Week in Review

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Week in Review

04/07/2018

For the week 4/2-4/6

[Posted 11:30 PM ET]

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Edition 991

Trump World

I wrote last week that the second quarter could be historic in nature, “monumental on the foreign policy front, and thus roil global markets further,” but I was focusing on the likes of the summit with North Korea, the Iran nuclear deal deadline, and Russia, for starters, but then there’s the ‘trade war’ talk between the U.S. and China.

This was a week that was bookended by big declines in stocks on Monday and Friday, ostensibly because of hostile trade rhetoric from both the White House and Beijing, and a rally midweek due to the feeling among market participants, albeit briefly, that negotiations would take months between the two players and, after all, various administration officials, including new economic adviser Larry Kudlow, told us, ‘Don’t worry....be happy...’

Friday, though, the market responded to a statement from the White House after the market closed Thursday that the president wanted an additional $100 billion in tariffs applied on unspecified Chinese goods, on top of the initial $50 billion.  China responded in kind, per below.

Here’s the thing.  If you’re a farmer in Iowa (and having been to the Iowa State Fair four times since the advent of StocksandNews, spending a lot of time talking to farmers so I have a good handle on the topic), you aren’t just sitting around waiting for negotiations to unfold over the coming months.  You have to act now (you were already acting all winter).  It’s always about supply and demand, including corn or soybeans for so many of the farmers in the region these days, and as I note below, there are all kinds of issues to deal with, including the banks.  The current rhetoric is killing the American farmer, and the actions that are taken later on could be devastating for the real heart and soul of this country. 

At the same time, no one despises China more than yours truly.  I know far more about the character of the people than President Trump does.  I want the worst to happen to them.

But at the same time, I’m too smart to know that the man President Trump “respects greatly,” Xi Jinping, is not just a new dictator, with all the requisite powers, he is an evil, bad person, and it is appalling that in the case of Xi, and also Vlad the Impaler, that our leader says anything good about them.

I argued for years that China was screwing us.  I’ve been doing this column for over 19 years, to be exact, and I know I could go back at least ten on the issue of intellectual property theft.

And I’m the guy who has been telling you for at least the past four years that Apple Inc. and its shareholders are going to get slammed because at the drop of a hat, President Xi will play the nationalism card.

China has been gearing up for this day; ripping off every sector of our economy through its spies and agents in the U.S. (some of whom have lived in my building and my surrounding area), and hackers, so that they could sell U.S.-quality product to their consumers through their own state enterprises, be it airplanes or smartphones. The only issue was the timeline and now President Trump has accelerated it.

Already today, CNBC’s reporter in Beijing was noting the first missives on social media about buying China...not U.S. products.  She correctly said it was at the level of just ‘noise’ for now, but understand one thing.

President Xi now has total control of Chinese state media, and there is no outside competition to speak of.  Ditto social media.

There is one message...the Communist Party’s message.  That is what “Xi Jinping Thought” is all about, sports fans.

This is going to get nasty.  And amidst the barbs being hurled from both sides, you still have the major issues of North Korea, Iran, and Russia, all potentially coming to a head in just the next three months.

And I leave you with this lovely thought that I first brought up a few years ago.

Why is it that there is never any talk of China’s nuclear force?  We talk about Russia and the U.S., and arms agreements potentially gone bad, and a new arms race, and whose nuclear force is more modern, and yet the United States doesn’t even have a rudimentary agreement with China. At least with Russia, there is still some level of inspections taking place on each other’s force.  Not with China.  China’s nukes are all underground.  We don’t have a freakin’ clue what they have.  Suffice it to say, it’s overwhelming.

I’ll tell you what the first thing I’d do with President Xi if I were Donald Trump.  I’d start nuclear arms talks immediately.  Not with Kim.  Xi...first.  We need an agreement between our two forces that we can inspect each other, not that the Chinese will tell us the truth on anything or give us access, but you have to try.

Lastly, back to trade, what really scares the Street is the likes of Peter Navarro and Wilbur Ross in President Trump’s ear. And the president insisting on going it alone...bilaterally...after he idiotically scuttled the TPP agreement, that laid out intellectual property guidelines...the U.S. and our allies against China. That’s the way it should have been.  More next time....and far more on trade below.

Trumpets....

--Special Counsel Robert Mueller has reportedly informed President Trump’s lawyers that the commander-in-chief is not a criminal target – although he remains under investigation.

Mueller said he still needs to interview Trump – to determine if the president had any corrupt intent to thwart the probe – and the special counsel plans to write a report about Trump’s potential obstruction of justice, the Washington Post reported on Tuesday.

Mueller’s characterization of Trump’s status has reportedly sent the president’s closest advisers into two distinct camps; one believes that it shows his chances of ever facing criminal charges are remote, while the other camp still believes the president remains a potential target for indictment.

Meanwhile, some Trump allies fear Mueller is zoning in on the president’s tax returns, and it is understood Mueller could work directly with the IRS to gain access.

--President Trump anticipates sending 2,000 to 4,000 National Guard troops to the border with Mexico. 

“We’ll probably keep them or a large portion of them” until a border wall is built, Trump said of the deployment while aboard Air Force One on Thursday.

Earlier, Homeland Security Secretary Kirstjen Nielsen said she is working with the governors of Texas, New Mexico, Arizona and California on the deployment plan to “start the negotiations.” The Republican governors of Texas, Arizona and New Mexico have expressed support for the move.

But California’s Democratic Gov. Jerry Brown has referred questions to the state’s National Guard Bureau.

The Border Patrol said about 37,000 people were caught crossing the Mexican border into the U.S. illegally last month.  Nearly 13,000 others were taken into custody at legal crossing points along the border.

Editorial / Wall Street Journal

“President Trump can’t seem to decide if his border-control plan is a success or an imminent national crisis.

“Not long ago he was touting fewer apprehensions at the Southwest border. Then he jumped on the story, from BuzzFeed and Fox News, that an immigrant ‘caravan’ was heading from Central America through Mexico for the Rio Grande. He treated this like a Russian invasion, first saying he’d send ‘the military’ to the border and then signing an order to deploy the National Guard.

“There was no need. By Thursday the invading horde had largely dispersed before it reached even Mexico City. It isn’t clear most were even heading to the U.S.  Mr. Trump conceded on Twitter that ‘The Caravan is largely broken up’ and he credited Mexico’s ‘strong immigration laws,’ which he usually derides.

He was also back to touting his border-control success; ‘Because of the Trump Administrations [sic] actions, Border crossings are at a still UNACCEPTABLE 46 year low.’

“Apprehensions were down in fiscal 2017 to 310,531, the lowest since at least 2000. But they were up year over year in February and March, and our guess is that’s due to the strong U.S. economy pulling in more migrants coming for work.

“This underscores the contradiction in Mr. Trump’s economic agenda. Faster growth from tax reform and deregulation means a tighter labor market that attracts more migrants. Mr. Trump would be wise to trade border security for reform that allows more legal immigration to meet the economy’s needs. Then he wouldn’t have to pull stunts like hyping a band of poor migrants as an invading army.”

Trump tweets on the topic: “Our Border Laws are very weak while those of Mexico & Canada are very strong. Congress must change these Obama era, and other, laws NOW! The Democrats stand in our way – they want people to pour into our country unchecked...CRIME! We will be taking strong action today.”

“The big Caravan of People from Honduras, now coming across Mexico and heading to our ‘Weak Laws’ Border, had better be stopped before it gets there. Cash cow NAFTA is in play, as is foreign aid to Honduras and the countries that allow this to happen. Congress MUST ACT NOW!”

“Mexico has the absolute power not to let these large ‘Caravans’ of people enter their country. They must stop them at their Northern Border, which they can do because their border laws work, not allow them to pass through into our country, which has no effective border laws.”

--President Trump denied on Thursday knowing of a $130,000 payment his lawyer made to Stormy Daniels, the porn actress who claims to have had a sexual encounter with him.  Speaking aboard Air Force One, Trump made his first public remarks on the topic. Asked by a reporter whether he knew about the payment, the president said, “No.”

Asked whether Michael Cohen, his personal lawyer, had made the payment, Trump said, “You have to ask Michael.”

Stormy Daniels’ (aka Stephanie Clifford) attorney, Michael Avenatti, quickly responded to the president on Twitter, accusing Trump of a “feigned lack of knowledge” about the payment, while pressing to use legal discovery to expose the back-and-forth around the $130,000 payment.

“As history teaches us, it is one thing to deceive the press and quite another to do so under oath,” Avenatti wrote.

--Trump tweets: “DACA is dead because the Democrats didn’t care or act, and now everyone wants to get onto the DACA bandwagon... No longer works. Must build Wall and secure our borders with proper Border legislation. Democrats want No Borders, hence drugs and crime!”

“HAPPY EASTER!”

Wall Street...Trade...

The week ended with Treasury Secretary Steven Mnuchin acknowledging in an interview with CNBC that there’s “a level of risk” that the tariff dispute could evolve into a full-blown trade war between the U.S. and China.

Earlier....

Trump tweets: “We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!”

“When you’re already $500 Billion DOWN, you can’t lose!”

This week the administration proposed 25 percent tariffs on some 1,300 Chinese industrial and other products, such as semiconductors and lithium batteries, and China shot back with a list of similar duties on American imports including soybeans, planes, cars, beef and chemicals.

“Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers,” Trump said.

No s---, Sherlock.  The U.S. shipped $14.6 billion of soybeans to China, its biggest buyer, in the last marketing year – more than a third of the entire crop.  [But this creates problems for China as it gobbles up about 60% of globally traded soybeans to feed the world’s largest livestock industry.]

U.S. farmers are already dealing with depressed crop prices and stagnant land values, let alone reduced access to credit, which now, regardless of any negotiations, will only get tighter.

Trump then said on Thursday that he had instructed U.S. trade officials to consider $100 billion in additional tariffs on China, saying in a statement that further tariffs were being considered “in light of China’s unfair retaliation” against earlier U.S. trade actions that included $50 billion of tariffs on Chinese goods. Trump added that the U.S. Trade Representative (USTR) had determined that China “has repeatedly engaged in practices to unfairly obtain America’s intellectual property.”

So the tit-for-tat battle continues amid fears the two are headed towards a full-blown trade war that would crush global growth.

Republican lawmakers from Western and Midwestern states impacted by the proposed retaliatory moves by China have voiced concerns that are directly related to their prospects in November’s mid-term elections.

Trump continues to demand that China cut its trade gap by $100 billion, but no formal negotiating sessions have been set, even though the administration has said it is willing to sit down with Beijing.

The USTR’s “Section 301” investigation authorizing the tariffs alleges China has systematically sought to misappropriate U.S. intellectual property through joint venture requirements that often cannot be negotiated without technology transfers, something China denies.

There is no word on what products would be targeted in Trump’s second $100 billion.

For their part, in response to the additional $100 billion ordered by President Trump, China said it would counter U.S. protectionism “to the end, and at any cost.”

China’s Commerce Ministry said in a statement: “The Chinese side will follow suit to the end and at any cost, and will firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people.”

U.S. Trade Representative Robert Lighthizer followed Trump’s statement Thursday evening with a statement of his own stressing that none of the tariffs would take immediate effect. The administration hasn’t said when any of the proposed tariffs would go into force.

Lighthizer said any additional tariffs would be subject to a 60-day public comment period, as would the penalties announced earlier in the week.

Newly installed chief economic adviser, Larry Kudlow, said on Wednesday, “I believe that the Chinese will back down and will play ball.”

Kudlow then said Thursday that the administration was involved in “delicate negotiations” that might forestall the need for tariffs, but no one seems to know just where these negotiations are taking place, when the fact is, there are none!

Fareed Zakaria / Washington Post

“Ever since the resignation of top advisers Gary Cohn and H.R. McMaster, it does seem as if the Trump White House has gotten more chaotic, if that is possible. But amid the noise and tumult, including the alarming tweets about Amazon and Mexico, let’s be honest – on one big, fundamental point, President Trump is right: China is a trade cheat.

“Many of the Trump administration’s economic documents have been laughably sketchy and amateurish. But the Office of the U.S. Trade Representative’s report to Congress on China’s compliance with global trading rules is an exception worth reading. In measured prose and great detail, it lays out the many ways that China has failed to enact promised economic reforms and backtracked on others, and uses formal and informal means to block foreign firms from competing in China’s market. It points out correctly that in recent years, the Chinese government has increased its intervention in the economy, particularly taking aim at foreign companies. All of this directly contradicts Beijing’s commitments when it joined the World Trade Organization in 2001.

“Whether one accepts the trade representative’s conclusion that ‘the United States erred in supporting China’s entry into the WTO,’ it is clear that the expectation that China would continue to liberalize its markets after its entry has proved to be mistaken.

“Washington approached China’s entry into the world trading system no differently from that of other countries that joined in the mid-20th century. As countries were admitted, the free world (especially the United States) opened its markets to the new entrants, and those countries in turn lowered their barriers to their markets. That’s how it went with such nations as Japan, South Korea and Singapore. But there were two notable factors about these countries: They were relatively small compared with the size of the global economy, and they also lived under the American security umbrella. Both factors meant that Washington and the West had considerable leverage over these new entrants. Singapore had 2.2 million people and a gross domestic product of $19 billion when it joined the GATT (the precursor to the WTO), while South Korea had 30 million people and a GDP of $41 billion. Japan was larger, with 90 million people and a GDP of under $800 billion.  (All GDP figures are adjusted for inflation.)

“And then came China, with 1.3 billion people and a GDP of $2.4 trillion when it joined the WTO in 2001. That was almost a fifth of the U.S. economy. The Chinese seemed to recognize that once they were in the system, the size of their market would ensure that every country would vie for access, and this would give them the ability to cheat without much fear of reprisal. Moreover, Beijing was never dependent on Washington for its security.  It had fought a war against American troops in the 1950s with some success and had grown into a great power in its own right.

“The scale and speed of China’s integration into the world trading system made it a seismic event....(and) a quarter of all manufacturing jobs lost in the United States between 1990 and 2007 could be explained by the deluge of Chinese imports. Nothing on this scale had happened before.

“Look at the Chinese economy today. It has managed to block or curb the world’s most advanced and successful technology companies, from Google to Facebook to Amazon.  Foreign banks often have to operate with local partners who add zero value – essentially a tax on foreign companies. Foreign manufacturers are forced to share their technology with local partners who then systematically reverse engineer some of the same products and compete against their partners. And then there is cybertheft. The most extensive cyberwarfare waged by a foreign power against the United States is done not by Russia but by China. The targets are American companies, whose secrets and intellectual property are then shared with Chinese competitors....

“The Trump administration may not have chosen the wisest course forward – focusing on steel, slapping on tariffs, alienating key allies, working outside the WTO – but its frustration is understandable.  Previous administrations exerted pressure privately, worked within the system, and tried to get allies on board, with limited results. Getting tough on China is a case where I am willing to give Trump’s unconventional methods a try.  Nothing else has worked.”

Philip Stephens / Financial Times

“Xi Jinping, now installed as emperor-president for life...judges the time has come for China to expunge two centuries of humiliation. The aim of the Belt and Road Initiative is to shift the center of global gravity to Eurasia. The Middle Kingdom can then take its rightful place center stage....

“Should the West have sought to halt China’s rise – declared it an enemy and locked it out of the WTO and other global institutions?  Would such containment have extended to a naval blockade of the South China Sea? These are not approaches likely to have safeguarded the international peace.

“In the event, the U.S. has turned out to be a bigger enemy than Beijing of its own grand design. Washington has seemed more determined to throw away the big idea faster than Beijing has been to challenge it. Wars of choice in Afghanistan and Iraq sapped America’s moral authority. The attempt to impose democracy at the point of a cruise missile undercut faith in political pluralism. The 2008 financial crash put paid to the consensus that liberal, open markets were a certain route to prosperity.

“Mr. Trump is picking up where others left off. If the West was careless in the defense of the rules-based system, the present occupant of the White House flatly repudiates it. Mr. Trump lives in a world of winners and losers. He blames the postwar structures built by America and its allies for western weakness. He is allergic to multilateralism.  ‘I do bilateral,’ he said the other day. Everything in Trumpworld is zero sum.

“So the only surprise about his decision to slap higher tariffs on imports of steel, aluminum and a range of other goods is that anyone should have been surprised. Mr. Trump has few deep-rooted beliefs, but economic nationalism has always been at the center of his worldview.  He blames weak leadership in Washington for allowing others to challenge U.S. pre-eminence.  Protectionism is his only remedy....

“The problem is not simply that trade wars are a very bad idea. History tells protectionism is virulently contagious. Europe has its own populists....

“But Mr. Trump is setting a direction that other nations feel compelled to follow. Beijing now belongs to nationalists. Europe has its own nativists. There will not be any winners.”

On the economic front, we had the release of the ISM purchasing managers indexes (PMIs) for March and manufacturing came in at a strong 59.3 vs. 60.8 in February, 58.8 for services vs. the prior month’s 59.5; 50 being the dividing line between growth and contraction.

February construction spending and factory orders both came in less than expected, 0.1% and 1.2%, respectively.

But the biggie was Friday’s release of the March employment report and only 103,000 jobs were added, well below the Street’s expectation for 180,000. But these figures are volatile, and with February revised upward to 326,000 from 313,000, while January was revised down from 239,000 to 176,000, the three-month average is still a very solid 202,000, especially given full employment, with the jobless rate at 4.1% for a sixth consecutive month.

U6, the underemployment rate, fell to 8.0%.  The labor participation rate remained historically low at 62.9%.

But the key average hourly earnings figure was 2.7% for the last 12 months, which is far from cause for concern for the Federal Reserve. It was the January figure, released first week in February, 2.9%, that first roiled the markets, with the feeling being the Fed would be forced to hike interest rates four times rather than the consensus of three, but with the last two reports, this figure has stabilized.

That said, in a recovery such as this one, historically you’d have average hourly earnings rising at a 3.5% clip.

Put it all together and the Atlanta Fed’s GDPNow barometer for the first quarter is forecasting growth of 2.3%.

Separately, in his annual letter to shareholders released Thursday, JPMorgan Chase CEO Jamie Dimon warned markets may be underestimating the risk of a quicker pace of interest rate hikes from the Fed.

“We have to deal with the possibility that at one point, the Federal Reserve and other central banks may have to take more drastic action than they currently anticipate,” Dimon wrote.  “While in the past, interest rates have been lower and for longer than people expected, they may go higher and faster than people expect.”

