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06/09/2018

For the week 6/4-6/8

[Posted 11:30 PM ET, Friday]

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Edition 1,000...thank you to all of those who have supported me....

I had big plans for this column, but due to some annual obligations outside the scope of this work that took place this week, time was severely restricted.  That said this is still one of the five longest columns I’ve ever done.  No shortage of material to write about.

But I do have to say that 1,000 columns...in 1,001 weeks...is kind of remarkable.  I want to tell some personal stories...next time...and kind of put this all in perspective and give you the very personal reasons why I feel like I do about Donald Trump.

It’s probably just as well, however, that I’m holding off one more week.  We all should hope our president does well the next few days in Singapore. But he was a freakin’ clown this past week.

It is beyond belief that Trump refused to say anything bad about Xi Jinping, Vladimir Putin, and Kim Jong Un, at the same time he did nothing but dis America’s best allies.

It’s sickening.  And wait ‘till you read below the story of what China has stolen from the U.S. Navy.  Putin and Xi are total bastards.  Yet there was Trump today, prior to jetting off to Quebec for the G7 summit, urging that the other members of the club reinstate Russia, our president acting as if Putin’s actions in Georgia and Ukraine, including the annexation of Crimea, never happened, which was the reason for them being booted out!

And if you wondered if Putin was winning, as I detail below, all you need to know is that the new Italian government agrees with our president, in part...at least in terms of removing sanctions against Moscow, which thankfully Trump hasn’t called for yet.

I will cut Trump slack for not dissing Kim Jong Un, today.  We’re about to give diplomacy a try.

But for now, yes, I have written 1,000 columns.   The only week I took off was fairly early on, I think 2001, when I took some of my old co-workers from PIMCO to Ireland for a week and knew beforehand I’d never get a lick of work done.  What a great time that was.   But every other week, whether I was here or in one of the 30+ countries I traveled to between 1999 and 2014, before the impact of the personal China beatdown really took hold (that year I used my frequent flyer miles to go back to China/Hong Kong and Paris for a last time), I got this column done.

Oh, it wasn’t always easy, for sure.  It was easier traveling alone, of course, but I wasn’t alone for most of my Ireland trips and that was rough...as in I was hung over, or worse, while completing most of these reviews.

I really don’t know how much longer I can do this.  I’m a perfectionist, as you’ve undoubtedly noticed.  I never want to leave anything out. I’ve been telling a story like no one else in the world.  No one! 

But I’m Van Gogh...I’ll be more famous when I’m dead.  I’ve known that all along.

Next week I’ll get into what makes me tick and why I fear for this country’s future...and why I’m right.

Trump World...North Korea and “allies”....

Yesterday, President Trump said he did not think the summit with Kim Jong Un required a great deal of preparation on his part.  “This isn’t a question of preparation,” he told reporters in the Oval Office.  “It’s a question of whether people want it to happen.”  And, “It’s about the attitude. It’s about willingness to get things done.”

Trump also asserted that his willingness to walk away from the Iran deal would set the right tone for his negotiations with Kim Jong Un.  Trump pointed out that he had already walked away from the Singapore meeting once – a decision he reversed after 24 hours when the Kim government issued a conciliatory response.

“I hope it won’t be necessary to walk because I really believe that Kim Jong Un wants to do something,” Trump said, while standing in the Rose Garden with Japanese Prime Minister Shinzo Abe.  “I believe we’re going to have a terrific success or a modified success.”  Trump promised the summit would be “much more than a photo op.”

Depending on the degree of success, the president continued, he could foresee inviting Mr. Kim to a follow-up meeting at the White House.  “I think he would look at it very favorably, so I think that could happen,” Trump said.

Secretary of State Mike Pompeo, who was on point and clearly prepared, unlike his boss, said that while the United States understood North Korea could not give up its nuclear arsenal “instantaneously,” the process needed to be “big and bold” and not open-ended. “We can’t step through this over years,” he said.

Asked whether the United States has narrowed the gap between how the U.S. understands the goal of “denuclearization” and how Kim defines that word, Pompeo replied succinctly, “Yes.”  Would he explain how? “No.”

“He has indicated to me personally that he is prepared to denuclearize, that he understands the current model doesn’t work,” Pompeo said.  “He understands that we can’t do it the way we’ve done it before, that this has to be big and bold and we have to agree to making major changes.”

As to rumors of a rift between Pompeo and national security adviser John Bolton, Pompeo said, “Ambassador Bolton and I will disagree with great, great consistency over time, I’m confident, right? We’re two individuals. We’re each going to present our views.”

Back to Trump, he said his demand that North Korea give up its entire nuclear arsenal immediately was part of a “process.”  He also said he would stop using the phrase “maximum pressure” to describe sanctions against the North, yet he insisted that they would remain in place.

For his part, Prime Minister Abe is worried that Trump might trade the security of the United States’ Asian allies in exchange for a deal with Kim on nukes. After all, Japan has been directly menaced by North Korean missiles fired over its waters and land.  It is seen as a primary target because of its decades-long security alliance with the United States and the presence of U.S. forces on its soil.

Plus Abe made a point to tell Trump about Japanese citizens abducted by North Korea in the 1970s and 1980s. 

As for the G7 summit in Quebec, Trump was the last to arrive and is expected to be the first to depart.  In a tweet beforehand, French President Emmanuel Macron said if Trump wanted to be isolated, the six other nations would sign their own agreement if need be “because these six countries represent values, they represent an economic market which has the weight of history behind it and which is now a true international force.”

Canadian Prime Minister Justin Trudeau described Trump’s citing of national security to defend his steel and aluminum tariffs as “laughable.”

Never one to back down, Trump fired off defiant tweets of his own, accusing Trudeau of being “indignant” and the European Union and Canada of erecting “massive trade tariffs and non-monetary trade barriers against the U.S.” for years.

“Take down your tariffs and barriers or we will more than match you,” Trump wrote.

“Please tell Prime Minister Trudeau and President Macron that they are charging the U.S. massive tariffs and create non-monetary barriers. The EU trade surplus with the U.S. is $151 Billion, and Canada keeps our farmers and others locked out. Look forward to seeing them tomorrow.”

“Prime Minister Trudeau is being so indignant, bringing up the relationship that the U.S. and Canada had over the many years and all sorts of other things...but he doesn’t bring up the fact that they charge us up to 300% on dairy – hurting our Farmers, killing our Agriculture!”

U.K. Prime Minister Theresa May appeared to take a more conciliatory approach, saying she wanted the EU to act with restraint and proportion in retaliating to the U.S. tariffs.

So as I go to post late Friday night, the big announcement out of Quebec was the U.S. and EU agreed to establish a dialogue on trade within the next two weeks, a modest step forward for bitterly divided allies.  The exchange between Trump and Macron was described as “affable.”

As former NBA star Derrick Coleman would have said, “Whoopty-damn-do.”

Trumpets....

--A report by the FBI’s internal watchdog into the agency’s handling of an enquiry into the management of emails by Hillary Clinton will be released next week, the agency said on Thursday. Inspector General Michael Horowitz said in a letter that most of the process is complete, including the protection of classified information it may contain, and it will be released June 14, President Trump’s birthday.

--House Speaker Paul Ryan sided with House Oversight Committee Chairman Trey Gowdy in disputing President Trump’s claims that “spies” infiltrated his 2016 presidential campaign.

Speaking with reporters on Wednesday, Ryan said he had seen no evidence to contradict the assessment last week from Gowdy, a South Carolina Republican, that the FBI acted appropriately when it sent an informant to meet with two Trump campaign aides during the run-up to the 2016 election.

Gowdy said May 30 that the FBI was acting on its mission to run to ground suspicions of Russian interference in the election, rather than trying to keep Mr. Trump from winning, as he had claimed.

“I think Chairman Gowdy’s initial assessment is accurate...but we have some more digging to do,” Ryan said.  “We’re waiting for some more documents requests. We have some more documents to review, we still have some unanswered questions. It would have been helpful if we got this information earlier.”

Gowdy and Ryan were among a small group of bipartisan lawmakers briefed last month on the FBI’s use of the informant. 

Trump lawyer Rudy Giuliani, in comments Wednesday in Israel, asserted that members of Robert Mueller’s team are Democrats trying to “frame” the president.

[In a new NBC/Wall Street Journal survey, 37 percent of voters say that – based on what they’ve seen, read or heard – Trump’s 2016 presidential campaign did collude or work secretly with Russia, while 34 percent disagree; 28 percent didn’t know enough to say. The findings are essentially unchanged from a Dec. 2017 NBC/WSJ poll.  46 percent believe Robert Mueller’s investigation should continue, while 36 percent think it should be ended.]

--Former campaign manager Paul Manafort on Friday was hit with a second superseding indictment by Robert Mueller’s office charging him with obstruction of justice.

Manafort’s longtime business associate in Ukraine, Konstantin Kilimnik, was also indicted on the same charge.

The indictments came after Mueller’s team accused Manafort of attempting to tamper with witnesses as he awaits trial of felony charges related to foreign lobbying work.

Kilimnik is accused of having ties to Russian intelligence.

--Secretary of State Mike Pompeo, when asked about Rudy Giuliani’s foreign policy pronouncements, including Giuliani’s claim that Kim Jong Un had come to Trump “on his hands and knees” after Trump had called off the summit last month, said, “I know Rudy, and Rudy does not speak for the administration when it comes to this negotiation and this set of issues,” Pompeo said.

--Trump tweets: “The Russian Witch Hunt Hoax continues, all because Jeff Sessions didn’t tell me he was going to recuse himself...I would have quickly picked someone else. So much time and money wasted, so many lives ruined...and Sessions knew better than most that there was No Collusion!”

“The Fake News Media is desperate to distract from the economy and record setting economic numbers and so they keep talking about the phony Russian Witch Hunt.”

“The appointment of the Special Counsel is totally UNCONSTITUTIONAL!  Despite that, we play the game because I, unlike the Democrats, have done nothing wrong!”

“As has been stated by numerous legal scholars, I have the absolute right to PARDON myself, but why would I do that when I have done nothing wrong? In the meantime, the never ending Witch Hunt, led by 13 very Angry and Conflicted Democrats (& others) continues into the mid-terms!”

“Farmers have not been doing well for 15 years. Mexico, Canada, China and others have treated them unfairly. By the time I finish trade talks, that will change. Big trade barriers against U.S. farmers, and other businesses, will finally be broken. Massive trade deficits no longer!”

“This is my 500th Day in Office and we have accomplished a lot – many believe more than any President in his first 500 days. Massive Tax & Regulation Cuts, Military & Vets, Lower Crime & Illegal Immigration, Stronger Borders, Judgeships, Best Economy & Jobs EVER, and much more...

“...We had Repeal & Replace done (and the saving to our country of one trillion dollars) except for one person, but it is getting done anyway. Individual Mandate is gone and great, less expensive plans will be announced this month. Drug prices coming down & Right to Try!”

--A veteran Senate Intelligence Committee staffer was arrested Thursday on charges of lying to FBI agents during an investigation into the leak of classified information in which federal authorities also seized emails and phone records belonging to a New York Times reporter.

James A. Wolfe, 58, who served as the committee’s director of security for nearly three decades, is alleged to have made false statements to agents in December about his contacts with three reporters, according to federal court documents made public Thursday.

One of the reporters was identified as New York Times correspondent Ali Watkins, the newspaper said, adding that Wolfe and Watkins had a personal relationship.

In August, Attorney General Jeff Sessions announced a broad crackdown on unauthorized disclosures of classified information, warning both would-be leakers and the media as he demanded that the “culture of leaking must stop.”

At the same time, Sessions offered an ominous warning to the press, saying that prosecutors have launched a review of Justice policy related to subpoenas issued to media organizations in criminal investigations.

“We respect the important role that the press has and we give them respect, but it is not unlimited,” Sessions said.  “They cannot place lives at risk with impunity.”

--President Trump commuted the life sentence of Alice Marie Johnson, who served nearly 22 years in federal prison after being convicted on nonviolent drug charges, though she ran a $50 million drug ring.  I disagree with the move, which only came about because Trump wanted to see Kim Kardashian, who was seeking clemency for Johnson.

Today, in the Q&A with reporters prior to leaving for the G7 and Singapore, Trump said he is looking into pardoning Muhammad Ali, though Ali’s attorneys said there is nothing to pardon as the Supreme Court overturned Ali’s conviction on draft evasion charges in 1971.

Wall Street / Trade, part II

White House economic adviser Larry Kudlow said this week that China, Europe and others who are breaking trade rules are at fault, not Donald Trump, as China warned that all commitments so far in talks with the U.S. over trade will be withdrawn if the U.S. imposes tariffs.

“Don’t blame Trump,” Kudlow said on ‘Fox News Sunday.’  “Blame China, blame Europe, blame NAFTA, blame those who don’t want reciprocal trading, tariff rates and protectionism.”

There had supposedly been some progress in U.S.-China talks, but Trump’s revival of a plan to slap tariffs on $50bn of Chinese imports cast the talks into turmoil.

China’s state-run Xinhua News Agency: “If the U.S. rolls out trade measures including tariffs, all the agreements reached in the negotiations won’t take effect.”

An editorial in the state-run Global Times said: “The U.S. can’t have its cake and eat it too.” The U.S. “needs to choose between tariffs and exporting more to China.”

Last weekend finance leaders of the G7 vented anger over the Trump administration’s metal import tariffs on Saturday, ending their three-day meeting with a stern rebuke.

In a rare show of division, the six other G7 member countries issued a statement asking U.S. Treasury Secretary Steven Mnuchin to convey their “unanimous concern and disappointment” about the tariffs.

French Finance Minister Bruno Le Maire warned a trade war could begin in “a few days.” 

Brad K., a big user of steel in his business, wrote that this week his contact at a Canadian mill both he and others in his industry buy from suggested a 25% hike in the price of Brad’s orders.  It was an inquiry, not a set price or order, yet, but as Brad put it a harbinger of things to come.  “U.S. mills cannot make all the tons and grades of steel U.S. manufacturers need.” And while the likes of Commerce Secretary Wilbur Ross say the cost to consumers of steel and aluminum tariffs is small, it all adds up. Brad adds that needless to say, the Canadian mill town where he buys from is “a bit rattled.  Many innocents will pay a price for all this not too well thought out 232 (see below).”

The Wall Street Journal had a piece that Trump’s 25% tariff on imported steel could make the drilling for shale oil in the U.S. significantly harder, driving up the cost, while making it more expensive to solve pipeline bottlenecks in the nation’s shale heartland – which could prolong an oil glut that has pushed the price of crude oil stored in Midland, Texas, to about $20 below the global Brent benchmark in recent weeks.

Steel typically contributes up to 10% to 20% of the cost of drilling and completing an oil well, according to the Texas Alliance of Energy Producers.  And up to half of the specialized pipe and tubular steel that the industry relies on is imported – “meaning energy companies will need to suck up nearly the entire 25% price increase, absent any tariff exemptions. U.S. steel prices, already among the highest of major economies, have risen by 20% since late February, when news of the planned tariffs first broke.”  [Nathaniel Taplin / WSJ]

As for agriculture, more than $20 billion of $140 billion of U.S. farm exports has or is likely to have retaliatory tariffs placed against it as a result of disputes with countries such as Mexico and China.  Mexico put tariffs on American products ranging from steel to pork and bourbon on Tuesday, in retaliation for the import duties on steel and aluminum imposed by the U.S. 

Editorial / Wall Street Journal

“Republicans have complained for years that the executive has encroached on the powers of the legislature, but the GOP hasn’t done much to stop the invasion. This week a bipartisan coalition in the Senate is finally rebelling against the Trump Administration’s unilateral trade war, and we’re glad to see it.

“Senator Bob Corker of Tennessee this week introduced a bill to rein in some of President Trump’s power to impose tariffs and other trade restrictions. He’s working with Pat Toomey of Pennsylvania, among others, including Democrats like Heidi Heitkamp of North Dakota and Mark Warner of Virginia, to minimize the damage from tariffs on steel and aluminum. The tariffs have invited retaliation from Canada, Mexico and the EU on everything from motorcycles to chocolate, and Mr. Trump may be willful enough to escalate.

“The Corker bill would amend the Trade Expansion Act of 1962, which under Section 232 allows the President to impose tariffs or restrictions in the name of national security. This is the justification the Trump Administration has invoked to protect from the terror of Canadian steel used in American fighter jets. The Corker legislation would require the President to submit 232 restrictions to Congress for approval under an expedited process.

“One reason for this mess is that Congress over time has ceded its Article I constitutional authority on trade to the President. This started after Congress observed the wreckage from its Smoot-Hawley tariffs in 1929 that kicked off a global trade war and contributed to the Great Depression.

“Congress then gave FDR’s Secretary of State Cordell Hull the power to negotiate bilateral deals that slowly rebuilt trade rules out of the wreckage. This led to the multilateral General Agreement on Tariffs and Trade in 1947 that laid the basis for the postwar economic boom. But as other economies recovered from the war, U.S. companies in steel and textiles began to clamor for protection again.

“Congress, led by Democrats, responded by handing more trade enforcement power to Presidents. These include Section 201 and 301 of the Trade Act of 1974, as well as trade-negotiating authority that lets Congress approve presidential trade deals with a simple majority. This lets Congress caterwaul on behalf of special interests while blaming Presidents for not punishing foreigners. Democrats have long specialized in this accountability ducking.

“The long-time assumption was that while Congress represented parochial or regional interests, a President would act in the national interest to expand trade. And for decades executives of both parties did.  George H.W. Bush negotiated NAFTA, while Bill Clinton pushed it through Congress. Free-trade Republicans in Congress passed bilateral trade deals under both Democratic and GOP Presidents.

“Enter Donald Trump, who has now taken that authority and is using it for protectionist, rather than trade-opening, ends. It’s no accident he’s using Section 232, which gives him enormous latitude to define a national-security trade threat and virtually unlimited authority to impose a tariff or quota remedy. For the first time in nearly a century, a President is more protectionist than Congress, and Congress needs to rein him in.

“The White House is now trying to block even a vote on Mr. Corker’s bill, which he wants to move as an amendment to the National Defense Authorization Act. This annual bill tends to pass with generous bipartisan support, and the White House is arguing the Corker provision would hurt Mr. Trump’s ability to negotiate trade deals. But it isn’t clear that Mr. Trump wants any trade deals, and they may turn out to be lousy if he does.

“Majority Leader Mitch McConnell is saying the Corker bill would be “an exercise in futility” because either the House or Senate might fail and show Congress is impotent, or the President will veto.  But so what? Members of Congress don’t take orders from Mr. Trump and they have their own principles and constituents to represent.

“If they think Mr. Trump’s trade policy is harming the economy, they have an obligation to try to stop him. They’ll have more than a few allies. The National Retail Federation has endorsed the Corker bill, as has the Motor & Equipment Manufacturers Association. Jamie Dimon, chairman of the Business Roundtable, said this week that Mr. Trump’s trade policy could undermine the strong economy.

“A vote would also expose the cynicism of Democrats who claim the GOP won’t stand up to Mr. Trump.  Ms. Heitkamp of North Dakota and Claire McCaskill of Missouri are running against tariffs and the damage that foreign retaliation is doing to their states. But Minority Leader Chuck Schumer and Ohio’s Sherrod Brown are griping that Mr. Trump isn’t protectionist enough. Make them vote.

“Mr. Trump might rage on Twitter, but Congress needs to send him a message that his protectionism isn’t cost-free.  Otherwise he might believe he can get away with blowing up NAFTA, imposing a 25% tariff on imported cars, or shutting down trade with China.  Mr. Corker’s effort is a test of the Republican Congress’ political will and its sincerity on the economic benefits of free trade.”

Cecilia Malmstrom, EU Trade Commissioner / Wall Street Journal

“The Trump administration’s stated reason for protecting U.S. steel, aluminum and cars is ‘national security.’  That is nonsense. In both U.S. and WTO law, the national-security clause is limited explicitly to cases involving emergencies, war and weapons. The U.S. is using the national-security claim to avoid taking measures required by U.S. and WTO law to compensate its trading partners.

“The EU has already filed a complaint with the WTO, and will exercise its right to compensation. Meanwhile, the U.S. Congress has failed to challenge the legitimacy of the administration’s national-security claim. Can American institutions be counted on to defend their country’s trade ideals?

“More than anything else, businesses require predictable conditions in which to operate.  But U.S. trade policy has become erratic, creating uncertainty throughout the global business world.

“Asked about what triggered last week’s decision on steel tariffs, Commerce Secretary Wilbur Ross replied that talks with the EU were taking too long.  In fact, the EU was creative and flexible in discussions with the U.S. It offered a positive trans-Atlantic trade agenda, including the prospect of an agreement that would have scrapped tariffs on all industrial products, including cars and car parts.

“Our offer was conditioned on the EU being exempted from new U.S. tariffs. The offer was confirmed in May by the EU heads of state and government.  This opportunity has now been discarded by the U.S.  Sad, indeed.

“The world is entering a period of international economic uncertainty, and instability for businesses, central banks and governments. In Europe, at least, we deeply regret that.  The EU doesn’t want to unfriend America.”

Robert Samuelson / Washington Post

“You cannot understand President Trump’s so-called trade war without acknowledging that it’s mostly about politics and not about economics.  Trump has embarked on a giant marketing campaign to convince us that foreigners – their exports – are to blame for our economic problems. It’s a seductive appeal to nationalism whose main defect is that it’s mostly untrue.

“To be fair, Trump’s message has been consistent since the early days of 2016. He said he would slap our trading partners with high tariffs, and so he has. The campaign continues. Here’s a recent tweet: ‘The U.S. has been ripped off by other countries for years on Trade, time to get smart!’

