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05/05/2018

For the week 4/30-5/4

[Posted 11:30 PM ET, Friday]

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

Edition 995

*The issues on the home front continue.  I came over to my parents' place to watch Mom for the night today, and shortly thereafter we had a power failure that lasted a number of hours.  At least JCP&L took care of it in fairly short order as these things go.  But it’s been stressful times.  Dr. Bortrum is still in rehab, though at least he is doing well. Anyway….

Trump World

I know the Trump supporters want to point to various successes, such as the economy, and potentially on the foreign policy front, but then the occupier of the Oval Office, and some of his associates, keep sticking their foot in their mouth.  The “truth” has become a casualty.

Wednesday night in a shocker, Rudy Giuliani, newly named to be part of President Trump’s legal team, gave an interview to Fox News host Sean Hannity and said the president had reimbursed Trump attorney Michael Cohen for the $130,000 Cohen paid porn star Stormy Daniels, thus contradicting the president’s earlier statements that he knew nothing about the arrangement or payment.

“I’m giving you a fact that you don’t know,” Giuliani said.  “It’s not campaign money. No campaign finance violation. They funneled through a law firm and the president repaid it.”

Giuliani added that Trump “didn’t know about the specifics of it as far as I know but he did know about the general arrangement that Michael would take care of things like this.”

“The president reimbursed that over a period of several months,” he added, and mentioned that Cohen had a $35,000 monthly retainer with Trump.

Trump, asked last month aboard Air Force One about the $130,000, said “No,” he wasn’t aware of it.

Cohen has said he used his own money for the payment to Daniels less than two weeks before the 2016 election as part of a nondisclosure agreement she signed not to talk about the alleged sexual affair she had with Trump in 2006.

President Trump, in a series of tweets Thursday, defended reimbursing the $130,000 to Cohen, arguing that it’s “common among celebrities and people of wealth” and that no campaign money was used.

“Mr. Cohen, an attorney, received a monthly retainer, not from the campaign and having nothing to do with the campaign, from which he entered into, through reimbursement, a private contract between two parties, known as a non-disclosure agreement, or NDA.  These agreements are very common among celebrities and people of wealth. In this case it is in full force and effect and will be used in Arbitration for damages against Ms. Clifford (Daniels).

“The agreement was used to stop the false and extortionist accusations made by her about an affair despite already having signed a detailed letter admitting that there was no affair.

“Prior to this violation by Ms. Clifford and her attorney, this was a private agreement.  Money from the campaign, or campaign contributions, played no roll* (sic) in this transaction.”

*Ed. from the self-proclaimed ‘first in his class’ at Wharton student, as Trump stated this week at the swearing in of Mike Pompeo as secretary of state.

Meanwhile, the New York Times reported on questions that Mueller wants to ask Trump, such as in the firing of former FBI director James Comey.

“Those are all questions intended to trap him in some weight and contradicting what is in fact a very, very solid explanation of what happened.  He fired Comey because Comey would not, among other things, say that he wasn’t a target of the investigation,” Rudy Giuliani said.

Wednesday also saw a report in POLITICO that Ivanka Trump is a target of the probe, leading Giuliani to wax on about her and the differences between men and women.

“Ivanka Trump?  I think I would get on my charger and go right into – run into their offices with a lance if they go after Ivanka,” he said.

Giuliani, though, had a different standard for Ivanka’s husband, Jared Kushner, also a reported target.  “Jared is a fine man, you know that.  But men are, you know, disposable. A fine woman like Ivanka, come on.”

Thursday, Giuliani told ABC News that there was a “50/50” chance the Special Counsel Robert Mueller would subpoena President Trump in order to compel him to testify in the Russia probe, Giuliani adding, “But I got to prepare for that 50 percent.”

Back to the issue of the $130,000, Giuliani said Thursday, “I think the investigation with him [Michael Cohen] largely fell apart, with the loss of the campaign finance possible violation which never existed in the first place, but they sure thought it did.”

The former NYC mayor also said: “They’re going to close the investigation within a month and a half or two months of the interview.  We’ll get all the questions in advance, we’ll knock it down to about half of what they wanted to ask.”

In an interview with Reuters, Giuliani thought if Trump agreed to a sit down with Mueller’s team, it should be limited to a few hours.  Asked what questions might be appropriate, Giuliani suggested two: “Was there some agreement with the Russians?  Was there any meeting of Trump with the Russians?” 

What became clear the past few days is that President Trump and Giuliani hatched this high-risk plan to disclose on live television that the president had reimbursed Cohen after all, but according to all the news sources, this left senior aides in the White House and the rest of his legal team “stunned,” as described in the account from the Wall Street Journal.

White House press secretary Sarah Sanders, who for months has told reporters that Trump had no knowledge of the payment, said Thursday that the first time she learned the president had reimbursed Mr. Cohen was from Giuliani’s interview on Wednesday.

Trump reportedly added Giuliani to his legal team because he wanted a stronger TV presence who could adopt a more aggressive approach to the Mueller investigation.

But then...Friday morning...on his way to Dallas for a speech at the National Rifle Association convention, Trump talked to reporters and totally undercut his attorney, Mr. Giuliani, saying he would eventually get the facts right regarding the payment to Stormy.

Giuliani, who joined Trump’s legal team last month, “started a day ago,” Trump said.  “He’s a great guy. He’ll get his facts straight.”

In the tweets following Giuliani’s interview on Fox News, though, Trump backed Giuliani. But, on Friday, the president said that everything said about the transaction “has been said incorrectly.”

“It’s actually very simple,” the president said, without elaborating.  Trump said the media got it wrong.  Then Giuliani issued a statement trying to clarify his remarks and only made it worse.

Editorial / Wall Street Journal

“Most storms pass eventually. This week Donald Trump tried to ensure that Stormy Daniels doesn’t rain down permanent distraction on his Presidency, though at the cost of further damage to his credibility.

“Mr. Trump contradicted his previous statements that he had no knowledge of payments that his lawyer had made to Ms. Daniels – the pornographic-movie actress whose real name is Stephanie Clifford – to quell stories of an alleged affair.

“Speaking in his new role as Mr. Trump’s lawyer, former New York City Mayor Rudy Giuliani disclosed that Mr. Trump made a series of payments to reimburse lawyer Michael Cohen, who had paid Ms. Clifford $130,000 as part of a non-disclosure agreement late in the 2016 presidential campaign....

“The apparent reason for these contortions (Ed. in Trump’s explanatory tweets) is the possibility that the payments if made by Mr. Cohen would have exceeded federal campaign-finance donation limits. We have long criticized the arcana of campaign-finance rules, but they are the law and carry real criminal penalties. That is why presidential candidates hire squads of lawyers to flyspeck donations during a campaign.

“Messrs. Trump and Giuliani are arguing that Mr. Trump’s payments to Ms. Clifford were made for reasons that fall outside Mr. Trump’s presidential campaign. And perhaps these admissions will lessen Mr. Trump’s legal vulnerability.

“What remains is the political damage. Attempting to quiet a similar storm in 1998, President Bill Clinton said, ‘I did not have sexual relations with that woman, Miss Lewinsky.’  Many of Mr. Clinton’s political supporters were unmoved by the allegations against him. Similarly now, Mr. Trump’s most ardent backers believe these charges aren’t relevant to his public initiatives as President.

“That may be true regarding whether Mr. Trump had an affair more than a decade ago. Voters in 2016 knew Mr. Trump was no choir boy, and the irony is that news of an affair would probably have made no difference in his race against Hillary Clinton, who was Bill Clinton’s wife and chief defender.

“But Mr. Trump’s public deceptions are surely relevant to his job as President, and the attempted cover-up has done greater harm than any affair would have. Mr. Trump asked Americans, not least his supporters, to believe his claims about the payments. They were false and conveniently so in putting the onus on Mr. Cohen. Now, as more of the story has emerged, he wants everyone to believe a new story that he could have told the first time.

“Mr. Trump is compiling a record that increases the likelihood that few will believe him during a genuine crisis – say, a dispute over speaking with special counsel Robert Mueller or a nuclear showdown with Kim Jong Un. Mr. Trump should worry that Americans will stop believing anything he says.”

