Week in Review

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Week in Review

08/04/2018

For the week 7/30-8/3

[Posted 11:30 PM ET, Friday]

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Edition 1,008

Trump World....

It was about ten days ago, July 25, that the Senate Foreign Relations Committee grilled Secretary of State Mike Pompeo on the Helsinki summit of July 16, and chairman Bob Corker (R-Tenn.) said to Pompeo, “It’s not about you; it’s not about Mattis,” complimenting both the secretary of state and secretary of defense, James Mattis.

“It’s the president who causes people to have concerns,” Corker then listing a series of statements Trump had made in July that he said appeared “purposefully” designed to “create tremendous distrust in this nation and our allies.”

“Why does he do those things?” Corker asked.

I didn’t have time last review to note the exchange, as Pompeo disagreed and pleaded with senators to pay more attention to policy than to presidential tweets and remarks, but I can guarantee you’ll be able to re-run the tape the remaining years Trump’s in the Oval Office.

What became crystal clear above anything else this week is that we have two governments.  I totally trust the likes of Mattis, Pompeo, Mnuchin and a few others (I’m not sold on John Kelly) to do the right thing, but it’s the Trump whisperers, Bannon, Miller and Hannity that I have a major problem with.  And if you don’t understand those last three are the key figures for the president, as of today (the lineup can always change, we’ve learned), then you just haven’t been paying attention. 

In an extraordinary show before the White House press corps...and the American people...Trump administration officials on Thursday vowed to defend the United States’ election against threats from Russia and other countries, describing influence campaigns by America’s adversaries in blunt terms never used by the president.

The heads of the nation’s national security agencies said Russia was still trying to influence and disrupt the midterm elections, and they pledged help for state and local governments to counter those efforts in the weeks ahead.

FBI Director Christopher A. Wray said, “Russia attempted to interfere with the last election,” and that Russian operatives were continuing to operate against the election system in “malign” ways. Wray said the United States government must face the threat with “fierce determination and focus.”

Director of national intelligence Dan Coats said, “We acknowledge the threat. It is real. It is continuing. We are doing everything we can to have a legitimate election that everyone can have trust in.”

Kirstjen Nielsen, secretary of homeland security, said, “Our democracy itself is in the crosshairs.”

The message was so strikingly different from anything President Trump has said in the past.

Earlier this week, Facebook reported that it had identified a political influence campaign targeting the midterm elections and removed 32 pages and fake accounts. Facebook did not link the campaign to Russia directly, but the accounts the company described bore all the hallmarks of the Kremlin.

Yet the day before his national security team made their appearance, Trump tweeted: “Russian Collusion with the Trump Campaign, one of the most successful in history, is a TOTAL HOAX.  The Democrats paid for the phony and discredited Dossier which was, along with Comey, McCabe, Strzok and his lover, the lovely Lisa Page, used to begin the Witch Hunt.  Disgraceful!”

[Trump added separately on Wednesday, “This is a terrible situation and Attorney General Jeff Sessions should stop this Rigged Witch Hunt right now, before it continues to stain our country any further. Bob Mueller is totally conflicted, and his 17 Angry Democrats that are doing his dirty work are a disgrace to USA!”]

So hours later, Thursday, Trump used a campaign rally in Pennsylvania to defend his meeting in Helsinki with Vladimir Putin, one in which we still have no freakin’ clue what the two discussed over two hours, though I have a piece below from former attorney general Michael Mukasey that I think nails it.

Without mentioning the dire warnings that national intelligence director Coats and the others were offering, Trump accused the media of mischaracterizing his meeting with Vlad the Impaler and said relations with Moscow were being hampered by special counsel Robert Mueller’s probe.

“I had a great meeting with Putin,” Trump said.  “We got along really well.”

Trump said he was surprised by the coverage, with every Republican worth a damn calling him out for being overly deferential to Putin, while criticizing him for appearing to accept the Russian president’s denial that Moscow interfered in the 2016 election.  The president later lied and said he misspoke.

“Whatever happened to diplomacy?” Trump asked of the rally crowd. “Whatever happened to honest reporting?”

Today, Russia responded to Coats, Wray et al by calling claims of meddling in our elections “hysteria” that “makes a mockery” of America.

Foreign Ministry spokeswoman Maria Zakharova told journalists: “The two-year hysteria over some kind of Russian interference in elections – which never happened – does not only damage bilateral relations but makes a mockery of the whole political system in the U.S.”

Of course this is exactly what the Kremlin and Putin want.  Sow discord and division by claiming in their fake Facebook accounts, for example, that the system is a joke.  Who helps in their messaging? Donald Trump.

It should be a layup for Republicans this fall.  Instead, the following is good advice for Democrats, who are floundering of their own accord, though Stephens is also focused on Republican critics such as moi.

Bret Stephens / New York Times

“Remember Jack Kemp? In the fall of 1996, Bob Dole’s vice-presidential candidate complained in his debate with Al Gore that economic growth of 2.5 percent just wasn’t good enough.  The American people thought better of it, and Dole-Kemp went on to lose the race by more than eight million votes.

“That’s a memory Donald Trump’s critics and prospective opponents might consider on the news that the U.S. economy grew at a robust annual rate of 4.1 percent in the second quarter, the best quarter since 2014.  No, the growth isn’t evenly distributed. It hasn’t shown up in wages. It shouldn’t excuse the president’s trade follies. It doesn’t mean the next quarter will be as good. And it never means that storm clouds aren’t brewing.

“But if you’re serious about wanting to defeat Trump, you might want to start with Rule No. 1: Don’t argue with sunshine.  Don’t acknowledge good news through gritted teeth, or chortle at the president’s boastful delivery, or content yourself with the thought that Barack Obama also had some strong quarters and deserves all the credit.

“And don’t bet on bad news.

“Why? Because it creates a toxic perception that Trump’s critics would rather see things go wrong, for the sake of their own vindication, than right, for the common good. That, in turn, reinforces the view that Trump’s critics are the sort of people whose jobs and bank accounts are sufficiently safe and padded that they can afford lousy economic numbers.

“If working-class resentment was a factor in handing the White House to Trump, pooh-poohing of good economic news only feeds it.

“While they’re at it, they might try to observe Rule No 2: Stop predicting imminent disaster.  The story of the Trump presidency so far isn’t catastrophe.  It’s corrosion – of our political institutions, civic morals, global relationships and democratic values.

“Democrats can make a successful run against the corrosion, just as George W. Bush did in a prosperous age with his promise to restore ‘honor and dignity’ to the White House after the scandals of the Clinton years. But they’re not going to do it by repeatedly forecasting a stock market meltdown, worldwide depression, or global thermonuclear war – and then wondering why they aren’t believed.

“Third rule: Stop obsessing about 2016.

“Faulkner was wrong: The past really is past, at least when it comes to Trump.  Obsessing over what was said at Trump Tower in 2016, or parsing the meaning of Trump’s tweets in 2017, will not lead to an indictment of the president, which Robert Mueller can’t bring anyway without rewriting Justice Department regulations. It will probably not lead to impeachment, unless Democrats retake the House. And it will never lead to a conviction in the Senate, barring a two-thirds Democratic majority.

“Good luck.

“The smart play is to defend the integrity of Mueller’s investigation and invest as little political capital as possible in predicting the result.  If Mueller discovers a crime, that’s a gift to the president’s opponents.  If he discovers nothing, it shouldn’t become a humiliating liability.

“Fourth: Ignore Trump’s tweets.  Yes, it’s unrealistic. But we would all be better off if the media reported them more rarely, reacted to them less strongly, and treated them with less alarm and more bemusement....

“Fifth: Beware the poisoned chalice.  We keep hearing that the 2018 midterms are the most important in all of history, or close to it. Why?

“Democrats took control of the Senate in the 1986 midterms but George H.W. Bush easily defeated Mike Dukakis two years later. Republicans took Congress in 1994, only to become Bill Clinton’s ideal foil. Republicans took the House again in 2010 amid a wave of discontent with Barack Obama, and you know what happened. Get my drift?”

Trumpets....

--Kimberley A. Strassel / Wall Street Journal

“If a tree falls in a noisy circus, does it make a sound?  If the Trump administration announces its largest deregulatory effort to date while the president is in the throes of a Twitterrampage, will anybody pay attention?

“No, and thereon may hang the balance of Republican congressional control. It’s never clear where Donald Trump gets political advice, if he does at all. What is clear is that this White House is doing an able job of whiffing one of the best political messages in decades, a reality that is demoralizing administration insiders and GOP candidates alike.

“The following are just a few pieces of news out of Washington, all of which hold enormous promise for Americans. The Environmental Protection Agency and Transportation Department released a plan – announced on the website of these pages – to ax the Obama administration’s car-emissions standards, saving consumers $500 billion. Dollarwise, it may be the biggest deregulation ever.

“The Treasury has recommended rescinding the ‘payday lending’ rule, which threatened to cut off the poorest Americans from viable credit. The Interior Department proposed the first real reforms to the Endangered Species Act in decades, offering hope to tens of thousands of landowners. The National Labor Relations Board is revisiting a 2014 decision that allowed unions to poach employer email systems, part of the board’s plan to review any case that overruled precedent in the name of Obama union backers.  The Internal Revenue Service lifted a political threat to nonprofits by allowing them to shield the names of their donors.

“The Department of Health and Human Services finalized its rule allowing more non-ObamaCare insurance options to millions of Americans. The Senate sent a $717 billion defense authorization bill to the White House, increasing active-duty strength and providing troops their largest pay raise in nine years.  The Senate also confirmed the 24th Trump circuit-court judge.

“The Labor Department released new numbers showing worker compensation increased 2.8% year over year, the fastest pace in a decade.  [Ed. The employment cost index’s wage component, discussed below.] Average home values are rising at twice that pace.  Unemployment hit record lows.  Second-quarter economic growth came in at 4.1%.

“If all this sounds wonderful, it is, though many Americans have heard little about it. The headlines? Mr. Trump publicly lecturing his attorney general.  Mr. Trump bashing Charles Koch.  More about Russian collusion, provoked by the president’s call for the firing of special counsel Robert Mueller. China tariffs. Border strife.  Michael Cohen. Paul Manafort.

“Yes, the mainstream media relentlessly drives anti-Trump stories. But what’s new? Republicans have long known they don’t a fair hearing from the press, which is why they shifted to talk radio and other alternative media.  Mr. Trump understands that better than most – thus his heavy use of Twitter, live rallies and press conferences.

“It’s the content that is mystifying. To hold the House and increase their Senate majority, Republicans must do two things: get out their base and bring along the center.  The president, with an unrivaled bully pulpit, has instituted policies that provide him a near-perfect message for those tasks. He can rally supporters by banging home his promises kept and warning that only their vote this fall will allow him to continue his mission.  And he can court the undecided with constant reminders of their new prosperity and freedom, and a vow that this is only the beginning.

“The president is certainly focused on his base, though with an eye to whipping them up with rallies focused primarily on the polarizing issues of trade and immigration.  His tweets revolve around the same issues – those and Mr. Mueller – and are often defensive or whiny.