“The standard anti-trade narrative is that U.S. officials have botched trade negotiations, giving too much to foreigners and getting too little for U.S. exporters.  Massive trade deficits result and destroy American jobs. The employment loss is aggravated by U.S. multinationals relocating factories to developing countries with their dirt-cheap wages.  Low-cost products are then exported back to the United States.

“Now, all these statements contain some truth. After World War II, the United States was generous in granting trade concessions to Europe and Japan to help revive their economics. Similarly, many U.S. multinationals do locate factories abroad. These statements are not blatantly false, but their effects are hugely exaggerated.

“Take the connection between trade deficits and job loss. Obviously, this occurs for individual factories. But it doesn’t exist for the entire economy. Consider: From 2009 to 2017, the annual U.S. trade deficit for goods and service rose from $384 billion to $568 billion. Over the same years, the number of private U.S. payroll jobs increased by 15.5 million, and the unemployment rate fell from 9.3 percent to 4.4 percent.

“If trade deficits created huge job losses, this would be impossible. The main explanation for the apparent paradox is, as I’ve argued for years, that the dollar is the main international currency. Foreigners and investors want dollars to conduct global trade and investment. This keeps the dollar’s exchange rate high, making U.S. exports costlier and imports cheaper. The resulting trade deficit is structural; but Americans’ spending for domestic products is still the main determinant of U.S. employment.”

Lastly, the U.S. reached  a deal that will allow Chinese telecom company ZTE Corp. to get back in business after it pays a record fine and agrees to management changes, eliminating a key sticking point as the two countries try to avert a trade war.

“We still retain the power to shut them down again,” Commerce Secretary Wilbur Ross said Thursday in an interview on CNBC.  He said the Commerce Department’s $1.4bn fine brings U.S. penalties against the company to $2.3 billion.

China in turn is likely to quickly approve the $43bn acquisition of NXP Semiconductors by Qualcomm Inc. of San Diego, a deal that has been pending for 18 months.

The United States had blocked ZTE’s access to U.S. suppliers in April, saying the company violated a 2017 sanctions settlement related to trading with Iran and North Korea and then lied about the violations. The company announced it was shutting down just weeks after the ban was announced.

But it’s incredible the United States is supplying a lifeline to China, while screwing our allies.

“I assure you with 100% confidence that #ZTE is a much greater national security threat than steel from Argentina or Europe. #VeryBadDeal,” Sen. Marco Rubio (R-Fla.) said on Twitter after the administration’s announcement.

Senate Majority Whip John Cornyn (R-Texas) said national security was “front and center” of the ZTE deal, and added that replacing the board and requiring compliance officers “goes a long way to addressing some of my concerns about the national security implication.”

But it’s still very much a Chinese company with tentacles in the U.S. in a critical industry.  I totally agree with Sen. Rubio.

Europe and Asia

Eurostat reported that GDP for the euro area (EA19) grew by 0.4% in the first quarter of 2018, according to a flash estimate, when compared with the previous quarter. GDP had grown by 0.7% in Q4.

Compared with the same quarter a year ago, GDP rose 2.5% in the eurozone, after a 2.8% pace in the fourth quarter.

Germany grew an estimated 2.3%, year-over-year in Q1, France 2.2%, Spain 3.0%, and Italy 1.4%.  Greece came in at a solid 2.3%, its best since the crisis.

IHS Markit reported on the Eurozone’s final PMI data for May, and the composite index for the EA19 was 54.1 (50 being the dividing line between growth and contraction), with euro area economic growth at a one-and-a-half year low. 

The final services reading (manufacturing figures were released the week before) for the EA19 was 53.8 vs. April’s 54.7.

Germany 52.1 vs. 53.0; France 54.3 vs. 57.4; Spain 56.4 vs. 55.6; Italy 53.1 vs. 52.6.

Chris Williamson, chief economist, IHS Markit:              

“The pace of eurozone economic growth sank to a one-and-a-half year low in May, and has now slowed continually since January’s peak to suggest that the region is on course for its worst quarter since 2016.

“The survey signals GDP growth of 0.4%-0.5% for the second quarter, but there is much uncertainty as to whether the pace will continue to weaken in coming months....

“The slowdown since earlier in the year has been broad-based, though Spain has shown the greatest degree of resilience.  Crisis-torn Italy has meanwhile reported the weakest expansion of the four largest euro member states for the fourth month running.

“With the economic indicators turning down at the same time as political uncertainty has spiked higher, the eurozone’s outlook has darkened dramatically compared to the sunny forecast seen at the start of the year.”

The European Central Bank made comments Wednesday that policy makers there are preparing to tighten monetary policy, with the bank’s chief economist signaling that the bank could decide as soon as next week to wind down its $35 billion-a-month bond-buying program, which some analysts credit with supporting the 19-nation currency union’s economic recovery.

Brexit: The British government set out its plans for a one-year backstop plan for the Irish border on Thursday, finding an agreement on only part of what has become Prime Minister Theresa May’s biggest Brexit stumbling block – customs.  But by setting a date on the plan for the standby arrangement to ensure no return of a hard border between Northern Ireland and EU member Ireland, May looked to have put aside a row with her Brexit secretary ahead of securing an agreement with the EU, which has already rejected a time limit.

May has been in a fierce fight with members of her cabinet which have all but stalled talks and brought warnings from EU officials over the lack of progress.

The EU has a critical summit June 28-29, at which time it is supposed to accept or reject Britain’s broad Brexit plan so that final changes can be made by the drop-dead date of October. 

The one-year backstop plan would come after an almost two year transition period following Britain’s departure from the EU in March next year. This was not the government’s preferred option, the proposal said, but if it was triggered, Britain should have the right to negotiate, sign and ratify trade deals with other parts of the world.

Brexit minister David Davis had raised concerns that an earlier proposal had no end date and could see Britain tied to the EU’s customs union indefinitely.  A pro-European member of the ruling Conservative Party dismissed the move.

“This doesn’t change anything. It doesn’t go far enough.  This is more wishful thinking from the government. There is no way they are going to get a deal in time.”

Earlier, Foreign Secretary Boris Johnson, May’s chief rival, criticized the government’s Brexit strategy, saying it lacked “guts” and suggested Donald Trump could do a better job.  He also said Chancellor Philip Hammond, the treasury secretary, was “the heart of Remain,” and said the Brexit talks were heading for a “meltdown” and Leave supporters may not get the deal they expected.

Johnson was speaking at a private dinner and somehow the conversation was recorded.

Italy: In his maiden speech as prime minister, Giuseppe Conte, the right-wing populist who leads a coalition of the anti-establishment Five Star Movement and the far-right League, said his government would “promote a review of the sanctions” system in meetings with other EU leaders.

Conte outlined his administration’s priorities, including a crackdown on irregular migrants and an end to austerity economic policies.

A lawyer with practically no political experience, Mr. Conte was the PM choice of League leader Matteo Salvini and Five Star leader Luigi de Maio.  The two will now serve as deputy prime ministers.

Conte told senators, “We will be the advocates of an opening towards Russia. A Russia which has consolidated its international role in recent years in various geopolitical crises. We will promote a revising of sanctions, starting with those that demean Russia’s civil society.”

Conte’s intervention came as Vladimir Putin was visiting neighboring Austria, where a right-wing government coalition government also favors closer ties to Moscow.

Matteo Salvini has been to Moscow many times, and angrily denied the suggestions of Hungarian-American billionaire George Soros this week that Italy’s junior coalition partner, the League, was potentially being funded by the Kremlin.

Salvini said he was an admirer of Putin and believed he was “one of the best statesmen.”

The EU had imposed sanctions on Russia “in response to the illegal annexation of Crimea and deliberate destabilization of Ukraine.”

As for concerns Italy will leave the European Union, according to Eurobarometer, 59 percent of Italians still want the country to remain in the eurozone.

Meanwhile, owing to the spending plans of the new government, and Italy’s already sky-high debt load, the yield on the Italian 10-year bond continued to soar, now 3.11% vs. 1.86% four weeks earlier.  I nailed this call.

Slovenia: The center-right anti-immigrant party led by a former prime minister won the most votes in parliamentary elections last weekend, but not enough to rule the country on its own.  Former prime minister Janez Jansa’s Slovenia Democratic Party (SDS) will struggle to pull together a government after its hardline stance on immigration has left it short of potential coalition partners.  Nine different parties made it into parliament, with SDS garnering 25 seats in the 90-seat parliament.

Catalonia: Nationalists regained control of Catalonia’s government on Saturday and immediately pledged to seek independence for the wealthy region, in a major challenge for new Spanish Prime Minister Pedro Sanchez.  Catalonia’s new leader, Quim Torra, called on Sanchez to meet and talk about Catalonia’s future.

France: Unions at Air France today called for a four-day strike starting June 23 over a continuing pay dispute. The dispute has resulted in 15 days of walkouts this year, but a four-day strike would do a number on passengers, including a ton of vacation travelers.  Air France is bleeding profusely and the Macron government has said it would not bail out the airline.  It does still hold a 14.3 percent stake in the company.

Turning to Asia, China’s private reading on the service sector (the Caixin index) came in at 52.9 for May, unchanged vs. April.

In Japan, the services PMI was 51.0, a big drop from April’s 52.5.

But revised data on GDP in Japan’s first quarter showed the economy contracted at an annualized 0.6 percent in the first quarter, which while unchanged from the preliminary reading, raised the prospect of a recession if weakness persists in the current quarter.  Economists had expected the figure to be revised upward to a smaller contraction.  Private consumption, which is half of GDP, fell 0.1 percent in January-March from the previous quarter. Capital spending grew 0.3 percent from Q4 2017.

When it comes to consumption, it doesn’t help that it was also reported this week that Japanese workers’ inflation-adjusted real wages showed no growth in April from the same period a year earlier, after a revised 0.7 percent annual increase in real wages in March.  Clearly, the government’s repeated efforts to encourage private-sector wage gains have fallen flat, as documented in this space now for years and years.

Street Bytes

--Stocks shook off the trade tensions this week and focused on the strength of the economy and future earnings growth, I guess.  Frankly, I don’t know why the Street was so sanguine.  I’ve been watching my beloved Mets score 8 runs in their last 7 games, including tonight against the hated Yankees in a 3-1 loss.

For the week, the Dow Jones had its best week since March, up 2.8% to 25316, while the S&P 500 gained 1.6% and Nasdaq 1.2% to 7645.  Nasdaq, now up 10.8% on the year, hit an all-time closing high on Wednesday of 7689.

But this coming week, aside from the Trump/Kim summit, we have potentially market-moving meetings with the Federal Reserve and European Central Bank, and maybe some news out of the Bank of Japan’s latest gathering. 

--Warren Buffett and Jamie Dimon penned an op-ed in the Wall Street Journal, on behalf of the Business Roundtable, an association of nearly 200 chief executives from major U.S. companies, “encouraging all public companies to consider moving away from providing quarterly earnings-per-share guidance. In our experience, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability....

“Short-term-oriented capital markets have discouraged companies with a longer term view from going public at all, depriving the economy of innovation and opportunity. Fewer public companies has also meant fewer opportunities for retail investors to create wealth through their 401ks and individual retirement accounts.”  Good luck, guys.

--U.S. Treasury Yields

6-mo. 2.10%  2-yr. 2.50%  10-yr. 2.95%  30-yr. 3.09%

The yield on the 10-year remained below the key 3.00% level, as worries about emerging markets, such as Brazil and Turkey, sparked buying.

--The U.S. exported a record amount of oil and fuel in April, helping to narrow the nation’s trade gap, with the country shipping $19.9 billion in petroleum (crude oil, liquefied gases and fuels such as gasoline) to other countries, the Commerce Department reported this week.  The U.S. is exporting four times as much petroleum each month as it did a decade ago.

The rise in exports is boosting earnings for American producers, which is helping offset the impact of higher gasoline prices that pinch consumers, as investment by oil producers also picks up.

Congress in 2015 helped by lifting a ban on most exports of U.S. crude oil, and U.S. crude exports have more than doubled since January 2017, according to the Energy Information Administration, and are averaging 1.7 million barrels a day so far this year.

Separately, oil prices fell some on Wednesday after U.S. data pointed to an unexpected build in crude and gasoline inventories, and on the week were down slightly to $65.56.

A key meeting for major oil producers is being held June 22-23 in Vienna, where it’s possible an output increase will be announced for later in the year.

--Jet-fuel prices have surged more than 50% over the past year, pushing air carriers to raise fares and cut profit expectations. Delta, the nation’s No. 2 carrier, became the latest on Wednesday to say it could take six to 12 months to recoup the extra fuel costs via pricier tickets.

Fuel accounts for about a quarter of operating costs.  But average domestic airline fares have fallen in each of the past four years, according to trade group Airlines for America, with carriers handing back fuel savings to passengers.

Shares of U.S. carriers are down because of the impact of fuel on airline profits, along with the issue of too many aircraft being added to fleets chasing too few extra passengers.

But so far there is strong summer demand, which is bolstering industry pricing power.

Early in the week Southwest Airlines shares fell on news the company expected a 3 percent drop in operating revenue per available seat mile, a key revenue metric.

Southwest said bookings declined as it reduced marketing efforts following an engine failure on Flight 1380 in April, which resulted in the death of one passenger.

Lastly, global airlines on Monday lowered their forecast for industry profits in 2018 by 12 percent due to rising fuel as well as labor costs, along with an upturn in interest rates. The International Air Transport Association (IATA), which represents about 280 carriers, said the airline industry is expected to post a $33.8 billion profit this year, down from a previous forecast of $38.4bn.

--According to documents obtained by E&E News, Bob Murray, CEO of Ohio-based Murray Energy, sent the Trump administration drafts of executive orders for withdrawing from the Paris climate accord. All the president had to do was sign them.

The orders also would have rolled back coal regulations established under the Obama administration that Murray thought were a burden to his industry, E&E News reported.

Murray sent a series of letters dated March 28, 2017, to Energy Secretary Rick Perry and EPA chief Scott Pruitt, including language to exit the Paris accord.

“President Trump should issue an executive order to withdraw from the Paris Climate Accord, and/or to direct the relevant federal agencies that they shall not require coal-fired electric generators to take action to comply with the Accord,” Murray wrote.

Murray, an early campaign supporter of Trump and major GOP donor, has gotten about half the items on his 2017 wish list thus far.

But according to the Bureau of Labor Statistics, only about 500 coal mining jobs were added in Trump’s first year, bringing the total to about 50,900 nationally.  The nation’s utilities have also continued to shutter coal-fired plants in favor of those burning natural gas made cheaper and more abundant by new drilling technologies.

Greg Ip / Wall Street Journal

“President Donald Trump’s efforts to revive coal mining have been criticized as picking winners. Actually, it’s more like picking losers: coal has become a sunset industry as cleaner energy sources rapidly get cheaper. If Mr. Trump succeeds at reversing the tide, it will come at a steep price, in both dollars and lives, most tragically for the coal miners he seeks to help.

“Centuries ago, coal was a miracle material. Cleaner, safer and more efficient than wood, it made the Industrial Revolution, steam power and electrification possible. In much of the world it remains ridiculously plentiful and will be the power generation fuel of choice for years to come.

“In the U.S., though, coal is headed toward obsolescence.  Thanks to the fracking revolution, natural-gas-fueled power plants are now cheaper to build and operate than coal-fired plants.  Solar- and wind-generated power now costs less per kilowatt-hour to produce than coal. Renewables cost slightly more than coal when you include the cost of backup power since the sun doesn’t always shine and wind doesn’t always blow, according to the Energy Policy Institute at the University of Chicago. But as innovation in shale gas, wind and solar continues to drive down costs, coal will lose whatever advantages it has now.

“Seeking to postpone the inevitable, Energy Secretary Rick Perry last year asked the Federal Energy Regulatory Commission to compel utilities to buy power from struggling coal and nuclear stations. Because they store fuel on site, he said, they reinforce the electrical grid against outages.

‘FERC rejected Mr. Perry’s request, but last week the White House, citing national security, said it was preparing a new, similar proposal.

“As countless witnesses told FERC, the administration’s argument is baseless. Fuel supply problems account for an infinitesimally small share of electrical outages and when supply problems do crop up, they are usually coal’s fault....

“Meanwhile, propping up uneconomical coal and nuclear plants would cost ratepayers a fortune.”

And then there is the cost to human lives, now that we know coal emits soot that even in tiny quantities causes cardiovascular and respiratory illness.

--The Social Security program’s costs will exceed its income this year for the first time since 1982, forcing it to dip into its nearly $3 trillion trust fund to cover benefits, three years sooner than expected a year ago, according to the latest annual report.

The trust fund will be depleted in 2034 and Social Security will no longer be able to pay its full scheduled benefits unless Congress takes action to shore up the program’s finances. Without any changes, scheduled benefits will be slashed.

Medicare’s hospital fund has different issues that are now moved up to 2026, three years earlier than projected.  Both can be fixed with relatively minor tweaks that politicians on both sides, and the president, are too weak to address.

--Americans’ wealth surpassed the $100 trillion mark for the first time in early 2018, with rising home prices offsetting the hit to households’ assets from a stock-market swoon in the first quarter, as noted in a report from the Federal Reserve on Thursday.

--Facebook has data-sharing partnerships with at least four Chinese electronics companies, including Huawei, a manufacturing giant that has a close relationship with the Xi Jinping government, Facebook conceded on Tuesday.

The agreements, which date back to at least 2010, gave private access to some user data to Huawei, a telecom equipment manufacturer that U.S. intelligence flagged as a national security threat, as well as to Lenovo, Oppo and TCL.

Facebook said all four relationships remain in place but the company was winding down the Huawei deal by the end of the week.

Talk about an outrage...another one, perpetrated by the arrogant schmuck, Mark Zuckerberg.  Facebook said the data shared with Huawei stayed on its phone, not the company’s servers, but this doesn’t make any sense.

Facebook claimed it had a manager and an engineer review the apps before they were deployed to ensure the data wasn’t saved on company’s servers, a Facebook spokeswoman said.

Going back to 2010?  You expect us to believe this in light of disclosures coming to light in 2018?  Spare me, babe.  Remember, it was Zuckerberg who testified before Congress in April that Facebook restricted data access to outsiders in 2015.

Democratic Senator Mark Warner (Va.) pointed out that concerns about Huawei go back to a 2012 congressional report on the “close relationships between the Chinese Communist Party and equipment makers like Huawei.”

“I look forward to learning more about how Facebook ensured that information about their users was not sent to Chinese servers,” said Warner, the top Democrat on the Intelligence Committee.  [New York Times / Wall Street Journal]

Separately, a software bug meant millions of Facebook users may have unknowingly posted private information to the public, the company has warned.

The glitch set a user’s post to be shared to “everyone,” even if a user had previously chosen a more restricted option, such as “friends of friends.”

Facebook said it had fixed the issue.

But what’s this? Tonight, the Wall Street Journal has a new story that Facebook “struck customized data-sharing deals that gave select companies special access to user records well after the point in 2015 that the social network has said it walled off that information, according to court documents, company officials and people familiar with the matter.”

So Facebook gave special data access to a broader universe of companies than was previously disclosed. This also raises “further questions about who has access to the data of billions of Facebook users and why they had access, at a time when Congress is demanding the company be held accountable for the flow of that data.”

What a bunch of a-holes!!!  Get a good prosecutor to nail Lyin’ Mark and Princess Sheryl, the con-queen.

You can’t trust a single word out of their freakin’ mouths!  Lock ‘em up!

[I forgot to note last time the results of a Pew Research Center study that showed only 51 percent of kids between 13 and 17 use Facebook, compared with 71 percent three years ago.  YouTube (Alphabet) is now the most popular among teens, used by 85 percent.]

-Starbucks Corp. said Howard Schultz is stepping down as executive chairman later this month from the coffee chain he joined more than 30 years ago.  Schultz will have title of chairman emeritus as of June 26. He said he is writing a book about Starbucks’ social impact efforts, while saying public service may be in his future.

Schultz, 64, said he is considering many possibilities, though he has been deflecting questions about whether he would run for office.

For years speculation has swirled that Schultz might run for president.

Separately, Starbucks is raising the cost of a cup of coffee, between 10 and 20 cents on all sizes of brewed coffee.

--Mexico’s retaliation for the U.S. tariffs levied on it target $1.42 billion in fresh and processed pork, a move that’s expected to hit Tyson Foods and JBS USA Holdings, a major meat processor, according to S&P Global Market Intelligence, which tracks global commerce.

--More than half of U.S. households, 53.9%, rely entirely on cellphones, according to a survey from the National Center for Health Statistics, an arm of the Centers for Disease Control and Prevention.  The figure has increased rapidly.  In 2006, only 15.8% of survey respondents said they didn’t have a landline telephone.  The iPhone and its Android counterparts launched the next year, and the abandonment of landlines accelerated.

One of the researchers of the report noted that 80% to 90% of some countries in Europe are wireless only. The survey was conducted in the second half of 2017.

--Tesla Inc. CEO Elon Musk said on Tuesday that a goal of building 5,000 Model 3s per week by the end of June was “quite likely” as the company’s production lines were now demonstrating the ability to build 3,500 vehicles per week.

“This is the most excruciating hellish several months I’ve ever had... but I think we’re getting there,” Musk said during Tesla’s annual meeting of stockholders in Mountain View, California.

--Athenahealth Inc.’s CEO Jonathan Bush stepped down on Wednesday and the healthcare software maker said it was exploring options, including selling itself, following pressure from activist investor Elliott Management.

Bush, a nephew of former President George H.W. Bush, founded Athenahealth in 1997 and has been in the media spotlight recently for all the wrong reasons, including reports of inappropriate comments.  Bush also issued an apology after a report in U.K.’s Daily Mail said that he had assaulted his former wife 14 years ago.

