain powered by the expectation that tax cuts may actually come to fruition after all.  Earnings continue to generally be OK, though I’d say far from spectacular.

As reported by CNBC, data via Thomson Reuters, following is the earnings growth in past quarters and the forecast looking ahead for the S&P 500.

Q1 2017...15.3%
Q2 2017... 12.3
Q3 2017...4.9 est.
Q4 2017...12.3 est.
Q1 2018...10.3 est.

If we come in with those kinds of numbers going through early next year, in a perfect world (which it sure isn’t), coupled with a sizable tax cut package, there would be little cause the market is going to correct in any meaningful way.  The Federal Reserve will hike rates again in December, but this has already been well-telegraphed, and you still have synchronized global growth across the 25 most developed nations.  Aside from the usual litany of geopolitical issues, relax. 

The issue will be going forward the rate of growth, inflation, and just how much further the Fed is forced to act. 

Speaking of the Fed, Chair Janet Yellen said on Sunday that the outlook was bright for both the economy and inflation prospects in coming months, saying the impact of the recent hurricanes will be muted and otherwise the economy is fine into year end.

Yellen, addressing an international banking conference, acknowledged the persistence of low inflation has been a surprise, but she said she expected it to start picking up.

“Economic activity in the United States has been growing moderately so far this year, and the labor market has continued to strengthen.”

There was some economic news of note this week.  September housing starts came in less than expected, while existing-home sales for the month were a little better than forecast at an annualized pace of 5.39 million, down 1.5% year-on-year.  The median home price at $245,100 is still a solid 4.2% above the level of Sept. 2016.

The Atlanta Fed’s GDPNow indicator for the third quarter is still at 2.7%.

Europe and Asia

Catalonia: Catalonia had a Monday deadline to clarify to Madrid whether it sought independence or not.

In a letter, Catalan leader Carles Puigdemont instead called for negotiations over the next two months.

Spain’s Deputy Prime Minister Soraya Saenz de Santamaria said Puigdemont had until Thursday to clarify his position, the Spanish government continuing to warn Catalonia that it must revoke the declaration or face direct rule from Madrid.

So with the Thursday deadline, Puigdemont once again failed to renounce independence, further escalating the crisis. 

He issued another letter urging dialogue, but threatened to have regional lawmakers vote on an explicit declaration of independence if Madrid does not agree to talks.

The office of Spanish Prime Minister Mariano Rajoy responded by saying the Cabinet would meet in special session Saturday, tomorrow, to trigger Article 155 of the Constitution, allowing the government to impose direct rule in a crisis, which has never been invoked in democratic Spain.  4,000 national police, who were dispatched to Catalonia at the time of the referendum have remained there since.

“The objective is to restore legality in Catalonia,” said a government spokesman, in reply to Puigdemont’s letter.

What happens tomorrow is potentially very dangerous.  Madrid shows every sign of enforcing the rule of law and taking over the running of Catalonia, probably including the arrest of Puigdemont and charging him with sedition, which would lead to massive demonstrations in the streets of Barcelona and elsewhere that no doubt will turn even more violent than the violence we saw surrounding the referendum.

It is also possible Rajoy will propose to his cabinet Saturday that pressure continue to be applied but gradually in an attempt to splinter the fragile coalition from which Puigdemont gains his power.

Politicians in Madrid are demanding Catalonia hold regional elections as early as January, but Puigdemont has made no mention of this.  Remember, while 90% voted for independence in the referendum, turnout was only 40%, the same number that favored independence in opinion polls prior to the vote. The numbers favoring an exit from Spain have been declining since regional elections in 2015 had separatist parties gaining a collective 48%.

For their part, the separatists are divided in their leadership, with most wanting to create more time for a negotiated settlement. Catalonia is facing major financial harm, amid a surge in corporate flight from the region that began after the Oct. 1 vote.

Brexit: In a bit of a surprise, EU leaders wrapped up their long-anticipated summit this week and agreed to start preparing for trade talks with the U.K. – though British Prime Minister Theresa May admitted there is “some way to go” in negotiations.

May’s 27 EU counterparts agreed in Brussels that enough progress had not been made on other issues, such as the divorce bill, to begin formal trade talks, but in starting internal talks, they are paving the way for them to begin, hopefully in December, which to me seems to be about the drop-dead date.  The March 2019 exit date is not that far away for such complicated negotiations.

As for the divorce bill, the major sticking point, Mrs. May said she had given a “firm commitment” on Britain’s financial obligations, but a “final settlement” would come as part of a “final agreement” with the EU.

The prime minister still hasn’t discussed any figures, but she also didn’t deny she told other EU leaders that Britain would shell out in excess of $30 billion.

“I have said that nobody need be concerned for the current budget plan, that they would have to either pay in more or receive less as a result of the U.K. leaving and that we will honor the commitments that we have made during our membership.”

But these commitments are being analyzed “line by line,” adding: “British taxpayers wouldn’t expect its government to do anything else.”

The prime minister said the two sides were making progress on the issue of citizens’ rights.

So the government is not where it wanted to be, by any stretch, at this point in time, but if May can show substantive progress in December, there then would be hope of an orderly Brexit.

This week’s summit and the conclusions reached also buys time for Mrs. May within her own fractious Conservative Party.

For his part, European Council president Donald Tusk said as the summit wrapped up that they had given the green light to preparations for the “second phase” of Brexit talks, dealing with trade.

“My impression is that the reports of the deadlock between the EU and the U.K. have been exaggerated. While progress is not sufficient, it does not mean there is no progress at all.  I hope we will be able to move to the second phase of our talks in December,” he said.

One thing seems clear. German Chancellor Angela Merkel, who has been a hardliner on how the Brexit negotiations should proceed in the past, softened her tone this week and said there were “encouraging” signs of progress, “step by step” despite the media reports to the contrary. Merkel added, “From my side there are no indications at all that we won’t succeed.”

So I am going to choose to be optimistic myself, until December.  Prime Minister May must return then with new proposals for the EU and final agreement on the financial tab.

Austrian Election: Right-wing parties made strong gains in parliamentary elections on Sunday, with the conservative People’s Party, led by 31-year-old Sebastian Kurz, winning 31.7% of the vote, while the far-right Freedom Party won 26%, close to the party’s best result ever in 1999.

The left-leaning Social Democrats, who led the outgoing government in a coalition with conservatives, won 27%.

Kurz is now the favorite to form a new government, and could do it possibly in coalition with the Freedom Party.  Kurz called for a crackdown on immigration during the campaign (co-opting the FP’s message), while cutting social benefits for refugees, and restricting access to the welfare state from other European Union countries.

The Freedom Party improved from its 20.5% share of the vote in the last elections in 2013.  It was as high as 35% in polls earlier in the year before Kurz took over the conservatives and stole the message.

Kurz thus becomes the world’s youngest leader (if you don’t include some 28-year-old who is regent of San Marino). Kurz is eight years younger than France’s Emmanuel Macron.  [Kim Jong Un is said to be 33.]

As for the far-right across Europe, what a turn of events after it was felt that following Marine Le Pen’s sound defeat in the French elections in the  spring that the movement had peaked.

Then the anti-immigration Alternative for Germany scored its unprecedented 13% in Bundestag elections, scooping up 92 of the 709 seats in parliament, and now this development in Austria.