Trumpets....

--Emmet Flood replaced the “retiring” Ty Cobb on President Trump’s legal team, Cobb having taken a cooperative approach toward the Russia investigation. Cobb had worked to bring the investigation to a speedy close by turning over more than 20,000 documents requested by Robert Mueller.  Cobb was also amenable to the prospect of Trump being interviewed.

Cobb has routinely urged Trump not to fire Mueller or any other top Justice Department officials. Flood is a longtime Washington lawyer who down the road could succeed current White House counsel Don McGahn.  Flood helped represent Bill Clinton in the impeachment proceedings.

The Wall Street Journal reported that back on March 5, Mueller and John Dowd, then Mr. Trump’s lead outside attorney, held a meeting and discussed a possible interview.  “During the conversation, Mr. Mueller said that if Mr. Trump refused an interview, the special counsel’s office would give him a grand jury subpoena in an attempt to compel his testimony.”

Dowd vowed to fight a subpoena “all the way to the Supreme Court” – a legal battle that would take years to play out, “while assuring Mueller the president would never talk to him under those circumstances.”

--Trump tweets: “There was no Collusion (it is a Hoax) and there is no Obstruction of Justice (that is a setup & trap). What there is is Negotiations going on with North Korea over Nuclear War, Negotiations going on with China over Trade Deficits, Negotiations on NAFTA, and much more. Witch Hunt!”

“A Rigged System – They don’t want to turn over Documents to Congress. What are they afraid of?  Why so much redacting? Why such unequal ‘justice?’ At some point I will have no choice but to use the powers granted to the Presidency and get involved!”

“So disgraceful that the questions concerning the Russian Witch Hunt were ‘leaked’ to the media. No questions on Collusion. Oh, I see...you have a made up, phony crime, Collusion, that never existed, and an investigation begun with illegally leaked classified information. Nice!”

--Trump’s former doctor, Harold Bornstein, told CNN he did not write a 2015 letter declaring the then-Republican presidential candidate’s “astonishing, excellent” health.  “[Trump] dictated that whole letter,” Bornstein said.

Bornstein also said that Trump’s bodyguard, Keith Schiller, and a Trump Organization lawyer had carried out a “raid” on his offices in February 2017, removing all of then-President Trump’s medical records.  It wasn’t clear why Bornstein made this allegation now, but he added the president was no doubt upset over Bornstein’s revelation that the president used a drug to help grow his hair.

Back to the 2015 report, Trump had tweeted weeks ahead of its release that Bornstein’s medical report would show “perfection.”

There was nothing illegal about the president getting hold of his records once he was in office.  It’s just the manner, if true, that was so Trumpian.

Wall Street

Earnings are great, perhaps up 24% on the S&P 500, somewhere in that range, and revenues, most encouragingly, are up 8% or so for the first quarter thus far.  That’s strong.

But commodities are up, wages too (though still not as much as they should  be), and investors are always looking ahead and see  margin pressures on the horizon, perhaps.  So some think, this is as good as it gets, because the economic data has been so-so of late.

And then there’s the trade issue…self-inflicted at that.  Of course there are some trade imbalances between the United States and its partners, but the master deal-maker in the White House just doesn’t understand the topic and he has been making things worse by the day.

Start with the premise, free trade has elevated living standards around the world, and thus literally billions more can now buy our goods…and U.S. consumers have gotten a good deal in return in lower prices.  No doubt, some of the dislocations have been severe, and not good, and President Trump is right to try and cut better deals with some countries.

But trade is not the zero-sum game he makes it out to be.  And I hope he’s learned his lesson with China in terms of dealing with his buddy, President Xi Jinping.  I keep saying, this guy is hardly a friend of the United States, and he proved it this week by refusing to meet with the high-powered trade delegation that President Trump sent to Beijing, ditto China’s vice president.  My initial reading of it as I go to post and the first stories emerge is that it was a mini-disaster, with the U.S. asking for $200 billion in Chinese trade concessions and China in turn asking for an easing of national-security reviews of Chinese companies trying to do business, or make acquisitions in this country.  Mission not accomplished.

The Chinese are bastards, witness some of the news down below on the military front.  Some of us have known for a long time that China is the ultimate threat to our country (Florida Republican Sen. Marco Rubio sure gets it), but President Trump doesn’t.  And some in Corporate America don’t either.

Trump, playing carnival barker, said on Friday, “We’re going to have some incredible trade deals announced,” once again adding he had “great respect” for President Xi.  Trump then told reporters, “That’s why we’re being so nice, because we have a great relationship.”

They’re freakin’ shining lasers in our fighter pilots’ eyes, Mr. President!

Meanwhile, you have the new deadline of June 1 for the likes of Europe, Mexico and Canada when it comes to the steel and aluminum tariffs, President Trump having issued a 30-day extension on his original deadline.  My man in the know on the steel front, Brad K., a steel pool manufacturer, noted all such companies face across the board price increases of 9-11%. Companies and manufacturers plan ahead.  Steel buyers of all grades have nowhere to turn for a lower price.  “For a full week, the lone mill I buy directly from won’t respond/reply to any update I ask for.  Buying mill direct provides ability to see where one’s order is, while in process.  Unlike sneakers, where a clerk goes back to mystery room where by luck your size is found, steel in process spans weeks involving stages that are documented. My May steel tonnage...nothing. Perhaps they are out of my size?”

It’s a classic example of Trump’s rhetoric and unintended consequences.

Editorial / Wall Street Journal

“When in doubt about government policy, businesses get cautious.  They hold back investment or slow down purchases. This is one of the great lessons of the last administration.   Barack Obama imposed record levels of regulation and periodically threatened new taxes. Mr. Trump has reduced those threats, but his tariffs and antitrade rhetoric are creating new worries.

“Mr. Trump and his trade apologists claim all of this is merely canny negotiating, and perhaps the President even believes it. But CEOs can’t make decisions out of his head.  They have to decide to invest or not, or make purchases or not, based on commercial reality.  And the evidence is growing that Mr. Trump’s trade policies are harming U.S. manufacturers and reducing the economic growth he promised voters.”

Moving along, the Federal Reserve held one of its Open Market Committee meetings and signaled it is getting more confident in the inflation outlook as it prepares for further increases in short-term interest rates in the coming months.

The Fed said on Wednesday that price growth has moved close to its target and is likely to stay there in the medium term.

Policymakers dropped language in previous post-meeting statements that said they were closely monitoring inflation. “Inflation on a 12-month basis is expected to run near the Committee’s symmetric 2 percent objective over the medium term,” adding that the risks to the outlook were “roughly balanced.”

Headline inflation is now at the Fed’s target of 2 percent and rates are going up another quarter-point at its next meeting on June 12-13, this much is certain. The question is do we get one or two more hikes the rest of the year after June.

Ian Shepherdson, economist at Pantheon Macroeconomics, was one of many pointing to use of the word “symmetric” in the Fed statement, concluding that he doesn’t expect a reaction to higher inflation over the summer.  [An expected surge in health-care related data could lift the core PCE inflation barometer above 2%, but then it is expected to fall back towards year end.]

The biggest issue is does the economy overheat, and towards that end, the April jobs report, released today, was tame, the economy adding 164,000 jobs, below consensus, while the unemployment rate ticked down to 3.9%, the lowest since 2000, and the underemployment rate, U6, was 7.8%, its lowest since Dec. 2001.  Average hourly earnings rose just 0.1%, but are up 2.6% year-over-year.

Separately, March personal income was 0.3%, while consumption was 0.4%, both as expected.  The aforementioned personal consumption expenditures index (PCE), the Fed’s preferred inflation barometer, came in at 2.0%, while the core rate, ex-food and energy, was 1.9%.

The ISM readings on manufacturing and services were solid, 57.3 and 56.8, but down from prior readings, ditto Chicago for April, 57.6,

Europe and Asia

We had the final April PMI figures for the eurozone (EA19), courtesy of IHS Markit, and the composite index was 55.1, vs. 55.2 in March (50 being the dividing line between growth and contraction). The manufacturing PMI for the EA19 was 56.2 last month, vs. 56.6 in March, while the services reading was 54.7 vs. 54.9 in March.