Athenahealth’s cloud-based service is used to track revenue from patients, physicians and hospitals.  CFO Marc Levine will assume greater day-to-day operational responsibilities.

--The Financial Times reported that former Cambridge Analytica CEO Alexander Nix walked away with $8 million before the British data firm collapsed, leaving staff and investors with nothing.

Nix allegedly withdrew the money from a potential successor company, Emerdata, set up by the power players at Cambridge. Emerdata raised a reported $19 million from international investors before Cambridge Analytica’s role in harvesting the data of 87 million Facebook users became such a huge story.

Nix, appearing before British lawmakers this week to answer questions on the Facebook scandal, said the allegation in the FT article “is false.”

--Wells Fargo & Co.’s sale of 52 branches to Flagstar Bancorp Inc. marks a retail-banking exit from Indiana, Michigan and Ohio; part of an effort to reduce its branch count to about 5,000 from roughly 5,800 today by the end of 2020, the company said Tuesday.

The Midwest retreat contrasts with plans by Bank of America to open 500 branches across the U.S. over the next four years, including an expansion in Ohio.

Bank of America now has the second-largest deposit base, ahead of Wells, with JPMorgan Chase first.

--McDonald’s is planning a new round of layoffs to further shrink its corporate structure, the Wall Street Journal reported on Thursday, citing a company email, though the scope of the headcount reduction was not known.

“We are putting into place a new U.S. field structure that will better support our franchisees and will ensure McDonald’s continues on a path to being more dynamic, nimble and competitive,” McDonald’s spokeswoman Terri Hickey told Reuters.

--IHOP announced it would be changing its name to “IHOb,” though the company remained mum on what the “b” would stand for, or whether the change would be permanent.

The company tweeted out on Monday, “For 60 pancakin’ years, we’ve been IHOP.  Now, we’re flippin’ our name to IHOb. Find out what it could b on 6.11.18.”

Guesses for the “b” range from “breakfast” to “bacon” to “burritos,” but a since-deleted thread for IHOP employees seems to make a strong case for “burgers.”

And so we’ll go with burgers...apparently a line of 100 percent Black Angus beef burgers that employees have been training on.

--Noted  New York fashion designer Kate Spade committed suicide at the family’s Park Avenue home. TMZ, citing law enforcement sources, said the 55-year-old was despondent over the end of her 24-year marriage to Andrew, who had moved out and was seeking a divorce.  Spade left a suicide note to her daughter, 13.  Despicably, details of the note leaked into the press and I refuse to relay them here.

Spade’s sister said the fashion icon had suffered from years of depression and had refused to get treatment. But Andrew said his wife was receiving it.

Just an awful story that was a blow far beyond the fashion design industry.

Then this morning, many of us were totally shocked to learn CNN’s Anthony Bourdain of  “Parts Unknown” fame had also committed suicide, found by his good friend Eric Ripert in a small hotel in France, where they were working on a segment for the show that I so loved.  Denise D., who also was a big fan, summed it up for all of us.  “I feel like I lost a good friend.” Bourdain had that gift...he let viewers inside, though we obviously didn’t know everything.

Just beyond sad.  But, thankfully, he left us a ton of shows and CNN would be foolish not to find a regular spot on a Saturday or Sunday night for his work.  RIP.

Separately, the Centers for Disease Control and Prevention said Thursday that suicide death rates have risen significantly in most states since the late 1990s, with 25 states recording increases of more than 30%.

The rates rose among all age and ethnic groups, propelled by mental illness, substance-use disorders, financial hardship and relationship problems, the CDC said.  Percentage increases ranged from 5.9% in Delaware to 57.6% in North Dakota.

--And to complete a very sad week, we had news today that the great Charles Krauthammer, the Fox News political analyst who has been missing almost a year due to mystery ailments, revealed he has just weeks to live...that he is in the final stages of cancer.

“I have been uncharacteristically silent these past ten months,” Krauthammer’s letter today began.  “I had thought that silence would soon be coming to an end, but I’m afraid I must tell you now that fate has decided on a different course for me.”

Krauthammer battled an abdominal tumor and subsequent complications, but it seemed he was finally recovering.

“However, recent tests have revealed that the cancer has returned.... My doctors tell me their best estimate is that I have only a few weeks left to live. This is the final verdict.  My fight is over.”

I love Charles Krauthammer.  How much?  I just plugged his name into my search engine.  Imagine, in 1,000 columns, basically minus the last 50 that he has been absent, I have quoted him 265 times!  I have better archives of Charles Krauthammer than he has himself, probably.

I’m saying a prayer tonight for him...we need a miracle.  He’s had other issues, as you know, but he’s persevered.  He’s only 68.  America needs him, today more than ever.

Dear Lord....if anyone deserves more time it’s Mr. Krauthammer...

Foreign Affairs

North Korea: Jonathan Cheng / Wall Street Journal

“The hardest part about disarming North Korea may be knowing where to start.

“The regime has the fissile material to make between 16 and 60 nuclear weapons and has likely built 10 to 20, according to U.S. experts. Its army might have 70 missiles, the Congressional Research Service estimates. Much is uncertain; even less is known about the North’s chemical and biological weapons, among them the deadly VX nerve agent. And it’s all hidden around a mountainous country about the size of Pennsylvania.”

But with the U.S. seeking complete, verifiable and irreversible denuclearization of North Korea – where do you start when it comes to the talks between President Trump and Kim Jong Un?

And how do you establish whether disarmament efforts are successful?  You have to know what Pyongyang’s entire arsenal is in the first place, and of course the United States has essentially zero intelligence in this regard. In prior negotiations, dating to 1994, Pyongyang resisted giving an accounting of its weapons.

Siegfried Hecker, a Stanford University nuclear scientist who visited North Korea’s facilities in 2010, estimated late last year that Pyongyang likely had enough fissile material to make between 16 and 32 nuclear weapons.

David Albright, another nuclear-arms expert, said he learned recently of a possible second nuclear-enrichment plant in North Korea, based on “more than two independent government sources.”

Such a facility would drastically alter estimates on the North’s nuclear stockpile.

Experts are also increasingly doubtful that North Korea has destroyed its underground nuclear testing site. The weak explosions on May 24 at entrances to the Punggye-ri test site deep beneath Mount Mantap did not trigger the internal collapses that would put the site out of commission, a U.S. official told CNN, based on seismic data.  U.S. officials also confirmed that North Korea removed technical equipment from the tunnel complex before they blew up the entrances before a handful of foreign journalists.

Defense Secretary Jim Mattis said on Sunday that North Korea will receive relief only after it shows “verifiable and irreversible” steps towards denuclearization, adding that it would be a bumpy road to a summit between President Donald Trump and North Korean leader Kim Jong Un.

“We can anticipate, at best, a bumpy road to the (negotiations),” Mattis said at a conference in Singapore. “We will continue to implement all U.N. Security Council resolutions on North Korea. North Korea will receive relief only when it demonstrates verifiable and irreversible steps to denuclearization,” he added.

Separately, Kim Jong Un removed his country’s top three military officials recently, as first reported by South Korea’s Yonhap news agency, as it seems Kim is dealing with dissension in the military over the approaches to South Korea and the U.S.  North Korea’s leadership is believed to regard nuclear weapons as crucial to its survival.

Editorial / USA TODAY

“As next week’s Singapore summit rapidly approaches, carrying with it the prospect of Donald Trump and Kim Jong Un greeting each other with warm handshakes and smiles, it’s worth remembering that North Korea is the world’s worst human rights nightmare.

“Kim’s capacious cruelty toward his own people cannot be overstated, nor mitigated by his recent diplomatic charm offensive. He is a true totalitarian tyrant.

“For North Korea’s 26 million people, Kim’s regime controls every aspect of life: where they reside, the direction of their lives, how much they can eat. From the earliest age, children are indoctrinated in themes of unconditional obedience to ‘the dear leader’ and a duty to criticize (inform on) others....

“Worse yet are the public executions, torture and ‘disappearing’ reserved for stamping out any shred of political dissent. Entire families vanish because of association with one accused member. Four political camps hold an estimated 80,000 to 120,000 of these forsaken people who, according to testimony before the U.N. commission, never go home.

“They live lives of unremitting misery and starvation, reduced to eating grass, scavenging for crumbs, and vying for the chance to kill vermin for protein. One woman was beaten for picking through cow dung for undigested grain.

“The fountainhead of this misery, Kim, is scheduled to sit down with America’s president next Tuesday. The harsh reality is that, for now, demands for basic human rights have to take a back seat to efforts to negotiate away the dynastic leader’s nuclear weapons.

“Even so, this does not mean Trump has to be a smiling, conciliatory pal, ignoring sins for the sake of amity.  His embrace of other authoritarian foreign leaders has already produced its share of cringe-worthy moments. If the world sees a beaming Trump patting and praising Kim, the U.S. president will have pandered to a whole new level of evil.”

Michael O’Hanlon / Wall Street Journal

“Should the U.S. bring its nearly 30,000 troops home from the Korean Peninsula in return for North Korean nuclear disarmament? An adviser to South Korean President Moon Jae-in recently suggested the answer might be yes. And Kim Jong Un likely won’t give up the bomb without an end to the U.S.-South Korea alliance in its current form.

“This might sound like a reasonable trade-off, but recall that the North Korean threat consists of much more than nuclear weapons. Pyongyang maintains a huge conventional military, robust special forces, stocks of chemical and biological arms, and hundreds of artillery tubes and missile launchers in range of Seoul. If these threats could also be substantially reduced, it would be fair to ask about the future of the alliance.

“Yet consider its tremendous benefits. A strong U.S.-led alliance system has been very good for international peace and stability, and the U.S.-South Korea alliance has been an integral part of that broader community. This transcends specific threats from North Korea, Russia or any other hostile power.

“South Korea is the world’s 11th-largest economy and remains influential. No one should want to return to the anarchy that prevailed in Europe and East Asia a century ago, when countries had weak and shifting relationships but no enduring bonds. The result was two world wars followed by catastrophic conflict in Korea.”

Defense Secretary Mattis said last weekend that the presence of U.S. troops in South Korea is not up for negotiation at the summit.

China: The Washington Post reported late tonight that Chinese government hackers compromised the computers of a U.S. Navy contractor and stole a large amount of highly sensitive data on undersea warfare, including plans for a supersonic anti-ship missile for use on U.S. submarines, the Post citing unnamed U.S. officials, with the breaches taking place in January and February, the officials told the paper, speaking on condition of anonymity about an ongoing investigation led by the Navy and assisted by the FBI.

A Chinese Embassy spokesperson told Reuters in an email that the Chinese government “staunchly upholds cyber security, firmly opposes and combats all forms of cyberattacks in accordance with law.”

Bastards.  The hackers targeted a contractor who works for the Naval Undersea Warfare Center, a military entity based in Newport, Rhode Island, according to the Post.  The hacked material comprised 614 gigabytes relating to a project known as Sea Dragon, as well as signals and sensor data, submarine radio room information relating to cryptographic systems and the Navy submarine development unit’s electronic warfare library, the Post reported.  The newspaper said it had agreed to withhold some details about the compromised missile project after the Navy said their release could harm national security.

Separately, there was a report China removed missile systems from a disputed island in the South China Sea, although U.S. officials and experts said the disappearance was likely only a temporary arrangement, amid rising tensions between the two countries.  China has done this before, and with the humidity in the region, and frequent storms, the missiles could be removed just for maintenance purposes.  [Or they are simply being concealed inside buildings on the island.]

A Chinese foreign ministry spokeswoman accused the U.S. military on Wednesday of “hyping up militarization and stirring up trouble,” and warned that “China will not be threatened by any military warships,” said Hua Chunying.

The “routine” fly-by mission came just days after Defense Secretary Jim Mattis pledged at the Singapore security summit that the U.S. would “compete rigorously” with China in the Indo-Pacific.

The Pentagon has been considering beefing up its naval patrols in the region to better observe Chinese facilities in the South China Sea and Taiwan Strait.  The Pentagon has been attempting to rally allies such as the U.K. and France to beef up their own military presence.

Meanwhile, a Taiwanese think tank is calling on Taipei to lease part of a Taiwan-controlled islet to the U.S. military, which would be a highly-explosive move President Trump should threaten to take if Beijing doesn’t cooperate on a myriad of issues.

Editorial / Wall Street Journal

“While President Trump focuses on trade and North Korea, China is aggressively building military outposts beyond its borders in the South China Sea. Beijing wants to push Washington out of the Indo-Pacific, and the Trump Administration and Congress may finally be developing a serious strategy to respond.

“Trillions of dollars of trade annually float through the Indo-Pacific, which stretches from East Africa through East Asia. In recent years China has built military bases on artificial islands hundreds of miles from its shores, ignoring international law and a 2016 ruling by a United Nations tribunal.

“The buildup has accelerated in recent weeks, as China has deployed antiship missiles, surface-to-air missiles and electronic jammers on the Spratly islands and even nuclear-capable bombers on nearby Woody Island. This violates an explicit promise that Chinese President Xi Jinping made to Barack Obama in 2015 that ‘China does not intend to pursue militarization’ on the Spratlys.

“The next step could be deployed forces. At that point ‘China will be able to extend its influence thousands of miles to the south and project power deep into Oceania,’ Admiral Philip Davidson, who leads the U.S. Indo-Pacific Command, said in April.

“In the face of China’s buildup, the U.S. has shown uneven commitment. Mr. Obama limited freedom-of-navigation patrols to avoid a confrontation and never committed the resources to make his ‘pivot to Asia’ a reality. China saw Mr. Obama’s hesitation and kept advancing. The growing concern is that China will begin to dictate the terms of navigation to the world and coerce weaker neighboring countries to agree to its foreign policy and trading goals.

“Defense Secretary Jim Mattis lately has been putting this concern front and center. He recently rescinded an invitation to the Chinese navy to participate in the multinational Rimpac exercises off Hawaii this summer. And at the annual Shangri-La security dialogue in Singapore this weekend, Mr. Mattis said that ‘the placement of these weapons systems is tied directly to military use for the purposes of intimidation and coercion.’....

“China’s rise, and Mr. Xi’s determination to make China the dominant power in the Indo-Pacific, is a generational challenge that will require an enduring, bipartisan strategy and commitment.  A firmer stand to deter Chinese military expansionism is an essential start.”

Lastly, Australian Foreign Minister Julie Bishop on Tuesday criticized China for pressuring national flag carrier Qantas Airways to change its website to refer to Taiwan as a Chinese territory, ramping up tensions between the two countries.

Qantas gave in to Beijing’s request to remove references on its websites and in other material that suggest Taiwan, Hong Kong and Macau are part of countries independent from China.

Australia adheres to the one-China policy, which means it does not recognize Taiwan as a country, but Bishop said private companies should be able to conduct business operations free from political pressure from governments.

Syria/Iran/Turkey: The U.S. and Turkey reached agreement on a plan to withdraw Kurdish fighters from the northern Syrian city of Manbij as a step toward resolving one of the tensest disputes between the countries.

Secretary of State Pompeo and Turkey’s foreign minister, Mevlut Cavusoglu, “endorsed a road map” to “ensure security and stability in Manbij,” according to the State Department after the two officials met in Washington on Monday.

The agreement hands a significant victory to President Recep Tayyip Erdogan just weeks ahead of presidential elections, that appear to be closer than Erdogan planned for.

Turkey regards the Kurdish militia as an affiliate of the Kurdistan Workers’ Party, which has been designated a terrorist group by both Turkey and the United States.

But the Pentagon considers the militia its most reliable fighting partner in the region, making up the command component of the American-backed Syrian Democratic Forces, which are fighting ISIS.

Meanwhile, Syrian President Bashar Assad, who is nearly finished consolidating his gains and regaining control of essentially the entire country, save for a few pockets, such as the above, said he plans to visit North Korea’s Kim Jong Un, North Korean state media reported Sunday, potentially the first meeting between Kim and another head of state in Pyongyang.

Pyongyang and Damascus have maintained good relations and United Nations monitors have accused North Korea of cooperating in Syria’s chemical weapons program, which the North denies.

President Assad’s regime is “no longer immune” from retaliation, Israeli Prime Minister Benjamin Netanyahu warned during a visit to London Thursday.

“He is no longer immune, his regime is no longer immune. If he fires at us, we will destroy his forces,” Netanyahu said, speaking at an event organized by the Policy Exchange think tank.

“I think there is a new calculus that has to take place and Syria has to understand that Israel will not tolerate the Iranian military entrenchment in Syria against Israel,” he said.

“The consequences are not merely to the Iranian forces there but to the Assad regime as well,” he said, adding: “I think it’s something he should consider very seriously.”

Israel has been pledging for months not to allow Iran to establish itself in Syria, and last month, Israel launched a large-scale attack on what it said were Iranian targets, raising fears of a major confrontation.

Separately, President Trump asserted Thursday that his decision to abandon the Iran nuclear deal had already curbed Iran’s aggressive behavior, and he predicted that his hard-nosed tactics would also result in a successful nuclear negotiation with North Korea.

Iran, he said, was no longer as adventurous in Syria and Yemen, and had relaxed its ambitions to extend its influence all the way to the Mediterranean Sea.  “Iran is not the same country that it was a few months ago,” Trump said at a news conference. “They’re a much, much different group of leaders,” he concluded.

But there is zero evidence of this, as Iran remains firmly under the control of Supreme Leader Ayatollah Khamenei, and its proxy forces continue to operate across the Middle East.

Iran also said it would not heed a call to cooperate more fully with UN nuclear inspectors until a standoff over the future of its agreement with major powers is resolved, its envoy to the agency said Wednesday.

The International Atomic Energy Agency, which is policing the restrictions placed on Iran’s activities under the deal, has said Tehran is implementing its commitments, but also called for “timely and proactive cooperation” on providing access for snap inspections.

IAEA chief Yukiya Amano has said the comment is “not an expression of concern or complaints but rather an encouragement to Iran.” Diplomats who deal with the agency, however, say it follows an inspection in late April that went down to the wire in terms of how quickly the IAEA team gained access to one site.

Tehran’s ambassador to the IAEA, Reza Najafi, said “no one should expect Iran to go to implement more voluntary measures.”

Ayatollah Khamenei said on Monday he had ordered that preparations be made to increase Iran’s uranium enrichment capacity in case the nuclear deal fell apart.

Finally, in a report that was a month overdue, the Pentagon said last weekend that U.S. military actions killed 499 civilians in Iraq, Syria, Afghanistan and Yemen last year. The report, which covers counterterrorism airstrikes and ground operations around the world, added that “more than 450 reports of civilian casualties from 2017 remained to be assessed.”

Data from Airwars, a nonprofit that tracks reports of civilian deaths in Iraq and Syria, reveals a far higher number – 6,259 since the start of the war against ISIS in Iraq and Syria, vs. the Pentagon’s announced 892.

Israel: Defense Minister Avigdor Liberman said there have been 600 kite attacks from the Gaza Strip, of which 400 were intercepted by technology, but 198 incendiary kites caused fires burning 2,500 acres.

“It must be clear, we are unwilling to accept kite attacks, riots on the fence, or attempts to rush the fence and harm land that is under Israeli sovereignty,” Liberman said. “We will act according to Israel’s interests at timing that is comfortable for us. We will not leave accounts open. We will settle accounts with Hamas, Islamic Jihad, and the rests of the terrorists operating against us from the Gaza Strip.”  [Jerusalem Post]

Critics say the Netanyahu government has no strategy, it just waits for the next attack and then responds.

Iraq: The parliament has voted in favor of a manual ballot recount after allegations of widespread fraud in the country’s recently held parliamentary elections, a lawmaker said, a development that could further prolong the process of forming a new government.

On Tuesday, Prime Minister Haider Abadi said a separate commission looking into alleged irregularities in the vote found “unprecedented” violations.

Supporters of the populist cleric Moqtada Sadr, whose forces once battled U.S. troops, emerged with the most seats in the May 12 vote, and it’s unclear whether a recount would change the outcome. The winners have already begun talks on forming a new government.

Russia: During his annual television call-in show on Thursday, Vladimir Putin accused the United States of violating the nuclear balance and warned against a “Third World War.”

Responding to a worried viewer who asked if such a war would occur, Putin called for negotiations in an attempt to return to the strategic parity the United States and Soviet Union had during the Cold War.

Quoting Albert Einstein’s aphorism that “World War IV will be fought with sticks and stones,” he said the U.S. exit from the Soviet-era anti-ballistic missile treaty in 2002 had disrupted the balance.

“The fear of mutually assured destruction has always restrained and forced military powers to respect each other,” he said. “The exit of the United States from the missile defense treaty was an attempt to ruin this parity, but our efforts in the development of new weapons will preserve this parity.”

Meanwhile, U.S. Defense Secretary Mattis is pressing European allies to ready more NATO troops, ships and planes for combat in a fresh move to shore up the alliance’s deterrence against a potential Russian attack.

The plan would require NATO to have 30 land battalions, 30 air fighter squadrons and 30 navy ships such as destroyers ready to deploy within 30 days of being put on alert. It does not discuss specific troop numbers or a deadline for setting up the strategy.

The size of battalions varies across NATO, from 600 to 1,000 soldiers.

“We have an adversary (Russia) that can move quickly into the Baltics and Poland in a ground attack,” said one senior NATO diplomat who was briefed on the U.S. plans.  “We don’t have the luxury of taking months to mobilize,” the diplomat said.

Russia’s war games last year involved an estimated 100,000 troops.

Hours before arriving in Austria, on his first trip to Western Europe in almost a year, Putin told Austrian ORF television he wanted a “united and prosperous” EU, calling it Russia’s most important commercial and economic partner.

The pro-Putin United Russia party has close links with far-right parties in the EU, which alarms many liberals.