Eurobits....

Eurostat reported that inflation for the eurozone (EA19) was 1.5% annualized in September, same as August, and up from 0.4% Sept. 2016.

Germany is at 1.8% ann., Spain 1.8%, France 1.1%, Italy 1.3% and Greece 1.0%.

The U.K., though, came in at 3%, the highest since April 2012, though pensioners are celebrating because they will receive a 3% increase next April as a result.  That said, wages are increasing less than the inflation rate, 2.1%, which isn’t good.

The falling pound in Britain is leading to higher costs for imported goods, and the Bank of England, with an inflation target of 2%, is on track to raise rates next month despite all the Brexit uncertainty.

September retail sales, for example, fell 0.8%, according to the Office for National Statistics.  Third-quarter retail growth was thus just 1.5% year-on-year, the slowest pace in four years.

--Spain cut its 2018 GDP forecast to 2.3% from 2.8% owing to the uncertainty in Catalonia, a region that makes up about 20% of the overall economy.

--Regarding the terror threat in the U.K., Andrew Parker, director-general of MI5, said that seven plots by Islamic extremists have been foiled since March and police have arrested record numbers on terrorist offenses in response to a threat that is “coming at us more quickly, and it can be harder to detect.”

“The scale at which we are operating is greater than ever before,” he said.  “We are now running well over 500 live operations involving around 3,000 individuals known to be currently involved in extremist activity in some way.”

--German Chancellor Merkel started her coalition talks with the pro-business Free Democrats (FDP) and the Greens (the “Jamaica coalition” after the colors of their party flags), and these could drag on for months.  Because the conservatives want to stick to budgets that do not add to the debt, there are limited future funds to be spent on new projects, which is the kind of sticking point you have when forming a coalition.  “We aren’t joining, Angela, unless we get 20bn euros for X,Y, and Z.  We might do better being in the opposition,” something like that.  We already know that for their part, the FDP is demanding the powerful Finance Ministry post.

Turning to Asia, I get into the important Chinese Communist Party gathering down below, but there was a slew of economic data on China for everyone to chew on, starting with the report on third-quarter GDP, 6.8%, after a second-quarter reading of 6.9%. The government had forecast 6.5% for the full year so this will be exceeded.

President Xi Jinping put heavy pressure on every government ministry to make sure he didn’t look bad and it’s funny how easy it is to comply.  “Boss, my numbers say 6.3%.”  “No they don’t.  Just change that 3 to an 8 by closing the circles.” 

Industrial production for September was up 6.6%, year-over-year, while fixed-asset investment for the first nine months grew 7.5%.  Retail sales grew 10.3% last month.  All the preceding from the National Bureau of Statistics.

The General Administration on Customs reported that Chinese exports rose 8.1% in September, largely on the strength of electronics and the roll outs of new smartphones from Apple and Samsung with imports up 18.7%, this latter figure good for Asia’s exporters.

An important figure for China, the percentage of the economy attributable to household consumption, has this at 39.3%, which is up from 36.7% in 2012 when Xi took control, but still far below most other industrialized nations, while debt to GDP in China is now 257.8%, up from 187.5% five years ago.  That is also part of Xi’s economic legacy thus far.

In Japan, September exports were up 14.1%, down from 18.1% in August, with imports up 12%.

Street Bytes

--The Dow Jones finished up a whopping 2% this week, its sixth consecutive week of gains, now at the aforementioned record level of 23328, while the S&P 500 rose 0.9% to its new record of 2575, and Nasdaq is at a new peak of 6629 after a gain of 0.3%.  The earnings crush continues this coming week.

--U.S. Treasury Yields

6-mo. 1.24%  2-yr. 1.49%  10-yr. 2.27%  30-yr. 2.81%

--As oil was bottoming in the winter of 2016, BP’s CEO Bob Dudley said that traders would start filling swimming polls with crude.  The other day at a conference in London, Dudley said, “The swimming pools are draining. Stock levels are just heading down, for both crude and products. So it does seem we’re heading towards the targets that were set by OPEC.”

Dudley said inventories were heading towards the five-year average range.  And he added, “I think the world has put aside geopolitical risk for a few years now. We’re starting to see that again effective in the price.  But if you look just at the balance of supply and demand I think it [the oil price] is about in the right place.”

--Goldman Sachs’ investment banking unit bailed out the traders this past quarter, as Goldman blew away Wall Street’s expectations on both earnings and revenues, the latter up 2% over a year ago. 

But revenues from fixed-income, currencies and commodities (FICC) declined 26%, this unit having long been the driver of Goldman’s results. The firm countered that with big gains in financial advisory, up 38%, and investing and lending, up more than 33%.

--Morgan Stanley reported net income of $5.5 billion for the first nine months of the year, its best showing since 2007.  In the third quarter, earnings were 93 cents a share on revenue of $9.2 billion, both handily beating expectations.

Summarizing the big banks’ quarterly earnings, the Wall Street Journal’s Liz Hoffman summed it up well.

“The five biggest Wall Street firms all improved from a year earlier, each relying on a different cocktail to overcome continued torpor in the once-lucrative securities business.  JPMorgan Chase and Citigroup leaned on corporate banking and credit cards.  Bank of America Corp. was aided by lending and expense discipline, while investment gains and merger fees helped Goldman.”  Morgan Stanley benefited from its wealth management unit – the army of brokers in 600 offices across the U.S.

The wealth-management business oversees $2.3 trillion for 3.5 million Americans and is the centerpiece of CEO James Gorman’s effort to create a steadier firm in terms of the P&L.  Morgan Stanley’s purchase of brokerage Smith Barney from Citigroup is now fully integrated and the wealth-management business had a profit margin of 26.5% in the quarter.  Profitability improves as assets increase.

Of Morgan Stanley’s assets, $1 trillion is now in flat fee-based portfolios.  Bank of America (read Merrill Lynch) also surpassed the $1 trillion in fee-based assets this quarter.

Amidst the good news, Morgan Stanley’s trading revenue fell 8%, similar to the others in the group, with fixed-income down 21% from a year ago.  It was down 27% at JP Morgan, and the above-noted 26% at Goldman.

--Shares in IBM soared 9% on Wednesday (the prime driver of that day’s solid Dow advance), after the company reported earnings after the market close on Tuesday.  The advance was bogus. 

Overall profit and sales declined, the latter down 0.4% from a year earlier, which while a minor slide was nonetheless the 22nd consecutive quarter of year-over-year declines.  Profit fell 4.5% to $2.73 billion.

But the Street seemed to take solace in the company’s announcement that the fourth quarter looks solid, with the transition the company has been undertaking from older, shrinking businesses to higher-growth opportunities finally beginning to bear fruit.

IBM has placed big bets on emerging technologies such as its Watson AI platform and blockchain, the networked ledger at the heart of digital currencies like bitcoin.

The company calls the newer opportunities strategic imperatives, including cloud computing, and this unit saw revenues grow 11% to $8.8 billion from a year earlier. Cloud revenue rose 20% to $4.1 billion.

But while strategic imperatives now account for 45% of total revenues, the growth rate in same has been slowing.

-Netflix Inc.’s wagers on original programming and international expansion are paying off, as the company ended its third quarter with 104 million paid streaming subscribers globally. It added 5.3 million streaming users in total, outpacing the 4.4 million the company had projected. [850,000 U.S. subscribers, and 4.45 million international subs.]