“This House midterm will hinge on marginal districts – suburban or exurban areas where Hillary Clinton outpolled Mr. Trump or came close. Those races in turn will hinge on centrist voters. If Mr. Trump makes those centrists believe this election is about family separation, Republicans lose.  If he refocuses it on voters’ newly thriving prospects, Republicans have a shot....

“If Mr. Trump isn’t going to spend every day embracing, elevating and making this product of his own presidency the dominant discussion, then no one will.  The press isn’t going to do it. Democrats sure aren’t.  And no other Republican has that megaphone.

“Some will doubt whether Mr. Trump’s unconventional style even allows him to deliver such a message. But meditating in his farewell address on his nickname, the Great Communicator, Ronald Reagan said: ‘I never thought it was my style or the words I used that made a difference: It was the content.’ The content – the results – of this administration is right there, waiting for the president to communicate.”

--Ms. Strassel’s commentary is brilliant, yet as part of his Pennsylvania rally on Thursday, totally out of left field, President Trump said reports he was 15 minutes late to meet the Queen of England was “fake fake disgusting news,” adding that it was the queen who made him wait.

I watched Trump’s royal encounter at Windsor Castle last month as it happened and he was indeed late.  It’s not remotely in question.

But who gives a damn?!  Any irritation on behalf of some lasted like 30 minutes...and it simply wasn’t a story.  And never should have been one again.

Yet there is Donald Trump, the “stable genius,” bringing it up and what do you think was on the front page of all the British tabloids Friday morning?  Trump’s false claim. That’s an outright idiot, people.  I’m sorry.

Trump continued, complaining how some say his meeting with the queen, scheduled for 15 minutes, lasted an hour.

“And then there’s the rest of the story. So they said I was late when I was actually early, number one. Number two, I guess the meeting was scheduled for 15 minutes and it lasted for an hour. The president overstayed!

“So I was late and I overstayed. And honestly folks, it was such a beautiful, beautiful visit...but they can make anything bad because they are the fake, fake disgusting news.”

Oh, Trump continued...going on and on about how his visit with the queen was misrepresented, and there wasn’t a single freakin’ soul in his audience who came to hear this, let alone cared.

I cite the tale because it is classic Trump...it’s Trump World.  I’m sure the man he was stumping for, Republican Lou Barletta, who is running against two-term incumbent Democrat Bob Casey for the Senate, was thrilled.

One more from Thursday’s rally....sadly I’ve watched them all recently.

“Whatever happened to the free press? Whatever happened to honest reporting?” the president asked, pointing to the media at the back of the hall.  “They don’t report it. They only make up stories.”

Trump’s asinine performance in PA came hours after White House press secretary Sarah Huckabee Sanders refused to distance herself from President Trump’s previous assertions that the media is the “enemy of the people.”

In a heated exchange with reporters, including CNN’s Jim Acosta (who I can’t stand), Sanders bleated, “As far as I know, I’m the first press secretary in the history of the United States that’s required Secret Service protection,” accusing the media of continuing “to ratchet up the verbal assault against the president and everyone in this administration.”

Well tell your boss to stop lying, Sarah, and stop lying in turn for him.

As Ms. Strassel wrote, it’s just a massive missed opportunity to tout a strong domestic record.  [On foreign policy, you know where I stand.]

--All of Trump’s talk about shutting down the government is inane.  As the Wall Street Journal points out, Congress is making swift progress in funding it, both the Senate and the House, and they are far closer to funding most of the government for the next fiscal year, which starts Oct. 1, than they normally are at this point – two full months before the deadline.

--Trump tweets: “They asked my daughter Ivanka whether or not the media is the enemy of the people. She correctly said no.  It is the FAKE NEWS, which is a large percentage of the media, that is the enemy of the people!”

“Charles Koch of Koch Brothers, who claims to be giving away millions of dollars to politicians even though I know very few who have seen this (?), now makes the ridiculous statement that what President Trump is doing is unfair to ‘foreign workers.’  He is correct, AMERICA FIRST!”

--Trump attorney Rudy Giuliani made the media rounds Monday, and other days this week, and aside from calling Michael Cohen a “scumbag,” which is accurate, he also said, “Collusion is not a crime,” which President Trump then picked up on all week.

--Tuesday, I watched Trump’s rally in Tampa in support of Republican gubernatorial candidate and Rep. Ron DeSantis, and the president mentioned a litany of his most popular talking points, including what he said was a war on saying “Merry Christmas.”  So on July 31, it started.  Expect this line in every rally from Labor Day on for sure.

--Bob Woodward’s book on the inner workings of the Trump White House, “Fear,” is due out Sept. 11 and no doubt will be a big topic of discussion; Mr. Woodward having apparently sourced the book exhaustively in terms of everything has been recorded, and he has hard copies of documents from those who work (or worked) there.  Woodward will be on all the Sunday and network morning shows that first week, but we know it won’t swing anyone in the Trump base. The issue will be, so close to the mid-term, do some independents who might be leaning Trump reconsider?  It’s bound to be devastating.

Wall Street and Trade

On the economic front, we had a slew of data, not all of it great, but today’s jobs report was another solid one. While the headline figure of 157,000 was below expectations, the figures for May and June were revised upward to 268,000 and 248,000, respectively, a 3-month average of 224,000...excellent...especially given where we are in the economic cycle and the length of the expansion.

The unemployment rate ticked back down to 3.9%, with the underemployment rate, U6, down to 7.5%, another big positive.

But average hourly earnings, while up a solid 0.3% for July, are still up only 2.7% year-over-year, and depending on your inflation benchmark, “real wages,” minus inflation, are essentially flat, and this isn’t good.

Separately, June personal income and consumption (consumer spending) both came in as expected, up 0.4%, though on consumption, May was revised sharply upward to 0.5%.

The Federal Reserve’s preferred inflation benchmark, the core (ex-food and energy) personal consumption expenditures index, or PCE, was 0.1% in June, 1.9% year-over-year, so the Fed looks at this and continues to see no major pricing pressures.

A separate reading on the employment cost index (ECI) for the second quarter came in at 2.8% year-over-year, with the wage component at 2.8% as well, which matches up with the average hourly earnings figure that was part of the jobs report.  The 2.8%, however, was the strongest since Sept. 2008.

From 2001 to 2007, wages, as measured by the ECI, averaged 2.9% a year; but just 1.9% since Q2 2009. 

Meanwhile, we had the purchasing managers indices for July and the key Chicago reading on manufacturing was a stupendous 65.5 (50 being the dividing line between growth and contraction), but the national ISM reading on manufacturing was less than forecast at 58.1, and down from 60.2 in June.  The ISM non-manufacturing (service sector) figure was also well below expectations at 55.7.  These numbers will be important going forward in not just helping forecast any slowdown, but also any impact from the trade wars.

Finally, June construction spending was down 1.1%, with June factory orders up 0.7%.  And home-price gains held steady in May, as a lack of sale inventory helped prevent a meaningful slowdown in price growth despite rising mortgage rates and growing affordability issues.

The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas, rose 6.4% in May, same as the increase reported in April..

The 20-city index gained 6.5%, down from 6.7% the previous month.

The national index has topped 5% every month since August 2016.

The biggest price gains remain in the West, with Seattle seeing a 13.6% annual gain in May vs. a year earlier, while Las Vegas prices increased 12.6% and San Francisco’s rose 10.9%.

The rate on a 30-year fixed mortgage was 4.54% last week, up from 3.99% at the end of last year, according to Freddie Mac.

Moving along, the aforementioned Federal Reserve gathered Tuesday and Wednesday for one of the eight confabs they hold each year and, as expected, held the line on interest rates but remained on track for another small hike in September that no doubt will draw President Trump’s ire.

Trump criticized the Fed last month for its recent rate increases, appearing to put them on notice that he wouldn’t stand for any further action that could hurt the economy.

But in its written statement, the Open Market Committee was more upbeat about economic conditions than it was after its last gathering in June, describing the economy as growing at a “strong rate,” an upgrade from the “solid rate” cited in the last statement.  Fed officials also added that household spending was growing “strongly,” which it has used before to describe business investment.

Yes, there is no doubt the economy is strong and after the blizzard of data this week, the Atlanta Fed’s GDPNow indicator has an initial reading for the third quarter of 4.4% (though this will change wildly over the coming months).  Recall, it forecast 3.8% at the end of the second vs. the official 4.1%, which was a good guess, as these things go.

Back to Trump, it was on July 19 that he told CNBC he was “not thrilled” by the Fed’s rate hikes and repeated his criticism on Twitter the next day.  But he also said he was “letting (the Fed) do what they feel is best.”  Fed Chairman Jay Powell will act independently, you can be sure.

Turning to trade...the United States further turned up the heat Wednesday on China, with the administration threatening to more than double proposed tariffs on imports while Congress passed a defense bill designed to restrict Beijing’s economic and military activity.

The White House said it would consider more than doubling proposed tariffs on a further $200 billion worth of Chinese goods to 25%, up from an original 10%.

Washington has already applied tariffs to $34 billion worth of Chinese imports, with another set of duties on $16 billion in goods scheduled in the days ahead.  On the new proposed round of $200 billion, there will be a comment period and a final decision on the rate isn’t expected until September at the earliest. 

But no doubt, a 25% tariff would boost the cost of a range of U.S. imports and if the official inflation barometers began to move up in kind, the Fed would be forced to act more quickly on interest rates.

Meantime, the Senate approved a defense-policy bill that both tightens U.S. national-security reviews of Chinese corporate deals and revamps export controls over which U.S. technologies can be sent abroad. The bill passed the House earlier and Trump is expected to sign it.

For its part, China has said it would respond in kind, but its currency, the yuan, has been falling, which makes Chinese products more competitive and thus helps mitigate the impact of the existing tariffs.

The Commerce Ministry said today that Beijing’s proposed new set of import tariffs on $60bn worth of U.S. goods is rational and restrained and warned that it reserves the right of further countermeasures.  The ministry said in a statement that timing of the implementation of the new tariffs would depend on the actions of the U.S.

The White House said this afternoon it is open to further talks with China on how to resolve the dispute.  Economic adviser Larry Kudlow said that there have been contacts in recent days between the two countries at the highest level, but Trump last spoke to his “great friend,” Xi Jinping, in May!

JPMorgan Chase CEO Jamie Dimon made some sweeping comments in an interview with CNBC this week, saying that President Trump’s tax cuts, along with some of his other efforts, have helped the economy.

“Presidents get a lot of credit [and] a lot of blame for things they didn’t do, but the president has done things which accelerated growth. We needed competitive taxes. The way the American public should be thinking of it is: For 20 years, we’ve been increasingly uncompetitive, driving capital and brains overseas.”

Dimon added that some of the regulatory rollbacks pushed by the president are helping small businesses.  “We’ve had less small business formation in America than in any other recovery,” he said. “This has accelerated the growth.  It’s been 20 percent over 10 years; it should’ve been 40. The reason it wasn’t 40 is because of a lot of things that we did hurt ourselves.”

But Dimon said he is concerned that Trump’s trade policies could be a headwind to the U.S. economic expansion, noting: “I think it could offset some of the benefits” of the tax overhaul and other measures.

Separately, strategists at both Citigroup and Morgan Stanley warned of storm clouds gathering and risks “biased to the downside” as the drivers of global growth, easy monetary policy and fiscal stimulus, begin to fail.