Walter Russell Mead / Wall Street Journal

“Vladimir Putin’s foreign-policy flair has both electrified and horrified the world for a full decade. Since 2008, Mr. Putin has partitioned Georgia, invaded Ukraine, and annexed Crimea. He has raised Russian power and prestige to their highest levels since the Cold War. He has muscled Russia back into the Middle East while inserting himself into America’s 2016 presidential election. He has also demonstrated an unequaled ability to weaponized information and bolster Russian power on the cheap.

“Breaking the rules, in other words, is Mr. Putin’s specialty. But this year he seems to be taking a more laid-back approach. The Kremlin continues to spread disinformation, and its political opponents still occasionally turn up poisoned or dead. But as U.S. policy has become more frenetic under President Trump, Russian foreign policy has become more restrained....

“Don’t misunderstand: Mr. Putin hasn’t had a change of heart or decided to mend fences with the West. He is toning down his foreign policy simply because so many of his key objectives have been accomplished that his best option now is to consolidate his gains.

“Ten years ago, the European Union and the North Atlantic Treaty Organization were on offense in Eastern Europe. Mr. Putin feared that the spread of Western ideas into Russia would challenge his rule.  Those worries are gone: A divided and confused West has given up its dream of pushing eastward, and both the EU and NATO are less confident and less effective than they were a decade ago. The West no longer endangers Russia. The real question is how much Russia endangers the West.

“Mr. Putin is no Stalin; he seeks to weaken the West rather than destroy it. From his point of view, the current situation in Europe looks promising: The U.S. and Europe are drifting apart. The gap within the Continent also continues to grow, as discontent mounts between Germany and many of its southern and eastern partners. Italy’s new government is likely to push to end sanctions against Russia, while forcing Europe into a new bout of navel gazing over the euro. All this favors Moscow without requiring Mr. Putin to do much of anything.

“In the Middle East, Russia would profit similarly from a period of relative inaction....

“For the moment things are breaking Mr. Putin’s way.  If Syria is to be a playing field for outside powers, the U.S. and Israel would prefer Russia be the leader rather than Iran. Mr. Putin can tell Benjamin Netanyahu that Russia is the best security against the Iranian forces on Israel’s border.  At the same time, Mr. Putin can promise Ayatollah Ali Khamenei that Russia will keep Bashar Assad in Damascus and the U.S. out....

“Meanwhile, developments at home counsel restraint as well. While Mr. Putin’s string of dramatic foreign-policy successes has shored up his domestic popularity, Russia’s sclerotic economy and corrupt social order ensure that the foundations of his power remain weak.  Mr. Putin has made Russia great again on the international stage, but the Russian people would rather see him use that daring and finesse to improve the situation at home.”

*The World Cup begins this week in Russia.  Here’s hoping it is a safe event, but this is one juicy target, 11 cities.  Russia has a lot of enemies.  If I was attending, I would not go to any pubs close by the stadiums.

Afghanistan: President Ashraf Ghani on Thursday announced an unconditional ceasefire with the Taliban until June 20, coinciding with the end of the Muslim fasting season, but excluded all other militant groups, such as Islamic State.

The decision came after a meeting of Islamic clerics from across the country this week who declared a fatwa on Taliban attacks. A suicide bombing claimed Islamic State killed 14 people at the entrance to the clerics’ peace tent in Kabul.

The clerics recommended a ceasefire with the Taliban, who are seeking to reimpose strict Islamic law after their ouster in 2001, and Ghani endorsed the recommendation.

“This ceasefire is an opportunity for Taliban to introspect (sic) that their violent campaign is not winning them hearts and minds but further alienating,” Ghani said in a message on social network Twitter after a televised address.

“With the ceasefire announcement we epitomize the strength of the Afghan government and the will of the people for a peaceful resolution to the Afghan conflict.”

But military experts believe this is not a good move in that it gives the Taliban the opportunity to regroup and prepare for more attacks.

Random Musings

--Presidential tracking polls....

Gallup: 41% approval of President Trump’s job performance, 55% disapproval (June 3)
Rasmussen: 47% approval, 51% disapproval

In a new NBC/Wall Street Journal national survey of registered voters, 44% approve of President Trump’s job performance, vs. 39% in April, though the 44% matches the approval rating for Ronald Reagan (in June 1982) and Barack Obama (in June 2010) before both presidents saw their parties lose a significant number of House seats in the midterms.

--Trump’s support from Republican voters remains rock solid, 87% per the latest Gallup poll, second only to George W. Bush’s 96%, which came nine months after 9/11.

--Senate Majority Leader Mitch McConnell said Tuesday he was canceling most of the Senate’s time-honored August recess, an election-year move that could help lawmakers confirm more of President Trump’s nominees while keeping vulnerable Democratic senators off the campaign trail.

McConnell said he decided to shorten the usual summer getaway “due to the historic obstruction by Senate Democrats of the president’s nominees” and to work on must-pass spending bills.

--Californians negotiated their “jungle primary” process on Tuesday, which gives the November ballot to the top two finishers, regardless of party.  $millions were spent to ensure Democratic contenders in the state’s congressional districts didn’t ruin their chances by splitting the vote too much among fellow Democrats, but Republicans secured a spot in the California’s governor race, multimillionaire John Cox*, which is critical for helping GOP turnout this fall and votes for House Republican candidates.  But Republicans missed a shot at Democratic incumbent Sen. Dianne Feinstein’s re-election big, with Feinstein facing a fellow Democrat, not a Republican in the fall.

*Cox goes up against prohibitive favorite Gavin Newsom, San Francisco’s former mayor and current lieutenant governor.  But the primary was a stunning defeat for former Los Angeles Mayor Antonio Villaraigosa, who finished a disappointing third.

On the House side, Democrats will be mounting strong challenges in open seats currently represented by Republican incumbents.

Nationally, in terms of the Democrats taking back control of the House, the two key states are going to be California and here in New Jersey.  Between these two, Democrats have a legitimate shot at at least 10 Republican-held seats, nearly half the 23 they need for control. 

Four Republican House seats in New Jersey are in serious trouble, including my congressman, Leonard Lance.  The district next door, retiring Republican Rep. Rodney Frelinghuysen’s seat, is looking strong for the Democrats.

But will we see a big Blue Wave across the country? That’s where the generic House poll is so critical.

The aforementioned NBC News/Wall Street Journal survey gives Democrats a 10-point advantage on congressional preference, with 50 percent of registered voters wanting a Democratic-controlled Congress, versus 40 percent who want a GOP-controlled one.

Democrats held a 7-point edge on this question back in April, 47-40.

And Democrats are more enthusiastic about the upcoming midterms, with 63 percent of them registering either a ‘9’ or ‘10’ on a 10-point scale in terms of interest, while just 47 percent of Republicans signal the same level of enthusiasm.

But by a 48-23 margin, voters indicate they’re more likely to support a congressional candidate who promises to provide a check on President Trump than those who say they’re less likely to support such a candidate.  At the same time, House Minority Leader Nancy Pelosi continues to be a serious drag on her party, with 45 percent saying they’re less likely to support a candidate who wants Pelosi as speaker, versus 21 percent who are more likely to back such a candidate.

Separately, six-in-10 are satisfied with the U.S. economy.

One thing seems clear after Tuesday’s primaries across the country.  Female candidates rule, including some strong Republican ones for Congress, such as Korean-American Young Kim, who will be trying to replace the retiring Republican Ed Royce in California.

--New Jersey’s Star-Ledger ran a headline post-Tuesday’s primary, “What the hell happened to Bob Menendez?” Newspaper publisher Lisa McCormick got 38% of the vote in the Democratic primary against Sen. Menendez despite not having reported any campaign spending.

So this clearly opens it up for Republican senate challenger Bob Hugin, and as I noted the other day, the Republican National Committee can’t be afraid to spend $s to help him.

One good note from the primary vote for Menendez, however, is that almost 200,000 more Democrats than Republicans went to the polls, and McCormick’s 157,000 were just 10,000 shy of Hugin’s total.

--Daniel Henninger / Wall Street Journal

“Will the feud between Donald Trump and the NFL ever end??!!!

“Here we are in middle of a perfectly fine baseball season, when suddenly the field of view is filled with another national-anthem battle royal between the president and the Philadelphia Eagles, who won Super Bowl LII.

“Who didn’t see this collision coming?

“In a tradition that by now feels as if it started with George Washington, yet another professional sports team was invited this week to the White House for a photo-op with the president. Then it developed that some, or maybe a lot, of the Eagles weren’t going to show up, because last season you-know-who dissed the NFL players who took a Kaepernick knee during the national anthem. For the record, all the Eagles players stood for every singing of ‘O say can you see’ last season.

“I’m not going to get into the NFL’s recent ruling on what players next season will have to do during the anthem because, frankly, I don’t care anymore about the NFL. Being from Cleveland is no help.

“Naturally, I did watch the start of Super Bowl LII to see if anything would happen during the national anthem, but it turned out to be the most patriotic display in the history of American sports. If the rattled NFL proprietors could have put a tank at midfield, they would have.

“Then I got sucked into watching the whole game because it quickly became the most mesmerizing championship in years. In the old days, hard to believe, that’s why we watched sports – for the sport. How naïve we all were.

“But back to the Trump White House, which retaliated for the Eagles’ threatened no-shows by ‘disinviting’ the whole team. Instead, the fans from Philadelphia got a quick concert of red, white and blue music by the Marine Band and Army Chorus.

“LeBron James took time off Tuesday from preparing for Cleveland’s NBA final against Golden State to say that neither basketball team would go to the White House because ‘no one wants the invite anyways.’ Amen.  Let’s end right now the ridiculous habit of inviting the sports world’s plutocrats to the White House.

“The press says Mr. Trump is pushing the battle of the national anthem because it plays to his base.  I suppose it does. But here’s what galls even non-Trumpians about this kneeling kerfuffle: We live in a world soaking in partisan politics. Then one day you wake up ready to relax with NFL Sunday, and you discover that ‘The Star-Spangled Banner’ has become totally politicized. Any normal person, including liberals who won’t admit it, would have a three-word reaction to this spectacle, and the first two words begin with ‘w’ and ‘t.’

“So what else is new? Today, if someone has a grievance or beef, first thing they do is look for something to attach it to – the anthem, the Pledge of Allegiance, 19th-century American fiction, Mom’s apple pie – anything that will draw the world’s attention, meaning the attention of the viral plague called social media....

“(Even) now, the people who voted for Hillary still claim to be shocked and stunned that an electorate beaten down by the politicization of everything in life voted for the guy who makes a mockery of all that.

“Worth noting is that there were no serious college commencement protests this year. Is this progress? Maybe. Or maybe the answer is that in the social-media era, when no thought lasts long, the commencement shout-downs and anthem kneelings burn themselves out as the protest zeitgeist moves on to find yet another platform.

“But there’s one protest platform that won’t burn off: Donald Trump....

“The sophisticates in the media thought they could beat Donald Trump at this game by burying him under waves of negative publicity. But he feeds off of it, just as he turned the Philadelphia Eagles’ White House no-show into a display of patriotic music, with the maestro at the center.

“Now, fantastically, some Democrats are complaining that they can’t get their message out (the tax cut didn’t work, Medicare for all) because Donald Trump has blotted out the media sun. Gee whiz, whose fault is that?

“The eclipse won’t end. The media has turned the Trump presidency into a phenomenon of constant self-absorption – their self-absorption in this one person. Donald Trump has become the biggest balloon in a political Macy’s parade of modern media’s own creation.  They could let go of the ropes. But they won’t.”

For the record, President Trump initially came out in strong support of the NFL’s new policy that will punish players who protest during the anthem.

“I think that is good,” Trump said of the new rule. “I don’t think people should be saying in locker rooms. You have to stand proudly for the national anthem. Or you shouldn’t be playing, you shouldn’t be there, maybe you shouldn’t be in this country.  You have to stand proudly for the national anthem and the NFL owners did the right thing if that is what they’ve done.”

Then he once again changed his mind...and then again today in extending a possible olive branch.

Lastly, it was pathetic that Fox News ran a clip of Eagles players kneeling on the field, claiming they were protesting the anthem when in fact they were in a pregame prayer.  Executive producer of Fox News @Night, Christopher Wallace, said in a statement: “To clarify, no members of the team knelt in protest during the national anthem throughout regular or post-season last year. We apologize for the error.”

--Reuters reports that the Atlanta cyberattack has had a more serious impact on the city’s ability to deliver basic services than previously understood, a city official said on Wednesday, as an additional $9.5 million to help pay for recovery costs was proposed.

More than a third of the 424 software programs used by the city have been thrown offline or partially disabled in the incident, Atlanta Information Management head Daphne Rackley said.  Nearly 30 percent of the affected applications are considered “mission critical,” affecting core city services, including police and courts.

Hackers had demanded $51,000 worth of bitcoin for the release of encrypted city data.  The interim city attorney said 71 of 77 computers were wiped out and a decade of legal documents, while the hack wiped out police dash-cam recordings.  “That is lost and will not be recovered,” said Police Chief Erika Shields.

--The Miss America pageant abandoned the swimsuit competition in yet another Sign of the Apocalypse. 

Gretchen Carlson, the former Fox news anchor and Miss America in 1989, who is now chairwoman of The Miss America Organization, said, “We are not going to judge you on your outward appearance.”

Ms. Carlson added: “We are moving it forward and evolving it in this cultural revolution.”

Discuss amongst yourselves...my attorneys have advised me not to comment myself.

Except I love the Monster Energy Girls!!! #NASCAR

--A pilot whale died off southern Thailand after swallowing 80 plastic bags.  The small male pilot whale had been discovered ailing and unable to swim in the Na Thap Canal, Thai marine officials said. Thailand is a major user of plastic bags and the government last month announced it was considering a ban. [BBC News]

Separately, more than 120 pregnant whales were killed during Japan’s annual hunt last summer, a report has revealed, prompting outrage among conservationists.

Figures show that 128 of the 333 minke whales caught during the 12-week expedition in the Southern Ocean were female.  122 of them were pregnant.

The figures were published in a technical report submitted to the International Whaling Commission and prepared by an agency linked to Japan’s fisheries ministry.

Conservationists greeted the report’s findings with fury, calling the statistics “shocking” and condemning the slaughter as “abhorrent.”

Japan has previously justified its whaling on an exemption in international law which allows the animals to be killed for scientific purposes, but Australia won a 2014 case at the International Court of Justice which ruled against the Japanese program in the Southern Ocean.

But then after the ruling, Japan announced a new research program, under which it would kill up to 333 Antarctic minke whales each year. The fisheries ministry said the program is necessary to study the best methods of managing minke populations.

‘Man’ sucks.

--A Supreme Court ruling in favor of a Colorado baker who refused to make a custom cake for a same-sex wedding could mark the first step toward allowing businesses to withhold certain services based on religious grounds.

But...while the outcome was a victory for religious freedom, the ruling was very specific to the circumstances of this particular case, and going forward, it’s unclear whether other businesses with religious objections can discriminate against customers based on their beliefs.

Most legal experts agree that even after Monday’s 7-2 ruling written by Justice Anthony Kennedy, “It does not create a simple across-the-board right to conscientious objection,” as University of Virginia law professor and expert on religious liberty Douglas Laycock put it to USA TODAY.

Instead, Justice Kennedy and the majority were ruling against the Colorado Civil Rights Commission, which appeared contemptuous toward Jack Phillips, owner of Masterpiece Cakeshop Ltd. in Lakewood, Colorado.  Justice Kennedy cited the comments of some commission members who initially ruled on Phillips’ case as evidence of “hostility to religion,” along with the commission’s refusal to sanction three other bakers who declined to produce cakes with messages attacking same-sex marriage.

Basically, the Colorado Civil Rights Commission is a bunch of a-holes.

This was the first major follow-on, albeit an inconclusive one, to the 2015 decision affording same-sex couples the same marriage rights as those held by opposite-sex couples.  Justice Kennedy’s opinion emphasized that progress toward gay rights should unfold in a civil and sensitive manner to those whom it discomforts.

--Former Fox News commentator, and retired lieutenant colonel, Ralph Peters spoke on CNN in his first television interview since his departure from Fox in March, having quit in disgust, and attacked his old employers again, saying that the network was “doing a great, grave disservice to our country.”

“With the rise of Donald Trump, Fox did become a destructive propaganda machine.  And I don’t do propaganda for anyone.”

For the past decade, Peters said he believed that Fox News was a necessary and legitimate conservative bulwark in the news media and an outlet for libertarian opinions.  But following the election of Donald Trump, the network turned rightward, Peters said.

The prime time hosts, particularly Sean Hannity, started to echo Trump’s debunked theories of a “deep state” undermining the administration, and joined the president in steadily attacking the Justice Department, the FBI and other democratic institutions, Peters said.

“I suspect Sean Hannity really believes it,” he said. “The others are smarter. They know what they’re doing. It’s bewildering to me. I mean, I wanted to just cry out and say: ‘How can you do this?  How can you lie to our country?’”

--NASA scientists announced exciting news Thursday. The “building blocks” for life have been discovered in 3-billion-year-old organic matter on Mars.

Researchers cannot yet say whether their discovery stems from life or a more mundane geological process.  However, “we’re in a really good position to move forward looking for signs of life,” said Jennifer Eigenbrode, a NASA biogeochemist and lead author of a study published Thursday in the peer-reviewed journal Science.

The material was discovered by the Mars Curiosity rover, which has been collecting data on the Red Planet since August 2012. The organic molecules were found in Gale Crater – believed to once contain a shallow lake the size of Florida’s Lake Okeechobee.

Methane has also been detected, which is significant because most methane on Earth comes from biological sources.

--George Will had a piece in the Washington Post on a new book by Donald Rumsfeld, “When the Center Held: Gerald Ford and the Rescue of the American Presidency.”

“Rumsfeld, who calls Ford ‘the president we always wanted that we didn’t know we had,’ tiptoes up to a comparison with today’s Washington when he says the city ‘can be a magnet for sizable personalities’ and that Ford’s ‘saving grace’ was that he was not like that: ‘His calm, thoughtful and steadfast nature was remarkable in Washington, D.C., even in his own day, and some might assert even more so now.’  Do tell.

“The current president’s contribution – unintended but not insignificant – to America’s civic health might be to help cure the country of unreasonable fastidiousness regarding presidential aspirants. For a while, at least, many voters will be less inclined than they once were to measure candidates with a political micrometer that encourages voters to be excessively finicky, rejecting candidates for minor blemishes, only to wind up with one who is all blemish. More than four decades on from Ford’s accidental presidency, this man who wore plaid trousers and wore power lightly is a reminder that the nation can always do worse than to embrace normality.”

--Patti Davis, author and daughter of Ronald and Nancy Reagan / Washington Post

“(My father) had a reverence and a love for America that burned in his eyes when he looked at the flag, that bled into his words when he spoke to the country.  Selfishly, I used to feel slighted by that love. I referred sometimes to my ‘sibling rivalry’ with America.  My strident protests against some of my father’s policies definitely got his attention, which was what I intended – but they also wounded him, which was not my intention.  In his last years of life, when Alzheimer’s disease had stolen many things but not love, I was able to sit with him and tell him my regrets. I miss my father in deeply personal ways, I also miss the dignity that he brought to the task of leading this country, the deep respect he had for our democracy, and now, after so much time has passed, I miss how much he loved America.

“People often ask me what he would say if he were here now....

“I think he would remind us that America began as a dream in the minds of men who dared to envision a land that was free of tyranny, with a government designed and structured so that no one branch of government could dominate the others. It was a bold and brave dream. But, he would caution, no government is infallible. Our democracy, because it is founded on the authority of ‘We the people,’ puts the burden of vigilance on all American citizens.

“Countries can be splintered from within, he would say. It’s a sinister form of destruction that can happen gradually if people don’t realize that our Constitution will protect us only if the principles of that document are adhered to and defended. He would be appalled and heartbroken at a Congress that refuses to stand up to a president who not only seems ignorant of the Constitution but who also attempts at every turn to dismantle and mock our system of checks and balances.

“He would plead with Americans to recognize that the caustic, destructive language emanating from our current president is sullying the dream that America once was. And in a time of increased tensions in the world, playing verbal Russian roulette is not leadership, it’s madness.  He would point to one of the pillars of our freedom – a free press – which sets us apart from dictatorships and countries ruled by despots.  He didn’t always like the press – no president does – but the idea of relentlessly attacking the media as the enemy would never have occurred to him. And if someone else had done so, he wouldn’t have tolerated it.

“He would ask us to think about the Statue of Liberty and the light she holds for immigrants coming to America for a better life. Immigrants like his ancestors, who persevered despite prejudice and signs that read ‘No Irish or dogs allowed.’ There is a difference between immigration laws and cruelty.  He believed in laws; he hated cruelty.

“Despite my father’s innate humility, he would ask the people of this country to reflect on his own words from his famous speech, ‘A Time for Choosing,’ delivered in 1964.  ‘You and I have a rendezvous with destiny. We’ll preserve for our children this, the last best hope of man on earth, or we’ll sentence them to take the last step into a thousand years of darkness.’”

---

Pray for the men and women of our armed forces...and all the fallen, including a U.S. soldier who died in a combat operation today in Somalia, four others injured.

God bless America.

---

Gold $1303
Oil
$65.56

Returns for the week 6/4-6/8

Dow Jones  +2.8%  [25316]
S&P 500  +1.6%  [2779]
S&P MidCap  +2.2%
Russell 2000  +1.5%
Nasdaq  +1.2%  [7645]

Returns for the period 1/1/18-6/8/18

Dow Jones  +2.4%
S&P 500  +3.9%
S&P MidCap  +5.3%
Russell 2000  +8.9%
Nasdaq  +10.8%

Bulls  N/A this week...50.0 / 19.2 last week
Bears

Go Justify in the Belmont!

Tune in next time for my life story...or some semblance thereof.