Such a scenario could catch investors off-guard, he warns, and cause markets to “get more volatile.”

Finally, I’ve been collecting some good info on steel and aluminum, post- the initial tariff talk, from Brad K, who relies on steel for his business.  I will present it next week after Brad and I obtain more data.  It’s not pretty.

Europe and Asia

Lots of eurozone (EA19) financial data this week. IHS Markit released its PMI stats for the month of March, with the final PMI on manufacturing for the EA19 coming in at 56.6 vs. 58.6 in February; services at 54.9 vs. 56.2 the prior month.

Germany had a manufacturing PMI of 58.2 last month vs. 60.6 in February, while the services reading was 53.9.
France had a 53.7 reading for manufacturing (down from 55.9), 56.9 on services.
Spain was 54.8 mfg., 56.2 services.
Italy was 55.1 mfg., 52.6 services.
Greece had a 55.0 in manufacturing, Netherlands 61.5, Ireland 54.1.

The U.K. came in at 55.1 on manufacturing, just 51.7 for services in March.

Bottom line, all the figures were above 50.

Chris Williamson, Chief Business Economist at IHS Markit:

“The eurozone economy came off the boil in March, though continued to run hot. Although the final PMI numbers showed the weakest rise in business activity since the start of last year, adding to signs that the growth spurt has peaked, the surveys are still indicative of the economy growing at an impressive 0.6% quarterly rate in March, down from a clearly unsustainably rapid 0.8-0.9% rate around the start of the year....

“Some of the loss in growth momentum also appears to have been the result of temporary factors, such as bad weather and short-term capacity constraints, notably shortages of supplies and labor. Some reversal of these impediments should therefore hopefully help boost growth in April.

“Gauging the true extent of any slowdown is consequently difficult due to the disruptions to business from bad weather in recent months. April’s PMI data will therefore be particularly important in ascertaining true underlying growth momentum and in providing a steer on the likely timing of any ECB policy changes.”

Separately, Eurostats released its flash reading on inflation for March in the eurozone, 1.4% annualized vs. 1.1% in February. Ex-food and energy the figure for March was 1.3%, still substantially below the European Central Bank’s 2% target level.

For the month of February, Eurostats said the unemployment rate for the EA19 was 8.5%, down a tick from January and 9.5% in February 2017.

Germany 3.5%, France 8.9%, Spain 16.1%, Italy 10.9%, Ireland 6.1%, Portugal 7.8% and Greece 20.8% (Dec.).

But you still have very high youth jobless rates with some of the eurozone members: Greece 45.0% (Dec.), Spain 35.5%, Italy 32.8%.

Brexit: There has been a lull in the negotiations following the European Union’s March summit milestones, primarily the agreement on a 21-month transition period following the March 2019 exit.

But now it’s about a huge to-do list between now and the EU’s October summit and deadline to conclude talks so that each of the 27 member nations, and the European parliament, can grant their approval, after the European Commission puts the agreement in the respective languages, dots all the “i”s and crosses the “t”s.

Germany’s Brexit coordinator tweeted this week that there’s been a “strange silence” from the U.K. since the summit breakthrough.

As in, literally, there is zero discussion suddenly between Brussels and London. This is nuts, but it’s brought about by the fact British Prime Minister Theresa May still has a fractured Cabinet and party and her leadership remains on a knife’s edge.

France: The nation has been hit by a wave of strikes against President Emmanuel Macron’s labor reforms.  The start of the rail strikes was dubbed “Black Tuesday,” but the action is slated to spread over three months, so if you are traveling to France this spring and summer, be aware of this. For example, I don’t know if the train from Charles de Gaulle Airport into Paris is impacted, but if it was and you were forced to take a cab (Uber has an issue here, if I remember correctly), you better be prepared to pay a king’s ransom, and I did see that commuter lines into Paris have been impacted in general.

Only 12% of France’s high-speed trains were expected to run.

France’s energy and waste sectors are also engaging in rolling strikes, and thousands of students have been protesting the toughening up of university entry regulations.

The action represent the biggest challenge to Macron since his election last May, but in terms of the rail strike, the president feels pretty optimistic because a majority of the public is against the job action. Rail services, especially for commuters, have fallen in recent years and there are more open calls for the kinds of reforms Macron is touting.

Catalonia: Former leader Carles Puigdemont walked out of a German prison on Friday after a court in the northern state of Schleswig-Holstein agreed to release him on bail.

The court on Thursday rejected an extradition request on the charge of rebellion for Puigdemont’s role in the campaign for Catalonia’s independence, but said extradition to Spain was possible on a lesser charge of misuse of public funds.

Boy, I don’t get this, but it’s another example of disunity in the EU, witness the next bit.

Hungary: Griff Witte and Michael Birnbaum / Washington Post

“On a spring night in 2004, a chorus sang in a Warsaw square. Beethoven’s ‘Ode to Joy’ – the anthem of the European Union – echoed across once-bloody frontiers. Midnight fireworks sparkled along the Mediterranean....

“ ‘The divisions of the Cold War are gone – once and for all,’ declared then-European Commission President Romano Prodi as he welcomed 10 new members to the E.U., eight from the former communist East. And yet, 14 years later, new divisions are emerging – many of them following old lines. The triumph of liberal democracy is being attacked from within by E.U. members that openly deride the club’s values, principles and rules. The bloc, meanwhile, has been incapable of fighting back, its weakness a side effect of the optimism with which it grew.

“Ground zero for the rebellion is here in Hungary, where Prime Minister Viktor Orban is running for reelection Sunday with boasts of his illiberalism, swipes at the hostile E.U. ‘empire’ and promises to further tighten his grip on a country dancing ever closer to the edge of autocracy.

“Orban’s defiance presents the E.U. with a far different threat than the one it faced in 2016, when Britain voted to exit and speculation swirled over who might go next. It may be more serious than that – a challenge that endangers the character of the union.

“ ‘Orban doesn’t want to leave the E.U.,’ a senior German official said.  ‘He really wants to change the E.U.’

“By some measures, he’s succeeding. Far from being a pariah, Orban has found imitators in Poland and admirers in the Czech Republic, Austria and even at top political levels in Germany.

“Orban’s European opponents, meanwhile, have proved unable to curb his behavior. Rather than punish Hungary for its intransigence, Brussels continues to supply the government with billions of euros in E.U. subsidies – money that Orban’s domestic critics say is vital to his survival because it boosts the economy and puts cash in the pockets of favored cronies.

“ ‘Orban is waging his freedom fight against the E.U. with huge amounts of E.U. money,’ said Peter Kreko, executive director of the Budapest-based policy research firm Political Capital.  ‘Lenin said, ‘Capitalists will sell the rope to us with which we’ll hang them.’ Well, the E.U. is not selling.  It’s giving it to Orban for free.’”

By the way, when he wins reelection, the 54-year-old Orban, who came to power in 2010, has promised to press ahead with legislation that would allow the banning of aid groups that work on behalf of refugees or other immigrants.

I have to admit I am on record as agreeing with Hungary’s strict immigration policy.  I am not in favor of Orban’s attempts to stifle a free press, ditto the situation in much of Eastern and Central Europe today.

Vladimir Putin is smiling broadly.

Turning to Asia...China released its official government PMI data for March; 51.1 manufacturing, 54.6 services, both up from February levels. The private Caixin readings for last month were 51.0 manufacturing, 52.3 services.

In Japan, the manufacturing PMI for March was 53.1, services 50.9.

So still growth mode for both China and Japan.

But real wages fell for a third consecutive month in February in Japan, 0.5% year on year (adjusted for inflation), while household spending pulled back during the period, down 0.9% year on year.

But base pay rose 1.1% in January, the strongest increase since 1997.

Elsewhere, Taiwan’s manufacturing PMI  for March was 55.3, but South Korea’s fell below 50, 49.1 vs. 50.3 in February.

Street Bytes

--Stocks finished down for a third week in four, on the heels of the aforementioned mini-bloodbaths on Monday and Friday, with three days of rallies in between. The Dow Jones lost 0.7% to 23932, in correction mode, off 10.1% from the high, while the S&P 500 fell 1.4%, and Nasdaq 2.1%.  The S&P and Nasdaq slides off their all-time records are shy of 10%.

Now come the earnings.

--U.S. Treasury Yields

6-mo.  1.89%  2-yr. 2.27%  10-yr. 2.77%  30-yr. 3.02%

--The above-mentioned shareholder letter from Jamie Dimon also had other concerns of his aside from the Fed hiking more aggressively than the markets anticipate.  He said potential hack attacks against banks ranked high on his list of risks. “I cannot overemphasize the importance of cybersecurity in America. This is a critical issue, not just for financial companies but also for utilities, technology companies, electrical grids and others.  It is an arms race, and we need to do whatever we can to protect the United States of America.”

Dimon says the new tax cut law that lowered taxes on businesses and individuals and Trump’s push to pare back regulations that were hurting companies’ growth are what was needed to unleash the potential of the economy.

“Our previous tax code,” he wrote, “was increasingly uncompetitive, overly complex and loaded with special interest provisions that created winners and losers. The good news is that the recent changes in the U.S. tax system have many of the key ingredients to fuel economic expansion.”

Dimon added, “The current administration is taking steps to reduce unnecessary regulation by insisting that congressional rules around cost-benefit analysis be properly applied.”