And as a Goldman Sachs report highlighted, gains in the S&P 500 were increasingly being driven by a small pool of stocks.  “Narrow bull markets eventually lead to large drawdowns” when investors lose confidence, which could be for any number of reasons.

Europe and Asia

As in the U.S., there was a ton of economic data in both Europe and Asia.

For starters, the eurozone (EA19) composite PMI for July came in at 54.3 (same as the flash figure), down from 54.9 in June.  Manufacturing was 55.1 vs. 54.9 the prior month, services at 54.2 vs. June’s 55.2.

Manufacturing / Services

Germany was 56.9 mfg., 54.1 services
France 53.3, 54.9
Spain 52.9 (11-mo. low), 52.6 (weakest since Nov. 2013)
Italy, 51.5 (21-mo. low), 54.0
Greece 53.5 mfg.

A flash reading on EA19 inflation for July was 2.1%; 1.3% ex-food and energy.  A year ago the headline was 1.3%, but the core was also 1.3% and that’s the key for the European Central Bank.

The eurozone unemployment rate was 8.3% in June, same as May, and vs. 9.0% a year ago.

Germany 3.4%, France 9.2%, Italy 10.9%, Spain 15.2% (17.0% yr. ago), Greece 20.2% (April), Ireland 5.1%, Netherlands 3.9%, Austria 4.7%.

Some youth jobless rates: Spain 34.1%, Italy 32.6%, Greece 42.3% (Apr.)

A flash reading on second-quarter GDP for the EA19 was 0.3%, quarter-over-quarter, 2.1% annualized (vs. U.S.’s 4.1% for Q2).

[The PMI data is courtesy of IHS Markit, while the other EA19 data is from Eurostat.]

Chris Williamson / IHS Markit

“The past two months have seen the most subdued spell of factory output growth since late-2016. Worse may be to come. Even this reduced rate of output growth continued to outpace order book growth, resulting in the smallest rise in order book backlogs for two years. The clear implication is that manufacturers may have to adjust production down in coming months unless demand revives.

“Clues to the current soft patch lie in the export growth trend, which has deteriorated dramatically since the start of the year across all member states to reach a near-two year low, with France and Austria seeing exports fall into decline in July.

“The survey responses indicate that the slowdown likely reflects worries about trade wars, tariffs and rising prices, as well as general uncertainty about the economic outlook. Optimism about the future remained at one of the lowest levels seen over the past two years.”

Eurobits....

--The Bank of England raised its benchmark interest rate for only the second time in a decade, from 0.5% to 0.75% - the highest level since March 2009. While the increase means those with variable mortgages will pay more, savers will welcome the rise.

Mark Carney, the Bank’s governor, said there would be further “gradual” and “limited” rate rises to come.

But some business groups questioned the move ahead of Brexit and any deal with the European Union, though Mr. Carney told the BBC that the Monetary Policy Committee would cut rates if needed.

The BoE had been expected to raise rates in May but held off as the British economy was going through a soft patch. The Bank is now confident that the dip was temporary and that economic growth will recover from a 0.2% quarter-over-quarter rate as seen in the first, to 0.4% in the second and maintain that pace throughout 2018.

But Mark Carney also told the BBC that the possibility of a no-deal Brexit is “uncomfortably high” and “highly undesirable.”  He also reiterated that it was “absolutely in the interest” of the EU and U.K. to have a transition period.  However, he added, “We have made sure that banks have the capital, the liquidity and that they need and we have the contingency plans in place.”

Well I don’t think anyone really has a clue what would happen if Britain crashes out without a deal, except it wouldn’t be good...it would be a disaster.  A major disruption in trade, economic activity, and you’d see much higher prices.

Brexit talks resume in Brussels in mid-August, and British and European officials will have just 10 weeks to finalize the complex set of international negotiations before their October deadline. Again, while Britain exits the bloc next March 29, October is the deadline because you need to leave time to ratify whatever agreement emerges in both the U.K. and European Parliaments prior to March.

Increasing numbers of officials in Britain are expressing zero optimism on being able to reach a deal with the EU.

Separately, Deutsche Bank said it was moving almost half of its euro clearing activities from London to Frankfurt. In terms of actual personnel, the move is minimal, but it’s symbolic of the moves so many financial firms have been making since the Brexit referendum.

Overall, London Stock Exchange Group, which owns LCH (London Clearing House), has warned as many as 100,000 jobs could leave the City if London loses its status as the euro clearing hub.  So-called central counterparty clearing houses directly affect financial stability and this is a major concern for European policymakers.

--The historic heatwave in much of Europe has ravaged fields, such as wheat crops in Germany and Scandinavia, while a combination of dry conditions and extreme rain in the Black Sea have led to further hits to output in that breadbasket area.  The situation in northern Europe has been described as a “catastrophe.”  France, the EU’s top producer of wheat, has also experienced a hit to its crop with forecasters slashing estimates for the harvest.  Some parts of northern Europe haven’t seen rain in months.  Germany’s wheat crop is expected to shrink 25 percent (Sweden’s 40 percent), Germany not having recovered from record heat in May.

Russia, on the other hand, is said to be in decent shape, having harvested a record wheat crop in 2017, and with better relative weather this summer than the rest of the continent.

--The French government firmly defeated a no-confidence motion put forward by opposition lawmakers over its handling of a scandal involving Emmanuel Macron’s bodyguard, confirming the president’s solid majority.  The move capped a tumultuous two weeks in French politics after a video showed the bodyguard beating protesters.

--Greek Prime Minister Alexis Tsipras met with survivors of a wildfire that killed at least 91 people during his first visit to the town of Mati on Monday, after facing criticism for the government’s response to the blaze, which like a number across the country was probably the work of arsonists. The death toll in Mati was greater than it should have been due to illegal construction activity that worsened the blaze.  25 are still missing, last I saw.

--This was too much...from BBC News:

“The UK’s new Foreign Secretary Jeremy Hunt is on an official visit to China – but an embarrassing gaffe is stealing the headlines instead.

“Mr. Hunt tried to get into his host’s good books by mentioning that his wife is Chinese – but called her ‘Japanese’ instead.

“He quickly corrected himself and those at the meeting laughed it off.

“But the gaffe is making headlines and, as Mr. Hunt himself says, it’s a ‘terrible mistake to make.’

“Lucia Guo was born in Xian in central China. She and Mr. Hunt met in 2008, when she was working at Warwick University. They have three children.

“Mr. Hunt was at a meeting with Chinese Foreign Minister Wang Yi, when he said, in English: ‘My wife is Japanese – my wife is Chinese. Sorry, that’s a terrible mistake to make.’....

“Confusing China with any other country is bad if you’re trying to curry favor with the Chinese government.

“But of all the countries to get confused with, Japan is probably the worst one.

“That’s because the two countries have had a particularly bitter relationship for decades. They fought each other in two Sino-Japanese wars, and are also in a dispute over territory in the East China Sea.”

Heck, there were several serious anti-Japanese protests across China in 2012, when tensions over the East China Sea flared up.

Turning to Asia, we had the PMI data for China, with the official government figure on manufacturing for July coming in at just 51.2 vs. 51.5 in June; services at 54.0 vs. 55.0. The composite was 53.6 vs. 54.4 (National Bureau of Statistics).

The private Caixin reading on manufacturing was 50.8 in July vs. 51.0 for June, with services at 52.8, down from 53.9.

In Japan, the big story was the Bank of Japan tweaked its ultra-easy monetary policy, introducing “forward guidance.”  While it has vowed to keep interest rates at essentially zero, the BOJ is taking the band on the 10-year bond, currently minus 0.1% to 0.1%, to minus 0.2% to 0.2%, furthering its policy of “yield-curve control” first introduced in September 2016.

Needless to say, Japan’s banks will still struggle to generate profits from their ordinary lending business and aren’t happy.  For the second straight week the 10-year finished the week with a yield of 0.09%.  Don’t spend it all at once.

Meanwhile, the July manufacturing figure was 52.3 vs. 53.0 in June, with the new orders component at its lowest mark since Oct. 2016.  The services reading for July was 51.3.

June industrial output was down 2.1% in Japan.  None of this is particularly good.

Two others...the manufacturing PMI in Taiwan was 53.1 in July vs. 54.5 in June; for South Korea 48.3 (contraction territory) vs. 49.8.

Street Bytes

--The market once again shrugged off trade fears and focused on largely positive earnings with the Dow Jones tacking on just 0.1% to 25462, while the S&P 500 gained 0.8% and Nasdaq 1.0%.  The market story was Apple, as noted below, and its stupendous achievement.

--U.S. Treasury Yields

6-mo. 2.20%  2-yr. 2.64%  10-yr. 2.95%  30-yr. 3.09%

Bonds were basically unchanged on the week, the 10-year yield not crashing through the key 3.00% level, beyond a tick or two intraday, which would cause a market hiccup, no doubt.

--Oil prices fell after government data showed an unexpected increase in U.S. inventories of crude, reigniting worries about oversupply.  According to the Energy Information Administration, U.S. commercial stockpiles of crude oil are now just 1% below the five-year average for this time of year, compared with nearly 5% below that average about a month ago.

The data is surprising, seeing as the U.S. is in the middle of peak driving season and refineries are running full tilt.

One figure worth watching is U.S. crude-oil exports, which were cut by more than half to 1.3 million barrels a day last week compared with 2.7 million barrels a day the week before.  Any furtherance in this trend would mean U.S. producers are having a tougher time selling U.S. crude to global buyers such as China.

Finally, there are signs of surging production from Saudi Arabia and Russia.

But if you just look at this one week, you could draw the conclusion oil prices will not be an issue come the mid-term elections; at least not a negative for Republicans.  Oil finished at $68.68 today on WTI, down a fifth straight week.

--Most major automakers reported new-vehicle sales declines for July as passenger cars continued to slump and some consumers opted for lightly used vehicles.

But after July’s results, the full-year sales estimate is still for 17 million, which is very solid.

SUVs, crossovers and pickups continue to fare substantially better than passenger cars for the month.  Ford sales analysis says about half of the U.S. vehicles sold last month were SUVs, helped by low relative gasoline prices and the strong economy.

Two brands, Subaru and Volkswagen, historically known for small vehicles, reported large sales increases because of their new SUV models.

Ford said passenger-car models, which it is phasing out, plunged 27.7 percent in July, which contributed to an overall 3.1 percent sales decline for the month.  But sales of Ford trucks and vans rose 10.2 percent.  [General Motors no longer reports sales monthly.]

Fiat Chrysler bucked the industry’s sales decline with a 5.9 percent increase as the company’s Jeep SUV brand continued to soar.  And Subaru’s sales rose 6.7 percent.

But Toyota’s fell 6 percent, including an 18 percent drop in passenger cars.  Honda was down 8.2 percent; with the company’s stalwart Accord and Civic models plunging 19.3 and 28.3 percent, respectively.  Nissan’s sales slumped 15.2 percent.

--Tesla reported another huge loss for the second quarter, but the shares rebounded strongly, a whopping 16% (a classic ‘short squeeze’) as the electric carmaker burned through less cash than expected while claiming it was ramping up production of its “bet the company” sedan, the Model 3.