Brian Trumbore



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Week in Review

06/09/2018

For the week 6/4-6/8

[Posted 11:30 PM ET, Friday]

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

Edition 1,000...thank you to all of those who have supported me....

I had big plans for this column, but due to some annual obligations outside the scope of this work that took place this week, time was severely restricted.  That said this is still one of the five longest columns I’ve ever done.  No shortage of material to write about.

But I do have to say that 1,000 columns...in 1,001 weeks...is kind of remarkable.  I want to tell some personal stories...next time...and kind of put this all in perspective and give you the very personal reasons why I feel like I do about Donald Trump.

It’s probably just as well, however, that I’m holding off one more week.  We all should hope our president does well the next few days in Singapore. But he was a freakin’ clown this past week.

It is beyond belief that Trump refused to say anything bad about Xi Jinping, Vladimir Putin, and Kim Jong Un, at the same time he did nothing but dis America’s best allies.

It’s sickening.  And wait ‘till you read below the story of what China has stolen from the U.S. Navy.  Putin and Xi are total bastards.  Yet there was Trump today, prior to jetting off to Quebec for the G7 summit, urging that the other members of the club reinstate Russia, our president acting as if Putin’s actions in Georgia and Ukraine, including the annexation of Crimea, never happened, which was the reason for them being booted out!

And if you wondered if Putin was winning, as I detail below, all you need to know is that the new Italian government agrees with our president, in part...at least in terms of removing sanctions against Moscow, which thankfully Trump hasn’t called for yet.

I will cut Trump slack for not dissing Kim Jong Un, today.  We’re about to give diplomacy a try.

But for now, yes, I have written 1,000 columns.   The only week I took off was fairly early on, I think 2001, when I took some of my old co-workers from PIMCO to Ireland for a week and knew beforehand I’d never get a lick of work done.  What a great time that was.   But every other week, whether I was here or in one of the 30+ countries I traveled to between 1999 and 2014, before the impact of the personal China beatdown really took hold (that year I used my frequent flyer miles to go back to China/Hong Kong and Paris for a last time), I got this column done.

Oh, it wasn’t always easy, for sure.  It was easier traveling alone, of course, but I wasn’t alone for most of my Ireland trips and that was rough...as in I was hung over, or worse, while completing most of these reviews.

I really don’t know how much longer I can do this.  I’m a perfectionist, as you’ve undoubtedly noticed.  I never want to leave anything out. I’ve been telling a story like no one else in the world.  No one! 

But I’m Van Gogh...I’ll be more famous when I’m dead.  I’ve known that all along.

Next week I’ll get into what makes me tick and why I fear for this country’s future...and why I’m right.

Trump World...North Korea and “allies”....

Yesterday, President Trump said he did not think the summit with Kim Jong Un required a great deal of preparation on his part.  “This isn’t a question of preparation,” he told reporters in the Oval Office.  “It’s a question of whether people want it to happen.”  And, “It’s about the attitude. It’s about willingness to get things done.”

Trump also asserted that his willingness to walk away from the Iran deal would set the right tone for his negotiations with Kim Jong Un.  Trump pointed out that he had already walked away from the Singapore meeting once – a decision he reversed after 24 hours when the Kim government issued a conciliatory response.

“I hope it won’t be necessary to walk because I really believe that Kim Jong Un wants to do something,” Trump said, while standing in the Rose Garden with Japanese Prime Minister Shinzo Abe.  “I believe we’re going to have a terrific success or a modified success.”  Trump promised the summit would be “much more than a photo op.”

Depending on the degree of success, the president continued, he could foresee inviting Mr. Kim to a follow-up meeting at the White House.  “I think he would look at it very favorably, so I think that could happen,” Trump said.

Secretary of State Mike Pompeo, who was on point and clearly prepared, unlike his boss, said that while the United States understood North Korea could not give up its nuclear arsenal “instantaneously,” the process needed to be “big and bold” and not open-ended. “We can’t step through this over years,” he said.

Asked whether the United States has narrowed the gap between how the U.S. understands the goal of “denuclearization” and how Kim defines that word, Pompeo replied succinctly, “Yes.”  Would he explain how? “No.”

“He has indicated to me personally that he is prepared to denuclearize, that he understands the current model doesn’t work,” Pompeo said.  “He understands that we can’t do it the way we’ve done it before, that this has to be big and bold and we have to agree to making major changes.”

As to rumors of a rift between Pompeo and national security adviser John Bolton, Pompeo said, “Ambassador Bolton and I will disagree with great, great consistency over time, I’m confident, right? We’re two individuals. We’re each going to present our views.”

Back to Trump, he said his demand that North Korea give up its entire nuclear arsenal immediately was part of a “process.”  He also said he would stop using the phrase “maximum pressure” to describe sanctions against the North, yet he insisted that they would remain in place.

For his part, Prime Minister Abe is worried that Trump might trade the security of the United States’ Asian allies in exchange for a deal with Kim on nukes. After all, Japan has been directly menaced by North Korean missiles fired over its waters and land.  It is seen as a primary target because of its decades-long security alliance with the United States and the presence of U.S. forces on its soil.

Plus Abe made a point to tell Trump about Japanese citizens abducted by North Korea in the 1970s and 1980s. 

As for the G7 summit in Quebec, Trump was the last to arrive and is expected to be the first to depart.  In a tweet beforehand, French President Emmanuel Macron said if Trump wanted to be isolated, the six other nations would sign their own agreement if need be “because these six countries represent values, they represent an economic market which has the weight of history behind it and which is now a true international force.”

Canadian Prime Minister Justin Trudeau described Trump’s citing of national security to defend his steel and aluminum tariffs as “laughable.”

Never one to back down, Trump fired off defiant tweets of his own, accusing Trudeau of being “indignant” and the European Union and Canada of erecting “massive trade tariffs and non-monetary trade barriers against the U.S.” for years.

“Take down your tariffs and barriers or we will more than match you,” Trump wrote.

“Please tell Prime Minister Trudeau and President Macron that they are charging the U.S. massive tariffs and create non-monetary barriers. The EU trade surplus with the U.S. is $151 Billion, and Canada keeps our farmers and others locked out. Look forward to seeing them tomorrow.”

“Prime Minister Trudeau is being so indignant, bringing up the relationship that the U.S. and Canada had over the many years and all sorts of other things...but he doesn’t bring up the fact that they charge us up to 300% on dairy – hurting our Farmers, killing our Agriculture!”

U.K. Prime Minister Theresa May appeared to take a more conciliatory approach, saying she wanted the EU to act with restraint and proportion in retaliating to the U.S. tariffs.

So as I go to post late Friday night, the big announcement out of Quebec was the U.S. and EU agreed to establish a dialogue on trade within the next two weeks, a modest step forward for bitterly divided allies.  The exchange between Trump and Macron was described as “affable.”

As former NBA star Derrick Coleman would have said, “Whoopty-damn-do.”

Trumpets....

--A report by the FBI’s internal watchdog into the agency’s handling of an enquiry into the management of emails by Hillary Clinton will be released next week, the agency said on Thursday. Inspector General Michael Horowitz said in a letter that most of the process is complete, including the protection of classified information it may contain, and it will be released June 14, President Trump’s birthday.

--House Speaker Paul Ryan sided with House Oversight Committee Chairman Trey Gowdy in disputing President Trump’s claims that “spies” infiltrated his 2016 presidential campaign.

Speaking with reporters on Wednesday, Ryan said he had seen no evidence to contradict the assessment last week from Gowdy, a South Carolina Republican, that the FBI acted appropriately when it sent an informant to meet with two Trump campaign aides during the run-up to the 2016 election.

Gowdy said May 30 that the FBI was acting on its mission to run to ground suspicions of Russian interference in the election, rather than trying to keep Mr. Trump from winning, as he had claimed.

“I think Chairman Gowdy’s initial assessment is accurate...but we have some more digging to do,” Ryan said.  “We’re waiting for some more documents requests. We have some more documents to review, we still have some unanswered questions. It would have been helpful if we got this information earlier.”

Gowdy and Ryan were among a small group of bipartisan lawmakers briefed last month on the FBI’s use of the informant. 

Trump lawyer Rudy Giuliani, in comments Wednesday in Israel, asserted that members of Robert Mueller’s team are Democrats trying to “frame” the president.

[In a new NBC/Wall Street Journal survey, 37 percent of voters say that – based on what they’ve seen, read or heard – Trump’s 2016 presidential campaign did collude or work secretly with Russia, while 34 percent disagree; 28 percent didn’t know enough to say. The findings are essentially unchanged from a Dec. 2017 NBC/WSJ poll.  46 percent believe Robert Mueller’s investigation should continue, while 36 percent think it should be ended.]

--Former campaign manager Paul Manafort on Friday was hit with a second superseding indictment by Robert Mueller’s office charging him with obstruction of justice.

Manafort’s longtime business associate in Ukraine, Konstantin Kilimnik, was also indicted on the same charge.

The indictments came after Mueller’s team accused Manafort of attempting to tamper with witnesses as he awaits trial of felony charges related to foreign lobbying work.

Kilimnik is accused of having ties to Russian intelligence.

--Secretary of State Mike Pompeo, when asked about Rudy Giuliani’s foreign policy pronouncements, including Giuliani’s claim that Kim Jong Un had come to Trump “on his hands and knees” after Trump had called off the summit last month, said, “I know Rudy, and Rudy does not speak for the administration when it comes to this negotiation and this set of issues,” Pompeo said.

--Trump tweets: “The Russian Witch Hunt Hoax continues, all because Jeff Sessions didn’t tell me he was going to recuse himself...I would have quickly picked someone else. So much time and money wasted, so many lives ruined...and Sessions knew better than most that there was No Collusion!”

“The Fake News Media is desperate to distract from the economy and record setting economic numbers and so they keep talking about the phony Russian Witch Hunt.”

“The appointment of the Special Counsel is totally UNCONSTITUTIONAL!  Despite that, we play the game because I, unlike the Democrats, have done nothing wrong!”

“As has been stated by numerous legal scholars, I have the absolute right to PARDON myself, but why would I do that when I have done nothing wrong? In the meantime, the never ending Witch Hunt, led by 13 very Angry and Conflicted Democrats (& others) continues into the mid-terms!”

“Farmers have not been doing well for 15 years. Mexico, Canada, China and others have treated them unfairly. By the time I finish trade talks, that will change. Big trade barriers against U.S. farmers, and other businesses, will finally be broken. Massive trade deficits no longer!”

“This is my 500th Day in Office and we have accomplished a lot – many believe more than any President in his first 500 days. Massive Tax & Regulation Cuts, Military & Vets, Lower Crime & Illegal Immigration, Stronger Borders, Judgeships, Best Economy & Jobs EVER, and much more...

“...We had Repeal & Replace done (and the saving to our country of one trillion dollars) except for one person, but it is getting done anyway. Individual Mandate is gone and great, less expensive plans will be announced this month. Drug prices coming down & Right to Try!”

--A veteran Senate Intelligence Committee staffer was arrested Thursday on charges of lying to FBI agents during an investigation into the leak of classified information in which federal authorities also seized emails and phone records belonging to a New York Times reporter.

James A. Wolfe, 58, who served as the committee’s director of security for nearly three decades, is alleged to have made false statements to agents in December about his contacts with three reporters, according to federal court documents made public Thursday.

One of the reporters was identified as New York Times correspondent Ali Watkins, the newspaper said, adding that Wolfe and Watkins had a personal relationship.

In August, Attorney General Jeff Sessions announced a broad crackdown on unauthorized disclosures of classified information, warning both would-be leakers and the media as he demanded that the “culture of leaking must stop.”

At the same time, Sessions offered an ominous warning to the press, saying that prosecutors have launched a review of Justice policy related to subpoenas issued to media organizations in criminal investigations.

“We respect the important role that the press has and we give them respect, but it is not unlimited,” Sessions said.  “They cannot place lives at risk with impunity.”

--President Trump commuted the life sentence of Alice Marie Johnson, who served nearly 22 years in federal prison after being convicted on nonviolent drug charges, though she ran a $50 million drug ring.  I disagree with the move, which only came about because Trump wanted to see Kim Kardashian, who was seeking clemency for Johnson.

Today, in the Q&A with reporters prior to leaving for the G7 and Singapore, Trump said he is looking into pardoning Muhammad Ali, though Ali’s attorneys said there is nothing to pardon as the Supreme Court overturned Ali’s conviction on draft evasion charges in 1971.

Wall Street / Trade, part II

White House economic adviser Larry Kudlow said this week that China, Europe and others who are breaking trade rules are at fault, not Donald Trump, as China warned that all commitments so far in talks with the U.S. over trade will be withdrawn if the U.S. imposes tariffs.

“Don’t blame Trump,” Kudlow said on ‘Fox News Sunday.’  “Blame China, blame Europe, blame NAFTA, blame those who don’t want reciprocal trading, tariff rates and protectionism.”

There had supposedly been some progress in U.S.-China talks, but Trump’s revival of a plan to slap tariffs on $50bn of Chinese imports cast the talks into turmoil.

China’s state-run Xinhua News Agency: “If the U.S. rolls out trade measures including tariffs, all the agreements reached in the negotiations won’t take effect.”

An editorial in the state-run Global Times said: “The U.S. can’t have its cake and eat it too.” The U.S. “needs to choose between tariffs and exporting more to China.”

Last weekend finance leaders of the G7 vented anger over the Trump administration’s metal import tariffs on Saturday, ending their three-day meeting with a stern rebuke.

In a rare show of division, the six other G7 member countries issued a statement asking U.S. Treasury Secretary Steven Mnuchin to convey their “unanimous concern and disappointment” about the tariffs.

French Finance Minister Bruno Le Maire warned a trade war could begin in “a few days.” 

Brad K., a big user of steel in his business, wrote that this week his contact at a Canadian mill both he and others in his industry buy from suggested a 25% hike in the price of Brad’s orders.  It was an inquiry, not a set price or order, yet, but as Brad put it a harbinger of things to come.  “U.S. mills cannot make all the tons and grades of steel U.S. manufacturers need.” And while the likes of Commerce Secretary Wilbur Ross say the cost to consumers of steel and aluminum tariffs is small, it all adds up. Brad adds that needless to say, the Canadian mill town where he buys from is “a bit rattled.  Many innocents will pay a price for all this not too well thought out 232 (see below).”

The Wall Street Journal had a piece that Trump’s 25% tariff on imported steel could make the drilling for shale oil in the U.S. significantly harder, driving up the cost, while making it more expensive to solve pipeline bottlenecks in the nation’s shale heartland – which could prolong an oil glut that has pushed the price of crude oil stored in Midland, Texas, to about $20 below the global Brent benchmark in recent weeks.

Steel typically contributes up to 10% to 20% of the cost of drilling and completing an oil well, according to the Texas Alliance of Energy Producers.  And up to half of the specialized pipe and tubular steel that the industry relies on is imported – “meaning energy companies will need to suck up nearly the entire 25% price increase, absent any tariff exemptions. U.S. steel prices, already among the highest of major economies, have risen by 20% since late February, when news of the planned tariffs first broke.”  [Nathaniel Taplin / WSJ]

As for agriculture, more than $20 billion of $140 billion of U.S. farm exports has or is likely to have retaliatory tariffs placed against it as a result of disputes with countries such as Mexico and China.  Mexico put tariffs on American products ranging from steel to pork and bourbon on Tuesday, in retaliation for the import duties on steel and aluminum imposed by the U.S. 

Editorial / Wall Street Journal

“Republicans have complained for years that the executive has encroached on the powers of the legislature, but the GOP hasn’t done much to stop the invasion. This week a bipartisan coalition in the Senate is finally rebelling against the Trump Administration’s unilateral trade war, and we’re glad to see it.

“Senator Bob Corker of Tennessee this week introduced a bill to rein in some of President Trump’s power to impose tariffs and other trade restrictions. He’s working with Pat Toomey of Pennsylvania, among others, including Democrats like Heidi Heitkamp of North Dakota and Mark Warner of Virginia, to minimize the damage from tariffs on steel and aluminum. The tariffs have invited retaliation from Canada, Mexico and the EU on everything from motorcycles to chocolate, and Mr. Trump may be willful enough to escalate.

“The Corker bill would amend the Trade Expansion Act of 1962, which under Section 232 allows the President to impose tariffs or restrictions in the name of national security. This is the justification the Trump Administration has invoked to protect from the terror of Canadian steel used in American fighter jets. The Corker legislation would require the President to submit 232 restrictions to Congress for approval under an expedited process.

“One reason for this mess is that Congress over time has ceded its Article I constitutional authority on trade to the President. This started after Congress observed the wreckage from its Smoot-Hawley tariffs in 1929 that kicked off a global trade war and contributed to the Great Depression.

“Congress then gave FDR’s Secretary of State Cordell Hull the power to negotiate bilateral deals that slowly rebuilt trade rules out of the wreckage. This led to the multilateral General Agreement on Tariffs and Trade in 1947 that laid the basis for the postwar economic boom. But as other economies recovered from the war, U.S. companies in steel and textiles began to clamor for protection again.

“Congress, led by Democrats, responded by handing more trade enforcement power to Presidents. These include Section 201 and 301 of the Trade Act of 1974, as well as trade-negotiating authority that lets Congress approve presidential trade deals with a simple majority. This lets Congress caterwaul on behalf of special interests while blaming Presidents for not punishing foreigners. Democrats have long specialized in this accountability ducking.

“The long-time assumption was that while Congress represented parochial or regional interests, a President would act in the national interest to expand trade. And for decades executives of both parties did.  George H.W. Bush negotiated NAFTA, while Bill Clinton pushed it through Congress. Free-trade Republicans in Congress passed bilateral trade deals under both Democratic and GOP Presidents.

“Enter Donald Trump, who has now taken that authority and is using it for protectionist, rather than trade-opening, ends. It’s no accident he’s using Section 232, which gives him enormous latitude to define a national-security trade threat and virtually unlimited authority to impose a tariff or quota remedy. For the first time in nearly a century, a President is more protectionist than Congress, and Congress needs to rein him in.

“The White House is now trying to block even a vote on Mr. Corker’s bill, which he wants to move as an amendment to the National Defense Authorization Act. This annual bill tends to pass with generous bipartisan support, and the White House is arguing the Corker provision would hurt Mr. Trump’s ability to negotiate trade deals. But it isn’t clear that Mr. Trump wants any trade deals, and they may turn out to be lousy if he does.

“Majority Leader Mitch McConnell is saying the Corker bill would be “an exercise in futility” because either the House or Senate might fail and show Congress is impotent, or the President will veto.  But so what? Members of Congress don’t take orders from Mr. Trump and they have their own principles and constituents to represent.

“If they think Mr. Trump’s trade policy is harming the economy, they have an obligation to try to stop him. They’ll have more than a few allies. The National Retail Federation has endorsed the Corker bill, as has the Motor & Equipment Manufacturers Association. Jamie Dimon, chairman of the Business Roundtable, said this week that Mr. Trump’s trade policy could undermine the strong economy.

“A vote would also expose the cynicism of Democrats who claim the GOP won’t stand up to Mr. Trump.  Ms. Heitkamp of North Dakota and Claire McCaskill of Missouri are running against tariffs and the damage that foreign retaliation is doing to their states. But Minority Leader Chuck Schumer and Ohio’s Sherrod Brown are griping that Mr. Trump isn’t protectionist enough. Make them vote.

“Mr. Trump might rage on Twitter, but Congress needs to send him a message that his protectionism isn’t cost-free.  Otherwise he might believe he can get away with blowing up NAFTA, imposing a 25% tariff on imported cars, or shutting down trade with China.  Mr. Corker’s effort is a test of the Republican Congress’ political will and its sincerity on the economic benefits of free trade.”

Cecilia Malmstrom, EU Trade Commissioner / Wall Street Journal

“The Trump administration’s stated reason for protecting U.S. steel, aluminum and cars is ‘national security.’  That is nonsense. In both U.S. and WTO law, the national-security clause is limited explicitly to cases involving emergencies, war and weapons. The U.S. is using the national-security claim to avoid taking measures required by U.S. and WTO law to compensate its trading partners.

“The EU has already filed a complaint with the WTO, and will exercise its right to compensation. Meanwhile, the U.S. Congress has failed to challenge the legitimacy of the administration’s national-security claim. Can American institutions be counted on to defend their country’s trade ideals?

“More than anything else, businesses require predictable conditions in which to operate.  But U.S. trade policy has become erratic, creating uncertainty throughout the global business world.

“Asked about what triggered last week’s decision on steel tariffs, Commerce Secretary Wilbur Ross replied that talks with the EU were taking too long.  In fact, the EU was creative and flexible in discussions with the U.S. It offered a positive trans-Atlantic trade agenda, including the prospect of an agreement that would have scrapped tariffs on all industrial products, including cars and car parts.

“Our offer was conditioned on the EU being exempted from new U.S. tariffs. The offer was confirmed in May by the EU heads of state and government.  This opportunity has now been discarded by the U.S.  Sad, indeed.

“The world is entering a period of international economic uncertainty, and instability for businesses, central banks and governments. In Europe, at least, we deeply regret that.  The EU doesn’t want to unfriend America.”

Robert Samuelson / Washington Post

“You cannot understand President Trump’s so-called trade war without acknowledging that it’s mostly about politics and not about economics.  Trump has embarked on a giant marketing campaign to convince us that foreigners – their exports – are to blame for our economic problems. It’s a seductive appeal to nationalism whose main defect is that it’s mostly untrue.

“To be fair, Trump’s message has been consistent since the early days of 2016. He said he would slap our trading partners with high tariffs, and so he has. The campaign continues. Here’s a recent tweet: ‘The U.S. has been ripped off by other countries for years on Trade, time to get smart!’