Germany’s manufacturing PMI was 58.1 in April, a 9-mo. low, with services at 53.0, a 19-mo. low.
Spain came in at 54.4 mfg., a 7-mo. low, and 55.6 on services.
France was 53.8 mfg., 57.4 services.
Italy 53.5 mfg., a 15-mo. low, 52.6 services.

So eurozone economic activity is still robust, but growth has downshifted some.

Chris Williamson / Chief Economist, IHS Markit:

“The final PMI numbers confirm the marked, broad-based fading of the eurozone’s growth spurt so far this year. The headline index has fallen from an eleven-and-a-half year peak in January to a 15-month low in April. Despite the drop, the PMI is not yet at a worryingly low level, but the survey details hint at further easing in the coming months.

“While the expansion signaled by April’s PMI is disappointing relative to the elevated levels seen at the start of the year, the survey remains indicative of the eurozone economy growing at a robust quarterly rate of 0.5-0.6%. Employment growth is also still booming, with the rate of job creation in the service sector at its highest for over a decade.

“Employment is a lagging indicator, however, and two reliable leading indicators have turned down, suggesting that both output and hiring trends will weaken further, at least into May. First, backlogs of uncompleted orders grew at the slowest rate for eight months. Second, companies’ expectations about future output hit a five-month low. Any further deterioration could herald new concerns among policymakers regarding the economic outlook.”

Separately, GDP was up by 0.4% in the euro area for the first quarter, per a flash estimate from Eurostat, up 2.5% vs. the first quarter of 2017.  Not too shabby.

A flash estimate on euro area annual inflation for April ticked down to 1.2% from March’s 1.3%, and vs. 1.9% in April 2017. The core rate, ex-food and energy, was just 1.1%, so the euro bond market rallied (for a day) as it’s yet another data point that keeps the European Central Bank on hold. While it will eventually end its bond-buying program should growth continue at a solid pace, the ECB is not raising its benchmark interest rate off the zero mark until well into 2019.

Euro area unemployment came in at 8.5% for March, stable compared with February 2018 and down from 9.4% in March 2017.  [Germany was at 3.4%, France 8.8%, Spain 16.1% and Italy 11.0%.]

One more, the volume of retail trade rose just 0.1% in the euro area in March compared with February, up 0.8% year-over-year.

The European Union issued an upbeat economic outlook for the eurozone Thursday, but warned of rising risks from President Trump’s protectionist trade policies, which the EU’s executive – the European Commission – described as an “unambiguously negative risk.”

Eurobits....

--On the Brexit front, Prime Minister Theresa May is facing a crisis after pro-Brexit ministers paired up with Conservative hardliners to demand a clean break from the European Union’s customs system, while Mrs. May favors a compromise solution. It is still possible that rebels in her party could destroy her government.

As noted in Bloomberg: “It was a reflection of May’s impossible position: Before she can even start trying to sell a deal to the EU, she has to find a proposal that both her Cabinet and Parliament will support. Both are fundamentally split, with each side strong enough to block a plan, but not to push one through.

“May has so far survived by avoiding a final confrontation with either side.  So it was no surprise that the so-called ‘War Cabinet’ put off its decision once again on Wednesday afternoon....

“May reiterated that she wanted to leave the EU’s customs union, and then set out once again her red lines for any new deal: There should be no hard border between Ireland and Northern Ireland, no border between Northern Ireland and the rest of the U.K., Britain should be able to negotiate its own trade deals, and trade with the EU should be as frictionless as possible.”

For its part, the EU is growing impatient.

Turning to Asia...we had the April PMI readings for China. The official government reading on manufacturing was 51.4 vs. 51.5 in March, with the service sector at 54.8 vs. 54.6.

The private Caixin–Markit manufacturing index rose to 51.1 vs. 51.0, so uniformity with the government figure, while the Caixin services reading was 52.9, up from 52.3 in March.

But with a trade war between China and the U.S. still brewing, export orders fell for the first time since November 2016 last month.  Companies said concerns over future export sales as well as subdued demand had weighed on their outlook for the coming 12 months.

In Japan, the April PMI on manufacturing was 53.8 vs. 53.1 the prior month, with the service number rising solidly to 52.5 from 50.9.

[Two other manufacturing PMIs for April...Taiwan was at 54.8, but South Korea was 48.4, contraction mode.]

Street Bytes

--Stocks finished mixed, with the Dow Jones and S&P 500 losing 0.2%, while Nasdaq picked up 1.3%.

--U.S. Treasury Yields

6-mo. 2.02%  2-yr. 2.50%  10-yr. 2.95%  30-yr. 3.12%

--Most major automakers posted lower U.S. sales in April with demand weakening some.  But overall, Autodata said the sales pace was still at an annualized 17.15 million, the eighth straight month over 17m, which is very solid, and compared with 17.04 million a year ago.  Last year, U.S. auto sales fell 2% after hitting a record high of 17.55 million units in 2016.

Ford reported a 4.7% decline in sales compared to April 2017, with retail sales to consumers down 2.6%.  The best-selling F-Series pickup truck saw sales rise 3.5%, however, with SUV and passenger car sales down 4.6% and 15% respectively.

No. 1 General Motors announced last month it would no longer report monthly sales and instead will just post them on a quarterly basis. [Ford said it would continue to post monthly figures.]

Fiat Chrysler was alone among the top sellers in the U.S. in posting an overall sales increase of 5%, but this was due to higher fleet sales to rental car companies and government agencies.  Ram pickup truck sales were down 9%.

Toyota posted a 4.7% decline in sales, with a 1.5% increase in SUV and pickup truck sales offset by a 12.7% drop in passenger car sales.

Honda Motor Co. saw April sales decline 9.2%, with car sales off 14.4%.  The all-new version of the flagship Accord plunged 19.3%, despite mostly rave reviews.

Nissan Motor Co.’s sales fell 28%, with passenger car sales plunging 35%.

So you look at the Japanese sales for passenger cars in the U.S. these days and they are troubling for Toyota, Honda and Nissan, the sedan being the bread-and-butter car for them since they entered the U.S. market decades ago.

The companies have resorted to deep discounting, as in the case of Toyota’s Camry.  It sold nearly 30,000 last month in the U.S. but with an average incentive of $2,483, according to analysis by Jefferies.  That’s a big bite for a car with a suggested retail price of $23,495.

Nissan’s offered incentives on its Altima of $3,445 in April, according to Jefferies, yet sales fell 49% over a year ago.

Now if gas prices at the pump continue to rise, we could see a different story down the road, though today’s SUVs, especially crossovers, are more fuel efficient than past models.

--Tesla CEO Elon Musk picked up a lot of publicity Wednesday for all the wrong reasons, as he was a total asshole on the company’s earnings conference call with analysts, especially when pressed for details on its cash-burn rate.

Tesla burned through another $1 billion in the first quarter, but the electric-car maker will generate cash in the second half of the year as it gains traction producing the Model 3, Musk told shareholders.  Tesla said it is resolving production issues that have plagued the cheapest vehicle and said it would be producing 5,000 a week in about two months.

After Tesla released its shareholder letter, that contained the positives, the shares dropped after the quarterly call as Musk cut off several analysts’ questions, calling them “so dry” and “not cool.”

In the letter Musk wrote: “We have good visibility of our path to fully ramp and stabilize Model 3 production this year. The path to an electrified revolution is not easy, but what we’re trying to achieve is worth fighting for.”

But the company has gone through more than $1 billion+ in cash for the third time in the last four quarters.  Tesla had $2.67 billion in cash on hand at the end of the first quarter.  Tesla did say problems plaguing its battery module line have been resolved.

So Musk said he won’t need to go back to equity or debt markets this year for additional funds, which analysts still doubt.  One well-known figure, Tony Sacconaghi of Sanford C. Bernstein, who rates Tesla the equivalent of a hold, asked a question about whether the company could reach its 25% gross margin target on the Model 3.  Musk replied, “Don’t make a federal case out of it,” after the CFO pointed out some roadblocks, like higher labor costs and recently imposed tariffs.

When Sacconaghi questioned the issue of raising more capital, Musk told the call operator: “Excuse me.  Next. Next. Boring, bonehead questions are not cool. Next?”