The $717.5 million loss was more than double the $336.4 million in the same quarter a year earlier, but Tesla reiterated its intentions to achieve profits in the third and fourth quarters and beyond.

In its quarterly letter to investors, the company said: “Going forward, we believe Tesla can achieve sustained quarterly profits, absent a severe force majeure or economic downturn, while continuing to grow at a rapid pace.”

So far this year the company has lost more than $1.5 billion, while its cash pile has fallen from $3.5 billion to $2.8 billion.

Tesla aims to produce 6,000 Model 3s a week by late this month, and then “increase production over the next few quarters beyond 6,000,” the letter said. “We aim to increase production to 10,000 Model 3s per week as fast as we can.”

The company produced 52,339 mostly Model 3s in the second quarter – with 12,600 of them needing to be delivered, where Tesla has issues of a different kind.

CEO Elon Musk, who apologized to analysts he had belittled on the last conference call, said Tesla doesn’t need to raise new debt or equity capital for the rest of the year.  Bloomberg reported Wednesday that Tesla is searching for a Chinese partner to help finance a planned $5 billion manufacturing complex in China; Tesla likely to borrow money from Chinese lenders.  Musk said China will play a large role in Tesla’s growth.

--Shares in Apple surged anew, surpassing the $1 trillion in market cap figure at $207 per share, becoming the first publicly traded American company to be worth that much, as the company shrugged off lower-than-expected iPhone sales Tuesday; investors focusing instead on the company’s sales projections for next quarter.

Congratulations!  In 1997, Apple was on the ropes, the Silicon Valley pioneer being decimated by Microsoft and its many partners in the personal-computer market.  Apple had just slashed its work force by a third, and as late co-founder Steve Jobs later said was 90 days from going broke.

That was then...this is now...

Apple projected it would take in $60 billion to $62 billion in Q3, exceeding forecasts, even as consumer interest in having the latest and greatest continues to wane.

The company, which derives 56% of its revenue from the iPhone, has had to deal with slowing sales growth for its biggest product.  [Samsung, see below, is facing the same issue.]

But Apple still sold 41.3 million iPhones, up less than 1% and shy of expectations for 41.8 million, though this accounted for $29.9 billion in revenue, of an overall record $53.2 billion, up a seventh straight quarter, 17 percent.  Apple reported profit of $11.5 billion, up from $8.7bn in the third quarter of 2017.

The company has focused more on services such as the App Store and its entertainment businesses as growth drivers, and in the last quarter, Apple’s services took in $9.5 billion, making it the second-largest business segment.  Apple’s Mac unit, which has been drawing complaints from consumers, reported a 5% drop in sales.

Apple is still expected to release three new models of the iPhone in the fall to diversify its offerings and convince those who did not upgrade to the iPhone 8 or the iPhone X that it’s time to buy a new one.

On the issue of trade tensions and China, CEO Tim Cook said, “We’re optimistic, as I’ve been the whole time, that this will get sorted out because there is an inescapable mutuality between the U.S. and China that sort of serves as a magnet to bring both countries together,” he said.  Apple depends on China for about one-fifth of sales, with the company basing future growth on continuing rapid expansion there.

But Apple has been facing increasing criticism from Chinese state-controlled media, which has turned up attacks on Apple over the past week. This has been my concern with the stock for years, and thus far I’ve been wrong.  I won’t be forever.

That said, Apple’s sales rose 19% to $9.55 billion, even as Huawei Technologies Co. of China* overtook Apple for the first time as the world’s second-largest smartphone maker, with 54 million devices shipped in the June quarter.

*The 54 million figure, up 41 percent year on year, is per a report from Canalys.  The company has a stated goal of shipping 200 million handsets in both domestic and global markets in 2018 after shipping 100 million as of July 18.

Huawei has been kicking butt with its fast-growing mid-tier segment Honor sub-brand, which is helping drive overseas growth.

Together, Huawei and Honor expanded their combined China market share to a record 27 percent in June, up from 21 percent a year ago.  Honor has a model, the Note 10, with a price tag starting at $410.

[The Democratic National Committee warned its candidates tonight not to use phones from Huawei or fellow Chinese telecom ZTE.  No one in their right mind in the U.S. should use product from these companies...period.  And never buy dog food made in China, sports fans...you’ll kill your pet!  Or farmed fish...but here you can’t trust the labels.]

--The aforementioned Samsung Electronics remains the largest smartphone vendor, shipping 73 million handset in the second quarter, but the South Korean company reported a big decline in mobile-phone profit on Tuesday.

Overall net income was $9.8 billion in Q2, but after a decade of growth, Samsung’s results were further evidence the global phone market is slowing as consumers wait for the next level of innovation such as bendable-screen phones and devices for fifth-generation wireless networks.  Samsung’s mobile unit reported a 22% drop in sales to $20.2 billion compared with the same time last year.

Samsung is looking for growth from its chip business; semiconductors being its strongest category in terms of sales trends.

--Google is developing a news-aggregation app for use in China that works like Beijing Bytedance’s popular Jinri Toutiao app, which uses artificial intelligence to tailor individualized feeds based on personal preference, according to various sources and the South China Morning Post.

The key is the app will meet the country’s censorship laws and is in addition to a mobile search app that was earlier reported; part of a plan by Google to re-enter the world’s biggest internet market in the near future.  But progress has stalled since trade tensions between the U.S. and China escalated this year.

Google’s plans to launch a version of its search engine in China of course means it will block some websites and search terms, this as China has stepped up scrutiny into U.S. tech firms such as Facebook, Apple and Qualcomm.  In Google’s case, search terms about human rights, democracy, religion and peaceful protests will be among the words blacklisted in the app.

Google had quit China’s search engine market in 2010, but it’s change of approach in dealing with China’s rigid censorship laws highlights the importance of the Chinese market as perceived by U.S. tech giants.  It’s also just wrong.

Editorial / Wall Street Journal

“Intent on abiding by its founding motto, ‘Don’t Be Evil,’ Google announced in June that it would not participate in a U.S. military program seeking to apply artificial intelligence to drone technology.  This week it has been reported that Google is attempting to reintroduce its flagship search engine into China, albeit with censoring and surveillance filters demanded by the Chinese government. This does not compute.

“Eight years ago, Google co-founder Sergey Brin pulled the company out of China, telling the Wall Street Journal that ‘in some aspects of their policy, particularly with respect to censorship, with respect to surveillance of dissidents, I see some earmarks of totalitarianism.’  That was true then and is more so now. China is famously using advanced technology to erect an Orwellian surveillance state.

“But like other companies, Google has concluded it cannot sacrifice access to China’s market, which is now dominated by the Chinese search-engine company Baidu. That means conforming itself to China’s rules on social control of the internet. Google hasn’t decided whether to proceed with this search-engine initiative, but clearly no license will be granted unless the company agrees to give Chinese censors access to the site’s vast internal information.

“That Google would seek re-entry to a country whose efforts at totalitarian control are increasing while the company ostentatiously separates itself from a U.S. defense program is more than a contradiction. It is naïve. What kind of world does Google think we live in?

“The June decision to withdraw from the Pentagon’s AI program was accompanied by an 8,000-word statement of Google’s ethical principles on the use of artificial intelligence.  Well, yes, the intersection between AI and human autonomy is complicated.

“But no one paying attention to China’s ambitions doubts that it is developing artificial intelligence for domestic political control and sophisticated military applications.  Its Communist Party leaders are doing so to gain a decisive advantage over China’s military competitors, primarily the United States and its citizens.

“A recent Journal article detailing China’s high-tech military programs quoted former People’s Liberation Army Maj. Gen. Xu Guangyu: ‘China will not ignore or let slip by any dual-use technology, or any technology at all, that might improve the ability of our military to fight, our awareness, or our ability to attack.’  In other words, the U.S. finds itself in an intense military competition with China. If American tech companies deny their own country access to advanced knowledge, the U.S. will fall behind.

“The good news is that most U.S. technology companies, including in Silicon Valley, understand these realities and are contributing to the U.S. effort to defend itself. Google and its hyper-political employees stand out for seeming to spend a remarkable amount of time navel-gazing and composing codes of conduct.

“Sergey Brin had it right in 2010: China’s success at lifting its people out of poverty is remarkable.  Its determination to deploy American knowledge to control the Chinese people remains abhorrent.”

--The CBS Board of Directors announced Wednesday it selected two law firms to conduct an independent investigation of CEO Leslie Moonves, following a New Yorker report that has six women accusing Moonves of sexual harassment.  One of the women leading the probe will be Mary Jo White, former head of the SEC. The board took no further action at the meeting, postponing CBS’ annual meeting of shareholders scheduled for Aug. 10.

The board did not suspend Moonves pending the investigation, but then Thursday the Los Angeles Times reported the board knew of an LAPD investigation six months ago into an alleged sexual assault by Moonves (from the 1980s), which is even more notable because CBS on Monday said there have been no reports of sexual harassment during Moonves’ tenure.

Should CBS eventually terminate Moonves “for cause,” Bloomberg estimates he could lose as much as $300 million in forfeited wages, bonuses and other awards, though it is unclear whether the allegations rise to the level of “cause” for termination.  If so, CBS would owe him much less in severance.  Or the board could hammer out a separate settlement.

But Thursday, after the market closed, CBS delivered better than forecast financial results for the second quarter, and then on the conference call with analysts afterwards, Les Moonves wasn’t grilled about the investigation, a company official saying it was off limits, with some analysts actually praising his performance. For his part, Moonves didn’t say anything on the probe (that part you’d expect), but to totally give him a pass was beyond bogus.  As in, how can Moonves remain in his position pending the investigation?  And when did the board first become aware of allegations against him?

For Q2, the company slightly beat expectations on both revenue and earnings.  CBS said it expects its streaming services to draw 8 million subscribers by next year, and 16m by 2020.

--Procter & Gamble Co. said it was raising prices on some of its big brands, after the consumer-products giant reported another quarter of tepid revenue growth.

P&G had been trying to combat weak demand with lower prices on staples like Tide and Gillette razors, but now it is changing course, saying it would increase prices on Pampers, 4% on average, and by 5% on brands such as Bounty and Charmin.

P&G didn’t highlight tariffs or trade disruptions for the shift, instead citing market dynamics. Executives now seem optimistic that stronger demand, coupled with improved products and savvier marketing, would result in shoppers willing to pay higher prices.

The above-noted strong consumer spending figures, let alone the overall strength in the economy are giving P&G and its ilk the opportunity to try a different strategy.

P&G said it expects organic sales (ex- from acquisitions, divestitures and currency fluctuations) to rise between 2% and 3% for the year, compared with 1% in the year just ended.  Profit in the fiscal fourth quarter, ending June 30, fell 15% to $1.89 billion, below expectations.

Last week, Colgate-Palmolive Co. also talked of higher prices in the second half of the year.

According to data provided by Wells Fargo, pricing for the top 50 U.S. household and personal-care products rose 2.2% in the four-week period ending July 14. 

--Caterpillar, the world’s largest maker of heavy equipment for mining, construction and energy companies, reported earnings that beat analysts’ expectations, a second-quarter profit that more than doubled from a year earlier.  Strong demand from oil, natural-gas and mining customers, as well as construction companies in China, helped push the company’s equipment sales up 25%.