--Wednesday, Facebook admitted that as many as 87 million people, most of them in the U.S. may have had their data accessed by research firm Cambridge Analytica. It was the company’s first official confirmation of the scope of the data leak, which we had been told previously was at about 50 million.

Actually, it was first thought to be 270,000 users, but then when you added all their friends at the time they gave the app permission, Facebook now calculates it is a total of 87 million impacted.

Facebook said it will notify those people whose data was accessed at the top of their news feeds starting April 9.  But it still doesn’t know if Cambridge has the data.  So with this one fact you can see what kind of grilling CEO Mark Zuckerberg will face when he appears before Congress next Tuesday and Wednesday.

And as we’ve all learned, Cambridge is far from the only app to have accessed one’s information on the site.

Zuckerberg will appear before the U.S. Senate Judiciary and Commerce committees on April 10 and the House Energy and Commerce Committee on April 11.

Question number one is, does Cambridge Analytica still have the data they were supposed to have deleted?  And of the new figure of 87 million, how many actually had their personal information accessed by Cambridge?

The Federal Trade Commission is also continuing to investigate whether Facebook violated a 2011 agreement meant to protect users’ privacy.

Separately, Mark Zuckerberg shot back at Apple CEO Tim Cook for his critiques of Facebook, Zuckerberg writing them off as “not aligned with the truth.”

Cook had said he would never be in the situation Zuckerberg found himself in after the Cambridge scandal, contrasting Apple’s focus on selling products with Facebook’s ad-based business (ditto Google) that is based on user data.

Zuckerberg described Cook’s comment that Facebook doesn’t care about its users as “extremely glib.”

Lastly, today Facebook announced it was instituting more changes – including more stringent rules for issue ads; an attempt to prevent election manipulation.

Every advertiser who wants to run a political or issue ad on Facebook must have their identity and location verified, CEO Zuckerberg posted today.

--President Trump tweeted Tuesday: “I am right about Amazon costing the United States Post Office massive amounts of money for being their Delivery Boy. Amazon should pay these costs (plus) and not have them bourne by the American Taxpayer. Many billions of dollars.  P.O. leads don’t have a clue (or do they?)!”

Rich Lowry / New York Post

“It’s hard to think of a more pointlessly destructive act of presidential jawboning in our history.  The online retailer is a jewel of our market economy that has delivered more choice and convenience at a lower cost.

“The backdrop for Trump’s animosity is that Amazon CEO Jeff Bezos owns The Washington Post, which, like much of the major media, is unrelentingly hostile to the president. WaPo’s bias is nothing new, nor should it be taken out on the underlying business of its owner.

“Trump’s anti-Amazon jag can be put in the same bucket as his tariffs against China – Trump being Trump, unleashing in accord with his gut instincts and animosities.

“The similarities end there. The difference is between targeting the Chinese regime and a great American company, between lashing out against mercantilism and against a capitalist success story, between berating an adversary of the United States  and an adversary of his own.

“If there wasn’t an Amazon someone would have invented it, or at least the basic model of leveraging new technologies to transform retail. Beginning in the late 1980s, the advent of big-box retailers brought a productivity revolution to the industry. Now, e-commerce is challenging the big-box retailers in their turn.

“This is how the U.S. economy works. Eventually, it grinds the high and mighty into dust. In the 1910s, the U.S. government desperately wanted to break up U.S. Steel; 100 years later, the company accounted for less than 10 percent of U.S. steel production. In the 1990s, the government wanted to keep Microsoft from dominating computing; 20 years later, it doesn’t even make the list of Big Tech bogeymen anymore.

“Trump has two specific complaints about Amazon. One is that it’s ripping off the U.S. Postal Service, costing the government billions. Perhaps a better deal can be extracted – a recent study by Citigroup concluded as much – but the postal service says its arrangement with Amazon is profitable.

“The second is that Amazon doesn’t pay sales taxes. This once was true, but Amazon now collects sales taxes in all states that levy them.

“The larger case against Amazon is that it’s killing off traditional retailing, while accruing too much power for itself. There’s no doubt bricks-and-mortar retail is in decline, although we shouldn’t exaggerate its scale. E-commerce currently accounts for less than 9 percent of retail sales, while Amazon, for its part, accounts for roughly 44 percent of all e-commerce.

“If Amazon is sharp-elbowed and aggressive with its competitors, no one is forced to buy from it. Customers go there because they find it easy to use and cheaper than the alternatives. Amazon isn’t pocketing huge profits. Instead, it’s doing what companies should do: innovating, then plowing the proceeds into more investments (Amazon is much more than an e-commerce company)....

“Michael Mandel of the Progressive Policy Institute points out that online shopping saves consumers the time involved in driving to a store and looking for a product – and shifts all that (unpaid) labor to (paid) workers in its fulfillment centers and drivers.

“This is a good deal all around, especially if Mandel is correct that jobs in fulfillment centers pay 30 percent more than jobs in traditional retail.  These jobs provide, he writes, ‘decent pay for a high-school graduate, in a fast-growing tech-related industry, which requires a mixture of physical and cognitive skills.  Many of them are full-time jobs with full benefits. They aren’t easy jobs, for sure – but neither are manufacturing jobs.’

“In short, there are many scourges in American life. Amazon isn’t one of them.”

Editorial / Wall Street Journal

“Over the past decade, the post office has lost more than $60 billion even while failing to make required retirement health payments.  Operating costs not including retirement obligations have outpaced revenue growth over the past four years, notwithstanding a 60% increase in shipping and package revenue.

“When businesses lose money, they shave costs or go bankrupt. Private package-delivery competitor UPS has announced plans to freeze its pension plan for non-unionized workers, and FedEx employs independent contractors. But collective-bargaining agreements constrain the post office’s ability to improve efficiency. According to USPS’s annual report, the number of deliveries measured across all work hours hasn’t increased since 2014.

“Congress has also refused to reduce USPS’s fixed costs by changing the six-day delivery mandate despite pleadings from prior postmasters general. A modified schedule could impel Amazon and other online retailers to pay more for deliveries. Alas, lawmakers can’t even pass de minimis reforms.  Last year a bipartisan bill was introduced in the House that would enroll postal retirees in Medicare and convert door delivery to clustered drop-offs. It’s gone nowhere.

“One reason is that the status quo benefits rural residents as well as businesses that use mail advertisements.  Maybe President Trump could use his bully pulpit to press Congress for postal reforms. Taxpayers would surely be better off if the post office were as efficient and innovative as Amazon.”

For its part, Amazon said in a statement: “The Postal Regulatory Commission has consistently found that Amazon’s contracts with the USPS are profitable. Amazon has invested hundreds of millions of dollars in a network of more than 20 package sortation facilities that inject directly into the USPS last mile network, bypassing most of USPS network. This investment resulted in more efficient processes as well as thousands of jobs and related economic benefits in local communities.”

Edward Luce / Financial Times

“It is hard to recall the last time a U.S. president sought to destroy a national corporate champion. Since Mr. Trump launched his anti-Amazon tirade last week, Mr. Bezos is $16bn less rich. That drop in paper value is roughly five times Mr. Trump’s net worth, Forbes says.

“Mr. Bezos is still worth more than $100bn. If this is a battle of the pockets, he should easily ride it out. Yet there is more at stake than Mr. Bezos’ fortune.

“Those least concerned about the health of the U.S. republic tell themselves that Mr. Trump’s incompetence outruns his malevolence.  Look at the quality of Mr. Trump’s counsel, they say. Top notch lawyers are refusing to represent him in the investigation into Russian meddling. By contrast, Robert Mueller, the special counsel leading the probe, has assembled a very strong team.

“But Mr. Trump is a genius at other things. Take his handling of the media, where he consistently outsmarts his critics. Even his biggest media detractors – indeed especially those – rely on Mr. Trump to drive their ratings. In his world, all publicity is good publicity. The U.S. president’s constant use of Twitter may single-handedly have revived the platform as an enterprise....

“How much damage can (Trump) do? The answer is a lot.

“Mr. Trump’s handiest weapons is regulatory. Much of the Democratic party now supports the idea of breaking up the big tech companies.  Mr. Trump could pressure the Federal Trade Commission to launch an antitrust investigation of Amazon’s impact on retailers.  Larry Kudlow, his new economic adviser, apparently backs such an assault. Amazon is clearly anticipating a backlash. It already has far more lobbyists in Washington than any other tech company. Their number has doubled in the past 18 months.”

--Related to the above, Ruth Simon / Wall Street Journal...this story hit tonight:

“The Trump administration is pushing for online retailers to pay more in state and local taxes.  One retailer that could be affected by a stricter tax policy: the online store of the Trump Organization, which collects sales tax from consumers in only two states.

“The TrumpStore.com website, which sells $100 polo shirts, baseball caps, spa teddy bears and other Trump-branded merchandise, collects sales tax on orders shipped to addresses in Florida and Louisiana, according to the company’s website.

“The site, which describes itself as the official retail website of the Trump Organization, doesn’t collect sales taxes from New York residents. The TrumpStore.com website invites shoppers to ‘visit our brand new Trump Tower flagship retail store’ in New York City.

“The website was registered by the Trump Organization, which is headquartered in Trump Tower....

“ ‘Trumpstore.com has always, and will continue to collect, report, and remit sales taxes in jurisdictions where it has an obligation to do so,’ a Trump Store spokeswoman said. The spokeswoman and the chief legal officer for the Trump Organization didn’t respond to requests for additional information.”