Netflix continues to pour money into original programs such as “Stranger Things” and “The Crown” to fend off the competition and attract new subscribers.  The company said it plans to spend as much as $8 billion on content next year – far outstripping the investments from Hulu, Amazon.com and HBO.

Revenue increased 30% to $2.99 billion in the third quarter.

But the company said it now has $17 billion in streaming-content obligations, a measure of current and future costs, up $2.6bn from the same quarter last year.

Netflix is showing this kind of growth while traditional pay-television distributors continue to feel the impact of cord-cutting, AT&T recently warning it had lost an estimated 390,000 traditional TV customers in the quarter.

The impact of Netflix’s recently announced price increase won’t be realized until the fourth quarter.  It does expect subscriber growth in the U.S. to decline as a result, but that is still growth.

--Verizon said on Thursday it added 603,000 wireless customers in the third quarter – a better-than-expected total propelled by the offer of unlimited data.

Third quarter revenue of $31.7 billion was a smidge higher than the Street’s forecasts, ditto earnings.  78 percent of Verizon’s wireless customers are now on unsubsidized plans – compared to 60 percent a year ago.

--Concerns over weak demand for the new iPhone 8 sent Apple shares down by the most in two months on Thursday, after Taiwan’s Economic Daily News said Apple has reportedly asked its suppliers to reduce iPhone 8 and iPhone 8 Plus production by nearly 50 percent in November and December.

Canada’s largest mobile network Rogers Communication said appetite for the latest iPhone had been “anemic.”

--Consumer Reports found that Toyota, Lexus and Kia are the top brands when it comes to reliability, while three domestic brands, Cadillac, GMC and Ram, are the worst.

Chrysler jumped up 10 to 17, from 27 (last), while Acura fell from 12 to 19.

Honda is 9, Hyundai 10, Ford 15.  Tesla is 21.

--American Express reported earnings that beat expectations with revenue up 9% from year ago levels, also beating the Street, plus the company guided higher for full year 2017.

But the stock fell a bit on the news that long-time CEO Kenneth Chenault is stepping down after a 16-year run.  The 66-year-old is being succeeded by Stephen Squeri, a three-decade AmEx veteran who previously ran the corporate card division.  Chenault is one of the country’s most prominent African-American corporate leaders.

--United Continental shares plunged 12 percent Thursday as the airline admitted it had dug itself a hole years ago and it would take some time to dig out of. CEO Oscar Munoz said, “We have dug ourselves in a hole from a competitive perspective,” and “it’s about regaining our competitive advantage,” vs. the likes of Delta.

Investors haven’t liked the airline slashing fares and the increase in supply of flights and seats, while from a public relations standpoint, United seems to stumble one time after another with passenger issues.

--SeaWorld Entertainment Inc. continues to struggle mightily, attendance declining, so it announced it was laying off another 350 workers, this time primarily at its corporate headquarters in Orlando, Fla., as well as the parks in Orlando and San Diego.

But the company said  it was not abandoning its animal rescue and rehabilitation operations.

The company simply has never recovered from the CNN documentary “Blackfish” and the resultant backlash.

In August, SeaWorld disclosed that its attendance dropped by 353,000 visitors in the first half of 2017 compared with 2016.

--China’s electric vehicle production could touch 1 million units next year and 3 million units by 2020, said Xu Heyi, chairman of carmaker BAIC Group, which would exceed current government targets.

China is looking to produce 2 million EVs a year by 2020 and 7 million by 2025.  The country produced 424,000 in the first three quarters of this year, according to the China Association of Automobile Manufacturers.

--Johnson & Johnson raised its full-year guidance after posting third quarter profit that topped analysts’ estimates, bolstered by double-digit sales growth at its pharmaceutical businesses and recent acquisitions.

Revenue was $19.65 billion in the quarter, up from $17.82bn in the corresponding quarter of the prior year and well ahead of the Street’s estimate.

Pharmaceutical sales were $9.7 billion, up 15.4%, the figure including the impact of the first full quarter of the acquisition of Swiss pharm and biotech company, Actelion, which contributed 7.9% to worldwide sales growth.

--Japan’s Kobe Steel said it increased the number of firms it says have been affected by its data fabrication scandal from 200 to 500. Earlier, Kobe admitted to falsifying quality data on some of its products for up to a decade.

Manufacturers such as General Motors, Boeing and Toyota have been investigating whether they have used sub-standard materials from Japan’s third-largest steel maker.

Boeing has already announced it does not consider their use of Kobe products a safety issue.

Central Japan Railway said some Kobe Steel parts for its bullet trains were substandard, but no safety problems.

--Carnival’s cruises are fully booked through the fourth quarter, as noted this week by CEO Arnold Donald (if he had bad news, he could have changed his name to Donald Arnold to throw people off).

Q4 is ahead of last year on cruise pricing.  With much of the Caribbean still a shambles, it seems like all the ships would be lining up at the same places.

--General Electric missed badly with its third-quarter earnings report and then the company guided sharply lower for the year to $1.05 to $1.10 a share, from a previous range of $1.60 to $1.70.  The stock initially tanked in pre-market trading Friday morning, following the release, but rallied back on blunt talk from new CEO John Flannery, who promised “sweeping change” in delivering a brutal assessment of the 125-year-old manufacturer.

Flannery said, “We need to make some major changes with urgency and a depth of purpose.”

He is seeking deep cost cuts and targeting $20 billion of asset divestitures within two years.

“Everything is on the table,” Flannery said on his first earnings call as CEO.  “Things will not stay the same at GE.”

For this past quarter, the maker of jet engines and gas turbines reported earnings of 29 cents a share, vs. an expectation of 50 cents.  GE hadn’t missed estimates by more than a penny in over nine years.

Investors are now bracing for a possible dividend cut, which it seems could be announced in mid-November, if the company decides to go that route.

--Procter & Gamble said it beat Nelson Peltz by 6.15 million votes, only 0.2% of its shares outstanding, meaning there will be a weekslong recount to determine the final outcome of the most-expensive proxy fight in history.

--Regarding the horrific fires in Napa and Sonoma counties in California, as the Los Angeles Times reported:

“For all their viticultural fame, Napa and Sonoma counties don’t dominate grape growing. That distinction is held by the Central Valley, which grew 70% of the state’s wine grapes last year, according to UC Davis.

“Only about 10% of either county is planted in grapes, according to wine growing associations. Most of it is in low-lying valleys that did not burn.”

But it may take until spring to know how many vines were damaged from heat.  New vines that needed to be planted wouldn’t be involved in wine-making for five years or more, according to growers.

Also, an estimated 85%-90% of grapes had already been picked when the fires broke out.

“Vintners can filter and blend wines to eliminate the smoky taste, but those grapes won’t be available for the higher-priced estate wines.”

As for when tourists will return, that’s a different story.  24 million visit the region each year.

--According to Forbes magazine’s annual list of the wealthiest Americans, President Trump fell to 248 from 156 in 2016, the president’s net worth falling from $3.7 billion to $3.1 billion, the magazine saying it arrived at that figure after “months of digging through financial disclosures and public property records and conducting dozens of interviews.”

One aspect of the Trump portfolio that is suffering is the golf division, with fewer people visiting courses in Miami, Ireland and Scotland.