But after blowing away Street forecasts, the shares fell after the company said it expects to pay more for materials as a result of tariffs this year. CAT also flagged supply-chain concerns.

The company said tariffs imposed by the Trump administration on some metal and component imports would increase its material costs by $100 million to $200 million over the rest of 2018.  But Caterpillar said price increases that recently went into effect would help offset the higher costs.

CAT also added 6,800 full-time workers in the second quarter compared with a year earlier, reaching a total of 101,600 employees at the end of June.

Total second-quarter sales rose to $14.01 billion, with a profit of $1.71 billion.

--Tyson Foods, the biggest meat producer by sales in the U.S., blamed the fallout from the tariffs and a glut of beef and pork in the domestic market for its decision to downgrade its earnings outlook.

Tyson had already been facing rising commodity and shipping costs, but has come under additional pressure from China and Mexico, which retaliated against Trump’s decision to impose tariffs on steel and aluminum products from such countries by imposing their own levies on U.S. exports such as soybeans, motorcycles and pork.

U.S. pork producers now face tariffs of 62 percent for exports to China and 20 percent for exports to Mexico – the U.S.’s top customer by volume.

Chicken sales volumes and pricing have now become sluggish owing to an abundance of relatively low-priced beef and pork.

--Almonds are yet another product getting hit by tariffs. China added a 50% tax, and it has closed a trading loophole that for years allowed large volumes of American almonds to be transported into the country via Vietnam without incurring import taxes.

The U.S. is the world’s largest producer and exporter of almonds, with 80% of the global supply coming from California.

U.S. almond exports to China in June were about half of what they were in the same month a year ago, and inventories are now rising...prices falling.

--Canada’s manufacturing PMI for July was a strong 56.9, down from a record high of 57.1 the prior month.

--Shares of U.S. casino operators fell hard on Wednesday after a report that gaming revenues in Macau rose less than expected, while Caesars Entertainment cautioned of room-rate pressures in Las Vegas, the other global gambling hub.

Gaming revenues in Macau climbed 10.3 percent from a year ago in July, missing analyst expectations for growth of 11.5 percent.  July thus marked the third month in a row growth (following a two-year slump associated with a Chinese anti-graft campaign) grew at a slower pace than analysts forecast.

--Ryanair, Europe’s largest airline by passenger numbers, is facing escalating strikes across the continent as it struggles in negotiations with trade unions.  Ryanair operates from 86 bases in 37 countries and carried 130 million passengers last year.  Strikes have been called in Sweden, Belgium, Ireland and the Netherlands, while Germany is giving the airline until August 6 to make a better offer after talks on a collective labor agreement fell apart.

Cabin crew in Italy, Spain, Portugal and Belgium staged a two-day strike July 25/26 that forced Ryanair to cancel the flights of more than 50,000 passengers...and on and on...

Yet Ryanair also saw traffic grow 4 percent year-on-year to 13.1 million customers.

--Shares in Chipotle fell hard after it shut down a restaurant following complaints that customers (140 of them) were falling sick at a unit in Powell, Ohio.

--Shares in Heineken fell on disappointing earnings and revenue for the first six months of 2018, as revenue rose 4 percent, but operating profit fell by 3 percent and profit margins were squeezed.

Heineken’s acquisition of Brazil Kirin for $700m in 2017 hasn’t gone well.  It was an attempt to challenge Anheuser-Busch InBev in its biggest market, but the plan to turn the business around there is weighing on profits.

Thursday, Heineken then announced it was selling its China operations and in turn taking a 40 percent stake in a firm controlling the country’s biggest beer maker China Resources Beer Co. Ltd.  Heineken entered China in 1983 but has struggled to set up a strong distribution network and to make a mark with its flagship Heineken lager, which lags far behind AB InBev’s Budweiser in the premium market.  China is the world’s biggest beer market by volume.

--Shake Shack shares were crushed Thursday after the burger chain’s same-store sales growth was just 1.1 percent in the three months to June 27.  For the full year the company expects same-store growth to be flat or up 1 percent.

--I need to get to McDonald’s to celebrate the 1968 national launch of the Big Mac.  It was in 1967 that Michael James “Jim” Delligatti lobbied the company to let him test his burger idea at his Pittsburgh area restaurants, McDonald’s adopting it nationwide a year later.  Delligati later acknowledged the Big Mac’s similarity to a popular sandwich sold by the Big Boy chain.  Other ideas from franchisees that hit the big time include Filet-O-Fish and the Egg McMuffin.

But the Big Mac is increasingly irrelevant.  There was a study in 2016 that showed only one out of five millennials had tried one.

Well gosh darnit, it’s still the best single sandwich in the history of our country.  [That’s ‘national sandwich.’  Locally, a New Jersey pork roll and egg sandwich is still tops, especially after a night of quaffing beers at the shore, but I digress....]

Foreign Affairs

North Korea: From the Wall Street Journal:

“A new letter to President Trump from North Korea’s Kim Jong Un has reinforced the cordial relationship between the two leaders and kept the door open for another summit meeting, which Mr. Trump suggested might happen soon.

“ ‘Thank you to Chairman Kim Jong Un for keeping your word & starting the process of sending home the remains of our great and beloved missing fallen!’ Mr. Trump wrote on Twitter, referring to what are believed to be the remains of U.S. soldiers killed in the Korean War.  ‘Also, thank you for your nice letter – I look forward to seeing you soon!’

“But the warm feelings at the highest level of government haven’t led to major progress in working-level diplomacy over eliminating North Korea’s nuclear and missile programs, according to accounts by the two sides.

“And while Mr. Kim has been effusive in praising Mr. Trump, the North Korean leader spent his time visiting a potato farm instead of meeting with Secretary of State Mike Pompeo during his July visit to Pyongyang.  The North Korean Foreign Ministry dismissed those talks as ‘regretful.’

“At the heart of the problem, some former officials believe, is the possibility the two sides came away from the June 12 Singapore summit between Messrs. Trump and Kim with fundamentally different expectations about the sequence of diplomatic moves to unwind more than 60 years of hostility.

“ ‘There remains a fundamental divide,’ said Robert Einhorn, a former U.S. negotiator with Pyongyang on its missile programs who is now at the Brookings Institution.”

David Ignatius / Washington Post

“Koreans have a saying that helps explain the recent upbeat exchanges among Washington, Seoul and Pyongyang: ‘Say pretty things to hear pretty things.’

“Beyond the Trump White House, there remains much skepticism that North Korea will ever give up its nuclear weapons. Recent leaks about North Korea’s continuing efforts to build its nuclear and missile arsenal underline the concern that President Trump gave up more than he got in Singapore. But the public rhetoric from Washington and Pyongyang is warming, after a chill, and it’s backed by some real moves to ease tensions.

“The latest sweet talk was Trump’s tweet Wednesday effusively thanking North Korean leader Kim Jong Un ‘for keeping your word’ and returning remains of U.S. soldiers who died in the Korean War. Trump called it a ‘kind action’ and enthused: ‘I look forward to seeing you soon!’

“This week’s most important conversation on Korea may have been the meeting between a North Korean and a South Korean general at the border village of Panmunjom.  This was the latest installment in a slow, steady process of engagement between the Koreas that pre-dates the Trump-Kim summit.

“The two generals discussed reducing weapons in the demilitarized zone (DMZ) and halting firing exercises and withdrawing artillery along the West Sea coast, according to South Korean reports. South Korean officials would like to turn the heavily mined DMZ into a weapons-free nature preserve as a symbol of progress.

“Trump gets the headlines when it comes to North Korea. But the real driver may be inter-Korean contacts. Kim signaled in a speech Jan. 1 that he wanted to leverage his nuclear-weapons capability for economic development, and South Korean President Moon Jae-in responded boldly with his Olympic diplomacy.  Trump embraced this opening, but he didn’t create it.

“The Washington diplomatic mood has been spiking like a fever chart in the nearly two months since the June 12 Singapore summit. American over-optimism about quick denuclearization (fueled by Trump) created frustration and disappointment when the North Koreans dragged their feet.  U.S. pressure for faster progress brought North Korean protests at supposed ‘gangster-like tactics.’

“The Korean fog has cleared, at least momentarily, because of a series of confidence-building measures by Kim that, although they didn’t move towards denuclearization, at least suggested good faith. The North Koreans last month dismantled rocket-testing and satellite-launch facilities, and then delivered the promised servicemen’s remains.*

 “Washington wants to begin the denuclearization process with a detailed inventory of North Korean materials and sites. Pyongyang has delayed, at least publicly, seeking more American goodwill gestures. A key issue ahead for the United States and the two Koreas is a proposed  joint declaration of the formal end of the Korean War. At their Panmunjom summit on April 27, Moon and Kim pledged that this declaration would be issued before the year’s end. The United States has resisted, wanting North Korea to deliver more on denuclearization....

“South Korean Ambassador to the United States Cho Yoon-je explained the importance of the end-of-war declaration and other confidence-building measures as a bridge to denuclearization in an interview last week.  ‘It is our firm belief that the enhanced exchange and communications between the two Koreas will help facilitate the denuclearization dialogue,’ he said. In other words, the path from Pyongyang to Washington may lead through Seoul.”

*Mr. Ignatius alludes to but doesn’t spell out that while Pyongyang was seemingly taking the above positive steps, it was constructing two new buildings at a missile facility and appears to be actively continuing production there, according to satellite imagery.

In Congressional testimony a week ago, Secretary of State Pompeo said North Korea was continuing to produce fuel for nuclear bombs.

Today, speaking from Singapore, Pompeo said the U.S. has “a ways to go” to achieve the goal of a nuclear-free North Korea and the country is still violating United Nations Security Council resolutions connected to the issue.

Pompeo told reporters: “Chairman Kim made a commitment to denuclearize – the world demanded that they do so. To the extent they are behaving in a manner inconsistent with that, they are a, in violation of one or both of the security council resolutions and b, we can see we have still a ways to go to achieve the ultimate outcome.”

As I go to post, it’s not known if Pompeo will meet with North Korean Foreign Minister Ri Yong Ho, who is also attending the ASEAN summit.

China: Philip Stephens / Financial Times

“Donald Trump, we know, has forged a special bond with North Korea’s Kim Jong Un. We should forget Russia’s effort to subvert American democracy – Vladimir Putin is fine, just fine. Even European Commission president Jean-Claude Juncker turns out to be a good guy when it comes to talking trade. Now the U.S. president says he is happy to meet his Iranian counterpart Hassan Rouhani. Last week he was threatening Tehran with all manner of fire and fury. Given the great deal Mr. Kim got in Singapore, Mr. Rouhani might do well to grab the offer.

“You can see why all this might leave Beijing feeling edgy.  Chinese President Xi Jinping was also once a recipient of the Trumpian best-of-friends treatment. But, as the crazy kaleidoscope that is U.S. foreign policy keeps spinning, the White House war on Beijing’s trade policies is establishing itself as something of a constant. The president’s revised view of Mr. Xi is that ‘he’s for them and I’m for us.’

“Mr. Trump has a point.  Most of his generalized rage about trade is a measure of ignorance about globalization and supply chains. He lives in the 1950s. In those days, things were made in one country – usually America – and then sold in another – preferably just about everywhere else. The modern world of bits and pieces, with components and semi-finished products moving to and fro across borders, does not fit the president’s template.