--According to the Wall Street Journal and real-estate data firm Reis Inc., which studies 77 metropolitan areas, the vacancy rate in big U.S. malls increased to 8.4% in the first quarter of 2018, up from 8.3% in the fourth quarter and the highest since the fourth quarter of 2012.  Just another sign of shifting consumer spending patterns.

The other day I walked through The Mall at Short Hills, a two-minute drive from where I live, to do two things....one to check on the vacancies at this ultra-high-end shopping center and there were a whopping 16 empty spaces (just five of which were relocations in the works), but the anchor tenants (Nordstrom, Neiman Marcus, Bloomingdale’s and Macy’s remain).

The other reason I went was to confirm what a deal I had received at Walmart for a pair of Wrangler jeans.  Next to my Dollar Tree is a Kohl’s and I’m always in there to see when there are sales on things like jeans (and for us guys who just want a regular pair of ‘em, they are never on sale there, minimum $40).

So I went to Walmart and Wrangler’s were on sale for $16.87!  One of their “Everyday Low Prices.”  I was like Charlie Brown, looking at his made-over Christmas tree. I kept staring at the price...in wondrous disbelief.

Anyway, you couldn’t get Wrangler’s at Macy’s for under $40 either.

So break up Walmart, President Trump!

--Shares  in Tesla Inc. rallied sharply after the company released production data for the last seven days of March, with the company announcing it had built 2,020 of its cheaper Model 3 sedans over that time, while announcing it did not need to raise more capital this year.

Tesla had been damaged in the past week by speculation over its finances, as well as the impact of a car crash in California.*

Instead, Tesla said it would produce increasing numbers of the Model 3 in the coming months, with the company continuing to target 5,000 units per week in about three months, “laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow,” the company’s release said.

“As a result, Tesla does not require an equity or debt raise this year, apart from standard credit lines.”

But for the quarter, deliveries of the luxury Model S and Model X vehicles, fell by 12% from a year ago.

Now Tesla had initially said it would be producing 2,500 a week by now, but the 2,020 is far above the 793 built in the final week of last year, so investors feel that the worst is over, at least the latest short-term crisis.

Meanwhile, Elon Musk had a stupid April Fool’s joke as a tweet over the weekend.

“Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt. So bankrupt, you can’t believe it.”

Just a real laugh-riot.

*Speaking of the crash, late Friday Tesla acknowledged its semiautonomous Autopilot system was engaged by the driver in the seconds before the fatal crash. Tesla said its vehicle logs show the driver’s hands weren’t detected on the wheel for six seconds before the collision, and he took no action despite having five seconds and about 500 feet of unobstructed view of a concrete highway divider that he then slammed into.

--Weeks after an autonomous Uber fatally hit a pedestrian in Arizona, an opinion poll of Californians commissioned by the San Diego Union-Tribune with 10News found that only 23 percent of respondents said computer-piloted vehicles should be allowed in their neighborhoods.  58 percent of those polled rejected the idea outright, with 19 percent undecided.

The same poll found only 28 percent of Californians said they would feel safe riding in a self-driving vehicle, with 57 percent feeling unsafe.

I don’t want these anywhere near me.  Nor do I ever want to ride in one.

--Canada reported a March PMI for manufacturing at a solid 55.7, while Brazil’s came in at 53.4 as its recovery continues.

--Editorial / Wall Street Journal

“The Environmental Protection Agency on Monday took the Obama fuel economy rules off autopilot. This is good news for consumers, automakers and the U.S. economy, but the Trump Administration’s big test will be negotiating around the political potholes.

“Corporate average fuel economy (Café) standards are a vestige of the 1970s gas shortages.  Like the Nixon-era price controls, the fuel standards were intended to reduce gas consumption. But the environmental left long ago hijacked the rules to impose their vision of an electric-car future.

“In 2012 the Obama EPA turned up the Café dial and mandated a fleetwide average of 54.5 miles a gallon by 2025 with a midpoint review in 2017.  After President Trump won the election, Obama EPA chief Gina McCarthy blazed through the review and upheld the 2012 targets no matter the economic and technological obstacles.

“Passengers cars were about half of U.S. vehicle sales in 2012 when gas averaged $3.60 a gallon. But last year they made up only about a third of the fleet mix, and their share has been declining amid lower gas prices. This will make it nearly impossible to hit future targets even with cleaner technologies. By the Obama EPA’s own projections, fewer than 1% of gas-burning vehicles would meet its 2022 target.

“Many automakers have met EPA’s targets so far by selling small and electric cars at a loss, and some have shifted production to lower-cost Mexico. Fiat Chrysler CEO Sergio Marchionne has estimated that his company loses $14,000 on each Fiat 500e.....

“While U.S. automakers have wanted a review, they’ve been cagey about endorsing lower targets.  ‘We support increasing clean car standards through 2025 and are not asking for a rollback’ but merely ‘additional flexibility,’ Ford Chairman Bill Ford and CEO Jim Hackett wrote last month.”

But the biggest issue for the administration on this topic is California, which was granted a waiver from the 1970 Clean Air Act that prohibited states from adopting their own auto-emissions rules.  EPA Administrator Scott Pruitt says he wants one national standard, but he cannot reject California’s waiver unless they can demonstrate that California “does not need such standards to meet compelling and extraordinary conditions.”

So we’ll see what happens in this battle.

But back to the easing of fuel-economy rules, Detroit’s Big Three and foreign rivals will sharpen their focus  on profitable pickup trucks and SUVs that achieve much lower miles-per-gallon than the hybrids and smaller cars favored by the old mandate.

So in terms of U.S. auto sales in March, it was a strong month, up 6.3% on rising sales of SUVs and trucks, with a seasonally adjusted annual sales rate of 17.48 million vehicles, compared with 16.8 million for March 2017, according to AutoData.

GM sold 296,341 vehicles last month, a 16% increase compared with the same period in 2017. Ford sales rose 3.5%, while Fiat Chrysler’s were up 14%.

But car sales for the Big 3 plunged 9.2%, while truck and SUV sales rose 16.3%.

Toyota’s overall sales were up 3.5%; Nissan’s dropped 3.6%; Honda’s rose 3.8%, led by a 15.7% gain in the Acura luxury brand; Hyundai’s were off 11%; and Volkswagen’s were up 13.5%.

Separately, GM said it is abandoning its decades-old practice of reporting monthly auto sales, which I can understand, because 30-day periods can be volatile due to weather, or extra (or fewer) weekends.

So expect all the others to follow GM’s lead over time.

Retailers Target and Walmart abandoned monthly sales years ago.

--Meanwhile, Mercedes-Benz set a quarterly record for sales in March as well as for the first quarter, as demand for premium cars continues to boom in China, overshadowing a decline in North America.

Daimler said it sold more than 237,000 Mercedes passenger cars last month, a 3.9% year-over-year increase.  In the first three months of 2018, sales rose 6%, led by a 17.2% increase in China.

--Spotify Technology shares slumped Wednesday, the day after it hit the public markets with an unorthodox listing process through which it simply floated substantially all of the company onto public markets.  Unlike a typical IPO, Spotify didn’t raise money or use underwriters who would backstop a deal for a period of time to stabilize the price of a stock if it was sliding, Spotify saving tens of millions of dollars in fees in the process.

But while the opening stock price Tuesday was $165.90, well above where the shares had been valued in the private market, it then fell the rest of the day to close at $149, valuing the startup at $27 billion, and then the next day, as buyers have been reluctant to emerge over fear of facing off against large blocks of sellers, the shares fell further to $144, and finished the week at $147.75..

There are no restrictions on investors selling, unlike a traditional IPO where insiders may be locked up for six months or so.

--Apple Inc. is planning to use its own chips in Mac computers beginning as early as 2020, replacing processors from Intel Corp., according to people familiar with the plans.

This isn’t a surprise, with Apple having a larger strategy to sync all of its devices – including Macs, iPhones, and iPads – to work more similarly together, so this is the first move in a transition.

Nonetheless, it’s a blow to Intel, with Apple providing Intel with about 5% of its annual revenue, according to Bloomberg, with the stock down 6% on the news.

But Apple could always delay the switch.

Currently, all iPhones, iPads, Apple Watches and Apple TVs use main processors designed by Apple.

--Fox News said it was standing by its embattled host Laura Ingraham, who has seen her advertisers flee her show over a tweet directed at Parkland, Fla., school shooting survivor David Hogg.

“We cannot and will not allow voices to be censored by agenda-driven intimidation efforts,” Jack Abernethy, co-president of Fox News, said in a statement to the Los Angeles Times.  “We look forward to having Laura Ingraham back hosting her program next Monday when she returns from spring vacation with her children.”

Ingraham had mocked David for not being accepted by four University of California schools, after which the kid responded by listing Fox News advertisers and urging his Twitter supporters to call for a boycott of her program.

Ingraham then issued a rather lame tweet apologizing, and David, the student-turned-gun control activist, didn’t accept it.  In this case they both suck.

Foreign Affairs

Syria: President Trump retreated from his statement that the 2,000 American forces in Syria would be rapidly brought home, with press secretary Sarah Sanders saying in a statement after Trump met with military commanders to discuss the future of the mission: “The military mission to eradicate ISIS in Syria is coming to a rapid end, with ISIS being almost completely destroyed. The United States and our partners remain committed to eliminating the small ISIS presence in Syria that our forces have not already eradicated.”