After another analyst inquired as to the number of Model 3 reservation holders, Musk said “We’re going to YouTube,” referring to the owner of a channel who lobbied Musk ahead of time for the chance to ask questions on behalf of retail investors.

“Sorry,” Musk said, “these questions are so dry. They’re killing me.”

--The country’s No. 3 and No. 4 wireless carriers by subscribers, T-Mobile US Inc. and Sprint Corp. signed the merger agreement that had eluded them for years.  The $26.5 billion all-stock union has long been rumored, with the last aborted attempt in 2014 after government officials told executives they weren’t likely to approve the deal.

So why will they now? The deal would leave the U.S. with three national wireless network operators, a scenario that Obama administration regulators opposed.  Sprint and T-Mobile said they don’t expect the proposed merger to close until next year.

[Verizon would have a customer base of 116 million, Sprint/T-Mobile 100 million, and AT&T 93 million.  On the revenue front, Verizon $88 billion in annuals sales, the combined company $74 billion, and AT&T $71 billion.]

Sprint and T-Mobile argue their situation is different from a few years ago. There are other smaller competitors, such as Comcast and Altice USA, now selling their customers cellphone plans that compete for wireless customers, though they still rely on Sprint and Verizon to run their networks.

Sprint and T-Mobile are also highlighting their plans to speed the rollout of fifth-generation, or 5G, networks in the U.S. and pledged to create U.S. jobs, two themes that should curry favor with the White House.

--Apple announced it would buy back an additional $100 billion in stock, part of a previously announced $252 billion it has brought back that had been held overseas under the new tax law. Investors have been wondering since the January announcement just what Apple would do with the haul.  But Apple didn’t provide a timeline for the repurchase.  The company also increased its dividend by 16 percent to 73 cents a share.

There are lots of critics of buybacks, which are seen by some as nothing more than manipulating the share price vs. reinvesting in the company and its employees.

Meanwhile, Apple said its profit increased 25 percent to $13.8 billion for the quarter, $2.73 a share, or six cents better than the Street projected. Revenue rose 16 percent to $61.1 billion.

The three months ending in March were Apple’s first full quarter selling its flagship iPhone X  There were concerns, mainly on the results of Apple’s suppliers, that the X, and its sister iPhone 8 and 8 Plus had failed to meet expectations, and Apple sold 52 million iPhones in the quarter, or 3 percent more than a year earlier.  But iPhone revenue was up 14 percent because of an increase in the average price.

The iPhone accounts for 62 percent of the company’s overall revenue and CEO Tim Cook said, “I don’t buy the view that the market is saturated.”

As for China, which I’ve been harping on for years, Apple said revenue in mainland China, Taiwan and Hong Kong had risen 21 percent to $13 billion, the largest increase in 10 quarters.

Apple’s services revenue, which includes iCloud and Apple Music subscriptions and its share of app sales, rose 31 percent to $9.2 billion.  Apple said consumers had paid for more than 270 million subscriptions for its services or ones sold via its App Store, up from roughly 170 million a year earlier.

The division that includes Apple’s smartwatches and AirPods wireless earbuds also saw revenue rise 38% to $3.95 billion in the period.

So all in all, an excellent report and the shares rallied.  But the smartphone market is clearly stagnating, worldwide, so it’s incumbent that Apple continue to grow its services revenues (much like Amazon needs its cloud division, which has a much-higher profit margin than its consumer biz, needs it to grow at a healthy clip).

As for Apple and China, I am not changing my stance one iota.  In today’s trade environment, it’s tension city.  Apple can be severely impacted and is at the whims of one President Xi Jinping.

--Chinese smartphone maker Xiaomi has filed to list on Hong Kong’s stock market, in a move that is expected to raise up to $10bn, which would be the world’s biggest debut in 2018, and the largest since fellow China tech giant Alibaba’s $25bn raise in 2014.

The decision to list in Hong Kong is a huge boost for that market as it competes against the likes of New York and Shanghai.

Xiaomi, aside from being a major player in China, has taken on Samsung for dominance in India.

--McDonald’s continues to rock and roll, beating revenue and profit expectations in the first quarter, and posting an 11th consecutive quarter of same-store sales growth.  But although U.S. comp store growth was a solid 2.9%, it was driven by menu price increases and higher-priced menu items, not by customer visits.

Plus 2.9% was less than the 4.5% McDonald’s posted in the fourth quarter.

Global comp sales rose 5.5%, well ahead of analysts’ forecasts.

About now I have a hankering for a Big Mac.

--Shares in Snap, parent of Snapchat, slumped more than 22% to hit a new record low after the company confirmed Wall Street fears that a controversial redesign of its flagship disappearing photo and video app has caused a drop in audience numbers.  The stock, now $11, is down more than 35% from its initial public offering price of $17.  [The day of its debut, March 2017, the shares hit a high of $29.44.]

--For all the talk on the campaign trail about pledging to bring about jobs in the coal industry, just 800, net, have been created since Trump’s inauguration.

But the industry is doing well as some of the bigger players like Peabody Energy and Alpha Natural Resources have emerged from bankruptcy, or had their assets bought by other companies.  The new companies are slimmed down, but with a greater chance of survival, even as the amount of electricity generated from coal in the US dropped by 2 percent last year, and is expected to fall further this year.

The difference has come from a surge in demand in international markets, for  use in both power plants and blast furnaces to make steel.  Demand is up from the likes of India, South Korea and Japan. The pickup in coal used for the production of steel has nothing to do with Trump administration policies, but rather a confluence of factors, including a severe cyclone that hit eastern Australia last year, causing widespread disruption to much of the country’s “met” coal production, and it has struggled to make up for the shortfall.

Separately, China has been curbing its production, even as demand has grown, to help meet pollution targets.  [Ed Crooks / Financial Times]

--Back to the issue of share buybacks, Goldman Sachs analysts estimated capital expenditures, capex, will rise 11 percent this year among S&P 500 companies, similar to the growth rate for dividends and research and development budgets, but there would be a 23 percent increase in spending on buybacks, as a result of corporate tax reform.

--Volkswagen’s former chief executive faces U.S. charges for his alleged role in the automaker’s emissions-cheating scandal that cost VW $billions in penalties and damaged its reputation.

Martin Winterkorn, who served as Volkswagen’s CEO from 2007 to 2015, was charged with conspiracy and wire fraud.  Last month, the company ousted CEO Matthias Muller, who had replaced Winterkorn, after he lost favor with shareholders.

Winterkorn faces serious jail time.

--CBS, amid the public melodrama concerning a possible merger with Viacom and National Amusements, their holding company, reported revenues for the first quarter that set a record, $3.76 billion, up 13%, with earnings per share handily topping estimates.  CEO Les Moonves promised record results for the year.

CBS took care to emphasize the success of its streaming services, CBS All Access and Showtime, which are expanding “while others are just entering this business.”

--Shares in Molson Coors touched a four-year low on Wednesday after the beer giant behind brands like Coors Light, Miller Lite and Molson Canadian reported slipping sales as liquor and craft beers continue to grab market share.

Molson Coors’ sales dropped 4.8% in the three months to the end of March, coming in at $2.33bn, with adjusted earnings down 40%.  The company said its U.S. brand volume declined 3.8% over the quarter.

--Facebook’s data practices continue to cause problems, and this time within the company.

Jan Koum, chief executive of the popular chat app WhatsApp, which Facebook purchased for $19 billion in 2014, is leaving the company after Facebook has repeatedly tried to use WhatsApp members’ personal data, according to the Washington Post.

Koum, who didn’t announce a departure data, will also step down from Facebook’s board of directors.

The original scandal involving Cambridge Analytica (which went out of business this week) led to WhatsApp co-founder Brian Acton to delete his profile on the social network.

--Google parent Alphabet Inc. said its workers earned a median pay package of more than $197,000 last year, the fourth-highest pay among the hundreds of companies in the S&P 500 index that have disclosed those figures.  Alphabet’s median pay was about 18% lower than at rival internet giant Facebook Inc., where employees earned a median salary of $240,000.