Some of Trump’s properties rose in value in the past year, including a hotel-condo tower in Las Vegas, and his minority stake in a downtown San Francisco office building.

The top four on Forbes’ list remained unchanged from 2016, with Bill Gates topping it a 24th straight year at $89 billion.  Jeff Bezos is next at $81.5bn, followed by Warren Buffett ($78bn) and Mark Zuckerberg ($71bn...the Facebook founder’s wealth increasing $15.5bn from 2016 to ’17).

--George Soros, 29th on the Forbes’ list of billionaires, has turned over nearly $18 billion to Open Society Foundation, a move that puts it in the top ranks of philanthropic organizations, number two in the U.S. by assets after the Bill and Melinda Gates Foundation.

A new chief investment officer at Soros Fund Management LLC is less a trader than an allocator of capital to various asset managers, including in-house.

Soros won’t trade the billions now at Open Society.

--The Harvey Weinstein situation got worse with further allegations from leading actresses of  sexual harassment and assault. But brother Bob Weinstein came under fire himself this week, as stories began to emerge of what an amazing dirtball he was in his own right.

Jeffrey Katzenberg, who ran Walt Disney Co.’s  movie studio for a period when it owned the brothers’ former studio Miramax, said it was Bob Weinstein who caused problems for Disney executives.  “Bob Weinstein was genuinely abusive to people in my company,” Katzenberg said in an interview with the Wall Street Journal.  “The one person who revealed himself in a way that was unacceptable to me was, in fact, Bob.”

Last weekend, Harvey Weinstein was expelled from the Academy of Motion Picture Arts and Sciences, the 54-member board of governors including the likes of Steven Spielberg and Tom Hanks.  21 of the 54 are women.

Other controversial members of the academy remain in good standing, however, such as Bill Cosby and Roman Polanski.

Tom Hanks, known for never saying anything bad about anyone, told the New York Times that he had never worked with Weinstein. “But, aah, it all just sort of fits, doesn’t it? ...I’m not the first person to say Harvey’s a bit of an ass.”

Foreign Affairs

Iraq / Syria: U.S.-backed militias have completely taken Syria’s Raqqa from Islamic State, the fall of ISIS’ de facto capital a potent symbol of their overall collapse; Raqqa also being the city from which many of the international attacks were planned.

The Syrian Democratic Forces (SDF), an alliance of Kurdish and Arab militias backed by a U.S.-led international alliance, has been fighting ISIS inside Raqqa since June.

But who now fills the vacuum?  The region is being swept up in all manner of conflicts.  One analyst in Qatar told the Wall Street Journal’s Yaroslav Trofimov, “The next conflict in Syria will be between the forces of the Syrian regime and the Syrian Kurds.  These are the two major military powers left in the country now,” a repetition of Kirkuk  And what will the Americans now do?

As for the remaining ISIS threat, intelligence agencies around the world are on high alert, as ISIS attempts to prove it is still relevant.  But the group is no longer able to reshape the Muslim world.

Anshel Pfeffer / Haaretz

“The group will probably take a time-out as it evolves from a political organization back to a more traditional jihadist terrorist outfit.  But this is nowhere near the end of Islamic State.

“For a start, they still have bases further afield – Libya, Sinai and Yemen, and other locations in the wider region where a vacuum in governance allow them space. But they are unlikely to establish another caliphate in the foreseeable future.

“The next incarnation of Islamic State will not be a geographical entity.  It’s likely to build up its online global franchise, using social media to maintain contact among thousands of scattered and isolated alumni and to keep up recruitment.  Those who make it to a sanctuary will serve as clandestine coaches and sources of inspiration for thousands more wannabe jihadists who failed to make it to the caliphate on time.  Aspiring soldiers will still be able to enlist online or by voice recording before carrying out suicide missions.

“And there will be no lack of targets.  In the Middle East, where there was a very brief period of consensus during which everyone wanted to get rid of Islamic State, there will be plenty of fissures to exploit.  This is especially true in Sunni communities, where resentment to Iran’s resurgent Shia proxies will boil over, and in the more faraway countries that sent warplanes to bomb the caliphate. The World Cup next summer in Russia is about to be the most threatened sports tournament in history.”

Meanwhile, Iraqi forces suddenly overran the oil rich province of Kirkuk, seizing it in battles with Kurdish forces who had been deployed there since 2014, in a most troubling escalation of tensions following a nonbinding referendum Sept. 25 on independence by the Kurds that was favored by 92%.  Baghdad wasn’t happy.  President Trump said the U.S. wouldn’t take sides, even as we’ve offered major support for the Kurds in the fight against ISIS

Kirkuk, which includes ethnically mixed Kirkuk city, is claimed by both the central government in Baghdad and the Kurdistan Region of Iraq (KRI).

By week’s end, 100,000 Kurds had fled Kirkuk, fearing unrest, many taking refuge in Irbil and Sulaimaniya. There were reports Kurdish forces have not withdrawn from a large oil field northwest of Kirkuk, Khurmala, which had been developed by the Kurdistan Regional Government.

The biggest blow to the Kurds was the loss of two other major oil fields that produced 300,000 barrels a day, or nearly half the total output of the Kurdish region. The KRI government had been extracting and selling its own oil and gas.

Major fighting has taken place throughout the week, but no reports on casualties.

Editorial / Wall Street Journal

“A central tenet of the Trump foreign policy, a work in progress, has been that the U.S. would rebuild its relationship with America’s allies.  That commitment is being put to the test in northern Iraq....

“Across the length of America’s recent history with Iraq, we have had no more reliable ally than Iraq’s Kurds and their fighting force, the Peshmerga.

“So far the Trump Administration has said little about the attack on the Kurds.  ‘We’re not taking sides, but we don’t like the fact that they’re clashing,’ President Trump told reporters at the White House Monday....

“But if the U.S. allows one of its most visible allies to be defeated in the Middle East, make no mistake: Other allies in the region will notice and start to recalculate their relationship with the Trump Administration....

“(The) strategic details of this attack on the Kurds are important.  Iraq’s offensive includes Iran.  According to the Washington-based Institute for the Study of War, Iranian-backed militias and the 9th Iraqi Armored Division moved toward Kirkuk last week to support the Iraqi army.

“The Abadi government in Baghdad is under constant pressure from Shiite Iran to align itself against the interest of Iraq’s Sunni populations in the north and west.  It follows that after Iraq’s progress on the battlefield against Islamic State, Iran would encourage the Iraqis to drive the Kurds out of Kirkuk.

“Notice this is all happening within days of President Trump decertifying the Iran nuclear deal, based in part on the assumption that Europe will support U.S. efforts to resist Iran’s ballistic-missile program and its penetrations across the Middle East. But what will the Europeans or our allies in the Middle East conclude if we abandon one of our oldest regional allies, the Iraqi Kurds?....

“The U.S. owes a debt to the Kurds.  Abandoning them now would damage America’s credibility, and not least Mr. Trump’s ability to enlist allies against Iran’s expansion across the Middle East. The assault on Kirkuk matters.”

Israel: Russian Defense Minister Segei Shoigu assured Israel that Moscow has agreed to expand a buffer zone between Israel and Syria, where Iranian and Hizbullah forces will not be allowed to enter, Arab media and the Jerusalem Post reported Wednesday, though Russia did not acquiesce to Israel’s request for a 25 mile off-limits zone. 