“China is different. When Mr. Trump accuses it of stealing intellectual property, shutting out imports and manipulating the Renminbi, he strikes a chord elsewhere. It is no coincidence that European governments – most recently Britain – are toughening controls to stop Chinese investment becoming a route to involuntary technology transfer. European businesses complain as bitterly as U.S. ones about Chinese ownership rules. Charges of dumping are frequent. China fully exploits the rules of the World Trade Organization – and then ignores them when it suits.

“So the prospect of a protracted trade conflict probably presents Chinese leaders with real cause for concern – the more so since the economy is slowing and there are visible cracks in the financial system.  Even the most authoritarian regimes fret about their grip on power.  Communist Party rule has by and large won acceptance because of accompanying rises in living standards.  Mr. Xi does not want to test the proposition that his writ would still run unchallenged during an economic slump....

“And yet. Tempting though it is to say that China is fast emerging as the big loser from Mr. Trump’s foreign policy, the reality is more likely to be the opposite. For all that the U.S. president has discomfited Mr. Xi, the noise obscures the longer-term impact of American policy. Any short term pain should be set against the immense strategic gain for China flowing from Mr. Trump’s worldview.  In the inevitable global contest between these two great powers, the U.S. is already surrendering advantage to its rival. Chinese policymakers have long had a plan for global primacy. You could be forgiven for thinking that the White House has decided to lend them a hand.

“The U.S. starts out with the huge advantage not just of its military and technological superiority but an unparalleled international alliance system. Economic, defense and security agreements with allies across Asia and the Middle East and military bases in dozens of nations have become part of the architecture of American power.  Beijing has only a handful of willing accomplices – think, say, Cambodia – alongside the deference it can buy with foreign investment. You do not find other nations saying they want to copy China.

“So how is the U.S. playing this advantage? For all the present let’s-be-nice mood in the White House, Mr. Trump is progressively dismantling the pillars of the U.S.-led international order.  One way or another the president has undermined the U.S. commitments to climate change, nuclear non-proliferation, NATO, the EU and longstanding treaty relationships with Japan and South Korea. No one can be sure that tomorrow he will not tear up the North American Free Trade Agreement or pull U.S. troops out of the Middle East. The credibility and trust on which U.S. power was built is draining away. If the U.S. does not respect an American-designed order why should anyone else?

“China’s long-term strategic goals are clear enough. It wants to restore its control over its own neighborhood – hence all those new military outposts in the South China Sea, and it wants to collapse the distance between Asia and Europe with its Belt and Road Initiative....China wants to be the leading Eurasian power. In any event, its ambitions have always rested on the assumption that it would need to roll back U.S. influence over time. Mr. Trump has set about this task with gusto. That, surely, is worth some short-term pain.”

Iran: Officials in Tehran said there would be no direct talks with President Trump unless he rejoins the 2015 nuclear agreement.  A day after Trump said he would meet Iranian President Hassan Rouhani without preconditions, an advisor to Rouhani indicated that the Islamic Republic could not trust an administration that unilaterally withdrew from the landmark nuclear pact.

Rhetorical hostilities escalated a week ago when Rouhani was quoted as saying, “America should know that peace with Iran is the mother of all peace, and war with Iran is the mother of all wars,” Trump fired back in all capital letters on Twitter, warning Rouhani to “never, ever threaten the United States again,” and that doing so would bring “consequences the likes of which few throughout history have ever suffered before.”

But in a news conference Monday, Trump said he would meet with Iranian leaders “any time.”

The first U.S. financial sanctions against Iran, a result of pulling out of the nuclear accord in May, are to go into place this coming Monday, targeting the automobile industry, the trade in gold and precious metals and other areas of the economy.

Fear of the renewed sanctions has thrown the Iranian economy into turmoil, with the rial falling to all-time lows against the dollar as ordinary citizens stockpile cash.

Another round of U.S. economic sanctions, covering other types of commerce, including oil purchases, goes into effect Nov. 4. Those are the biggies.

Syria / Israel: Thursday, Israel said it saw potentially stabilizing benefits to President Bashar Assad’s winning the Syrian civil war, after the Israeli military said it had killed seven Islamist insurgents in a strike across the countries’ frontier.  As in there seems to be an emerging accommodation with Assad, who as an old enemy never sought direct confrontation with Israel, especially now as he regains control of the country from rebels, including some Islamist groups.

But just a week ago, Israel was warning Assad against advances in the southwest, where he has been waging war against one of the final rebel strongholds, and it shot down a Syrian warplane it said had strayed into the Israeli-occupied Golan Heights, while also warning Iranian and Hezbollah forces against trying to deploy on the Syrian-held side.

Yet now Israeli Defense Minister Avigdor Lieberman is describing an Assad win as a given.

“From our perspective, the situation is returning to how it was before the civil war, meaning there is a real address, someone responsible and central rule,” Lieberman told reporters.

Meanwhile, Russian military police began deploying on the Syrian-held Golan and planned to set up observation posts in the area, what Moscow says is in support of a decades-old United Nations peacekeeper presence.  The Russian posts would be handed over to the Syrian government once the situation stabilized, Russia’s defense ministry said.

Lieberman said that for there to be long-term quiet between Israel and Syria, Assad must abide by a 1974 UN-monitored armistice that set up demilitarized zones on the Golan.  Additionally, Israel continues to demand that Iran not set up military bases against it in Syria.

So UN peacekeepers did return on Thursday to patrol the frontier for the first time in years, as their mission was halted back in 2014 amid the violence of the Syrian civil war.  It was the first time Russian forces were involved in the patrols.

Russia and Israel apparently reached an agreement on the removal of Iranian forces at least 85 kilometers (52 miles) from the Golan Heights, which would decrease Israel’s concerns. This has been a single focus of Prime Minister Benjamin Netanyahu in his discussions with Vladimir Putin.  Israel wants Iran to fully withdraw from Syria, but Russia has warned that is not realistic.

For his part, Assad told his troops Wednesday they were close to winning the seven-year civil war after inflicting a succession of defeats on rebels.  Early last year, government forces held just 17 percent of national territory until a series of offensives forced the rebels out of their strongholds. Today, Assad’s forces control at least two-thirds of the country.

Assad has promised a final offensive against the rebels’ sole remaining major stronghold – Idlib province in the northwest, though Moscow, in support of Assad, has ruled out any large-scale assault, the population in the region having grown to around 2.5 million as rebels and civilians bussed out of the other zones that have fallen to the government were taken to Idlib.

Finally, the Syrian government has begun updating the records of tens of thousands of activists who disappeared during the early stages of the civil-war in the first tacit admission that many of them died while held by the regime.  Amnesty International, in a report last year, said at least 13,000 people had been executed in secret.  Think about that.

Amnesty claimed that the Sednaya prison outside Damascus was a “human slaughterhouse,” where detainees were killed on an industrial scale. There was a crematorium on site, used to “manage” the sheer numbers of bodies.

Turkey: Secretary of State Pompeo met with his Turkish counterpart, Foreign Minister Mevlut Cavusoglu on the sidelines of an Asean summit in Singapore on Friday, to discuss the escalating dispute over a detained U.S. pastor.

Earlier this week, the U.S. imposed sanctions on two Turkish officials after the government refused to release Andrew Brunson, a pastor from Black Mountain, N.C., who was arrested in Turkey almost two years ago.  Turkey claims Brunson aided a failed military coup in Turkey in the summer of 2016.  The U.S. says the case is politically motivated.  A Turkish court rejected an appeal for Brunson to be released from house arrest during his trial on terrorism charges.

Pompeo told reporters after, “The Turks were well on notice that the clock had run and that it was time for Pastor Brunson to be returned, and I hope they’ll see this for what it is, a demonstration that we’re very serious,” he said.

Turkey has threatened to retaliate in kind with sanctions unless the U.S. reverses its action.

The government of President Recep Tayyip Erdogan continues to want the U.S. to deport Fethullah Gulen, a Turkish cleric living in Pennsylvania who is accused by Ankara of plotting the unsuccessful overthrow of the regime. Gulen has denied the allegations.

The diplomatic effort is also complicated by Syria, where Turkey is relying on the U.S. to take on ISIS, but it’s critical of U.S. support for Kurdish fighters in Syria that Turkey views as terrorists.

Tajikistan: ISIS claimed responsibility for an attack here last weekend in which four foreign tourists were killed, including two Americans, when a car hit them as they were trekking by bicycle. Three other tourists were also injured.  It is the first time Islamic State has claimed an attack in the country.

Two people suspected of involvement were later killed by authorities.  There was a video from a dash cam and it’s horrifying watching the bicyclists being targeted.

Russia: Michael B. Mukasey / Wall Street Journal

“Two weeks have passed since the meeting between Donald Trump and Vladimir Putin, but there is still no public account of what the two leaders said – other than their own self-congratulatory remarks. But the recent actions of the U.S. and Russian presidents suggest they may have discussed the role and ambitions of the North Atlantic Treaty Organization, taking steps toward a rebalancing of power that should worry Europeans and Americans alike.

“President Trump provided one clue in his statements about Montenegro, a tiny Eastern European country and the newest NATO member. During a July 18 conversation with Fox News’ Tucker Carlson, he suggested that ‘aggressive’ Montenegrins might start a global conflict. To be fair, Mr. Trump didn’t raise the subject; it was Mr. Carlson who suggested that honoring NATO’s mutual-defense obligation might entangle the U.S. in a fight Americans would rather sit out. But once the subject was raised, Mr. Trump pounced – conjuring the specter of Montenegro dragging the U.S. into World War III.

“Where did that come from? There’s no evidence that Mr. Trump had any earlier concern about Montenegro, or even that he knew where it was. Though Montenegro joined NATO shortly after he took office, Mr. Trump’s only direct interaction with the country on record came during a photo session at least year’s NATO summit, when he shoved aside Montenegrin President Dusko Markovic to get a spot in the front row.

“There is plenty of evidence, however, that Russia is worried about Montenegro’s accession to NATO. The Kremlin promised unspecified retaliation against NATO in 2015 when the alliance first formally offered membership to Montenegro.  Senior Russian officials claim that, in adding the Balkan country to the alliance, NATO members violated their promise not to expand the alliance eastward – an assurance they had given Russia during the presidency of George H.W. Bush.

“NATO’s commitment to nonexpansion was never binding; it was meant to apply to East Germany and became moot in 1990 when Germany reunified. But that hasn’t stopped Russian intelligence officers from theorizing – perhaps after a vodka or two – that Montenegro could be the flashpoint for World War III, as its neighbor Serbia was for World War I. That worry may not have been familiar to Mr. Trump, but it certainly was to Mr. Putin, a career intelligence officer.  In Helsinki, the Russian president had a motive and an opportunity to raise the Montenegro issue.

“Mr. Putin’s actions since the summit also have evinced his renewed aggression toward trans-Atlantic solidarity – on a different front.  The day after he met Mr. Trump, Mr. Putin remained in Helsinki to meet one-on-one with the president of Finland, a country long torn between the influence of Russia and Western Europe.