The highest median pay reported in the S&P 500 so far was by Incyte Corp., a Wilmington, Del., biotech firm with 1,208 employees. Incyte’s median pay was about $253,000.  Vertex Pharmaceuticals was third highest, below Facebook and above Alphabet, at more than $211,000.  [Douglas MacMillan / Wall Street Journal]

--To me, Macau’s gambling revenues have always been a good barometer for China’s economy.  But President Xi’s crackdown on corruption led to a big downfall in 2015-16, with Macau now firmly in recovery mode.

Gaming revenues jumped 27.6 percent year on year in April, the 21st consecutive month of growth.  Total revenues are up 22.2 percent for the first four months, according to the city’s Gaming Inspection and Coordination Bureau.

--From Jo Craven McGinty of the Wall Street Journal:

“When the left engine of Southwest Flight 1380 broke apart last week, shattering a window of the aircraft and causing the Boeing 737 to lose cabin pressure, the pilots pushed the nose of the plane down and zoomed from 32,500 feet to 10,000 feet in about eight minutes.

“The abrupt dive led some passengers to describe the change in altitude as a free fall. But pilots appear to have executed a perfect emergency descent.

“The reason for the steep drop was straightforward: Without enough oxygen, everyone aboard the plane could lose consciousness.

“At 35,000 feet, the duration of useful consciousness – the length of time pilots can perform their duties efficiently while deprived of adequate oxygen – is no more than 60 seconds. At 30,000 feet, they can hang on for as long as three minutes. At 10,000 feet, the air is breathable.

“Masks provide pilots with pressurized oxygen that could last several hours, but passengers receive only 10 to 20 minutes of oxygen with no pressure. At more than 30,000 feet, even with the air flowing, they’re in an emergency situation, so when an airplane’s cabin depressurizes, the goal is to quickly descend to an altitude where people can breathe.

“ ‘You can’t do it slower,’ said Chris Manno, a former Air Force pilot who now flies 737s for American Airlines.  ‘You have to get to a habitable altitude as soon as possible.’”

--Guitar-maker Gibson Brands Inc. filed for bankruptcy protection Tuesday as the company has struggled with its debt load after a series of acquisitions. Gibson said it will continue to operate during the proceedings as it focuses on reorganizing around its core businesses, musical instruments, vs. the Gibson’s Innovations business, which had acquired various equipment makers, like Royal Phillips’s home-entertainment systems, and TEAC and Onkyo stereos.

--“Avengers: Infinity War” kicked off the summer movie season, giving Walt Disney Co. the largest North American and global debuts in history. The film took in a record $630 million worldwide, according to ComScore Inc.  An estimated $250 million of that was collected in U.S. and Canadian theaters, better than expected, while the film also earned $380 million overseas.

And the movie had yet to open in China, the second biggest box office, where it debuts May 11.

“Infinity War” cost $300 million to make, according to Bloomberg Intelligence, and many millions more to market.

--What a mess at NBC News, the latest being the Tom Brokaw debacle.  A third woman came forward to accuse the veteran anchor of making an unwanted advance toward her when she was a young reporter many years ago. Freelance writer Mary Reinholz alleges Brokaw French kissed her inside her L.A. home during the 1960s.

“Brokaw made a pass at me 50 years ago...I pulled away, reminding him that he was married and a tryst was out of the question,” Reinholz wrote in a piece for the Villager.

“He said, ‘Yes, it would be unfair to Meredith,’ meaning his wife.”

But do you believe this detailed account from 50 years ago?  I sure as heck don’t.

Meanwhile, some female staffers at NBC News are complaining they felt under huge pressure to sign the “women’s letter” defending Brokaw against sexual harassment allegations, including that of former colleague Linda Vester. 

115 women signed the letter hailing Brokaw as “a man of tremendous decency and integrity.” Rachel Maddow, Mika Brzezinski, Andrea Mitchell and Maria Shriver were among those backing the former anchor after he angrily denied Vester’s claims, likening them to “a drive by shooting.”

But some said the women were signing without knowing the facts, and it would scare future women from coming forward.  Megyn Kelly cautioned: “You don’t know what you don’t know.”

NBC said it won’t be launching a full internal investigation.

[Separately, the Charlie Rose scandal at CBS News continues to explode.]

--We note the passing of designer Art Paul, 93, who created Playboy’s famous tuxedoed bunny head logo.

Paul was a freelance illustrator when he started working with Playboy founder Hugh Hefner as the magazine’s first employee in the 1950s.  He said he came up with the bunny logo in about an hour.  Paul also hired other artists to create illustrations for Playboy, including Salvador Dali, Andy Warhol and Shel Silverstein. He was the magazine’s art director until he retired in 1982.

Paul told the Chicago Sun-Times, “We didn’t think it would be such a success right from the beginning, just Hefner and I putting it together. Hef was kind to me. I think I gave him a lot. He gave me a lot.”

Christie Hefner said, “Art deserves the credit for the illustrator’s liberation. He helped redefine the whole notion of commercial art as being able to be as well-regarded and legitimate as high art.”

--I loved this story from the AP.  “A 7-Eleven in California has found a way to keep people from panhandling and loitering outside the store: crank up classical music.

“Sukhi Sandhu, who owns the franchise in Modesto, said his customers tell him they feel safer since he started blasting symphonies and occasional operas over outdoor speakers.

“ ‘Once the music started, the riffraff left,’ said Manuel Souza, who’s homeless and jokingly referred to himself as part of the riffraff.  The loud music makes it hard ‘to hang out and gossip and joke around’ near the store.”

I’m surprised the riffraff doesn’t hang around to weigh in on the question: “Which is better? Rachmaninoff’s Piano Concerto No. 2 or No. 3?”  Personally, I go with 2.

Foreign Affairs

Iran: In a brilliant performance on Monday, Israeli Prime Minister Benjamin Netanyahu, standing in front of a screen with the words “Iran Lied,” revealed a cache of documents he says prove Iran lied to the world and continued to work to create a nuclear weapon, even after the nuclear deal with the world.

Presenting 55,000 pages of documents and 183 CDs obtained in a bold mission by the Mossad, Netanyahu said Iran hid an ‘atomic archive’ of documents on its nuclear program.

“These files conclusively prove that Iran was brazenly lying when it said it never had a nuclear weapons program,” he said.  “The nuclear deal is based on lies. It is based on Iranian lies and Iranian deception.”

“This is a terrible deal which should never have been concluded and in a few days’ time President Trump will make his decision on what to do with the nuclear deal.  I’m sure he will do the right thing. The right thing for the U.S., the right thing for Israel, and the right thing for the peace of the world.”

Visiting in Israel Sunday, U.S. Secretary of State Mike Pompeo said the United States will cancel the Iran nuclear deal if it is not fixed.  “We remain deeply concerned about Iran’s dangerous escalation of threats toward Israel and the region.”

President Trump has signaled he will withdraw from the Iran nuclear agreement by May 12 if it is not renegotiated and changed. Those changes have included proposals to limit Iran’s ballistic missile program, which Tehran says it has as a defensive deterrent.

Netanyahu said a day after his presentation that he was not seeking a military confrontation with Iran.

Boris Johnson, the British foreign secretary, argued that the new Israeli intelligence only underscored the need to keep the nuclear deal and preserve access for inspectors to look inside Iranian research facilities.

“The Israeli prime minister’s presentation on Iran’s past research into nuclear weapons technology underlines the importance of keeping the Iran nuclear deal’s constraints on Tehran’s nuclear ambitions,” Mr. Johnson said.

“The Iran nuclear deal is based on tough verification, including measures that allow inspectors from the International Atomic Energy Agency (IAEA) unprecedented access to Iran’s nuclear program.”

France said some of the information had been disclosed in 2002, and stressed the importance of continuing the deal.  The U.S., though, said the documents were proof the deal had not been built on good faith.

An Iranian Foreign Ministry spokesman said Netanyahu’s allegations that Tehran had lied about its nuclear ambitions were “worn-out, useless and shameful.”

Foreign Minister Javad Zarif said the documents were a rehash of old allegations already dealt with by the IAEA, which has been tasked with investigating Iran’s nuclear past. That report from 2015, which found some activities in 2003 “relevant to the development of a nuclear explosive device,” also found “no credible indications of activities in Iran relevant to the development of a nuclear explosive device after 2009.”