With the war in Syria winding down, Israel is rightfully concerned Iran will help Hizbullah produce more accurate precision-guided missiles and aid them in strengthening their foothold in the Golan Heights.

Which leads to the next topic....

Iran: To repeat, last Friday, President Trump declared the Iran nuclear deal is no longer in the national security interest of the United States, though he stopped short of withdrawing from the Obama-era pact and demanded reforms.

“I am announcing today that we cannot and will not make this certification. We will not continue down a path whose predictable conclusion is more violence, more terror and the very real threat of Iran’s nuclear breakout.”

On the Sunday talk shows, Secretary of State Rex Tillerson said he believes staying in the Iran nuclear deal is in the best interest of the U.S., and that both he and Defense Secretary James Mattis do not want Congress to immediately impose sanctions that would end the multilateral deal.

The goal, said Tillerson, is to see if the U.S. can address the flaws in the accord by staying within the agreement and working with the country’s friends and allies.

National security adviser H.R. McMaster said on “Fox News Sunday,”:

“What the president has done is, he has set out a marker, a marker to Iran, our allies and our partners that we have to fix fundamental flaws in this deal.... It is a weak deal that is being weakly monitored, and so the president has made clear he will not permit this deal to provide cover for what we know is a horrible regime to develop a nuclear weapon.”

Iranian Foreign Minister Javad Zarif said on CBS’ “Face the Nation”:

“None of us ever trusted the United States.  This deal was not based on trust. It was based on mutual mistrust....The U.S. is no longer not just unpredictable but unreliable.”

German Foreign Minister Sigmar Gabriel said: “My big concern is that what is happening in Iran or with Iran from the U.S. perspective will not remain an Iranian issue but many others in the world will consider whether they themselves should acquire nuclear weapons too given that such agreements are being destroyed.”

Gabriel said if the United States terminated the deal or if sanctions were reimposed on Tehran, it would give Iranian hardliners, who are against negotiations with the West, the upper hand.

“Then they might revert to developing nuclear weapons,” Gabriel said, adding Israel would not tolerate that and “then we will be back where we were 10, 12 years ago with the danger of war relatively close to Europe.”

Russian Deputy Foreign Minister Sergei Ryabkov told his Iranian counterpart that Moscow remains committed to the Iran deal, Russia’s Foreign Ministry said in a statement on Thursday.

Earlier, Saudi King Salman praised Trump in a phone call for his “firm strategy” against “Iranian aggression and its support for terrorism in the region.”

Josh Roggin / Washington Post

“(The) administration’s convoluted strategy virtually assures that Congress won’t succeed – foreshadowing yet another crisis over the deal and perhaps a U.S. withdrawal in just three months’ time.

“In a sense, the move was classic Trump. As with other campaign promises, including on health care and immigration, the president combined tough-sounding rhetoric about reversing part of President Barack Obama’s legacy with a too-clever-by-half plan to avoid doing the heavy lifting himself.  Now Congress is left to deal with the mess while the international community scratches its head.”

Israeli Prime Minister Benjamin Netanyahu, in an interview on CBS’ “Face the Nation” with moderator John Dickerson.

Q: Why do you think what the president has done is going to lead to a better situation (re Trump’s move on the Iran deal)?

Netanyahu: Well, I’m focused on the result.  And I think that right now the deal, as it stands, guarantees that Iran will have not a single nuclear bomb, but an entire nuclear arsenal within ten years. And I think the president was very courageous in saying, I’m not going to kick this can down the road, I’m not going to say, well, it’s going to be on somebody else’s watch. I’m going to stop this from happening because, remember, we cannot allow Iran, the world’s foremost terrorist regime, that hangs gays, kills protesters, jails journalists and foments aggression throughout the region and the world.  We cannot allow this rogue regime 30 times the size of North Korea’s economy to have a nuclear arsenal. It’s a very brave decision and I think it’s the right decision for the world....

“And...you should know that in the Middle East something very historic is happening. I mean it’s not just Israel that is supporting the president.  It’s key Arab states like Saudi Arabia and the Emirates. And I suggest that, you know, when Israel and the key Arab states agree on something, you know, you should pay attention.  We’re close to – with our ears to the ground. We live right here next to Iran. We see what it’s doing.  And I think that what the president has done has created new space to prevent a very bad deal from materializing and to fix it. Everybody should join forces in doing just that.

Q: What’s your response to those, including the signatories to this agreement, who say that Iran has been abiding by the agreement and that while ten years is a deadline you pick, that, in fact, there are longer deadlines where Iran will be monitored and if they break and try to move back to a nuclear capability, the entire world will see and jump on them right away?

Netanyahu: John, I’ve always said that the greatest danger of this deal is not that Iran will violate it, but that Iran will keep it, because under the deal, in a few years’ time, Iran is guaranteed to have as many as 100 nuclear bombs. That’s folly.  And kicking the can down the road is not wise policy.

So whether or not they keep it or violate it is not the point. The point is they have a highway right now to – assuming they keep the deal, to get to that point where they become a terrorist rogue regime with a vast nuclear arsenal.  So that really has to be stopped.  And I don’t think the issue right now is whether to keep it or whether they violate it.  The issue right now is, we’ve got to change the destination to which they’re heading.

Amir Handjani / Bloomberg

“Trump’s action doesn’t in and of itself shred the nuclear pact: Congress now has 60 days to vote on that step, and the White House is asking it instead to set up a number of ‘trigger points’ that would result in re-imposition of sanctions.

“But don’t be fooled: By decertifying in the face of all evidence that Iran is complying, Trump is in effect going rogue, and the consequences will be felt across the globe.

“The U.S. and Europe brought Iran to the negotiating table after 10 years of coordinated and painstaking sanctions that targeted all aspects of Iran’s economy, including banking, energy and trade.  Over two administrations (those of George W. Bush and Obama), Washington, in close cooperation with the EU effectively cut Tehran off from the global economy.

“This was a remarkable act by the Europeans. Tehran, despite the 1979 Islamic Revolution, had robust commercial relationships with Europe. Iranians could travel with relative ease to Europe and, despite being isolated from the U.S., were getting essential goods and services such as medicine and technology from the EU....

“In the last two years since the deal was signed, Europe has slowly regained its access to the Iranian market.  Iran’s economy is rebounding.  EU foreign policy chief Frederica Mogherini has called the nuclear deal vital to international peace and security. French President Emmanuel Macron and U.K. Prime Minister Theresa May have gone on record saying the deal is doing what it was intended to do, prevent Iran from developing a nuclear weapon.....

“Trump’s actions, and any new sanctions from Congress, will drive a wedge between Washington and Europe on Iran.  It would be virtually impossible to reconstitute that sanctions regime that was in place before the nuclear deal came into effect. Trump’s decision will be viewed as callous disregard for multilateral negotiations and norms.  It will reinforce the image that Iran often portrays the U.S. as being a bully on the world stage that does what it wants with reckless abandon – alliances and commitments notwithstanding.  It’s an image that Trump embraces in both style and substance.

“The implications for Europe go well beyond the Iran deal. With Trump’s precedent of shunning the global security architecture that the U.S. has led for 75 years now in question, Europeans will be left wondering if the U.S. would really live up to its security commitments if, say, Russia became more aggressive in the Baltic states or Eastern Europe.”