Tuesday, Trump had said at a news conference with Baltic leaders: “I want to get out. I want to bring our troops back home. I want to start rebuilding our nation.”

The president’s military advisers have argued that maintaining U.S. forces in Syria is not just crucial to defeating ISIS and ensuring it doesn’t regain a foothold in the region, but that it’s paramount to maintain a presence so we have leverage at any negotiations on a political settlement, which the U.S. has been shut out of thus far.

After the relationship between Turkey and Russia deteriorated two years ago with the downing of a Russian warplane by Turkey near its border, sweeping trade sanctions levied by Moscow against Ankara in response, and a Russian ambassador being gunned down by a Turkish policeman, this week President Vladimir Putin was feted in Ankara by President Erdogan as the Turkish leader seeks help in crushing the autonomy aspirations of Syrian Kurds, which Turkey views as an existential threat to its survival.

During his visit to Turkey, Putin’s first foreign trip since he won reelection on March 18, Russia agreed to supply Turkey its S-400 air defense system and to build the Akkuyu nuclear reactor on the Mediterranean coast.

As Soner Cagaptay, head of the Turkish program at the Washington Institute for Near East Policy think tank told the Wall Street Journal’s Yaroslav Trofimov: “Putin wants Turkey to be angry with the West and the West to be angry with Ankara.  Putin’s goal is to dilute NATO, and what better way is there to weaken the alliance than making sure the country with NATO’s second-largest army becomes an angry, unwilling and foot-dragging member?”

Meanwhile, Iran is in the theater and wants to make sure that any political settlement down the road preserves its strategic influence in Syria.  Iran’s President Hassan Rouhani joined Putin and Erdogan for talks on the end game; all no doubt hanging on every Trump comment about his desire to withdraw.

Editorial / Washington Post

“President Trump’s national security team appears to have barely persuaded him not to make the mistake of abruptly withdrawing U.S. forces from Syria, where they are defending vital U.S. interests. But he still seems determined to abandon the arena soon and at the expense of American friends, such as Israel and Jordan, and to the advantage of Russia and Iran.

“Mr. Trump startled his advisers by declaring at a rally last week that U.S. troops would ‘very soon’ get out of the country.  Now he has agreed they can stay long enough to complete the elimination of several pockets of Islamic State militants and to train local forces to police the large area controlled by U.S. allies.

“That’s a welcome turnabout as far as it goes. Mr. Trump’s sudden embrace of a pullout was itself a reversal of a strategy for Syria he endorsed  just a few months ago.  Withdrawal now could allow the Islamic State to reconstitute itself, reversing the gains of years of hard fighting by U.S. and allied forces. Still, that is only one of the major U.S. interests at stake.  The others include preventing Iran and Russia from entrenching in the country at the expense of U.S. allies including Israel and Jordan; preserving Turkey’s place as a NATO ally; and preventing more humanitarian catastrophes, with the resulting destabilizing waves of refugees headed for Europe.

“Mr. Trump’s new position, which envisions a U.S. withdrawal in months and suspends the modest reconstruction aid recently allocated by the State Department, abdicates responsibility for those challenges. It also delivers a stab in the back to the Syrian forces, led by Kurds, who have collaborated with the United States in fighting the Islamic State and now could be left to deal alone with a Turkish regime irrationally bent on annihilating them.

“That Mr. Trump’s intended retreat is a gift to Vladimir Putin perhaps should not be surprising, given Mr. Trump’s curious eagerness to accommodate the Russian ruler. But by boosting Iran at Israel’s expense, Mr. Trump is flagrantly undermining a central tenet of his foreign policy. Israel has said it cannot tolerate the presence of Iranian bases near its northern border, but a U.S. evacuation would remove one of the main obstacles to Tehran’s military expansion. The eventual result could be an Israeli-Iranian war that could devastate Syria, Lebanon and Israel itself.*

“Mr. Trump is not without arguments against a longer or deeper U.S. involvement in Syria; President Barack Obama also resisted engagement in ‘someone else’s civil war.’ But the Trump administration has the advantage of having seen the disastrous consequences of previous U.S. passivity; and Mr. Obama’s State Department did at least mount a vigorous diplomatic effort to end the bloodshed.

“American diplomacy failed largely because the United States lacked leverage on the ground and so could not force other parties to bargain honestly or respect agreements. Now Mr. Trump has a powerful card in the form of de facto U.S. control over a quarter of Syria’s territory and most of its oil resources. But rather than use it to advance U.S. strategic aims, he proposes to walk away. There has been no discernible U.S. diplomatic activity; instead, Russia, Iran and Turkey have been meeting on their own to carve up Syria.  ‘Let the other people take care of it now,’ Mr. Trump said last week. He seems not to care that those ‘other people’ are dedicated to harming American interests.”

*At week’s end, it is being reported that Israeli Prime Minister Netanyahu read Trump the riot act on his Syrian withdrawal plans in a phone call between the two leaders. Good.

As for the battle over the eastern Ghouta town of Douma, the UN’s humanitarian adviser for Syria said some 80,000-150,000 civilians were “on their knees” after years of siege and fighting.  Syrian government forces, backed by Russia, have recaptured nearly all of eastern Ghouta, which was the last major rebel enclave on the outskirts of Damascus and the last remaining rebels forces have been negotiating their withdrawal.

Of the nearly 400,000 people besieged in eastern Ghouta for years by Syrian government forces, 130,000 had fled in the last three weeks, according to the UN.

Russia claimed this week that 40,000 have returned to the region.

More than 1,600 civilians were killed since mid-February, according to the Syrian Observatory for Human Rights.

Michael Gerson / Washington Post

“Years of poor decisions – and no decisions – have left a wicked problem in Syria. But U.S. forces are making a difference. And their withdrawal at this point would be an act of strategic imbecility. It would leave Russia as the undisputed power broker at the heart of the Middle East. It would cede oil fields under the control of U.S.-allied forces. And it would reward Iran’s search for regional hegemony. Does Trump even realize the incoherence of objecting to the softness of the Iran nuclear agreement while proposing to surrender Syria to Iran?

“And then there is the radiating humanitarian nightmare. There are perhaps 3 million Syrian refugee children in camps and communities – some traumatized by violence, some bullied and harassed as outsiders, some forced into labor, some subject to radicalization, some 40 percent out of school. Our indifference is storing up generations of resentment and rage.

“The final victory of Iran, Russia and Assad would send a number of clear messages: That mass murder works. That the use of chemical weapons works. That the forced starvation of civilians works. That the rules of war and condemnations by the United States can be ignored with impunity.

“And the slow-motion betrayal of Syria has sent a message to every refugee I met and to every potential friend of our country: It can be dangerous to trust in America.”

Saudi Arabia: In an interview for The Atlantic, Saudi Crown Prince Mohammed bin Salman was asked if he believes that the Jewish people have a right to a nation-state in at least part of their ancestral homeland, and MBS replied: “I believe that each people, anywhere, has a right to live in their peaceful nation. I believe the Palestinians and the Israelis have the right to have their own land.

“But,” he continued, “we have to have a peace agreement to assure the stability for everyone and to have normal relations.”

Any kind of public recognition of Israel’s right to exist in an area associated with ancient Jewish history is rare from a senior Arab leader. Granted, Egypt and Jordan already have some form of peace with Israel, but MBS’ father, King Salman, called President Trump to reaffirm Saudi Arabia’s “steadfast position towards the Palestinian issue and the legitimate rights of the Palestinian people to an independent state with Jerusalem as its capital.”

So it’s about context, and indeed Israel and Saudi Arabia have been nudging closer to each other, including on items such as Air India flights to and from Tel Aviv being allowed to cross Saudi airspace.

Shlomo Avineri / Haaretz

“The 19th century statesman and philosopher Alexis de Tocqueville once remarked that the most dangerous moment for despotic regimes is when they try to carry out reforms. The traditional norms and institutions no longer function, while those that are meant to replace them have yet to become established. He was basically referring to changes that King Louis XVI wanted to introduce in the absolute monarchy, and which led to the violence of the French Revolution and in the end to the execution of the king himself.

“A more proximate example is the attempts by Mikhail Gorbachev to carry out far-reaching reforms in the Soviet regime, which led to the disintegration of the Soviet Union and the ousting of Gorbachev himself from the government. It is quite possible that the steps of the young Saudi Crown Prince Mohammed bin Salman are liable to lead to similar unexpected results.

“Thanks to its tremendous oil wealth, until now Saudi Arabia has been able to disperse huge sums of money among broad swathes of the population, and to maintain the extreme fundamentalist regime, based on the Wahhabi interpretation of Islam....

“(But) the steep decline in oil prices and the shockwaves that followed the Arab Spring – which led to the fall of the rulers in Tunisia, Egypt, Libya and Yemen, and challenged the rule of the Assad family in Syria – were a sign that Saudi Arabia is also in need of change, if only in order to prevent upheavals.

“Mohammed bin Salman won praise worldwide when he declared that he intended to allow women to drive, and at the same time reduced the powers of the Saudi religious police, one of whose jobs was to enforce the dress code in the public space, especially for women.  These were unquestionably positive steps, as were his declarations that he intended to lead Saudi Arabia to practice a less fanatic and more tolerant interpretation of Islam, in terms of its attitude towards Christians and Jews, among other things.