“The standard anti-trade narrative is that U.S. officials have botched trade negotiations, giving too much to foreigners and getting too little for U.S. exporters.  Massive trade deficits result and destroy American jobs. The employment loss is aggravated by U.S. multinationals relocating factories to developing countries with their dirt-cheap wages.  Low-cost products are then exported back to the United States.

“Now, all these statements contain some truth. After World War II, the United States was generous in granting trade concessions to Europe and Japan to help revive their economics. Similarly, many U.S. multinationals do locate factories abroad. These statements are not blatantly false, but their effects are hugely exaggerated.

“Take the connection between trade deficits and job loss. Obviously, this occurs for individual factories. But it doesn’t exist for the entire economy. Consider: From 2009 to 2017, the annual U.S. trade deficit for goods and service rose from $384 billion to $568 billion. Over the same years, the number of private U.S. payroll jobs increased by 15.5 million, and the unemployment rate fell from 9.3 percent to 4.4 percent.

“If trade deficits created huge job losses, this would be impossible. The main explanation for the apparent paradox is, as I’ve argued for years, that the dollar is the main international currency. Foreigners and investors want dollars to conduct global trade and investment. This keeps the dollar’s exchange rate high, making U.S. exports costlier and imports cheaper. The resulting trade deficit is structural; but Americans’ spending for domestic products is still the main determinant of U.S. employment.”

Lastly, the U.S. reached  a deal that will allow Chinese telecom company ZTE Corp. to get back in business after it pays a record fine and agrees to management changes, eliminating a key sticking point as the two countries try to avert a trade war.

“We still retain the power to shut them down again,” Commerce Secretary Wilbur Ross said Thursday in an interview on CNBC.  He said the Commerce Department’s $1.4bn fine brings U.S. penalties against the company to $2.3 billion.

China in turn is likely to quickly approve the $43bn acquisition of NXP Semiconductors by Qualcomm Inc. of San Diego, a deal that has been pending for 18 months.

The United States had blocked ZTE’s access to U.S. suppliers in April, saying the company violated a 2017 sanctions settlement related to trading with Iran and North Korea and then lied about the violations. The company announced it was shutting down just weeks after the ban was announced.

But it’s incredible the United States is supplying a lifeline to China, while screwing our allies.

“I assure you with 100% confidence that #ZTE is a much greater national security threat than steel from Argentina or Europe. #VeryBadDeal,” Sen. Marco Rubio (R-Fla.) said on Twitter after the administration’s announcement.

Senate Majority Whip John Cornyn (R-Texas) said national security was “front and center” of the ZTE deal, and added that replacing the board and requiring compliance officers “goes a long way to addressing some of my concerns about the national security implication.”

But it’s still very much a Chinese company with tentacles in the U.S. in a critical industry.  I totally agree with Sen. Rubio.

Europe and Asia

Eurostat reported that GDP for the euro area (EA19) grew by 0.4% in the first quarter of 2018, according to a flash estimate, when compared with the previous quarter. GDP had grown by 0.7% in Q4.

Compared with the same quarter a year ago, GDP rose 2.5% in the eurozone, after a 2.8% pace in the fourth quarter.

Germany grew an estimated 2.3%, year-over-year in Q1, France 2.2%, Spain 3.0%, and Italy 1.4%.  Greece came in at a solid 2.3%, its best since the crisis.

IHS Markit reported on the Eurozone’s final PMI data for May, and the composite index for the EA19 was 54.1 (50 being the dividing line between growth and contraction), with euro area economic growth at a one-and-a-half year low. 

The final services reading (manufacturing figures were released the week before) for the EA19 was 53.8 vs. April’s 54.7.

Germany 52.1 vs. 53.0; France 54.3 vs. 57.4; Spain 56.4 vs. 55.6; Italy 53.1 vs. 52.6.

Chris Williamson, chief economist, IHS Markit:              

“The pace of eurozone economic growth sank to a one-and-a-half year low in May, and has now slowed continually since January’s peak to suggest that the region is on course for its worst quarter since 2016.

“The survey signals GDP growth of 0.4%-0.5% for the second quarter, but there is much uncertainty as to whether the pace will continue to weaken in coming months....

“The slowdown since earlier in the year has been broad-based, though Spain has shown the greatest degree of resilience.  Crisis-torn Italy has meanwhile reported the weakest expansion of the four largest euro member states for the fourth month running.

“With the economic indicators turning down at the same time as political uncertainty has spiked higher, the eurozone’s outlook has darkened dramatically compared to the sunny forecast seen at the start of the year.”

The European Central Bank made comments Wednesday that policy makers there are preparing to tighten monetary policy, with the bank’s chief economist signaling that the bank could decide as soon as next week to wind down its $35 billion-a-month bond-buying program, which some analysts credit with supporting the 19-nation currency union’s economic recovery.

Brexit: The British government set out its plans for a one-year backstop plan for the Irish border on Thursday, finding an agreement on only part of what has become Prime Minister Theresa May’s biggest Brexit stumbling block – customs.  But by setting a date on the plan for the standby arrangement to ensure no return of a hard border between Northern Ireland and EU member Ireland, May looked to have put aside a row with her Brexit secretary ahead of securing an agreement with the EU, which has already rejected a time limit.

May has been in a fierce fight with members of her cabinet which have all but stalled talks and brought warnings from EU officials over the lack of progress.

The EU has a critical summit June 28-29, at which time it is supposed to accept or reject Britain’s broad Brexit plan so that final changes can be made by the drop-dead date of October. 

The one-year backstop plan would come after an almost two year transition period following Britain’s departure from the EU in March next year. This was not the government’s preferred option, the proposal said, but if it was triggered, Britain should have the right to negotiate, sign and ratify trade deals with other parts of the world.

Brexit minister David Davis had raised concerns that an earlier proposal had no end date and could see Britain tied to the EU’s customs union indefinitely.  A pro-European member of the ruling Conservative Party dismissed the move.

“This doesn’t change anything. It doesn’t go far enough.  This is more wishful thinking from the government. There is no way they are going to get a deal in time.”

Earlier, Foreign Secretary Boris Johnson, May’s chief rival, criticized the government’s Brexit strategy, saying it lacked “guts” and suggested Donald Trump could do a better job.  He also said Chancellor Philip Hammond, the treasury secretary, was “the heart of Remain,” and said the Brexit talks were heading for a “meltdown” and Leave supporters may not get the deal they expected.

Johnson was speaking at a private dinner and somehow the conversation was recorded.

Italy: In his maiden speech as prime minister, Giuseppe Conte, the right-wing populist who leads a coalition of the anti-establishment Five Star Movement and the far-right League, said his government would “promote a review of the sanctions” system in meetings with other EU leaders.

Conte outlined his administration’s priorities, including a crackdown on irregular migrants and an end to austerity economic policies.

A lawyer with practically no political experience, Mr. Conte was the PM choice of League leader Matteo Salvini and Five Star leader Luigi de Maio.  The two will now serve as deputy prime ministers.

Conte told senators, “We will be the advocates of an opening towards Russia. A Russia which has consolidated its international role in recent years in various geopolitical crises. We will promote a revising of sanctions, starting with those that demean Russia’s civil society.”

Conte’s intervention came as Vladimir Putin was visiting neighboring Austria, where a right-wing government coalition government also favors closer ties to Moscow.

Matteo Salvini has been to Moscow many times, and angrily denied the suggestions of Hungarian-American billionaire George Soros this week that Italy’s junior coalition partner, the League, was potentially being funded by the Kremlin.

Salvini said he was an admirer of Putin and believed he was “one of the best statesmen.”

The EU had imposed sanctions on Russia “in response to the illegal annexation of Crimea and deliberate destabilization of Ukraine.”

As for concerns Italy will leave the European Union, according to Eurobarometer, 59 percent of Italians still want the country to remain in the eurozone.

Meanwhile, owing to the spending plans of the new government, and Italy’s already sky-high debt load, the yield on the Italian 10-year bond continued to soar, now 3.11% vs. 1.86% four weeks earlier.  I nailed this call.

Slovenia: The center-right anti-immigrant party led by a former prime minister won the most votes in parliamentary elections last weekend, but not enough to rule the country on its own.  Former prime minister Janez Jansa’s Slovenia Democratic Party (SDS) will struggle to pull together a government after its hardline stance on immigration has left it short of potential coalition partners.  Nine different parties made it into parliament, with SDS garnering 25 seats in the 90-seat parliament.

Catalonia: Nationalists regained control of Catalonia’s government on Saturday and immediately pledged to seek independence for the wealthy region, in a major challenge for new Spanish Prime Minister Pedro Sanchez.  Catalonia’s new leader, Quim Torra, called on Sanchez to meet and talk about Catalonia’s future.

France: Unions at Air France today called for a four-day strike starting June 23 over a continuing pay dispute. The dispute has resulted in 15 days of walkouts this year, but a four-day strike would do a number on passengers, including a ton of vacation travelers.  Air France is bleeding profusely and the Macron government has said it would not bail out the airline.  It does still hold a 14.3 percent stake in the company.

Turning to Asia, China’s private reading on the service sector (the Caixin index) came in at 52.9 for May, unchanged vs. April.

In Japan, the services PMI was 51.0, a big drop from April’s 52.5.

But revised data on GDP in Japan’s first quarter showed the economy contracted at an annualized 0.6 percent in the first quarter, which while unchanged from the preliminary reading, raised the prospect of a recession if weakness persists in the current quarter.  Economists had expected the figure to be revised upward to a smaller contraction.  Private consumption, which is half of GDP, fell 0.1 percent in January-March from the previous quarter. Capital spending grew 0.3 percent from Q4 2017.

When it comes to consumption, it doesn’t help that it was also reported this week that Japanese workers’ inflation-adjusted real wages showed no growth in April from the same period a year earlier, after a revised 0.7 percent annual increase in real wages in March.  Clearly, the government’s repeated efforts to encourage private-sector wage gains have fallen flat, as documented in this space now for years and years.

Street Bytes

--Stocks shook off the trade tensions this week and focused on the strength of the economy and future earnings growth, I guess.  Frankly, I don’t know why the Street was so sanguine.  I’ve been watching my beloved Mets score 8 runs in their last 7 games, including tonight against the hated Yankees in a 3-1 loss.

For the week, the Dow Jones had its best week since March, up 2.8% to 25316, while the S&P 500 gained 1.6% and Nasdaq 1.2% to 7645.  Nasdaq, now up 10.8% on the year, hit an all-time closing high on Wednesday of 7689.

But this coming week, aside from the Trump/Kim summit, we have potentially market-moving meetings with the Federal Reserve and European Central Bank, and maybe some news out of the Bank of Japan’s latest gathering. 

--Warren Buffett and Jamie Dimon penned an op-ed in the Wall Street Journal, on behalf of the Business Roundtable, an association of nearly 200 chief executives from major U.S. companies, “encouraging all public companies to consider moving away from providing quarterly earnings-per-share guidance. In our experience, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability....

“Short-term-oriented capital markets have discouraged companies with a longer term view from going public at all, depriving the economy of innovation and opportunity. Fewer public companies has also meant fewer opportunities for retail investors to create wealth through their 401ks and individual retirement accounts.”  Good luck, guys.

--U.S. Treasury Yields

6-mo. 2.10%  2-yr. 2.50%  10-yr. 2.95%  30-yr. 3.09%

The yield on the 10-year remained below the key 3.00% level, as worries about emerging markets, such as Brazil and Turkey, sparked buying.

--The U.S. exported a record amount of oil and fuel in April, helping to narrow the nation’s trade gap, with the country shipping $19.9 billion in petroleum (crude oil, liquefied gases and fuels such as gasoline) to other countries, the Commerce Department reported this week.  The U.S. is exporting four times as much petroleum each month as it did a decade ago.

The rise in exports is boosting earnings for American producers, which is helping offset the impact of higher gasoline prices that pinch consumers, as investment by oil producers also picks up.

Congress in 2015 helped by lifting a ban on most exports of U.S. crude oil, and U.S. crude exports have more than doubled since January 2017, according to the Energy Information Administration, and are averaging 1.7 million barrels a day so far this year.

Separately, oil prices fell some on Wednesday after U.S. data pointed to an unexpected build in crude and gasoline inventories, and on the week were down slightly to $65.56.

A key meeting for major oil producers is being held June 22-23 in Vienna, where it’s possible an output increase will be announced for later in the year.

--Jet-fuel prices have surged more than 50% over the past year, pushing air carriers to raise fares and cut profit expectations. Delta, the nation’s No. 2 carrier, became the latest on Wednesday to say it could take six to 12 months to recoup the extra fuel costs via pricier tickets.

Fuel accounts for about a quarter of operating costs.  But average domestic airline fares have fallen in each of the past four years, according to trade group Airlines for America, with carriers handing back fuel savings to passengers.

Shares of U.S. carriers are down because of the impact of fuel on airline profits, along with the issue of too many aircraft being added to fleets chasing too few extra passengers.

But so far there is strong summer demand, which is bolstering industry pricing power.

Early in the week Southwest Airlines shares fell on news the company expected a 3 percent drop in operating revenue per available seat mile, a key revenue metric.

Southwest said bookings declined as it reduced marketing efforts following an engine failure on Flight 1380 in April, which resulted in the death of one passenger.

Lastly, global airlines on Monday lowered their forecast for industry profits in 2018 by 12 percent due to rising fuel as well as labor costs, along with an upturn in interest rates. The International Air Transport Association (IATA), which represents about 280 carriers, said the airline industry is expected to post a $33.8 billion profit this year, down from a previous forecast of $38.4bn.

--According to documents obtained by E&E News, Bob Murray, CEO of Ohio-based Murray Energy, sent the Trump administration drafts of executive orders for withdrawing from the Paris climate accord. All the president had to do was sign them.

The orders also would have rolled back coal regulations established under the Obama administration that Murray thought were a burden to his industry, E&E News reported.

Murray sent a series of letters dated March 28, 2017, to Energy Secretary Rick Perry and EPA chief Scott Pruitt, including language to exit the Paris accord.

“President Trump should issue an executive order to withdraw from the Paris Climate Accord, and/or to direct the relevant federal agencies that they shall not require coal-fired electric generators to take action to comply with the Accord,” Murray wrote.

Murray, an early campaign supporter of Trump and major GOP donor, has gotten about half the items on his 2017 wish list thus far.

But according to the Bureau of Labor Statistics, only about 500 coal mining jobs were added in Trump’s first year, bringing the total to about 50,900 nationally.  The nation’s utilities have also continued to shutter coal-fired plants in favor of those burning natural gas made cheaper and more abundant by new drilling technologies.

Greg Ip / Wall Street Journal

“President Donald Trump’s efforts to revive coal mining have been criticized as picking winners. Actually, it’s more like picking losers: coal has become a sunset industry as cleaner energy sources rapidly get cheaper. If Mr. Trump succeeds at reversing the tide, it will come at a steep price, in both dollars and lives, most tragically for the coal miners he seeks to help.

“Centuries ago, coal was a miracle material. Cleaner, safer and more efficient than wood, it made the Industrial Revolution, steam power and electrification possible. In much of the world it remains ridiculously plentiful and will be the power generation fuel of choice for years to come.

“In the U.S., though, coal is headed toward obsolescence.  Thanks to the fracking revolution, natural-gas-fueled power plants are now cheaper to build and operate than coal-fired plants.  Solar- and wind-generated power now costs less per kilowatt-hour to produce than coal. Renewables cost slightly more than coal when you include the cost of backup power since the sun doesn’t always shine and wind doesn’t always blow, according to the Energy Policy Institute at the University of Chicago. But as innovation in shale gas, wind and solar continues to drive down costs, coal will lose whatever advantages it has now.

“Seeking to postpone the inevitable, Energy Secretary Rick Perry last year asked the Federal Energy Regulatory Commission to compel utilities to buy power from struggling coal and nuclear stations. Because they store fuel on site, he said, they reinforce the electrical grid against outages.

‘FERC rejected Mr. Perry’s request, but last week the White House, citing national security, said it was preparing a new, similar proposal.

“As countless witnesses told FERC, the administration’s argument is baseless. Fuel supply problems account for an infinitesimally small share of electrical outages and when supply problems do crop up, they are usually coal’s fault....

“Meanwhile, propping up uneconomical coal and nuclear plants would cost ratepayers a fortune.”

And then there is the cost to human lives, now that we know coal emits soot that even in tiny quantities causes cardiovascular and respiratory illness.

--The Social Security program’s costs will exceed its income this year for the first time since 1982, forcing it to dip into its nearly $3 trillion trust fund to cover benefits, three years sooner than expected a year ago, according to the latest annual report.

The trust fund will be depleted in 2034 and Social Security will no longer be able to pay its full scheduled benefits unless Congress takes action to shore up the program’s finances. Without any changes, scheduled benefits will be slashed.

Medicare’s hospital fund has different issues that are now moved up to 2026, three years earlier than projected.  Both can be fixed with relatively minor tweaks that politicians on both sides, and the president, are too weak to address.

--Americans’ wealth surpassed the $100 trillion mark for the first time in early 2018, with rising home prices offsetting the hit to households’ assets from a stock-market swoon in the first quarter, as noted in a report from the Federal Reserve on Thursday.

--Facebook has data-sharing partnerships with at least four Chinese electronics companies, including Huawei, a manufacturing giant that has a close relationship with the Xi Jinping government, Facebook conceded on Tuesday.

The agreements, which date back to at least 2010, gave private access to some user data to Huawei, a telecom equipment manufacturer that U.S. intelligence flagged as a national security threat, as well as to Lenovo, Oppo and TCL.

Facebook said all four relationships remain in place but the company was winding down the Huawei deal by the end of the week.

Talk about an outrage...another one, perpetrated by the arrogant schmuck, Mark Zuckerberg.  Facebook said the data shared with Huawei stayed on its phone, not the company’s servers, but this doesn’t make any sense.

Facebook claimed it had a manager and an engineer review the apps before they were deployed to ensure the data wasn’t saved on company’s servers, a Facebook spokeswoman said.

Going back to 2010?  You expect us to believe this in light of disclosures coming to light in 2018?  Spare me, babe.  Remember, it was Zuckerberg who testified before Congress in April that Facebook restricted data access to outsiders in 2015.

Democratic Senator Mark Warner (Va.) pointed out that concerns about Huawei go back to a 2012 congressional report on the “close relationships between the Chinese Communist Party and equipment makers like Huawei.”

“I look forward to learning more about how Facebook ensured that information about their users was not sent to Chinese servers,” said Warner, the top Democrat on the Intelligence Committee.  [New York Times / Wall Street Journal]

Separately, a software bug meant millions of Facebook users may have unknowingly posted private information to the public, the company has warned.

The glitch set a user’s post to be shared to “everyone,” even if a user had previously chosen a more restricted option, such as “friends of friends.”

Facebook said it had fixed the issue.

But what’s this? Tonight, the Wall Street Journal has a new story that Facebook “struck customized data-sharing deals that gave select companies special access to user records well after the point in 2015 that the social network has said it walled off that information, according to court documents, company officials and people familiar with the matter.”

So Facebook gave special data access to a broader universe of companies than was previously disclosed. This also raises “further questions about who has access to the data of billions of Facebook users and why they had access, at a time when Congress is demanding the company be held accountable for the flow of that data.”

What a bunch of a-holes!!!  Get a good prosecutor to nail Lyin’ Mark and Princess Sheryl, the con-queen.

You can’t trust a single word out of their freakin’ mouths!  Lock ‘em up!

[I forgot to note last time the results of a Pew Research Center study that showed only 51 percent of kids between 13 and 17 use Facebook, compared with 71 percent three years ago.  YouTube (Alphabet) is now the most popular among teens, used by 85 percent.]

-Starbucks Corp. said Howard Schultz is stepping down as executive chairman later this month from the coffee chain he joined more than 30 years ago.  Schultz will have title of chairman emeritus as of June 26. He said he is writing a book about Starbucks’ social impact efforts, while saying public service may be in his future.

Schultz, 64, said he is considering many possibilities, though he has been deflecting questions about whether he would run for office.

For years speculation has swirled that Schultz might run for president.

Separately, Starbucks is raising the cost of a cup of coffee, between 10 and 20 cents on all sizes of brewed coffee.

--Mexico’s retaliation for the U.S. tariffs levied on it target $1.42 billion in fresh and processed pork, a move that’s expected to hit Tyson Foods and JBS USA Holdings, a major meat processor, according to S&P Global Market Intelligence, which tracks global commerce.

--More than half of U.S. households, 53.9%, rely entirely on cellphones, according to a survey from the National Center for Health Statistics, an arm of the Centers for Disease Control and Prevention.  The figure has increased rapidly.  In 2006, only 15.8% of survey respondents said they didn’t have a landline telephone.  The iPhone and its Android counterparts launched the next year, and the abandonment of landlines accelerated.

One of the researchers of the report noted that 80% to 90% of some countries in Europe are wireless only. The survey was conducted in the second half of 2017.

--Tesla Inc. CEO Elon Musk said on Tuesday that a goal of building 5,000 Model 3s per week by the end of June was “quite likely” as the company’s production lines were now demonstrating the ability to build 3,500 vehicles per week.

“This is the most excruciating hellish several months I’ve ever had... but I think we’re getting there,” Musk said during Tesla’s annual meeting of stockholders in Mountain View, California.

--Athenahealth Inc.’s CEO Jonathan Bush stepped down on Wednesday and the healthcare software maker said it was exploring options, including selling itself, following pressure from activist investor Elliott Management.

Bush, a nephew of former President George H.W. Bush, founded Athenahealth in 1997 and has been in the media spotlight recently for all the wrong reasons, including reports of inappropriate comments.  Bush also issued an apology after a report in U.K.’s Daily Mail said that he had assaulted his former wife 14 years ago.