Afghanistan: It was an awful week here, and with all the other news of the week severely underreported, but the Taliban wiped out an entire Afghan army post, killing 43 (of 60) soldiers, when they stormed the base with suicide bombers in the southern province of Kandahar.  The battle ended with U.S. airstrikes.

This attack was Wednesday night. Wednesday morning, 12 police officers died in two smaller Taliban strikes.

Earlier in the week, a string of Taliban attacks in three separate provinces killed 74 people.

But wait...there’s more!  Friday, at least 60 people were killed in two separate attacks on mosques in Afghanistan, including a gunman entering a Shia mosque in Kabul before opening fire and detonating an explosive, killing at least 39 worshippers.

An attack on a Sunni Muslim mosque in Ghor province killed another 20.

ISIS had previously targeted Shia mosques across Afghanistan.

The situation here is grim.

North Korea: Saying Pyongyang does not plan to hold any talks with Washington about its nuclear program, and that possessing nuclear weapons was a matter of life and death, the leader of the North American department of North Korea’s foreign ministry, Choe Son-hui, told a non-proliferation conference in Moscow on Friday. 

“This is a matter of life and death for us. The current situation deepens our understanding that we need nuclear weapons to repel a potential attack....We will respond to fire with fire.”

Robert Samuelson / Washington Post

“It turns out that North Korea isn’t just a nuclear threat. It’s also a cyberthreat, and in some ways, this may be more frightening.  Launched largely anonymously, cyberattacks can cripple essential infrastructure – power grids, financial networks, transportation systems – and inflict social disorder and political anarchy.  Immediate retaliation is difficult.

“All this now seems plausible.

“Until recently, cybersecurity experts dismissed North Korea’s attack capabilities. It was too backward to pose a serious threat. No more.  In a lengthy front-page story on Oct. 16, the New York Times reported that cybersecurity experts admit that they underestimated North Korea, which has now been tied to some major cyberattacks.  This includes the heist of an estimated $81 million of funds from the central bank of Bangladesh....

“North Korea ‘can hold large swaths of nation-state infrastructure and private-sector infrastructure at risk,’ said former deputy director of the National Security Agency Chris Inglis.  In part, the North Koreans were instructed and encouraged by Iran, the Times said.  But mostly their gains reflected persistence....

“Just how the United States can react to North Korea’s cyber prowess is unclear.  According to the Times, ‘Hundreds, if not thousands, of American cyberwarriors spend each day mapping the North’s few networks, looking for vulnerabilities that could be activated in time of crisis.’  By some accounts, the United States has planted sleeper cells in North Korea’s networks.

“But the United States is constrained by its huge commitment to the Internet. We are more dependent on the Web than the North Koreans. In practice, this means that we are more vulnerable to attacks on it.  More systems can be shut down and crippled than in North Korea.   Americans think that technological superiority works to our benefit. Here, the opposite may be true.”

China: In a nearly 3 ½-hour speech Wednesday before the 19th Communist Party Congress, President Xi Jinping warned of “severe” challenges while laying out a road map to China becoming a leading power by 2050.

In the long anticipated speech and Congress, which is just a twice-a-decade event and is usually meant, after the first five years of a president’s term, to confirm the second term, Xi clearly dropped hints he wants to continue beyond 2022, as I’ve written for over a year now.

I have also written numerous times that Xi is dangerous. He is not a smart guy, though obviously very shrewd.  He has not traveled widely (except now on government business), he is a princeling and former party hack (governor of the province where my failed investment was and I know he knew the CEO), and he has a very closed inner circle, receives little outside advice of any kind.  Outsiders are threats to his authority, and especially the last two years, any threat has been dealt with harshly.

And for the people, the liberalization of society of the roughly 20-year period until he took over in 2012 is long gone.  There is no Internet freedom.  Xi is slamming the doors all over. And any talk of seeking foreign investment is total bunk.

Hong Kong and Taiwan, I also hasten to add, are screwed.

“Chinese people will enjoy greater happiness and well-being, and the Chinese nation will stand taller and firmer in the world,” Xi said of his vision for 2050.  Hardly, regarding the first half of that statement.

Of the modernization of the People’s Liberation Army into one of the world’s top militaries by 2050, Xi said, “A military is built to fight.”

Xi is emerging as one of the country’s top three leaders along with Deng Xiaoping and Mao Zedong.

Some of the major takeaways of his report to the Congress:

A new name for Xi’s political philosophy.  Xi said China has formed “socialism with Chinese characteristics for a new era.” The idea will be the guiding principle for the country’s development in the coming years.

Xi said the dream of national rejuvenation would only be a fantasy without the leadership of China’s Communist Party. The party should lead in all areas and the authority of the party central leadership should be respected, he said.

“The party resolutely opposes all attempts that will weaken, distort or reject the leadership of the party and the implementation of socialism.”

Keeping up with the “irreversible” momentum of anti-corruption campaign and maintaining the rule of law.

Protecting national sovereignty.

The Chinese military will embark on a massive hardware upgrade and top leadership shakeup under President Xi’s orders, as he lays out his ambitious plan for the People’s Liberation Army, as noted in the report to the Party Congress on Wednesday. Xi said the PLA must modernize by 2035.

Xi said technology was at the core of combat strength and the PLA needed to apply information technology and modern warfare strategies to advance.

Upholding central government authority over Hong Kong and Macau and opposing Taiwan independence.

Xi said the “one country, two systems” principle will not be changed nor distorted in Hong Kong.

On Taiwan, Xi said Beijing will continue to resolutely oppose any move to seek independence for Taiwan.

Creating a level playing field for foreign businesses.

Xi said China would give equal treatment to all businesses. “The China which has opened up will not close, but will open wider and wider,” he said. This a total crock of merde.

Next week we’ll get the announcement on the makeup of the new 25-member Politburo and the seven-member Politburo Standing Committee, the latter which runs the country, which will comprised of Xi loyalists.

Editorial / Washington Post

“In perhaps the most important speech of his career, Chinese leader Xi Jinping on Wednesday promised ‘a new era’ that ‘sees China moving closer to center stage’ as ‘a leading global power’ with a ‘world-class’ military. Given how else he described the regime he intends to fashion over the next few years, that prediction ought to concern the world’s democratic nations.

“A decade and more ago, the United States and other Western leaders were urging China to become a global ‘stakeholder.’  But the superpower that Mr. Xi intends to lead doesn’t look like the cooperative partner and gradually liberalizing society they imagined.

“Instead, China’s 64-year-old ruler, having concentrated power in his own hands, now seeks to reinforce the authority of the Communist Party in all areas of life, at the expense of the rule of law, political dissent, private enterprise and even privacy itself: A new system of social monitoring will minutely record and rate the activities of every citizen, while storing their facial images for easy recognition.

“While offering token mentions of markets, private enterprise and openness to foreign investment, Mr. Xi promised to help state companies become ‘stronger’ and ‘bigger.’  He touted his ‘belt and road’ initiative, a centrally directed project to pour hundreds of billions of dollars of infrastructure investments into countries across Eurasia.