Netanyahu accused Iran of conducting a secret nuclear weapons program, dubbed Project Amad, and said it had continued to pursue nuclear weapons knowledge after the project was shuttered in 2003.

But the Israeli leader did not provide evidence that Iran had violated the accord since it went into effect in early 2016, though he insisted that Project Amad had continued at the Iranian Defense Ministry – citing the head of the program as saying: “Special activities will be carried out under the title of scientific know-how developments.”

The White House initially responded to Netanyahu’s allegations by saying they were consistent with its understanding that Iran “has” a “robust, clandestine nuclear weapons” program.

However, it later corrected the statement by changing the tense of the verb to “had,” blaming a “clerical error.”

What is clear is that Netanyahu has an audience of one: President Trump.

At week’s end, at the same time it is clear Britain, France and Germany have all agreed that the current nuclear accord remains the best way of stopping Tehran from getting nukes, though the three have called on Iran to limit its regional influence and curb its missile program.

The Jerusalem Post reported on Tuesday that the Iranian regime is “quaking in its boots,” after Prime Minister Netanyahu’s revelations on the documents appropriated by the Mossad, according to former ex-Pentagon Iran expert, Harold Rhode, who spent 28 years at the Pentagon and studied in Iran before the 1979 revolution there.

Rhode told the Post that when things are not going well in Iran, you have lots of infighting between Iranian Revolutionary Guard Corps officials and rival ayatollahs, who attack each other in a public blame game that expresses how exposed and vulnerable they feel their rule has become.

Israel “humiliated the Iranian government by capturing all of this material,” Rhode said, and many Iranians were laughing at the Islamic regime on social media.

According to Rhode and his sources in Iran, the protests there, which the media stopped covering, continue.

Thursday, Iranian Foreign Minister Javad Zarif said Iran will not “renegotiate or add onto” the accord.

David M. Halbfinger / New York Times

“In three bold moves this week – with F-15s, a PowerPoint presentation and the passage of a contentious new law – Prime Minister Benjamin Netanyahu has strengthened his hand in trying to foil Iran’s strategic ambitions, while potentially pulling the two nations closer to direct conflict.

“In Syria late Sunday, F-15s, widely assumed to be Israel’s, struck facilities where Iran and its proxies had entrenched themselves. The attack on a storage site near Hama destroyed 200 missiles and killed at least 16 people, 11 of them Iranians.

“In Tel Aviv the next evening, Mr. Netanyahu gave a bravura PowerPoint performance on live television from inside the Defense Ministry, flaunting the booty pilfered from a secret Tehran warehouse by an intrepid Mossad team – evidence, he said, of Iranian deceit about its long-running efforts to develop a nuclear bomb....

“Even as Mr. Netanyahu was speaking, his coalition in Parliament was pushing through a bill that would shift the power to go to war or carry out a military operation from the full cabinet to the smaller security cabinet – and, under ‘extreme circumstances,’ allow the prime minister and defense minister alone to order such action.

“In short order, Mr. Netanyahu had managed to exploit important political, military and intelligence advantages to advance his agenda on both the nuclear and conventional fronts, intensify the pressure on Iran, and free his hand under Israeli law to take the country to war without cabinet approval.

“Taken together, his moves have prompted longtime observers of the prime minister, whom they have long credited with a healthy aversion to all-out warfare, to ask if he may have turned to a grim new way of thinking....

“Crucially, the show of force in Syria and the show-and-tell of spycraft both come as Iran is constrained from plunging into a shooting war with Israel, either by itself or by proxy. Its own public is increasingly restive. Its close ally in Lebanon, Hezbollah, which might otherwise be counted on to retaliate against Israel, is reined in, at least for the moment, by elections on May 6, in which it is fielding candidates.

“Most of all, with President Trump set to announce his decision on the nuclear agreement by May 12, Iran is unlikely to give Mr. Trump any fresh excuses to quit it.”

Bret Stephens / New York Times

“As for Iran’s current compliance, of  course it’s complying. The deal gave Iran the best of all worlds. It weakened UN restrictions on its right to develop, test and field ballistic missiles – a critical component for a nuclear weapons capability that the Iranians haven’t fully mastered. It lifted restrictions on Iran’s oil exports and eased other sanctions, pumping billions of dollars into a previously moribund economy. And it allows Iran to produce all the nuclear fuel it wants come the end of the next decade.

“Yes, Iran is permanently enjoined from building a nuclear weapon, even after the limitations on uranium enrichment expire. But why believe this regime will be faithful to the deal at its end when it was faithless to it at its beginning?

“Netanyahu’s revelations were plainly timed to influence Donald Trump’s decision, expected later this month, on whether to stay in the Iran deal. Trump is under pressure from the French, British and Germans to stay in it, on the view that, if nothing else, the agreement has kept Iran from racing toward a bomb.

“But the deal now in place allows Iran to amble toward a bomb, even as it uses the financial benefits of the agreement to fund (in the face of domestic upheaval and at a steep cost to its own economy) its militancy in Iraq, Lebanon, Yemen and especially in Syria. And Iran’s own nuclear history suggests the country’s leaders have always been cautious in the face of credible American threats, which is one reason they shelved much of their nuclear program in 2003 after the U.S. invaded Iraq.

“ ‘When the Iranians fear American power, they either back down or they stall,’ says Mark Dubowitz, an expert on Iran sanctions at the Foundation for Defense of Democracies. ‘When they don’t fear American power, they push forward. With Trump, the question is: Are they going to feel American power, or American mush?’

“I opposed the Iran deal, but immediately after it came into effect, I believed that we should honor it scrupulously and enforce it unsparingly. Monday’s news is that Iran didn’t honor its end of the bargain… Punitive sanctions combined with a credible threat of military force should follow.”

Israel: From the Jerusalem Post: “Even Palestinian Authority President Mahmoud Abbas’ diplomatic friends condemned him.

“Friends and foes alike blasted Abbas as an ‘antisemite’ and a ‘Holocaust denier,’ after he charged that the Nazis killed Jews in the Holocaust because they were money lenders.

“ ‘The Holocaust did not occur in a vacuum, it was the result of thousands of years of persecution,’ UN Special Coordinator for the Middle East Peace Process Nickolay Mladenov said on Wednesday.

“ ‘This is why attempts to rewrite, downplay or deny it are dangerous.’

“Mladenov along with the European Union, Sweden, Germany and US officials from both the Trump and Obama administrations spoke out sharply against Abbas’ words spoken Monday night to the Palestinian National Council in Ramallah.

“Abbas chose to ‘repeat some of the most contemptuous anti-Semitic slurs, including the suggestion that the social behavior of Jews was the cause for the Holocaust,’ Mladenov said.

“Israeli leaders have long charged Abbas with antisemitism, but it is unusual for the UN to do so, given its strong support for the Palestinian cause....

“Prime Minister Benjamin Netanyahu said, ‘Abu Mazen [Abbas] gave another anti-Semitic speech. With utmost ignorance and brazen gall, he claimed that European Jews were persecuted and murdered not because they were Jews, but because they gave loans with interest.

“ ‘Abu Mazen again recited the most contemptible anti-Semitic canards.  Apparently the Holocaust denier is still a Holocaust denier. I call on the international community to condemn Abu Mazen’s severe antisemitism; the time has come for it to pass from the world.’”

North Korea: Friday, President Trump said a date and place had been set for the summit with Kim Jong Un, but gave no further details.  We did learn South Korean President Moon would travel to the White House for a briefing with Trump on May 22, prior to the Big One.

During the week Trump linked his threats to kill the Iran nuclear agreement with his hopes to strike a deal with North Korea, saying Kim Jong Un should know that the U.S. will walk away if it doesn’t think its partners are committed to compliance.

“I think it sends the right message,” Trump told reporters at the White House.  Others believe that Pyongyang will receive a different message: That the United States can’t be trusted to keep its commitments, so don’t worry about compliance.

Trump tweeted this week: “Headline: ‘Kim Prepared to Cede Nuclear Weapons if U.S. Pledges Not to Invade’ – from the Failing New York Times. Also, will shut down Nuclear Test Site in May.”