“The conflict dates to World War II, when Stalin tried to station Red Army garrisons inside Finland as he had done in the Baltic states of Latvia, Estonia and Lithuania. The Finns were forced to yield but tried to get even by allowing German troops free passage through their territory after Hitler invaded Russia in June 1941.  When the war ended, the Finns had to give up some territory and be so cautious not to offend their powerful neighbors that their country’s name has become synonymous with submissive neutrality, as in ‘Finlandization.’

“This might seem like ancient history, but the loss of influence over Finland still matters to the Russians – and particularly to Mr. Putin, who regards the collapse of the Soviet Union as a tragedy. And though Finland has declined to join NATO, it nonetheless is increasingly cooperating with the West on defense, having committed in May to a new strategic partnership with the U.S. and Sweden.

“In light of this, it is likely that Mr. Putin used his extended stay in Helsinki to persuade the Finns that Mr. Trump had indicated to him an unwillingness to contest Russia’s ambitions in Europe. It wouldn’t have been a tough case to make: Why would a U.S. president so diffident about protecting his own country’s sovereignty as to laugh off election-related Russian hacking be likely to act boldly in protecting Finland’s sovereignty?

“Yes, this is speculation.  It is possible that the two-hour meeting between Messrs. Trump and Putin was innocuous, that the conversation revolved around golf and grandchildren, and that what looked like abject exculpation of the Russians really was simply a lingual slip on the way to a forceful accusation against the Russians. But Americans must at least take seriously the possibility that Mr. Trump diminished the U.S. commitment to European defense.”

Separately, three Russian journalists were killed in the Central African Republic by unidentified assailants who ambushed their vehicle.

The journalists were shooting a documentary film about the Russia-linked Wagner private military contractor, Interfax reported.  The Kremlin no doubt played a role in this. 

The Wagner Group is a mercenary army backed by a Russian oligarch. It was responsible for an attack on the U.S. army in Syria this past Feb. 7. The U.S. then obliterated the group, killing at least 100 in a counterattack.

The oligarch, Yevgeniy Prigozhin, was indicted by special counsel Robert Mueller for an alleged role in “information warfare” during the 2016 presidential election.

Wagner first gained attention for its role in the invasion of eastern Ukraine by Russia.

This would be a perfect story for “60 Minutes.”

Zimbabwe: President Emmerson Mnangagwa won Zimbabwe’s presidential election, according to the country’s electoral commission, with 50.8% of the vote to 44.3% for opposition leader Nelson Chamisa.  Opposition officials on the commission rejected the results, with the chairman of Chamisa’s MDC Alliance saying the vote could not be verified.

By narrowly winning more than 50%, Mnangagwa avoids a second run-off election against Chamisa.

Mnangagwa said he was “humbled” and called the result “a new beginning.”

But Chamisa insists he won, while the Electoral Commission says there was “absolutely no skullduggery.”

Six opposition supporters were killed in protests in Harare on Wednesday.  Thursday, it was reported that Harare was a ghost town, troops patrolling the streets.

The elections were the first since long-time ruler Robert Mugabe, 94, was ousted in November.

Mexico: The number of homicides in Mexico last year was higher than originally thought, with national statistics institute INEGI reporting Monday that there were 31,174 slayings in 2017; the most since comparable records began being kept in 1997, including the peak year of Mexico’s drug war in 2011.

INEGI said the homicide rate last year broke down to 25 per 100,000 inhabitants – near the levels of Brazil and Colombia at 27 per 100,000.

Honduras and El Salvador – among the deadliest countries in the world – have homicide rates of around 60 per 100,000.

Some U.S. cities like Chicago, Detroit and New Orleans have higher rates than Mexico.  [USA TODAY]

But amidst the talk of death, we had the miracle ending to the crash of Aeromexico Flight 2431, an Embraer ERJ-190 AR jet that took off from Durango, Mexico, in horrible weather and immediately after it began to ascend, it went down, nose first.  All 103 passengers and crew somehow survived.

Random Musings

--Presidential tracking polls....

Gallup: 40% approval for President Trump, 55% disapproval (July 29)
Rasmussen: 48% approval, 50% disapproval (Aug. 3)

--Editorial / Wall Street Journal

“Does President Trump care if Republicans lose the House of Representatives this November? If that seems like an odd question, consider that Mr. Trump is running a campaign strategy that puts the House at maximum risk while focusing on the Senate. The latest evidence is Mr. Trump’s threat to shut down the government in September if he doesn’t get money for his border wall.

“It’s always risky to use the word ‘strategy’ about Mr. Trump because he’s so impulsive and capricious.  Only last week GOP leaders thought they had his agreement to delay a wall-funding brawl until after the election. Then on Sunday Mr. Trump tweeted that ‘I would be willing to ‘shut down’ government if the Democrats do not give us the votes for Border Security, which includes the Wall!’

“Did Mr. Trump pop off on a whim, or did he consult Stephen Bannon, his former White House aide and strategist from 2016? The shutdown threat fits Mr. Bannon’s midterm election strategy, which is to stress issues that polarize the electorate to drive voter turnout among the Trump base.  This means muting talk of tax cuts and the economy and talking up immigration and trade policies that bash foreigners.

“ ‘Trump’s second presidential race will be on November 6 of this year. He’s on the ballot, and we’re going to have an up or down vote. Do you back Trump’s program, OK, with all that’s good and all that’s bad? Do you back Trump’s program, or do you back removing him?’ Mr. Bannon said recently, though Mr. Trump’s name won’t be on any ballot.

“A shutdown brawl fits this polarize-and-hope-to-conquer strategy.  Mr. Trump may figure that shutdown pressure would force Senate incumbents running for re-election in Trump-leaning states into a corner on voting for the wall.  One problem with this strategy is that Senate Democrats have enough votes to block wall funding even if they give eight of their incumbents a pass to vote for it.

“The bigger problem is that what works in Senate races in Trump states might boomerang in House districts where the majority will be won or lost.  There are swing districts where moderate Republicans and independents determine who wins. Think Miami-Dade, northern Virginia, the Denver and Philadelphia suburbs.  Hillary Clinton carried 23 of those seats in 2016, and Democrats need to gain only 23 seats to take the House.

“Hostility to immigration and trade aren’t popular in those districts by and large, and a shutdown wouldn’t be either. Voters know Republicans control the Congress.  While the pols typically show that voters blame both sides in a shutdown, the GOP risk is that they’d hold the party in power more responsible. This is all the more likely if President Trump is inviting a shutdown on Twitter.

“The Bannon belief is that this ‘base election’ may work in Senate races in North Dakota or Missouri, where Republicans have a party advantage. But the opposite is probably true in swing House seats. A constant focus on immigration and making this a referendum on Donald J. Trump will drive up Democratic turnout....

“A Democratic House would mean the end of most of Mr. Trump’s agenda of the last two years. But Mr. Trump’s policy alliance with House Republicans has been in part one of convenience.  Mr. Trump could cut deals with Democrats on paid family leave, public-works spending and trade protectionism.

“House Democrats would start up the impeachment machinery, and once underway the momentum would be hard to stop. But as long as he’s safe from conviction by the Senate, Mr. Trump might figure he could benefit from a backlash against impeachment the way Bill Clinton did. The President and Mr. Bannon also might think a Democratic House improves Mr. Trump’s chances for re-election as Republicans and independents conclude he’s the only barrier to a left-wing government led by a President Elizabeth Warren.

“The biggest loser in all this would be a genuine conservative agenda.  Judges aside, the House has been essential to Mr. Trump’s main achievements that have lifted the economy – corporate tax reform, deregulation – and whatever government-reform victories they’ve had. If they lose the House this year, Republicans aren’t likely to get it back until the end of the Trump Presidency.

“The Bannon strategy is an incitement to Democrats to vote in precisely the places where House Republicans are most vulnerable. The more the election is a referendum on Donald Trump and his polarizing political style, rather than on a reform agenda for the next Congress, the better for Democrats.”

--Six weeks ahead of New York’s Democratic primaries, Gov. Andrew Cuomo maintains a large lead over rival Cynthia Nixon, according to a new Siena College Research Institute poll.

Cuomo holds a 31-point lead among registered Democrats, which is down from 47 poinnts in March.  The governor leads by 56 points among black voters.  60% of Nixon voters say they would be voting more against Cuomo than for her.

Editorial / New York Post

“Fresh evidence keeps rolling in that Gov. Andrew Cuomo’s ‘economic development’ programs amount to one vast pay-to-play scheme.  The latest: an Albany Times-Union expose on the exceptional state aid for Crystal Run, an upstate health care company.

“The T-U obtained emails and records showing how the firm got loads of special help from Team Cuomo to expand the business...after company officials started kicking in big time to the governor.

“Because Crystal Run’s $400,000 in donations to Cuomo may have involved the use of illegal straw donors, it’s now under criminal investigation by a federal grand jury.

“According to the T-U, help from the gov’s office began flowing shortly after Crystal Run’s CEO made his first $25,000 donation to Cuomo.  And the point man working to grease the skids of state bureaucracy was none other than Joe Percoco, then Cuomo’s deputy secretary and a guy the governor long called a ‘brother.’

“The same Joe Percoco who just recently was convicted of pocketing more than $300,000 in bribes in the Buffalo Billion bid-rigging scandal benefiting two development firms – also both hefty Cuomo donors.

“With Percoco’s help, Crystal Run was constantly on the receiving end of state help and financing – even for projects that had long ago broken ground without any state money.

“In fact, the T-U reports, Cuomo’s Health Department awarded $547 million worth of financing to 63 projects through its Capital Restructuring and Financing Program. All recipients were nonprofits – except Crystal Run.

“All this, even as The Post has shown how the $10 billion-plus spent on ‘Andy Land’ economic development has failed to deliver anything like the jobs the gov promised.

“Back in February, we suggested that the only thing on which Cuomo and Mayor Bill de Blasio appear to see eye-to-eye is rewarding their donors. Also like de Blasio, who escaped criminal charges, Cuomo has not been accused of any wrongdoing.

“But when multiple major Cuomo officials and donors are headed to prison for corruption, the governor is anything but an innocent bystander.”

--Malaysia Airlines Flight 370 went down on March 8, 2014, and over four years later, the official government inquiry released a 495-page report that gave no definitive answers as to the fate of the airliner...and that is likely to be the final word.

The plane was heading from Kuala Lumpur, Malaysia, to Beijing, when it deviated from its scheduled path, turning west across the Malay Peninsula.  After radar contact was lost, it is believed the plane turned to the south and crashed somewhere in the southern Indian Ocean after running out of fuel.  Tests showed the change in direction was done manually rather than by autopilot, and the switching off of a transponder – “irresistibly point” to “unlawful interference,” which could mean that the plane was hijacked.

But the panel found no indication of who might have interfered or why.  The head of the investigation said as to the theory of pilot suicide, investigators were “not of the opinion that it could have been an event committed by the pilot.”

The report detailed an extensive examination of the pilot and the first officer and investigators “could not detect any abnormality.”

Investigators considered data saved on a flight simulator at the pilot’s home and said it was impossible to draw any conclusions.

No significant pieces of the wreckage of the jetliner have ever been found, nor any remains of the 239 people on board.