“Most of all, his vision of China as a superpower was infused by a nationalist agenda....Mr. Xi intoned the phrase ‘strong power’ or ‘great power’ 26 times, according to a New York Times count.  Mr. Xi boasted that one of his regime’s most internationally controversial actions, the fortification of islets in the South China Sea, was a highlight of his first five years in office, even though an international tribunal found Beijing to be acting contrary to international law.

“Mr. Xi’s biggest applause line was a vow to ‘never allow anyone...at any time or in any form, to separate any part of Chinese territory from China.’ That would include Hong Kong and Taiwan, along with those disputed rocks.  But he said nothing about North Korea or its manic pursuit of a nuclear arsenal, the crisis that most demands China’s responsible cooperation....

“The question of whether Mr. Xi’s strategy of party and state dominance can succeed in making China the world’s leading power will take far longer to play out... But China’s ambitious ruler does have one big advantage. Thanks to the disarray of the U.S. political system and the retreat by two successive presidents from America’s global role, an ambitious regime may find a vacuum to fill.”

Editorial / The Economist

“Unlike Vladimir Putin, Russia’s president, Mr. Xi is not a global troublemaker who seeks to subvert democracy and destabilize the West.  Still, he is too tolerant of troublemaking by his nuke-brandishing ally, North Korea.  And some of China’s military behavior alarms its neighbors, not only in Southeast Asia but also in India and Japan.

“At home, Mr. Xi’s instincts are at least as illiberal as those of his Russian counterpart.  He believes that even a little political permissiveness could prove not only his own undoing, but that of his regime. The fate of the Soviet Union haunts him, and that insecurity has consequences. He mistrusts not only his enemies his purges have created but also China’s fast-growing, smartphone-wielding middle class, and the shoots of civil society that were sprouting when he took over. He seems determined to tighten control over Chinese society, not least by enhancing the state’s powers of surveillance, and to keep the commanding heights of the economy firmly under the party’s thumb.  All this will make China less rich than it should be, and a more stifling place to live.  Human-rights abuses have grown worse under Mr. Xi, with barely a murmur of complaint from other world leaders....

“Mr. Xi may think that concentrating more or less unchecked power over 1.4bn Chinese in the hands of one man is, to borrow one of his favorite terms, the ‘new normal’ of Chinese politics.  But it is not normal; it is dangerous.  No one should have that much power.  One-man rule is ultimately a recipe for instability in China, as it has been in the past – think Mao and his Cultural Revolution.  It is also a recipe for arbitrary behavior abroad, which is especially worrying at a time when Mr. Trump’s America is pulling back and creating a power vacuum. The world does not want an isolationist United States or a dictatorship in China. Alas, it may get both.”

Somalia: Sunday morning I saw the first news headlines of the horrific twin-bombing in Somalia, and the initial death toll was about 20. But in looking at the massive devastation in the capital of Mogadishu, you couldn’t help but think, boy,  that will rise.  And it did, to 86. And then over 100.  And then over 200.  At last word tonight the tally is 358 dead, 300 injured.  You can imagine the poor healthcare structure there and how the severely stressed system is beyond overwhelmed, including in the need for blood. 

Al-Qaeda-linked al-Shabab is presumed to be responsible.

Malta: For those of us who viewed Malta as some peaceful little country in the Mediterranean, such thoughts were shattered this week when Daphne Caruana Galiza, 53, died in an explosion shortly after she left her home near Mosta in a car bomb attack.  She was known for her blog attacking political corruption.

Her son, Matthew, who was close by and attempted to save her from the burning vehicle, said, “My mother was assassinated because she stood between the rule of law and those who sought to violate it....

“When the institutions of the state are incapacitated, the last person left standing is often a journalist,” he wrote in a Facebook post.

Matthew took aim at Malta’s projected image as a liberal Western nation.

“Yes, this is where we are: a mafia state where you will be blown to pieces for exercising your basic freedoms.”  [BBC News]

Caruana Galiza was a harsh critic of the government and effectively triggered an early election this year by publishing allegations linking Prime Minister Joseph Muscat to the Panama Papers scandal. Muscat and his wife denied they used secret offshore bank accounts to hide payments from Azerbaijan’s ruling family.

Venezuela: The opposition is in shambles after last Sunday’s elections for provincial governors.  Polls had showed the opposition would win up to two-thirds of the races, which made sense since few actually support the government.  But the results had 17 of the 23 governorships being awarded to President Nicolas Maduro’s party, which was said to have collected 54% of the vote.

What stunned the opposition is that there was no outright evidence of fraud in the vote count, though as the Washington Post pointed out, in the province covering greater Caracas, the opposition was ahead by nine points in the polling prior to the vote, but lost by six.

Oh, there was chicanery, like moving polling places from anti-government neighborhoods to those in regime-friendly areas, and the results were condemned by the U.S. State Department, but Maduro can claim he has a democratic mandate.  By week’s end, there was no unified opposition against him.

Random Musings

--Presidential tracking polls....

Gallup: 35% approval for President Trump, 60% disapproval
Rasmussen: 43% approval, 55% disapproval

A new CNN poll conducted by SSRS found that 37% of Americans approve of the way Trump is handling the presidency, 57% disapprove.

32% approve of the way the President is handling his relationship with Republicans in Congress while 54% disapprove.  Among Republicans, 68% say they approve of the way Trump is handling it. When asked if they trust Trump or the congressional Republicans to handle major issues facing the country, 63% of Republicans choose Trump, 29% said Republicans in Congress.

In a generic congressional ballot – Democrats trounced Republicans 51% to 37% overall, driven by a unified base of Democrats. Nearly all self-identified Democrats (98%) say they prefer the Democratic candidate in their congressional district, compared to 88% of Republicans who prefer the GOP candidate in theirs.  But among independents, Democrats have an edge of just four points, within the margin of sampling error for that group.

Meanwhile, in the same poll, 52% opposed Trump’s recent tax reform proposals, while only 34% say they support the Trump plan.  81% of Democrats oppose, 70% of Republicans support them.  Independents are 50% opposed, 35% in favor.

--Sen. John McCain, remarks at the 2017 Liberty Medal ceremony, Oct. 16:

“We are blessed, and we have been a blessing to humanity in turn.  The international order we helped build from the ashes of world war, and that we defend to this day, has liberated more people from tyranny and poverty than ever before in history. This wondrous land has shared its treasures and ideals and shed the blood of its finest patriots to help make another, better world.

“And as we did so, we made our own civilization more just, freer, more accomplished and prosperous than the America that existed when I watched my father go off to war on December 7, 1941

“To fear the world we have organized and led for three-quarters of a century, to abandon the ideals we have advanced around the globe, to refuse the obligations of international leadership and our duty to remain ‘the last best of hope of earth’ for the sake of some half-baked, spurious nationalism cooked up by people who would rather find scapegoats than solve problems is as unpatriotic as an attachment to any other tired dogma of the past that Americans consigned to the ash heap of history.

“We live in a land made of ideals, not blood and soil.  We are the custodians of those ideals at home, and their champion abroad.  We have done great good in the world.  That leadership has had its costs, but we have become incomparably powerful and wealthy as we did.  We have a moral obligation to continue in our just cause, and we would bring more than shame on ourselves if we don’t.  We will not thrive in a world where our leadership and ideals are absent. We wouldn’t deserve to.”

Trump, in a radio interview the next day with host Chris Plante, was asked if he had heard McCain’s comments from the night before.