Athenahealth’s cloud-based service is used to track revenue from patients, physicians and hospitals.  CFO Marc Levine will assume greater day-to-day operational responsibilities.

--The Financial Times reported that former Cambridge Analytica CEO Alexander Nix walked away with $8 million before the British data firm collapsed, leaving staff and investors with nothing.

Nix allegedly withdrew the money from a potential successor company, Emerdata, set up by the power players at Cambridge. Emerdata raised a reported $19 million from international investors before Cambridge Analytica’s role in harvesting the data of 87 million Facebook users became such a huge story.

Nix, appearing before British lawmakers this week to answer questions on the Facebook scandal, said the allegation in the FT article “is false.”

--Wells Fargo & Co.’s sale of 52 branches to Flagstar Bancorp Inc. marks a retail-banking exit from Indiana, Michigan and Ohio; part of an effort to reduce its branch count to about 5,000 from roughly 5,800 today by the end of 2020, the company said Tuesday.

The Midwest retreat contrasts with plans by Bank of America to open 500 branches across the U.S. over the next four years, including an expansion in Ohio.

Bank of America now has the second-largest deposit base, ahead of Wells, with JPMorgan Chase first.

--McDonald’s is planning a new round of layoffs to further shrink its corporate structure, the Wall Street Journal reported on Thursday, citing a company email, though the scope of the headcount reduction was not known.

“We are putting into place a new U.S. field structure that will better support our franchisees and will ensure McDonald’s continues on a path to being more dynamic, nimble and competitive,” McDonald’s spokeswoman Terri Hickey told Reuters.

--IHOP announced it would be changing its name to “IHOb,” though the company remained mum on what the “b” would stand for, or whether the change would be permanent.

The company tweeted out on Monday, “For 60 pancakin’ years, we’ve been IHOP.  Now, we’re flippin’ our name to IHOb. Find out what it could b on 6.11.18.”

Guesses for the “b” range from “breakfast” to “bacon” to “burritos,” but a since-deleted thread for IHOP employees seems to make a strong case for “burgers.”

And so we’ll go with burgers...apparently a line of 100 percent Black Angus beef burgers that employees have been training on.

--Noted  New York fashion designer Kate Spade committed suicide at the family’s Park Avenue home. TMZ, citing law enforcement sources, said the 55-year-old was despondent over the end of her 24-year marriage to Andrew, who had moved out and was seeking a divorce.  Spade left a suicide note to her daughter, 13.  Despicably, details of the note leaked into the press and I refuse to relay them here.

Spade’s sister said the fashion icon had suffered from years of depression and had refused to get treatment. But Andrew said his wife was receiving it.

Just an awful story that was a blow far beyond the fashion design industry.

Then this morning, many of us were totally shocked to learn CNN’s Anthony Bourdain of  “Parts Unknown” fame had also committed suicide, found by his good friend Eric Ripert in a small hotel in France, where they were working on a segment for the show that I so loved.  Denise D., who also was a big fan, summed it up for all of us.  “I feel like I lost a good friend.” Bourdain had that gift...he let viewers inside, though we obviously didn’t know everything.

Just beyond sad.  But, thankfully, he left us a ton of shows and CNN would be foolish not to find a regular spot on a Saturday or Sunday night for his work.  RIP.

Separately, the Centers for Disease Control and Prevention said Thursday that suicide death rates have risen significantly in most states since the late 1990s, with 25 states recording increases of more than 30%.

The rates rose among all age and ethnic groups, propelled by mental illness, substance-use disorders, financial hardship and relationship problems, the CDC said.  Percentage increases ranged from 5.9% in Delaware to 57.6% in North Dakota.

--And to complete a very sad week, we had news today that the great Charles Krauthammer, the Fox News political analyst who has been missing almost a year due to mystery ailments, revealed he has just weeks to live...that he is in the final stages of cancer.

“I have been uncharacteristically silent these past ten months,” Krauthammer’s letter today began.  “I had thought that silence would soon be coming to an end, but I’m afraid I must tell you now that fate has decided on a different course for me.”

Krauthammer battled an abdominal tumor and subsequent complications, but it seemed he was finally recovering.

“However, recent tests have revealed that the cancer has returned.... My doctors tell me their best estimate is that I have only a few weeks left to live. This is the final verdict.  My fight is over.”

I love Charles Krauthammer.  How much?  I just plugged his name into my search engine.  Imagine, in 1,000 columns, basically minus the last 50 that he has been absent, I have quoted him 265 times!  I have better archives of Charles Krauthammer than he has himself, probably.

I’m saying a prayer tonight for him...we need a miracle.  He’s had other issues, as you know, but he’s persevered.  He’s only 68.  America needs him, today more than ever.

Dear Lord....if anyone deserves more time it’s Mr. Krauthammer...

Foreign Affairs

North Korea: Jonathan Cheng / Wall Street Journal

“The hardest part about disarming North Korea may be knowing where to start.

“The regime has the fissile material to make between 16 and 60 nuclear weapons and has likely built 10 to 20, according to U.S. experts. Its army might have 70 missiles, the Congressional Research Service estimates. Much is uncertain; even less is known about the North’s chemical and biological weapons, among them the deadly VX nerve agent. And it’s all hidden around a mountainous country about the size of Pennsylvania.”

But with the U.S. seeking complete, verifiable and irreversible denuclearization of North Korea – where do you start when it comes to the talks between President Trump and Kim Jong Un?

And how do you establish whether disarmament efforts are successful?  You have to know what Pyongyang’s entire arsenal is in the first place, and of course the United States has essentially zero intelligence in this regard. In prior negotiations, dating to 1994, Pyongyang resisted giving an accounting of its weapons.

Siegfried Hecker, a Stanford University nuclear scientist who visited North Korea’s facilities in 2010, estimated late last year that Pyongyang likely had enough fissile material to make between 16 and 32 nuclear weapons.

David Albright, another nuclear-arms expert, said he learned recently of a possible second nuclear-enrichment plant in North Korea, based on “more than two independent government sources.”

Such a facility would drastically alter estimates on the North’s nuclear stockpile.

Experts are also increasingly doubtful that North Korea has destroyed its underground nuclear testing site. The weak explosions on May 24 at entrances to the Punggye-ri test site deep beneath Mount Mantap did not trigger the internal collapses that would put the site out of commission, a U.S. official told CNN, based on seismic data.  U.S. officials also confirmed that North Korea removed technical equipment from the tunnel complex before they blew up the entrances before a handful of foreign journalists.

Defense Secretary Jim Mattis said on Sunday that North Korea will receive relief only after it shows “verifiable and irreversible” steps towards denuclearization, adding that it would be a bumpy road to a summit between President Donald Trump and North Korean leader Kim Jong Un.

“We can anticipate, at best, a bumpy road to the (negotiations),” Mattis said at a conference in Singapore. “We will continue to implement all U.N. Security Council resolutions on North Korea. North Korea will receive relief only when it demonstrates verifiable and irreversible steps to denuclearization,” he added.

Separately, Kim Jong Un removed his country’s top three military officials recently, as first reported by South Korea’s Yonhap news agency, as it seems Kim is dealing with dissension in the military over the approaches to South Korea and the U.S.  North Korea’s leadership is believed to regard nuclear weapons as crucial to its survival.

Editorial / USA TODAY

“As next week’s Singapore summit rapidly approaches, carrying with it the prospect of Donald Trump and Kim Jong Un greeting each other with warm handshakes and smiles, it’s worth remembering that North Korea is the world’s worst human rights nightmare.

“Kim’s capacious cruelty toward his own people cannot be overstated, nor mitigated by his recent diplomatic charm offensive. He is a true totalitarian tyrant.

“For North Korea’s 26 million people, Kim’s regime controls every aspect of life: where they reside, the direction of their lives, how much they can eat. From the earliest age, children are indoctrinated in themes of unconditional obedience to ‘the dear leader’ and a duty to criticize (inform on) others....

“Worse yet are the public executions, torture and ‘disappearing’ reserved for stamping out any shred of political dissent. Entire families vanish because of association with one accused member. Four political camps hold an estimated 80,000 to 120,000 of these forsaken people who, according to testimony before the U.N. commission, never go home.

“They live lives of unremitting misery and starvation, reduced to eating grass, scavenging for crumbs, and vying for the chance to kill vermin for protein. One woman was beaten for picking through cow dung for undigested grain.

“The fountainhead of this misery, Kim, is scheduled to sit down with America’s president next Tuesday. The harsh reality is that, for now, demands for basic human rights have to take a back seat to efforts to negotiate away the dynastic leader’s nuclear weapons.

“Even so, this does not mean Trump has to be a smiling, conciliatory pal, ignoring sins for the sake of amity.  His embrace of other authoritarian foreign leaders has already produced its share of cringe-worthy moments. If the world sees a beaming Trump patting and praising Kim, the U.S. president will have pandered to a whole new level of evil.”

Michael O’Hanlon / Wall Street Journal

“Should the U.S. bring its nearly 30,000 troops home from the Korean Peninsula in return for North Korean nuclear disarmament? An adviser to South Korean President Moon Jae-in recently suggested the answer might be yes. And Kim Jong Un likely won’t give up the bomb without an end to the U.S.-South Korea alliance in its current form.

“This might sound like a reasonable trade-off, but recall that the North Korean threat consists of much more than nuclear weapons. Pyongyang maintains a huge conventional military, robust special forces, stocks of chemical and biological arms, and hundreds of artillery tubes and missile launchers in range of Seoul. If these threats could also be substantially reduced, it would be fair to ask about the future of the alliance.

“Yet consider its tremendous benefits. A strong U.S.-led alliance system has been very good for international peace and stability, and the U.S.-South Korea alliance has been an integral part of that broader community. This transcends specific threats from North Korea, Russia or any other hostile power.

“South Korea is the world’s 11th-largest economy and remains influential. No one should want to return to the anarchy that prevailed in Europe and East Asia a century ago, when countries had weak and shifting relationships but no enduring bonds. The result was two world wars followed by catastrophic conflict in Korea.”

Defense Secretary Mattis said last weekend that the presence of U.S. troops in South Korea is not up for negotiation at the summit.

China: The Washington Post reported late tonight that Chinese government hackers compromised the computers of a U.S. Navy contractor and stole a large amount of highly sensitive data on undersea warfare, including plans for a supersonic anti-ship missile for use on U.S. submarines, the Post citing unnamed U.S. officials, with the breaches taking place in January and February, the officials told the paper, speaking on condition of anonymity about an ongoing investigation led by the Navy and assisted by the FBI.

A Chinese Embassy spokesperson told Reuters in an email that the Chinese government “staunchly upholds cyber security, firmly opposes and combats all forms of cyberattacks in accordance with law.”

Bastards.  The hackers targeted a contractor who works for the Naval Undersea Warfare Center, a military entity based in Newport, Rhode Island, according to the Post.  The hacked material comprised 614 gigabytes relating to a project known as Sea Dragon, as well as signals and sensor data, submarine radio room information relating to cryptographic systems and the Navy submarine development unit’s electronic warfare library, the Post reported.  The newspaper said it had agreed to withhold some details about the compromised missile project after the Navy said their release could harm national security.

Separately, there was a report China removed missile systems from a disputed island in the South China Sea, although U.S. officials and experts said the disappearance was likely only a temporary arrangement, amid rising tensions between the two countries.  China has done this before, and with the humidity in the region, and frequent storms, the missiles could be removed just for maintenance purposes.  [Or they are simply being concealed inside buildings on the island.]

A Chinese foreign ministry spokeswoman accused the U.S. military on Wednesday of “hyping up militarization and stirring up trouble,” and warned that “China will not be threatened by any military warships,” said Hua Chunying.

The “routine” fly-by mission came just days after Defense Secretary Jim Mattis pledged at the Singapore security summit that the U.S. would “compete rigorously” with China in the Indo-Pacific.

The Pentagon has been considering beefing up its naval patrols in the region to better observe Chinese facilities in the South China Sea and Taiwan Strait.  The Pentagon has been attempting to rally allies such as the U.K. and France to beef up their own military presence.

Meanwhile, a Taiwanese think tank is calling on Taipei to lease part of a Taiwan-controlled islet to the U.S. military, which would be a highly-explosive move President Trump should threaten to take if Beijing doesn’t cooperate on a myriad of issues.

Editorial / Wall Street Journal

“While President Trump focuses on trade and North Korea, China is aggressively building military outposts beyond its borders in the South China Sea. Beijing wants to push Washington out of the Indo-Pacific, and the Trump Administration and Congress may finally be developing a serious strategy to respond.

“Trillions of dollars of trade annually float through the Indo-Pacific, which stretches from East Africa through East Asia. In recent years China has built military bases on artificial islands hundreds of miles from its shores, ignoring international law and a 2016 ruling by a United Nations tribunal.

“The buildup has accelerated in recent weeks, as China has deployed antiship missiles, surface-to-air missiles and electronic jammers on the Spratly islands and even nuclear-capable bombers on nearby Woody Island. This violates an explicit promise that Chinese President Xi Jinping made to Barack Obama in 2015 that ‘China does not intend to pursue militarization’ on the Spratlys.

“The next step could be deployed forces. At that point ‘China will be able to extend its influence thousands of miles to the south and project power deep into Oceania,’ Admiral Philip Davidson, who leads the U.S. Indo-Pacific Command, said in April.

“In the face of China’s buildup, the U.S. has shown uneven commitment. Mr. Obama limited freedom-of-navigation patrols to avoid a confrontation and never committed the resources to make his ‘pivot to Asia’ a reality. China saw Mr. Obama’s hesitation and kept advancing. The growing concern is that China will begin to dictate the terms of navigation to the world and coerce weaker neighboring countries to agree to its foreign policy and trading goals.

“Defense Secretary Jim Mattis lately has been putting this concern front and center. He recently rescinded an invitation to the Chinese navy to participate in the multinational Rimpac exercises off Hawaii this summer. And at the annual Shangri-La security dialogue in Singapore this weekend, Mr. Mattis said that ‘the placement of these weapons systems is tied directly to military use for the purposes of intimidation and coercion.’....

“China’s rise, and Mr. Xi’s determination to make China the dominant power in the Indo-Pacific, is a generational challenge that will require an enduring, bipartisan strategy and commitment.  A firmer stand to deter Chinese military expansionism is an essential start.”

Lastly, Australian Foreign Minister Julie Bishop on Tuesday criticized China for pressuring national flag carrier Qantas Airways to change its website to refer to Taiwan as a Chinese territory, ramping up tensions between the two countries.

Qantas gave in to Beijing’s request to remove references on its websites and in other material that suggest Taiwan, Hong Kong and Macau are part of countries independent from China.

Australia adheres to the one-China policy, which means it does not recognize Taiwan as a country, but Bishop said private companies should be able to conduct business operations free from political pressure from governments.

Syria/Iran/Turkey: The U.S. and Turkey reached agreement on a plan to withdraw Kurdish fighters from the northern Syrian city of Manbij as a step toward resolving one of the tensest disputes between the countries.

Secretary of State Pompeo and Turkey’s foreign minister, Mevlut Cavusoglu, “endorsed a road map” to “ensure security and stability in Manbij,” according to the State Department after the two officials met in Washington on Monday.

The agreement hands a significant victory to President Recep Tayyip Erdogan just weeks ahead of presidential elections, that appear to be closer than Erdogan planned for.

Turkey regards the Kurdish militia as an affiliate of the Kurdistan Workers’ Party, which has been designated a terrorist group by both Turkey and the United States.

But the Pentagon considers the militia its most reliable fighting partner in the region, making up the command component of the American-backed Syrian Democratic Forces, which are fighting ISIS.

Meanwhile, Syrian President Bashar Assad, who is nearly finished consolidating his gains and regaining control of essentially the entire country, save for a few pockets, such as the above, said he plans to visit North Korea’s Kim Jong Un, North Korean state media reported Sunday, potentially the first meeting between Kim and another head of state in Pyongyang.

Pyongyang and Damascus have maintained good relations and United Nations monitors have accused North Korea of cooperating in Syria’s chemical weapons program, which the North denies.

President Assad’s regime is “no longer immune” from retaliation, Israeli Prime Minister Benjamin Netanyahu warned during a visit to London Thursday.

“He is no longer immune, his regime is no longer immune. If he fires at us, we will destroy his forces,” Netanyahu said, speaking at an event organized by the Policy Exchange think tank.

“I think there is a new calculus that has to take place and Syria has to understand that Israel will not tolerate the Iranian military entrenchment in Syria against Israel,” he said.

“The consequences are not merely to the Iranian forces there but to the Assad regime as well,” he said, adding: “I think it’s something he should consider very seriously.”

Israel has been pledging for months not to allow Iran to establish itself in Syria, and last month, Israel launched a large-scale attack on what it said were Iranian targets, raising fears of a major confrontation.

Separately, President Trump asserted Thursday that his decision to abandon the Iran nuclear deal had already curbed Iran’s aggressive behavior, and he predicted that his hard-nosed tactics would also result in a successful nuclear negotiation with North Korea.

Iran, he said, was no longer as adventurous in Syria and Yemen, and had relaxed its ambitions to extend its influence all the way to the Mediterranean Sea.  “Iran is not the same country that it was a few months ago,” Trump said at a news conference. “They’re a much, much different group of leaders,” he concluded.

But there is zero evidence of this, as Iran remains firmly under the control of Supreme Leader Ayatollah Khamenei, and its proxy forces continue to operate across the Middle East.

Iran also said it would not heed a call to cooperate more fully with UN nuclear inspectors until a standoff over the future of its agreement with major powers is resolved, its envoy to the agency said Wednesday.

The International Atomic Energy Agency, which is policing the restrictions placed on Iran’s activities under the deal, has said Tehran is implementing its commitments, but also called for “timely and proactive cooperation” on providing access for snap inspections.

IAEA chief Yukiya Amano has said the comment is “not an expression of concern or complaints but rather an encouragement to Iran.” Diplomats who deal with the agency, however, say it follows an inspection in late April that went down to the wire in terms of how quickly the IAEA team gained access to one site.

Tehran’s ambassador to the IAEA, Reza Najafi, said “no one should expect Iran to go to implement more voluntary measures.”

Ayatollah Khamenei said on Monday he had ordered that preparations be made to increase Iran’s uranium enrichment capacity in case the nuclear deal fell apart.

Finally, in a report that was a month overdue, the Pentagon said last weekend that U.S. military actions killed 499 civilians in Iraq, Syria, Afghanistan and Yemen last year. The report, which covers counterterrorism airstrikes and ground operations around the world, added that “more than 450 reports of civilian casualties from 2017 remained to be assessed.”

Data from Airwars, a nonprofit that tracks reports of civilian deaths in Iraq and Syria, reveals a far higher number – 6,259 since the start of the war against ISIS in Iraq and Syria, vs. the Pentagon’s announced 892.

Israel: Defense Minister Avigdor Liberman said there have been 600 kite attacks from the Gaza Strip, of which 400 were intercepted by technology, but 198 incendiary kites caused fires burning 2,500 acres.

“It must be clear, we are unwilling to accept kite attacks, riots on the fence, or attempts to rush the fence and harm land that is under Israeli sovereignty,” Liberman said. “We will act according to Israel’s interests at timing that is comfortable for us. We will not leave accounts open. We will settle accounts with Hamas, Islamic Jihad, and the rests of the terrorists operating against us from the Gaza Strip.”  [Jerusalem Post]

Critics say the Netanyahu government has no strategy, it just waits for the next attack and then responds.

Iraq: The parliament has voted in favor of a manual ballot recount after allegations of widespread fraud in the country’s recently held parliamentary elections, a lawmaker said, a development that could further prolong the process of forming a new government.

On Tuesday, Prime Minister Haider Abadi said a separate commission looking into alleged irregularities in the vote found “unprecedented” violations.

Supporters of the populist cleric Moqtada Sadr, whose forces once battled U.S. troops, emerged with the most seats in the May 12 vote, and it’s unclear whether a recount would change the outcome. The winners have already begun talks on forming a new government.

Russia: During his annual television call-in show on Thursday, Vladimir Putin accused the United States of violating the nuclear balance and warned against a “Third World War.”

Responding to a worried viewer who asked if such a war would occur, Putin called for negotiations in an attempt to return to the strategic parity the United States and Soviet Union had during the Cold War.

Quoting Albert Einstein’s aphorism that “World War IV will be fought with sticks and stones,” he said the U.S. exit from the Soviet-era anti-ballistic missile treaty in 2002 had disrupted the balance.

“The fear of mutually assured destruction has always restrained and forced military powers to respect each other,” he said. “The exit of the United States from the missile defense treaty was an attempt to ruin this parity, but our efforts in the development of new weapons will preserve this parity.”

Meanwhile, U.S. Defense Secretary Mattis is pressing European allies to ready more NATO troops, ships and planes for combat in a fresh move to shore up the alliance’s deterrence against a potential Russian attack.

The plan would require NATO to have 30 land battalions, 30 air fighter squadrons and 30 navy ships such as destroyers ready to deploy within 30 days of being put on alert. It does not discuss specific troop numbers or a deadline for setting up the strategy.

The size of battalions varies across NATO, from 600 to 1,000 soldiers.

“We have an adversary (Russia) that can move quickly into the Baltics and Poland in a ground attack,” said one senior NATO diplomat who was briefed on the U.S. plans.  “We don’t have the luxury of taking months to mobilize,” the diplomat said.

Russia’s war games last year involved an estimated 100,000 troops.

Hours before arriving in Austria, on his first trip to Western Europe in almost a year, Putin told Austrian ORF television he wanted a “united and prosperous” EU, calling it Russia’s most important commercial and economic partner.

The pro-Putin United Russia party has close links with far-right parties in the EU, which alarms many liberals.