Families of the victims were devastated by the lack of answers in the report, but as a casual observer of the whole process all these years, sometimes there aren’t answers. 

The panel disbanded, but declined to call the report final.

The lead on the investigation, Mr. Kok, said, “It is too presumptuous of us to say this is the final report. No wreckage has been found.  The victims have not been found. How could this be final?”

--Your heart goes out to those losing their homes (and lives) in the latest wave of wildfires in California, but the commercial impact has been huge in the Yosemite Valley, where the national park has been off limits, the first time a fire has shut down the area since 1990, which is doing a number on the region’s economy during peak season.

Last year, millions of park visitors spent around $452 million in the surrounding area, supporting 6,670 jobs, according to the National Park Service.  1,200 seasonal workers flock to Yosemite each summer.

--Editorial / The Economist

“Earth is smoldering.  From Seattle to Siberia this summer, flames have consumed swathes of the northern hemisphere.  One of 18 wildfires sweeping through California, among the worst in the state’s history, is generating such heat that it created its own weather. Fires that raged through a coastal area near Athens last week killed 91. Elsewhere people are suffocating in the heat. Roughly 125 have died in Japan as the result of a heatwave that pushed temperature in Tokyo above 40 C. for the first time.

“Such calamities, once considered freakish, are now commonplace. Scientists have long cautioned that, as the planet warms – it is roughly 1 degree C hotter today than before the industrial age’s first furnaces were lit – weather patterns will go berserk. An early analysis has found that this sweltering European summer would have been less than half as likely were it not for human-induced global warming.

“Yet as the impact of climate change becomes more evident, so too does the scale of the challenge ahead. Three years after countries vowed in Paris to keep warming ‘well below 2 degrees C relative to pre-industrial levels, greenhouse-gas emissions are up again. So are investments in oil and gas. In 2017, for the first time in four years, demand for coal rose. Subsidies for renewables, such as wind and solar power, are dwindling in many places and investment has stalled; climate-friendly nuclear power is expensive and unpopular. It is tempting to think these are temporary setbacks and that mankind, with its instinct for self-preservation, will muddle through to a victory over global warming. In fact, it is losing the war.

“Insufficient progress is not to say no progress at all. As solar panels, wind turbines and other low-carbon technologies become cheaper and more efficient, their use has surged. Last year the number of electric cars sold around the world passed 1m. In some sunny and blustery places renewable power now costs less than coal.

“Public concern is picking up.  A poll last year of 38 countries found that 61% of people see climate change as a big threat; only the terrorists of Islamic State inspired more fear.  In the West campaigning investors talk of divesting from companies that make their living from coal and oil.  Despite President Donald Trump’s decision to yank America out of the Paris deal, many American cities and states have reaffirmed their commitment to it. Even some of the sceptic-in-chief’s fellow Republicans appear less averse to tackling the problem.  In smog-shrouded China and India, citizens choking on fumes are prompting governments to rethink plans to rely heavily on coal to electrify their countries.

“Optimists say the decarbonisation is within reach. Yet, even allowing for the familiar complexities of agreeing on and enforcing global targets, it is proving extraordinarily difficult.

“One reason is soaring energy demand, especially in developing Asia.  In 2006-16, as Asia’s emerging economies forged ahead, their energy consumption rose by 40%.  The use of coal, easily the dirtiest fossil fuel, grew at an annual rate of 3.1%.  Use of cleaner natural gas grew by 5.2% and of oil by 2.9%.... Even as green fund managers threaten to pull back from oil companies, state-owned behemoths in the Middle East and Russia see Asian demand as a compelling reason to invest.

“The second reason is economic and political inertia. The more fossil fuels a country consumes, the harder it is to wean itself off them....

“Last is the technical challenge of stripping carbon out of industries beyond power generation. Steel, cement, farming, transport and other forms of economic activity account for over half of global carbon emissions....

“Western countries grew wealthy on a carbon-heavy diet of industrial development.  They must honor their commitment in the Paris agreement to help poorer places both adapt to a warmer Earth and also abate future emissions without sacrificing the growth needed to leave poverty behind.

“Averting climate change will come at a short-term financial cost – although the shift from carbon may eventually enrich the economy, as the move to carbon-burning cars, lorries and electricity did in the 20th century.  Politicians have an essential role to play in making the case for reform and in ensuring that the most vulnerable do not bear the brunt of the change. Perhaps global warming will help them fire up the collective will. Sadly, the world looks poised to get a lot hotter first.”

--Donald Trump biographer Michael D’Antonio, to the New York Times’ Maureen Dowd.

“Trump’s like a mobster, D’Antonio said, in the sense that he ‘does not believe that anyone is honest. He doesn’t believe that your motivations have anything to do with right and wrong and public service. It’s all about self-interest and a war of all against all. He’s turning America into Mulberry Street in the ‘20s, where you meet your co-conspirators in the back of the candy store.’”

--Cardinal Theodore McCarrick resigned from the College of Cardinals on Saturday, becoming the first cardinal in history to step down due to sexual abuse allegations, a major step up in the huge crisis that Pope Francis must deal with...and definitively.

The Pope ordered McCarrick to remain in seclusion, and in prayer, until a church trial considers further sanctions.  But pressure is on to find a stronger punishment.

McCarrick has been a public face for efforts to end clergy sexual abuse, and a globe-trotting diplomat.

Pope Francis is also dealing with a massive case of abuse and cover-up in Chile. The country’s 34 bishops offered to step down en masse after meeting with Francis in May; so far, the pope has accepted five of those resignations.

Francis is due to travel to Ireland this month, another country where the church was scared and weakened by systemic abuse.

Marie Collins is a former member of the Vatican Commission for the Protection of Minors who resigned last year, citing a reluctance among Vatican administrators to implement the commission’s recommendations.

“I don’t think the pope or the Vatican has changed in any way,” Collins told the Washington Post.  [McCarrick was archbishop of Washington from 2001 to 2006, until his retirement, after he which he was a Vatican diplomat.]  “When things are public or are no longer tenable, they are asked to resign, and they have the prayer and penitence. But that is not the same thing as proper accountability.”

William McGurn / Wall Street Journal

“Theodore McCarrick isn’t the first prince of the Catholic church to have lived a private life scandalously at odds with the red hat he wore.

“Nor is he the first to have been booted from the College of Cardinals, as he was this past Saturday after disturbing allegations – that as a priest he had molested an altar boy as well as another teen he had baptized as an infant, and that as a bishop had invited seminarians to his bed – had become public. Yet the McCarrick affair may ultimately prove something far more than another disgusting case of sexual abuse, if only because the scandal breaks at a moment of tremendous cultural transition.

“Think of it as akin to the Reformation, except here it will not be Protestant Christianity but some materialist orthodoxy that will likely move in after the church takes this latest hit. For rising generations weaned on the absolutes of science and safe sex, Archbishop McCarrick offers the perfect meme for a corrupt and hypocritical church out of touch with reality.

“In this sense the bishop may resemble the hapless Johann Tetzel, a 16th century German Dominican friar whose name has become synonymous with the corrupt sale of indulgences. Though the reality is more complicated, a once-popular ditty captures how he is remembered: ‘As soon as a coin in the coffer rings / the soul from purgatory springs.’ To put it another way, without Tetzel as an embodiment of the Catholic Church’s corruption (and without the help of a relatively new invention called the printing press), those 95 theses Martin Luther nailed to the door of the Wittenburg Castle Church might have remained an academic dispute.

“In our day the battle is no longer between competing versions of Christianity.  It’s not even so much about God, though it’s often characterized that way. The real fight has to do with who’s right about the reality of the human person – those who posit him as but a physical combination of matter and energy or those who believe him, as the Eighth Psalm puts it, only ‘a little lower than the angels.’

“For centuries, the Judeo-Christian view has been the defining assumption of Western civilization, enshrined, for example, in the metaphysical truth in the Declaration of Independence about our being endowed by our Creator with certain unalienable rights. From this assumption all sorts of understandings flow: about human rights, about human sexuality, about human flourishing and so on.

“Today, alas, traditional understandings once taken for granted are yielding to the prevailing notion that science has rendered all moral judgments subjective – and that so long as sex is consensual and no one gets pregnant, it has no higher meaning.  Throughout history Christian teachings about the limits and purposes of human sexuality have often proved a hard sell. But in our day, these teachings are literally incomprehensible to increasing numbers of people, who now regard them as a monstrous effort by frustrated old men in robes to keep others from enjoying life....

“So where does Archbishop McCarrick fit in?  On its own, the tale is sick and tawdry and sadly familiar: A priest who molests boys becomes a bishop who takes advantage of seminarians and who then goes on to be awarded a cardinal’s hat by a hierarchy looking the other way.

“At least the faithful don’t appear inclined to take it this time. Among the laity there are now serious efforts to draft and institute reforms that would ensure bishops tell the truth and are held accountable. Not to mention, no more secret settlements and payoffs....

“This is all good and necessary.  And the church certainly has the sacramental tools for genuine healing and forgiveness. Still, it’s hard not to feel the suspicion among the American Catholic laity that this isn’t over, that Archbishop McCarrick is our Harvey Weinstein – abetted by fellow bishops who now live in fear they might be the next person outed in the church’s own #MeToo moment.

“The classic rejoinder is that we are all sinners and the Catholic Church will survive the McCarrick scandal as it has survived so many scandals over its 2,000 years.

“But the Reformation left a cleavage that persists to this day. And it is foolish to think the exposure of one of America’s highest-profile prelates nearly two decades after we were told the abuse problem had been dealt with can be treated as just another case of sexual misbehavior. As Rome deals with Theodore McCarrick, it would do well to remember Johann Tetzel.”

I told you a few weeks ago of my personal connection with McCarrick.  I can’t say I’m heartbroken, because I’ve become inured to all this.  I still have the picture of the two of us in Rome after he was elevated to cardinal.  It’s hard just to throw it away.  Frankly, I don’t know what the hell to do.  I think I’ll wait until after his trial.

--Finally, Pope Francis declared the death penalty wrong in all cases, a definitive change in church teaching from the prior doctrine that accepted the death penalty if it was “the only practicable way” to defend lives, which gave some Catholics license to support capital punishment in many cases.

A recent Pew Research Center poll had 60 percent of U.S. Catholics supporting the death penalty and the “pro-life movement” has focused on ending abortion – not capital punishment.  Personally, I want to expand the use of the death penalty to include certain white collar crimes, such as massive insurance fraud.

What will be interesting is down the road, four current Supreme Court justices, Chief Justice Roberts and Justices Thomas, Alito and Sotomayor are Catholic, as is nominee Brett Kavanaugh.

---

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

God bless America.

---

Gold $1221
Oil $68.68

Returns for the week 7/30-8/3

Dow Jones  +0.1% [25462]
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S&P MidCap  +1.3%
Russell 2000  +0.6%
Nasdaq  +1.0%  [7812]

Returns for the period 1/1/18-8/3/18

Dow Jones  +3.0%
S&P 500  +6.2%
S&P MidCap  +5.2%
Russell 2000  +9.0%
Nasdaq  +13.2%

Bulls 54.5
Bears 18.8

Dr. Bortrum posted a new column...everything from neutrinos to U.S.-Russian cooperation in space.

Have a great week.

Brian Trumbore

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