“Yeah well, I hear it,” Trump said.  “People have to be careful because at some point, I fight back.  I’m being nice. I’m being very, very nice.  But at some point I fight back, and it won’t be pretty.”

McCain, asked to respond to Trump, said, “I’ve faced far greater challenges than this.”

--On Thursday, former President George W. Bush warned that “bigotry seems emboldened” in the U.S., and that Americans need to reject “white supremacy.”

“Bigotry seems emboldened.  Our politics seem more vulnerable to conspiracy theories and outright fabrication.”

“Bigotry or white supremacy in any form is blasphemy against the American creed.”

Bush also warned against “a new era of cyber threats” including Russia’s attempt to influence the 2016 presidential election.

While Bush didn’t mention Trump by name, there is no doubt who he was going after.

But, the former president also said in the same speech:

“(For years), challenges have been gathering to the principles we hold dear. And, we must take them seriously. Some of these problems are external and obvious.  Here in New York City, you know the threat of terrorism all too well.  It is being fought even now on distant frontiers and in the hidden world of intelligence and surveillance.  There is the frightening, evolving threat of nuclear proliferation and outlaw regimes.  And there is an aggressive challenge by Russia and China to the norms and rules of the global order – proposed revisions that always seem to involve less respect for the rights of free nations and less freedom for the individual.

“These matters would be difficult under any circumstances.  They are further complicated by a trend in western countries away from global engagement and democratic confidence.  Parts of Europe have developed an identity crisis.  We have seen insolvency, economic stagnation, youth unemployment, anger about immigration, resurgent ethno-nationalism, and deep questions about the meaning and durability of the European Union.

“America is not immune from these trends.  In recent decades, public confidence in our institutions has declined.  Our governing class has often been paralyzed in the face of obvious and pressing needs....

“There are some signs that the intensity of support for democracy itself has waned, especially among the young, who never experienced the galvanizing moral clarity of the Cold War, or never focused on the ruin of entire nations by socialist central planning. Some have called this ‘democratic deconsolidation.’  Really, it seems to be a combination of weariness, frayed tempers, and forgetfulness.”

--A new poll by Politico and Morning Consult shows that 46% of voters believe that major news organizations fabricate stories about the president and his administration.  37% believe the media doesn’t fabricate stories about Trump and 17% were undecided.

76% of Republicans believe the media makes up news about the president, 65% of Democrats “think they do not.”

Only 28% of voters believe the government should yank the broadcasting license of news organizations.

--During an impromptu session with reporters at a Cabinet meeting this week, I was startled when President Trump asserted that he had heard Ireland was going to cut its already low corporate tax rate.  “I hear that Ireland is going to be reducing their corporate rates down to 8 percent from 12.”  I follow Ireland closely and I immediately thought, ‘What the heck is he talking about?  The European Commission has been applying non-stop pressure on Ireland over the years to raise it.’

So Irish Prime Minister Leo Vradkar said this was “fake news.”  “I can confirm that President Trump’s claim that we are proposing to reduce our corporation profit tax to 8 percent is indeed fake news. There is no such plan to do so.”  The rate, long at 12.5 percent, is remaining at that level.

--Rep. Tom Marino (R-Pa.) withdrew his name from consideration as the nation’s drug czar following a blistering Washington Post-60 Minutes joint investigation that highlighted his support for legislation that weakened the government’s ability to go after drug companies that critics said contributed to the nation’s opioid crisis.

It was Marino who spearheaded legislation that made it tougher for the Drug Enforcement Administration to stop suspicious shipments of drugs.

--U.S. Army Sgt. Bowe Bergdahl, who walked off his post in Afghanistan and was captured by the Taliban, pleaded guilty on Monday to desertion, and other charges of misbehavior.

Bergdahl, captured in 2009, remained in captivity until 2014, when he was freed in a controversial prisoner exchange.

Bergdahl’s admission makes the move by President Obama to exchange five Taliban detainees for this now admitted traitor abominable.

--Over the past two years, after decades of declining deaths on the road, U.S. traffic fatalities surged by 14.4 percent.  In 2016 alone, more than 100 people died every day in or near vehicles in America, the first time the country has passed that grim toll in a decade.  Regulators, meanwhile, still have no good idea why crash-related deaths are spiking. People are driving longer distances but not much more.  Drinking and speeding may be up a bit, but not more than usual.

What’s clear is the spike is due to distracted driving.

Last year, 5,987 pedestrians were killed by cars in the U.S., almost 1,100 more than in 2014 – a staggering 22% increase.

But as Kyle Stock, Lance Lambert and David Ingold note in an extensive report  for Bloomberg News, the data that would confirm everyone’s suspicions isn’t easily obtained.

“Out of NHTSA’s full 2015 dataset, only 448 deaths were linked to mobile phones – that’s just 1.4 percent of all traffic fatalities. By that measure, drunk driving is 23 times more deadly than using a phone while driving, though studies have shown that both activities behind the wheel constitute (on average) a similar level of impairment.  NHTSA has yet to fully crunch its 2016 data, but the agency said deaths tied to distraction actually declined last year.

“There are many reasons to believe mobile phones are far deadlier than NHTSA spreadsheets suggest. Some of the biggest indicators are within the data itself. In more than half of 2015 fatal crashes, motorists were simply going straight down the road – no crossing traffic, rainstorms, or blowouts.  Meanwhile, drivers involved in accidents increasingly mowed down things smaller than a Honda Accord, such as pedestrians or cyclists, many of whom occupy the side of the road or the sidewalk next to it.  Fatalities increased inordinately among motorcyclists (up 6.2 percent in 2016) and pedestrians (up 9 percent).”

The nonprofit National Safety Council found only about half of fatal crashes tied to known mobile phone use were coded as such in NHTSA databases.

But police departments largely focus on drinking or drug use when first investigating a crash, while proving a mobile phone was in use at the time of one is getting trickier every day.

The problem is, lawmakers, investigators and prosecutors won’t prioritize the danger of mobile phones in vehicles “until they are seen as a sizable problem – as big as drinking, say.  Yet, it won’t be measured as such until it’s a priority for these same folks.

“ ‘That’s the catch-22 here,’ said the mother of a victim of distracted driving.  ‘We all know what’s going on, but we don’t have a breathalyzer for a phone.’”

Jonathan Adkins, executive director of the Governors Highway Safety Association, told Bloomberg:

“I use the cocktail party example,” he explained. “If you’re at a cocktail party and say, ‘I was so hammered the other day, and I got behind the wheel,’ people will be outraged. But if you say the same thing about using a cell phone, it won’t be a big deal.  It is still acceptable, and that’s the problem.”

Damn right.  I swear to God, I haven’t used a phone while driving in years.

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

God bless America.

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Gold $1281
Oil $51.66

Returns for the week 10/16-10/20

Dow Jones  +2.0%  [23328]
S&P 500  +0.9% [2575]
S&P MidCap  +0.8%
Russell 2000  +0.4%
Nasdaq  +0.3%  [6629]

Returns for the period 1/1/17-10/20/17

Dow Jones +18.0%
S&P 500  +15.0%
S&P MidCap  +10.5%
Russell 2000  +11.2%
Nasdaq  +23.1%

Bulls 60.0...high level still doesn’t matter
Bears 15.2 [Source: Investors Intelligence]

Have a great week.

Brian Trumbore