Later, Trump ordered the Pentagon to prepare options for reducing the number of U.S. troops in South Korea, as first reported by the New York Times. While reducing U.S. troop levels is not intended to be a bargaining chip in the summit between Trump and Kim, if a peace treaty between the two Koreas is signed, it could diminish the need for the 23,500 U.S. soldiers currently stationed on the peninsula.

Meanwhile, following the summit between South Korean President Moon Jae-in and Kim Jong Un last Friday, 78 percent of respondents to a Korea Research Center poll say they trust the North Korean leader, which is staggering.  Just a month-and-a-half ago, the figure was 10 percent!  President Moon’s approval rating, 86 percent, is a record for all South Korean presidents in history.

But the commitment to denuclearize, which was raised in the Korea summit, does not explicitly refer to North Korea halting its nuclear activities but rather to the aim of “a nuclear-free Korean peninsula.”

David Ignatius / Washington Post

“President Trump deserves credit for seizing the moment for negotiations with North Korea.  But some little-noticed documents reveal that Kim Jong Un has been planning his denuclearization offer and opening to the United States for the past five years.

“The diplomatic pace is accelerating now as Trump and the Korean leader prepare for their summit. There’s talk that North Korea may soon release three American prisoners, and Pyongyang has announced plans for a theatrical demolition of a nuclear test site later this month, with American observers watching.

“How did this extraordinary Korean détente happen? It’s a complicated story, but it appears that Kim has been the main driver. He has relentlessly pursued a dual strategy: to obtain a usable nuclear weapon, and then pivot toward dialogue and modernization of his economy. He sought his nuclear deterrent with almost reckless determination, but he has been surprisingly nimble in making the turn toward diplomacy.

“Would Kim have moved toward negotiations regardless of who was president? We’ll never know.  But there’s no denying that Trump’s confrontational approach created an opportunity for crisis diplomacy – and that he was bold enough to embrace Kim’s offer of direct talks....

“Kim’s regime explicitly put denuclearization on the table in a June 16, 2013, statement by the National Defense Commission (NDC).  Though the statement had the usual rhetoric, calling the United States a ‘war arsonist’ at one point, it also included this remarkable language: ‘The denuclearization of the Korean Peninsula is the behest of our leader’ and ‘must be carried out...without fail.’ The statement also urged ‘high-level talks between the DPRK [North Korea] and the U.S. authorities to...establish peace and security in the region.’....

“Despite the talk of denuclearization, Kim’s regime drove defiantly toward the nuclear weapons capability that the statements claimed he was ready to give up. This push culminated in a series of nuclear and missile tests last year, after Trump became president. Despite Trump’s bellicose threats, the North Koreans kept testing.

“Late last year, Kim declared, in effect, ‘mission accomplished.’ After a missile launch on Nov. 29, he proclaimed ‘with pride that now we have finally realized the great historic cause of completing the state nuclear force.’

“On New Year’s Day came the pivot.  Kim said that although ‘the nuclear button is on my office desk all the time,’ and that his missiles could target all of America, he now wanted to stress ‘the building of a prosperous country’ and a diplomatic outreach to South Korea.

“Kim proposed that North Korea attend the PyeongChang Olympics to ‘ease the acute military tension’ and ‘create a peaceful environment on the Korean Peninsula.’ From that proposal flowed the extraordinary chain of meetings, confidence-building measures and public promises about denuclearization – and the pathway to the expected Trump-Kim summit.

“Last month, Kim said at a Workers’ Party plenum that the byunglin line* had triumphed and that he was shifting to a ‘new strategic line’ devoted to boosting the economy.

“Kim is like an illusionist who tells you what trick he’s going to do, and then does it before your eyes, daring you to guess the secret. Trump sees himself as a clever, confrontational deal-maker, but he may have met his match with the kid from Pyongyang.”

*Kim’s announced dual strategy of strengthening his nuclear weapons capability while also improving North Korea’s impoverished economy.

Walter Russell Mead / Wall Street Journal

“One of the world’s oldest and ugliest frozen conflicts, dating back to 1950, appears to be thawing. North and South Korea are vowing to end their state of war. Kim Jong Un is offering one concession after another on his nuclear program, while progress continues toward a summit between Mr. Kim and President Trump.

“At the same time, the U.S. and its Middle Eastern allies are tightening the screws on Iran. America’s newly confirmed secretary of state, Mike Pompeo, made his first trip to the region in his new role this week. As he orchestrated a series of anti-Iranian statements with Arab and Israeli leaders, bunker-busting bombs (presumably Israel’s) hit Iranian bases in Syria.

“These developments are closely related. Throughout Mr. Trump’s tenure, his foreign-policy team has juggled two crises: First, North Korea’s progress on missiles that could carry its nuclear weapons to the U.S. mainland threatened to upset the balance of power in Northeast Asia. If Mr. Kim destroyed Tokyo, would the U.S. really retaliate and put the American homeland at risk?

“Second, the Obama administration’s bungled attempt to stabilize the Middle East by softening its approach to Iran had the opposite effect. Longtime American allies became jittery about Iran’s imperial ambitions, even as sectarian war and jihadist violence erupted across Syria and Iraq.

“The dilemma for the White House was that neither challenge could be ignored, but managing two explosive crises, one at each end of Asia, would stretch America’s political and military capacities to the limit. Complicating matters further, North Korea is a client of China, while Iran is an ally of Russia. An aggressive approach risked pitting the U.S. against Beijing and Moscow at the same time.

“The big question was whether one of the two crises could be put on hold.  In his unconventional way, Mr. Trump has been probing to see whether China or Russia is willing to cooperate. With China, he linked trade negotiations to Beijing’s help on the Korea issue, even as he raised the temperature by signaling that U.S. military action against Mr. Kim was on the table.  With Russia, Mr. Trump has consistently spoken of his desire for better relations and made clear that Moscow’s help with Iran could lead to sanctions relief.

“Mr. Trump seems to have believed initially that Russia would be more likely to choose engagement, but Moscow has so far stuck by Iran. China, in contrast, has twisted Mr. Kim’s arm to de-escalate. This makes sense: Although a rising China may be a greater long-term threat to the U.S. than a declining Russia, China has more powerful motives for working with the U.S. than Russia does....

“China and the U.S. also have some interests in common in the Middle East. They both want low oil prices and a stable geopolitical environment. If disruption in the region jacks up energy prices, China loses, given that it is the world’s largest energy importer, and Russia wins, since high prices would prop up its shaky economy and make Vladimir Putin’s foreign ambitions more affordable. Whenever Chinese leaders reflect on these truths, it is a good day for Washington and a bad day for Moscow.

“Mr. Kim’s concessions thus far do not mean that the nuclear standoff on the Korean Peninsula is over. China may be interested in preventing North Korea’s missile program from destabilizing East Asia, but forcing Pyongyang to give up its existing arsenal would be much harder. Still, even a temporary freeze of the missile program gives the U.S. breathing room to focus its efforts on the Middle East.

“The early signs are that the Trump administration intends to make the most of this North Korean opportunity. By responding positively to Mr. Kim’s overtures and continuing preparations for the promised summit, the White House is signaling its appreciation for China’s help and paving the way for intense negotiations with Beijing and Pyongyang over both security and trade. That will let the U.S. ratchet up the pressure even further in the Middle East. Moscow and Tehran would be well-advised to study their copies of ‘The Art of the Deal.’”

Victor Cha / Washington Post

“The footage of smiles, hugs and handshakes between the leaders of North and South Korea made for great television. But it also demonstrated that puzzling together peace on the Korean Peninsula still requires two missing pieces: Kim Jong Un’s true intentions regarding his nuclear weapons and President Trump’s ability to persuade the North Korean leader to part with his armaments. Thus, the Korea summit has only raised the stakes for the expected summit between Trump and Kim in May or June....

“But what his summit highlights is the indispensability of the United States to a diplomatic solution for peace and an end to the nuclear crisis on the peninsula. The Koreans can declare peace, but a treaty that would end the 1953 Korean War armistice would require the United States (and China) as a signatory. And it is hard to imagine that Trump would sign such a piece of paper without the end of the nuclear weapons program in North Korea.