“Even statements attributed to him on the Israeli-Palestinian issue, and reports of Saudi willingness to cooperate with Israel, as limited and clandestine as this may be, were justly appreciated in the West and in Israel. The same is true of his plans to free Saudi Arabia from its exclusive dependence on oil revenues.

“But other steps by the crown prince are problematic. The arrest of hundreds of leading Saudis, including dozens of princes and prominent businessmen, among them several with international status, are presented as a ‘war against corruption’ and were also positively received in intellectual circles in Saudi Arabia itself.

“But this is a campaign that is being waged without any relation to the law or to civil rights – for one because Saudi Arabia lacks any orderly system of laws, and the arrests are not subject to any organized judicial system. The claim that this is the way to restore to the state treasury billions of dollars that were illegally looted is of course popular, but the practical meaning of these steps is the concentration of tremendous economic power in the hands of the crown prince himself, effectively turning him into a sole and autocratic ruler, which was never the case in the kingdom.

“Already now the crown prince is also serving as deputy prime minister, chairman of the economic council and defense minister.  Until now Saudi Arabia had a decentralized government system, which placed very broad powers in the hands of a number of princes, making the king perhaps the first among equals, but not a sole ruler.”

“(MBS) is undoubtedly a reformer, but these are reforms at the end of which he will be the sole ruler of the country....

“We won’t see the birth of a freer and more liberal Saudi Arabia even if women are able to drive cars. On the other hand, Bin Salman’s aggressive moves may lead to resistance from the elites that he is now trying to crush – princes and other influential people – or even from the considerable Shiite minority in the eastern part of the kingdom, which is likely to seek a military or political patron for itself in Iran....

“(The) political solidarity of many Arab countries is fragile and doesn’t always withstand crises.

“It is also possible that the behavior of the crown prince will lead to an armed confrontation with Iran, during which there is no doubt that Iran will defeat Saudi Arabia, which despite all its advanced American equipment is militarily weak and has almost no real army. We can only hope that such a confrontation, if it takes place, won’t drag the region into a more comprehensive war, and it’s important for Israel’s leaders to be aware of that.”

Israel: Prime Minister Netanyahu did an about-face on Tuesday, announcing that he was cancelling the agreement he dramatically announced and advocated less than 24 hours before regarding the African migrants in Israel.

The prime minister’s announcement came at the beginning of a meeting in his office with residents of south Tel Aviv neighborhoods opposed to the policy which would allow some 16,000 African migrants to remain in the country, while another 16,000 would – under an agreement reached with the United Nations High Commission on Refugees (UNHCR) – be absorbed by other western countries.

“Every year I make thousands of decision that benefit the State of Israel and the citizens of Israel,” said Netanyahu. “From time to time a decision is made that needs to be reconsidered.”

As for the violence on the border with Gaza, last Friday’s protests subsided after 15 Palestinians were killed, but then over the weekend, Turkish President Erdogan said Israel was “a terror state” and that Prime Minister Netanyahu was “a terrorist,” after Netanyahu hit back at Turkish criticism of Israel’s response to protests on the Gaza border.

Netanyahu said that the Israeli military “will not be lectured to by someone who for years is bombing civilian populations indiscriminately.”  Morality lessons from Ankara, he said, were apparently an “April Fool’s joke.”

Today, there was a second round of protests on the border, and as I go to post, another nine Palestinians were killed.

Russia: President Trump’s outgoing national security adviser, H.R. McMaster, warned that Russia’s confidence is growing and that “for too long some nations have looked the other way” and not done enough to combat Kremlin-backed “subversion and espionage.”

McMaster used his last public remarks as national security adviser to warn that the response to Russia’s actions, such as the poisoning of the former spy in Britain, had been insufficient.  “Russia employs sophisticated strategies deliberately designed to achieve objectives while falling below the target state’s threshold for a military response. Tactics include infiltrating social media, spreading propaganda, weaponizing information and using other forms of subversion and espionage.

“So for too long some nations have looked the other way in the face of these threats. Russia brazenly and implausibly denies its actions and we have failed to impose sufficient costs.

“The Kremlin’s confidence is growing as its agents conduct their sustained campaigns to undermine our confidence in ourselves and in one another.”  [Daily Telegraph]

The Kremlin said Facebook’s removal of accounts controlled by various Russian media was a hostile move that smacked of censorship. Facebook announced Tuesday it had deleted hundreds of Russian accounts and pages associated with a “troll factory” indicated by U.S. prosecutors for fake activist and political posts in the 2016 U.S. election campaign.

As for reports Presidents Trump and Putin were going to get together for a summit anytime soon, the White House downplayed the prospect, with press secretary Sarah Sanders saying, “We have nothing further to add at this time,” while the Kremlin has been pressing Trump for a meeting, saying Trump proposed it in his congratulatory phone call to Putin on March 20.

Trump had indeed proposed a meeting at the White House, with Putin not having been there since 2005, when President Bush hosted him.  President Obama never invited Putin to the White House, and Putin declined an invitation to Camp David in 2012 for a meeting of what was then called the Group of 8.

Meanwhile, back to Britain and the poisoning of Sergei Skripal and his daughter, both of whom are recovering nicely, Russia told Britain a total of more than 50 of its diplomats will have to leave, after Moscow had initially expelled 23 British diplomats after 23 Russian diplomats were ordered out by London.

And also today, Friday, the Trump administration imposed new sanctions on seven of Russia’s richest men and 17 top government officials in the latest effort to punish Vladimir Putin’s inner circle for interference in the 2016 election and other Russian aggressions.

Among those sanctioned are Oleg V. Deripaska, an oligarch who once had close ties to President Trump’s former campaign manager, Paul Manafort.

These sanctions have been under consideration for some time and had nothing to do with the poisoning case in England.

China / North Korea: North Korean leader Kim Jong Un told Chinese President Xi Jinping during talks in Beijing last week that he agreed to return to six-party talks on his nation’s nuclear program and missile tests, according to the Nikkei newspaper in Tokyo.  According to multiple sources connected to China and North Korea, the report said that Kim agreed to resuming the talks, which were last held in 2009, and that Kim could convey his willingness to resume them to President Trump at their May summit, though who knows if the talks would actually take place.  One thing we do know is that this would be a great way for Kim to drag things out for years, and we still have the major issues of the U.S. troop presence in South Korea and Washington’s so-called nuclear umbrella for South Korea and Japan, both of which Pyongyang wants withdrawn.

Separately, China appears to have banned the ‘Bible’ from being sold online or in large book stores, as Beijing and the Vatican negotiate a historic agreement that would give the Vatican more control over the appointment of bishops in China, though Chinese Catholics believe recognizing Beijing’s role in the Church would represent a betrayal of their faith.

China’s ruling Communist Party is officially atheist, but the Chinese government recognizes Buddhism, Taoism, Islam, Protestantism and Catholicism.

Yet China’s leaders have called for increased efforts to ‘Sinocise’ religion in comments seen as being part of a  wider clampdown on Western ideas.

As for the Bible not being available, authorities have confirmed that warnings have been issued to some online retailers.

I am ticked at Pope Francis for acquiescing in such a manner.  I can’t imagine John Paul II doing so.

South Korea: Park Geun-hye, South Korea’s first female president,  was sentenced to 24 years in prison after being found guilty of crimes ranging from bribery to coercion, abuse of power and the leaking of state secrets.  Prosecutors had been seeking 30 years.  Park can appeal.

But for the former leader, now 66, who was impeached last year over an influence peddling scandal, this is an extraordinary sentence.

The Seoul Central District Court accepted the prosecutors’ argument that Park pressured top executives to donate tens of millions of dollars to a foundation run by Park’s longtime friend, Choi Soon-sil, in return for government favors.

The judges rejected prosecutors’ allegations that Park sought bribes from Samsung in return for government help to solidify Jay Y. Lee’s control of the conglomerate.

Park was the first daughter of Park Chung-hee, who ruled South Korea from 1963 until his assassination in 1979.

Two weeks ago, Park’s predecessor, Lee Myung-bak, was arrested over a separate bribery case before and during his term in office, 2008-2013.

Sri Lanka: From Shashank Bengali / Los Angeles Times

“With Sri Lanka under a state of emergency after a spasm of anti-Muslim bloodshed, lawyer Jeevanee Kariyawasam went on Facebook to complain. The company hadn’t blocked users inciting violence, she wrote, and the government hadn’t arrested those sending out the offending posts. Facebook’s response was swift: It suspended Kariyawasam’s account.

“The company restored her account within 24 hours, but the incident this month highlighted how Facebook has become a powerful vehicle for hate speech worldwide, and how the Silicon Valley giant’s efforts to police incendiary rhetoric in distant countries have often fallen short.

“As Facebook confronts a scandal over data privacy in the United States and Britain, it faces widening criticism in Asia for stoking discord in countries with few legal protections for religious, ethnic and political minorities.

“When a Sri Lankan Facebook user complained this month of a post that said, ‘Kill all Muslims, don’t let even one child of the dogs escape,’ it took the company six days to respond. Then it said the post did not meet its definition of hate speech.

“In Myanmar, United Nations investigators said this month that Facebook had ‘turned into a beast’ by propelling racism and calls to violence against Rohingya Muslims. In Cambodia and the Philippines, authoritarian leaders have used Facebook to disseminate propaganda and whip up animosity toward journalists and political opponents.”