Walter Russell Mead / Wall Street Journal

“Vladimir Putin’s foreign-policy flair has both electrified and horrified the world for a full decade. Since 2008, Mr. Putin has partitioned Georgia, invaded Ukraine, and annexed Crimea. He has raised Russian power and prestige to their highest levels since the Cold War. He has muscled Russia back into the Middle East while inserting himself into America’s 2016 presidential election. He has also demonstrated an unequaled ability to weaponized information and bolster Russian power on the cheap.

“Breaking the rules, in other words, is Mr. Putin’s specialty. But this year he seems to be taking a more laid-back approach. The Kremlin continues to spread disinformation, and its political opponents still occasionally turn up poisoned or dead. But as U.S. policy has become more frenetic under President Trump, Russian foreign policy has become more restrained....

“Don’t misunderstand: Mr. Putin hasn’t had a change of heart or decided to mend fences with the West. He is toning down his foreign policy simply because so many of his key objectives have been accomplished that his best option now is to consolidate his gains.

“Ten years ago, the European Union and the North Atlantic Treaty Organization were on offense in Eastern Europe. Mr. Putin feared that the spread of Western ideas into Russia would challenge his rule.  Those worries are gone: A divided and confused West has given up its dream of pushing eastward, and both the EU and NATO are less confident and less effective than they were a decade ago. The West no longer endangers Russia. The real question is how much Russia endangers the West.

“Mr. Putin is no Stalin; he seeks to weaken the West rather than destroy it. From his point of view, the current situation in Europe looks promising: The U.S. and Europe are drifting apart. The gap within the Continent also continues to grow, as discontent mounts between Germany and many of its southern and eastern partners. Italy’s new government is likely to push to end sanctions against Russia, while forcing Europe into a new bout of navel gazing over the euro. All this favors Moscow without requiring Mr. Putin to do much of anything.

“In the Middle East, Russia would profit similarly from a period of relative inaction....

“For the moment things are breaking Mr. Putin’s way.  If Syria is to be a playing field for outside powers, the U.S. and Israel would prefer Russia be the leader rather than Iran. Mr. Putin can tell Benjamin Netanyahu that Russia is the best security against the Iranian forces on Israel’s border.  At the same time, Mr. Putin can promise Ayatollah Ali Khamenei that Russia will keep Bashar Assad in Damascus and the U.S. out....

“Meanwhile, developments at home counsel restraint as well. While Mr. Putin’s string of dramatic foreign-policy successes has shored up his domestic popularity, Russia’s sclerotic economy and corrupt social order ensure that the foundations of his power remain weak.  Mr. Putin has made Russia great again on the international stage, but the Russian people would rather see him use that daring and finesse to improve the situation at home.”

*The World Cup begins this week in Russia.  Here’s hoping it is a safe event, but this is one juicy target, 11 cities.  Russia has a lot of enemies.  If I was attending, I would not go to any pubs close by the stadiums.

Afghanistan: President Ashraf Ghani on Thursday announced an unconditional ceasefire with the Taliban until June 20, coinciding with the end of the Muslim fasting season, but excluded all other militant groups, such as Islamic State.

The decision came after a meeting of Islamic clerics from across the country this week who declared a fatwa on Taliban attacks. A suicide bombing claimed Islamic State killed 14 people at the entrance to the clerics’ peace tent in Kabul.

The clerics recommended a ceasefire with the Taliban, who are seeking to reimpose strict Islamic law after their ouster in 2001, and Ghani endorsed the recommendation.

“This ceasefire is an opportunity for Taliban to introspect (sic) that their violent campaign is not winning them hearts and minds but further alienating,” Ghani said in a message on social network Twitter after a televised address.

“With the ceasefire announcement we epitomize the strength of the Afghan government and the will of the people for a peaceful resolution to the Afghan conflict.”

But military experts believe this is not a good move in that it gives the Taliban the opportunity to regroup and prepare for more attacks.

Random Musings

--Presidential tracking polls....

Gallup: 41% approval of President Trump’s job performance, 55% disapproval (June 3)
Rasmussen: 47% approval, 51% disapproval

In a new NBC/Wall Street Journal national survey of registered voters, 44% approve of President Trump’s job performance, vs. 39% in April, though the 44% matches the approval rating for Ronald Reagan (in June 1982) and Barack Obama (in June 2010) before both presidents saw their parties lose a significant number of House seats in the midterms.

--Trump’s support from Republican voters remains rock solid, 87% per the latest Gallup poll, second only to George W. Bush’s 96%, which came nine months after 9/11.

--Senate Majority Leader Mitch McConnell said Tuesday he was canceling most of the Senate’s time-honored August recess, an election-year move that could help lawmakers confirm more of President Trump’s nominees while keeping vulnerable Democratic senators off the campaign trail.

McConnell said he decided to shorten the usual summer getaway “due to the historic obstruction by Senate Democrats of the president’s nominees” and to work on must-pass spending bills.

--Californians negotiated their “jungle primary” process on Tuesday, which gives the November ballot to the top two finishers, regardless of party.  $millions were spent to ensure Democratic contenders in the state’s congressional districts didn’t ruin their chances by splitting the vote too much among fellow Democrats, but Republicans secured a spot in the California’s governor race, multimillionaire John Cox*, which is critical for helping GOP turnout this fall and votes for House Republican candidates.  But Republicans missed a shot at Democratic incumbent Sen. Dianne Feinstein’s re-election big, with Feinstein facing a fellow Democrat, not a Republican in the fall.

*Cox goes up against prohibitive favorite Gavin Newsom, San Francisco’s former mayor and current lieutenant governor.  But the primary was a stunning defeat for former Los Angeles Mayor Antonio Villaraigosa, who finished a disappointing third.

On the House side, Democrats will be mounting strong challenges in open seats currently represented by Republican incumbents.

Nationally, in terms of the Democrats taking back control of the House, the two key states are going to be California and here in New Jersey.  Between these two, Democrats have a legitimate shot at at least 10 Republican-held seats, nearly half the 23 they need for control. 

Four Republican House seats in New Jersey are in serious trouble, including my congressman, Leonard Lance.  The district next door, retiring Republican Rep. Rodney Frelinghuysen’s seat, is looking strong for the Democrats.

But will we see a big Blue Wave across the country? That’s where the generic House poll is so critical.

The aforementioned NBC News/Wall Street Journal survey gives Democrats a 10-point advantage on congressional preference, with 50 percent of registered voters wanting a Democratic-controlled Congress, versus 40 percent who want a GOP-controlled one.

Democrats held a 7-point edge on this question back in April, 47-40.

And Democrats are more enthusiastic about the upcoming midterms, with 63 percent of them registering either a ‘9’ or ‘10’ on a 10-point scale in terms of interest, while just 47 percent of Republicans signal the same level of enthusiasm.

But by a 48-23 margin, voters indicate they’re more likely to support a congressional candidate who promises to provide a check on President Trump than those who say they’re less likely to support such a candidate.  At the same time, House Minority Leader Nancy Pelosi continues to be a serious drag on her party, with 45 percent saying they’re less likely to support a candidate who wants Pelosi as speaker, versus 21 percent who are more likely to back such a candidate.

Separately, six-in-10 are satisfied with the U.S. economy.

One thing seems clear after Tuesday’s primaries across the country.  Female candidates rule, including some strong Republican ones for Congress, such as Korean-American Young Kim, who will be trying to replace the retiring Republican Ed Royce in California.

--New Jersey’s Star-Ledger ran a headline post-Tuesday’s primary, “What the hell happened to Bob Menendez?” Newspaper publisher Lisa McCormick got 38% of the vote in the Democratic primary against Sen. Menendez despite not having reported any campaign spending.

So this clearly opens it up for Republican senate challenger Bob Hugin, and as I noted the other day, the Republican National Committee can’t be afraid to spend $s to help him.

One good note from the primary vote for Menendez, however, is that almost 200,000 more Democrats than Republicans went to the polls, and McCormick’s 157,000 were just 10,000 shy of Hugin’s total.

--Daniel Henninger / Wall Street Journal

“Will the feud between Donald Trump and the NFL ever end??!!!

“Here we are in middle of a perfectly fine baseball season, when suddenly the field of view is filled with another national-anthem battle royal between the president and the Philadelphia Eagles, who won Super Bowl LII.

“Who didn’t see this collision coming?

“In a tradition that by now feels as if it started with George Washington, yet another professional sports team was invited this week to the White House for a photo-op with the president. Then it developed that some, or maybe a lot, of the Eagles weren’t going to show up, because last season you-know-who dissed the NFL players who took a Kaepernick knee during the national anthem. For the record, all the Eagles players stood for every singing of ‘O say can you see’ last season.

“I’m not going to get into the NFL’s recent ruling on what players next season will have to do during the anthem because, frankly, I don’t care anymore about the NFL. Being from Cleveland is no help.

“Naturally, I did watch the start of Super Bowl LII to see if anything would happen during the national anthem, but it turned out to be the most patriotic display in the history of American sports. If the rattled NFL proprietors could have put a tank at midfield, they would have.

“Then I got sucked into watching the whole game because it quickly became the most mesmerizing championship in years. In the old days, hard to believe, that’s why we watched sports – for the sport. How naïve we all were.

“But back to the Trump White House, which retaliated for the Eagles’ threatened no-shows by ‘disinviting’ the whole team. Instead, the fans from Philadelphia got a quick concert of red, white and blue music by the Marine Band and Army Chorus.

“LeBron James took time off Tuesday from preparing for Cleveland’s NBA final against Golden State to say that neither basketball team would go to the White House because ‘no one wants the invite anyways.’ Amen.  Let’s end right now the ridiculous habit of inviting the sports world’s plutocrats to the White House.

“The press says Mr. Trump is pushing the battle of the national anthem because it plays to his base.  I suppose it does. But here’s what galls even non-Trumpians about this kneeling kerfuffle: We live in a world soaking in partisan politics. Then one day you wake up ready to relax with NFL Sunday, and you discover that ‘The Star-Spangled Banner’ has become totally politicized. Any normal person, including liberals who won’t admit it, would have a three-word reaction to this spectacle, and the first two words begin with ‘w’ and ‘t.’

“So what else is new? Today, if someone has a grievance or beef, first thing they do is look for something to attach it to – the anthem, the Pledge of Allegiance, 19th-century American fiction, Mom’s apple pie – anything that will draw the world’s attention, meaning the attention of the viral plague called social media....

“(Even) now, the people who voted for Hillary still claim to be shocked and stunned that an electorate beaten down by the politicization of everything in life voted for the guy who makes a mockery of all that.

“Worth noting is that there were no serious college commencement protests this year. Is this progress? Maybe. Or maybe the answer is that in the social-media era, when no thought lasts long, the commencement shout-downs and anthem kneelings burn themselves out as the protest zeitgeist moves on to find yet another platform.

“But there’s one protest platform that won’t burn off: Donald Trump....

“The sophisticates in the media thought they could beat Donald Trump at this game by burying him under waves of negative publicity. But he feeds off of it, just as he turned the Philadelphia Eagles’ White House no-show into a display of patriotic music, with the maestro at the center.

“Now, fantastically, some Democrats are complaining that they can’t get their message out (the tax cut didn’t work, Medicare for all) because Donald Trump has blotted out the media sun. Gee whiz, whose fault is that?

“The eclipse won’t end. The media has turned the Trump presidency into a phenomenon of constant self-absorption – their self-absorption in this one person. Donald Trump has become the biggest balloon in a political Macy’s parade of modern media’s own creation.  They could let go of the ropes. But they won’t.”

For the record, President Trump initially came out in strong support of the NFL’s new policy that will punish players who protest during the anthem.

“I think that is good,” Trump said of the new rule. “I don’t think people should be saying in locker rooms. You have to stand proudly for the national anthem. Or you shouldn’t be playing, you shouldn’t be there, maybe you shouldn’t be in this country.  You have to stand proudly for the national anthem and the NFL owners did the right thing if that is what they’ve done.”

Then he once again changed his mind...and then again today in extending a possible olive branch.

Lastly, it was pathetic that Fox News ran a clip of Eagles players kneeling on the field, claiming they were protesting the anthem when in fact they were in a pregame prayer.  Executive producer of Fox News @Night, Christopher Wallace, said in a statement: “To clarify, no members of the team knelt in protest during the national anthem throughout regular or post-season last year. We apologize for the error.”

--Reuters reports that the Atlanta cyberattack has had a more serious impact on the city’s ability to deliver basic services than previously understood, a city official said on Wednesday, as an additional $9.5 million to help pay for recovery costs was proposed.

More than a third of the 424 software programs used by the city have been thrown offline or partially disabled in the incident, Atlanta Information Management head Daphne Rackley said.  Nearly 30 percent of the affected applications are considered “mission critical,” affecting core city services, including police and courts.

Hackers had demanded $51,000 worth of bitcoin for the release of encrypted city data.  The interim city attorney said 71 of 77 computers were wiped out and a decade of legal documents, while the hack wiped out police dash-cam recordings.  “That is lost and will not be recovered,” said Police Chief Erika Shields.

--The Miss America pageant abandoned the swimsuit competition in yet another Sign of the Apocalypse. 

Gretchen Carlson, the former Fox news anchor and Miss America in 1989, who is now chairwoman of The Miss America Organization, said, “We are not going to judge you on your outward appearance.”

Ms. Carlson added: “We are moving it forward and evolving it in this cultural revolution.”

Discuss amongst yourselves...my attorneys have advised me not to comment myself.

Except I love the Monster Energy Girls!!! #NASCAR

--A pilot whale died off southern Thailand after swallowing 80 plastic bags.  The small male pilot whale had been discovered ailing and unable to swim in the Na Thap Canal, Thai marine officials said. Thailand is a major user of plastic bags and the government last month announced it was considering a ban. [BBC News]

Separately, more than 120 pregnant whales were killed during Japan’s annual hunt last summer, a report has revealed, prompting outrage among conservationists.

Figures show that 128 of the 333 minke whales caught during the 12-week expedition in the Southern Ocean were female.  122 of them were pregnant.

The figures were published in a technical report submitted to the International Whaling Commission and prepared by an agency linked to Japan’s fisheries ministry.

Conservationists greeted the report’s findings with fury, calling the statistics “shocking” and condemning the slaughter as “abhorrent.”

Japan has previously justified its whaling on an exemption in international law which allows the animals to be killed for scientific purposes, but Australia won a 2014 case at the International Court of Justice which ruled against the Japanese program in the Southern Ocean.

But then after the ruling, Japan announced a new research program, under which it would kill up to 333 Antarctic minke whales each year. The fisheries ministry said the program is necessary to study the best methods of managing minke populations.

‘Man’ sucks.

--A Supreme Court ruling in favor of a Colorado baker who refused to make a custom cake for a same-sex wedding could mark the first step toward allowing businesses to withhold certain services based on religious grounds.

But...while the outcome was a victory for religious freedom, the ruling was very specific to the circumstances of this particular case, and going forward, it’s unclear whether other businesses with religious objections can discriminate against customers based on their beliefs.

Most legal experts agree that even after Monday’s 7-2 ruling written by Justice Anthony Kennedy, “It does not create a simple across-the-board right to conscientious objection,” as University of Virginia law professor and expert on religious liberty Douglas Laycock put it to USA TODAY.

Instead, Justice Kennedy and the majority were ruling against the Colorado Civil Rights Commission, which appeared contemptuous toward Jack Phillips, owner of Masterpiece Cakeshop Ltd. in Lakewood, Colorado.  Justice Kennedy cited the comments of some commission members who initially ruled on Phillips’ case as evidence of “hostility to religion,” along with the commission’s refusal to sanction three other bakers who declined to produce cakes with messages attacking same-sex marriage.

Basically, the Colorado Civil Rights Commission is a bunch of a-holes.

This was the first major follow-on, albeit an inconclusive one, to the 2015 decision affording same-sex couples the same marriage rights as those held by opposite-sex couples.  Justice Kennedy’s opinion emphasized that progress toward gay rights should unfold in a civil and sensitive manner to those whom it discomforts.

--Former Fox News commentator, and retired lieutenant colonel, Ralph Peters spoke on CNN in his first television interview since his departure from Fox in March, having quit in disgust, and attacked his old employers again, saying that the network was “doing a great, grave disservice to our country.”

“With the rise of Donald Trump, Fox did become a destructive propaganda machine.  And I don’t do propaganda for anyone.”

For the past decade, Peters said he believed that Fox News was a necessary and legitimate conservative bulwark in the news media and an outlet for libertarian opinions.  But following the election of Donald Trump, the network turned rightward, Peters said.

The prime time hosts, particularly Sean Hannity, started to echo Trump’s debunked theories of a “deep state” undermining the administration, and joined the president in steadily attacking the Justice Department, the FBI and other democratic institutions, Peters said.

“I suspect Sean Hannity really believes it,” he said. “The others are smarter. They know what they’re doing. It’s bewildering to me. I mean, I wanted to just cry out and say: ‘How can you do this?  How can you lie to our country?’”

--NASA scientists announced exciting news Thursday. The “building blocks” for life have been discovered in 3-billion-year-old organic matter on Mars.

Researchers cannot yet say whether their discovery stems from life or a more mundane geological process.  However, “we’re in a really good position to move forward looking for signs of life,” said Jennifer Eigenbrode, a NASA biogeochemist and lead author of a study published Thursday in the peer-reviewed journal Science.

The material was discovered by the Mars Curiosity rover, which has been collecting data on the Red Planet since August 2012. The organic molecules were found in Gale Crater – believed to once contain a shallow lake the size of Florida’s Lake Okeechobee.

Methane has also been detected, which is significant because most methane on Earth comes from biological sources.

--George Will had a piece in the Washington Post on a new book by Donald Rumsfeld, “When the Center Held: Gerald Ford and the Rescue of the American Presidency.”

“Rumsfeld, who calls Ford ‘the president we always wanted that we didn’t know we had,’ tiptoes up to a comparison with today’s Washington when he says the city ‘can be a magnet for sizable personalities’ and that Ford’s ‘saving grace’ was that he was not like that: ‘His calm, thoughtful and steadfast nature was remarkable in Washington, D.C., even in his own day, and some might assert even more so now.’  Do tell.

“The current president’s contribution – unintended but not insignificant – to America’s civic health might be to help cure the country of unreasonable fastidiousness regarding presidential aspirants. For a while, at least, many voters will be less inclined than they once were to measure candidates with a political micrometer that encourages voters to be excessively finicky, rejecting candidates for minor blemishes, only to wind up with one who is all blemish. More than four decades on from Ford’s accidental presidency, this man who wore plaid trousers and wore power lightly is a reminder that the nation can always do worse than to embrace normality.”

--Patti Davis, author and daughter of Ronald and Nancy Reagan / Washington Post

“(My father) had a reverence and a love for America that burned in his eyes when he looked at the flag, that bled into his words when he spoke to the country.  Selfishly, I used to feel slighted by that love. I referred sometimes to my ‘sibling rivalry’ with America.  My strident protests against some of my father’s policies definitely got his attention, which was what I intended – but they also wounded him, which was not my intention.  In his last years of life, when Alzheimer’s disease had stolen many things but not love, I was able to sit with him and tell him my regrets. I miss my father in deeply personal ways, I also miss the dignity that he brought to the task of leading this country, the deep respect he had for our democracy, and now, after so much time has passed, I miss how much he loved America.

“People often ask me what he would say if he were here now....

“I think he would remind us that America began as a dream in the minds of men who dared to envision a land that was free of tyranny, with a government designed and structured so that no one branch of government could dominate the others. It was a bold and brave dream. But, he would caution, no government is infallible. Our democracy, because it is founded on the authority of ‘We the people,’ puts the burden of vigilance on all American citizens.

“Countries can be splintered from within, he would say. It’s a sinister form of destruction that can happen gradually if people don’t realize that our Constitution will protect us only if the principles of that document are adhered to and defended. He would be appalled and heartbroken at a Congress that refuses to stand up to a president who not only seems ignorant of the Constitution but who also attempts at every turn to dismantle and mock our system of checks and balances.

“He would plead with Americans to recognize that the caustic, destructive language emanating from our current president is sullying the dream that America once was. And in a time of increased tensions in the world, playing verbal Russian roulette is not leadership, it’s madness.  He would point to one of the pillars of our freedom – a free press – which sets us apart from dictatorships and countries ruled by despots.  He didn’t always like the press – no president does – but the idea of relentlessly attacking the media as the enemy would never have occurred to him. And if someone else had done so, he wouldn’t have tolerated it.

“He would ask us to think about the Statue of Liberty and the light she holds for immigrants coming to America for a better life. Immigrants like his ancestors, who persevered despite prejudice and signs that read ‘No Irish or dogs allowed.’ There is a difference between immigration laws and cruelty.  He believed in laws; he hated cruelty.

“Despite my father’s innate humility, he would ask the people of this country to reflect on his own words from his famous speech, ‘A Time for Choosing,’ delivered in 1964.  ‘You and I have a rendezvous with destiny. We’ll preserve for our children this, the last best hope of man on earth, or we’ll sentence them to take the last step into a thousand years of darkness.’”

---

Pray for the men and women of our armed forces...and all the fallen, including a U.S. soldier who died in a combat operation today in Somalia, four others injured.

God bless America.

---

Gold $1303
Oil
$65.56

Returns for the week 6/4-6/8

Dow Jones  +2.8%  [25316]
S&P 500  +1.6%  [2779]
S&P MidCap  +2.2%
Russell 2000  +1.5%
Nasdaq  +1.2%  [7645]

Returns for the period 1/1/18-6/8/18

Dow Jones  +2.4%
S&P 500  +3.9%
S&P MidCap  +5.3%
Russell 2000  +8.9%
Nasdaq  +10.8%

Bulls  N/A this week...50.0 / 19.2 last week
Bears

Go Justify in the Belmont!

Tune in next time for my life story...or some semblance thereof.

Brian Trumbore