This should infuriate all of you, as it does me.  Here’s hoping Congress this coming week is aware of stories like the above and reduces the mega-billionaire to a puddle of tears.

Random Musings

--Presidential tracking polls....

Gallup: 39% approval for President Trump, 56% disapproval [April 1]
Rasmussen: 47% approval, 52% disapproval.  This is for today, Friday.  Wednesday, the figure was 51% approval and President Trump crowed on Twitter.

“Thank you to Rasmussen for the honest polling. Just hit 50%, which is higher than Cheatin’ Obama at the same time in his Administration.”

Some of us were trying to figure out what he meant by “Cheatin’ Obama.”

--As of Monday, the GoFundMe campaign of former FBI deputy director Andrew McCabe stopped taking donations after the total hit more than $554,000.  McCabe had sought to raise $250,000 for his legal defense.  This is beyond absurd.

--Sinclair Broadcast Group Inc., the nation’s largest owner of broadcast TV stations, came under fire this week for requiring news anchors at dozens of local stations to read a segment saying they were concerned about “the troubling trend of irresponsible, one-sided news stories plaguing our country.”

In the promo, the exact language for which was provided by the parent company, anchors accused national media outlets of publishing “fake stories without checking the facts first.”  The script adds that these journalists are using their platforms to “push their own personal bias and agenda” and are “extremely dangerous to our democracy.”

After the story broke, Sinclair issued a statement Monday that its promotions serve no political agenda and “represent nothing more than an effort to differentiate our award-winning news programming from other, less reliable sources of information.”

Edward Luce / Financial Times...continued from above....

“Mr. Trump has already tilted the playing field towards his media allies. Last week, Americans learned that Sinclair Broadcasting, which is the largest single owner of U.S. local television stations, obliged its anchors to recite a word-for-word jihad against ‘fake news.’ That was Orwellian enough. Less well known is that Trump-appointed regulators have altered competition rules to make it easier for Sinclair’s bid for Tribune Media to succeed. The $3.9bn acquisition would extend Sinclair’s reach to more than 70 percent of U.S. homes.

“The broadcaster’s politics makes Fox News look centrist. Its stations are obliged to air a nearly nightly segment from its ‘terrorism alert desk,’ which keeps viewers in a state of paranoia. A better name for the segment would be ‘fear all Muslims.’....

“(At the same time), under Mr. Trump, the Department of Justice is seeking to block AT&T’s $85bn bid for Time Warner, which owns CNN. Mr. Trump often refers to the channel as the FNN – the Fake News Network.

“Those who think Mr. Trump acts solely on impulse are not paying attention. He is doing what populists always do. They target independent media.  In some cases, such as Victor Orban’s Hungary, they direct state advertising to friendly outlets. In Recep Tayyip Erdogan’s Turkey, they hound independents with tax raids. Regulatory intimidation also works. Mr. Trump keeps telling the world he intends to use such tools. We keep downplaying the risk. This is America, after all. Such things do not happen.

“Yet they already have. Ponder this Ohio State University study. It found that voters who switched from Barack Obama in 2012 to Mr. Trump in 2016 were influenced by three fake stories: Hillary Clinton was suffering from poor health; Pope Francis had endorsed Mr. Trump; and Mrs. Clinton had sold arms to ISIS terrorists. All were essentially false. Together they may have tipped the election, says the report. Mr. Trump is using his powers to ensure more Americans consume more stories like these. It helped elect him once. Why wouldn’t he press the advantage?”

Trump tweet: “The Fake News Networks, those that knowingly have a sick and biased AGENDA, are worried about the competition and quality of Sinclair Broadcast. The ‘Fakers’ at CNN, NBC, ABC & CBS have done so much dishonest reporting that they should only be allowed to get awards for fiction!”

--Related to the above, a new Monmouth University Poll found that 77% of Americans believe that traditional major TV and newspaper media outlets report “fake news,” up from 63% of the public who felt that way last year.

Just 25% say the term “fake news” applies only to stories where the facts are wrong.  Most Americans (65%), on the other hand, say that “fake news’ also applies to how news outlets make editorial decisions about what they choose to report.

Patrick Murray, director of the independent Monmouth University Polling Institute, said: “These findings are troubling, no matter how you define ‘fake news.’ Confidence in an independent fourth estate is a cornerstone of a healthy democracy. Ours appears to be headed for the intensive care unit.”

I’d say with all the carnival barkers we have out there, from President Trump on down, we are headed for hospice care.  This is truly depressing.

At least Monmouth found that President Trump “is trusted less as a source of information than the three cable news outlets – except if you ask Republicans.  For example, nearly half the American public (48%) trusts CNN more than Trump, compared with 35% who trust Trump more than CNN.

--Trump tweet: “Do you believe that the Fake News Media is pushing hard on a story that I am going to replace A.G. Jeff Sessions with EPA Chief Scott Pruitt, who is doing a great job but is TOTALLY under siege? Do people really believe this stuff? So much of the media is dishonest and corrupt!”

--A story in New Jersey’s Star-Ledger Thursday reported there have already been 765 suspected drug deaths this year, according to state data. The state attorney general said, “We’re on pace to far surpass the figures from 2016 and 2017.”  So 2018 is on track to set a record for the third-straight year, with 85 percent of the deaths blamed on opioids.

This week the U.S. Surgeon General urged individuals and families at risk of opioid abuse to keep a medication, naloxone, on hand that reverses the effects of an overdose.  Naloxone has become increasingly available at pharmacies without a prescription and is widely carried by police and emergency personnel.

Surgeon General Jerome Adams cited a 21% increase in opioid overdose deaths from 2015 to 2016, adding, “It is time to make sure more people have access to this lifesaving medication, because 77% of opioid overdose deaths occur outside of a medical setting and more than half occur at home.”

--Rev. Jesse Jackson / New York Times

“As the nation prepares to commemorate the 50th anniversary of the assassination of the Rev. Dr. Martin Luther King Jr., we should dwell not merely on how Dr. King died but also on how he lived.

“He mobilized mass action to win a public accommodations bill and the right to vote.  He led the Montgomery bus boycott and navigated police terror in Birmingham. He got us over the bloodstained bridge in Selma and survived the rocks and bottles and hatred in Chicago. He globalized our struggle to end the war in Vietnam.

“How he lived is why he died.

“As he sought to move beyond desegregation and the right to vote, to focus his work on economic justice, antimilitarism and human rights, the system pushed back hard. In the last months of his life, he was attacked by the government, the press, former allies and the military industrial complex. Even black Democrats turned their backs on him when he challenged the party’s support for the war in Vietnam.

“A growing number of Americans had a negative view of Dr. King in the final years of his life, according to public opinion polls.  A man of peace, he died violently.  A man of love, he died hated by many.

“America loathes marchers but loves martyrs. The bullet in Memphis made Dr. King a martyr for the ages.

“We owe it to Dr. King – and to our children and grandchildren – to commemorate the man in full: a radical, ecumenical, antiwar, pro-immigrant and scholarly champion of the poor who spent much more time marching and going to jail for liberation and justice than he ever spent dreaming about it....

“(Today) we are in a battle for the soul of America, and it’s not enough to admire Dr. King. To admire him is to reduce him to a mere celebrity. It requires no commitment, no action. Those who value justice and equality must have the will and courage to follow him. They must be ready to sacrifice. The struggle continues.”

I’ll never forget what I was doing April 4, 1968.  Back then the living room was the center of activity in our house.  We would get morning and evening newspapers and at age 10, I was already a newshound.  If I wasn’t in my room listening to a Knicks, Rangers or Mets game on the radio, I was lying on the living room floor, listening to the family radio and the favorite station that had good hourly newscasts and that evening we had the bulletin that Dr. Martin Luther King Jr. had been assassinated and I knew more than enough to know the country was about to explode again, having heard all about the riots in my area the summer before in the likes of Newark and Plainfield, the town I was born in but which we had fortuitously left two summers before.

Over the next week following Dr. King’s death, riots in more than 100 cities nationwide left 39 people dead, more than 2,600 injured and 21,000 arrested.  And the year was just getting started.

--Finally, last Feb. 2, Punxsutawney Phil saw his shadow, auguring six more weeks of winter.  February then was a warm month, with record high temperatures, at least in the northeast, but March was beyond awful and now parts of the region are going to see snow this weekend, or over eight weeks later. 

So we tip our hat to Phil, who was said to have just a 36% accuracy record heading into this year. Give the man, err, groundhog, a Yuengling.

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Pray for the men and women of our armed forces...and all the fallen, including those U.S. servicemen we lost in accidents in California and Nevada this week.

God bless America.

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Gold $1337
Oil $61.95...rough week, down from $64.91

Returns for the week 4/2-4/6

Dow Jones  -0.7%  [23932]
S&P 500  -1.4%  [2604]
S&P MidCap  -1.3%
Russell 2000  -1.1%
Nasdaq  -2.1%  [6915]

Returns for the period 1/1/18-4/6/18

Dow Jones  -3.2%
S&P 500  -2.6%
S&P MidCap  -2.5%
Russell 2000  -1.5%
Nasdaq  +0.2%

Bulls 47.6
Bears 18.1 

Dr. Bortrum posted a new column.

Have a great week.

Brian Trumbore

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