“The summit unfortunately did not bring greater clarity to this piece of the puzzle. While the two Korean leaders confirmed the common goal of complete denuclearization and a nuclear-free Korean Peninsula, their statements fall far short of previous commitments by Pyongyang to abandon ‘all nuclear weapons and existing nuclear programs’ in the 2005 denuclearization agreement I worked on as the U.S. deputy head of delegation to the Six Party talks for President George W. Bush. Nor do the statements come close to North Korea’s commitment in a previous inter-Korean agreement in 1992 to forswear the development and possession of nuclear weapons, as well as to prohibit reprocessing and enrichment facilities in their countries.

“Perhaps Kim is saving this agenda item for his meetings with the United States. Or perhaps he never intends to give away his weapons and instead wants to have his cake and eat it, too – in the form of a peace treaty that would make it harder for the United States to carry out a preventive military attack, a photo op with the U.S. leader that legitimizes him as ruler of the newest nuclear weapons state, and the promise of lifting economic sanctions, all in return for a cap on nuclear weapons production and ban on missile testing....

“(The) stakes and the expectations have only been made higher by the Korea summit. Trump needs to respect South Korean desires for a peaceful diplomatic solution, but he should also maintain economic sanctions pressure on the North Korean regime, while at the same time compelling Kim to drop his weapons and embrace open-market forces that could have deleterious effects for his own autocratic rule.

“Moreover, given the hype Trump has created around the meeting with his own tweets, he cannot break his own cardinal rule, which is never to want a deal more than your counterpart. This meeting will be a clear test of the president’s self-proclaimed negotiating skills, and the stakes could not be higher because failure would mean the end of diplomacy and a return to discussions of military options. After all, the only thing after a summit is a cliff.”

China: The White House said on Thursday it was prepared to take measures against China’s stationing of military equipment on islands in the South China Sea, as Beijing has evaded questions on whether it has installed new missiles on outposts also claimed by Vietnam and the Philippines.

“We’re well aware of China’s militarization of the South China Sea. We’ve raised concerns directly with the Chinese about this, and there will be near-term and long-term consequences,” White House spokeswoman Sarah Sanders told reporters.

CNBC reported that the Chinese installed anti-ship and air defenses on the islands over the last 30 days, citing sources close to U.S. intelligence.

If the information is verified, it could provoke renewed tensions between countries bordering the strategically vital maritime region.

Separately, Chinese military personnel are targeting American flight crews in the skies over the east African nation of Djibouti using a high-powered laser, in a new show of Chinese harassment, according to Pentagon officials.

On Taiwan, the Dominican Republic’s government announced it is establishing diplomatic relations with Beijing and breaking ties with Taipei, another setback for Taiwan in the Caribbean and Latin America. Panama dropped its long-time ties with Taipei last year and established relations with mainland China, which considers Taiwan to be Chinese territory.

The number of countries that maintain full diplomatic ties with Taiwan has now been reduced to 19, mainly small, developing countries, 10 of them in Latin America.

Beijing has been seeking to increase pressure on Taiwan’s independence-leaning President Tsai Ing-wen.

Afghanistan: A 22-year-old U.S. service member was killed Monday during a combat operation in eastern Afghanistan, weeks before his deployment was scheduled to end.

“Spc. Gabriel D. Conde, of Loveland, Colorado, was killed while supporting Operation Freedom’s Sentinel and died as a result of “enemy small arms fire.”

Earlier, a wave of attacks killed nearly 40 people, including nine journalists in a double-suicide attack in Kabul. 

Separately, a U.S. government watchdog report (the Special Inspector General for Afghanistan Reconstruction) said Afghan security forces had declined sharply over the past 12 months, by about 10% to just under 300,000.  The defense ministry rejected the findings, telling the BBC the army had enough soldiers to fight the militants.

More than 8,000 U.S. special forces remain in the country backing Afghan troops.

Random Musings

--Presidential tracking polls....

Gallup: 42% approve of President Trump’s job performance, 53% disapprove. [Apr. 29...was 38/57 the prior week.]
Rasmussen: 51% approve, 49% disapprove

--Michael Gerson / Washington Post

“On a Saturday night in April, the rhetoric of our historical era reached a culminating, symbolic moment.

“In Washington – at the White House Correspondents’ Association dinner – comedian Michelle Wolf mocked the physical appearance of a Trump administration official, joked about feticide and compared the president’s daughter to ‘an empty box of tampons.’

“In Washington, Mich., President Trump gave an 80-minute speech in a stream-of-semi-consciousness style that mixed narcissism, nativism, ignorance, mendacity and malice.  He attacked the FBI, intelligence agencies, the Justice Department and his presidential predecessors.  ‘Any Hispanics in the room?’ he asked at one point, producing some boos.  Of the press: ‘These people, they hate your guts.’ Of his political opponents: ‘A vote for a Democrat in November, is a vote for open borders and crime. It’s very simple.’

“In both Washingtons, political discourse was dominated by the values and practices of reality television and social media: nasty, shallow, personal, vile, vindictive, graceless, classless, bullying, ugly, crass and simplistic. This is not merely change; it is digression. It is the triumph of the boors.  It is a discourse unworthy of a great country, and a sign that greatness of purpose and character is slipping way....

“For starters, I would deny that most people would have anything to do with such revolting garbage in their own lives. A guest at your dinner table like Wolf who profanely attacked other guests would be politely (or not so politely) asked to leave.  A neighbor who ranted like Trump about Mexicans and the FBI would be avoided like the plague. And yet people whom we could not trust to behave in civilized company now dominate American public discourse.  It is something Wolf would immediately recognize: a sad, sick joke....

“A great and memorable phrase encapsulates an argument.  ‘The world must be made safe for democracy’ expressed Woodrow Wilson’s vision of America’s role in the world.  Kennedy’s ‘Let them come to Berlin’ summarized America’s commitment to containing the Soviet Union. The Rev. Martin Luther King Jr.’s ‘I Have a Dream’ speech grew out of a compelling conception of fairness and justice.

“Trump’s signature phrase – ‘fake news’ – is an attack on the free press and a comfort to authoritarians everywhere. The memorable rallying cry of his campaign – ‘lock her up’ – was a call to jail his political opponent. His degraded language results from a degraded politics.  And the repair of our public life will eventually require a restoration of rhetoric.”

Peter Funt / Wall Street Journal

“(Michelle) Wolf’s material – most of which was laced with too much profanity to print here – wasn’t about the First Amendment, as some suggested. Nor was it about the #MeToo movement, which she attempted at one point to hide behind.  It was simply a Saturday Night Massacre of dignity and common sense.

“It helped prove two unfortunate truths: First, the notion of having working journalists dress up for ‘nerd prom,’ as they call it, and fawn over celebrity guests while listening to a hired comic roast the officials they cover each day was never a good idea.  Now, in the freewheeling age of social media, it’s completely bankrupt.

“Second, Mr. Trump was right to skip the event. No reasonable person, even among his harshest critics, would have expected him to sit through this....

“Through this misguided event, the Correspondents’ Association has given Donald Trump what he wants most: the last laugh.”

--President Trump once mocked Republican Sen. John McCain, saying he wasn’t a war hero because he was captured after his plane was shot down over Vietnam: “I like people that weren’t captured.”

So McCain, in his final book, “The Restless Wave,” said of the president: “He has declined to distinguish the actions of our government from the crimes of despotic ones. The appearance of toughness, or a reality show facsimile of toughness, seems to matter more than any of our values.”

“I would like see us recover our sense that we are more alike than different,” McCain writes.

“We are citizens of a republic made of shared ideals forged in a new world to replace the tribal enmities that tormented the old one. Even in times of political turmoil such as these, we share that awesome heritage and the responsibility to embrace it.”

McCain, who knows his time is limited due to stage 4 cancer, writes: “ ‘The world is a fine place and worth the fighting for and I hate very much to leave it,’ spoke my hero, Robert Jordan, in ‘For Whom the Bell Tolls.’

“And I do, too. I hate to leave it. But I don’t have a complaint. Not one. It’s been quite a ride. I’ve known great passions, seen amazing wonders, fought in a war, and helped make a peace. I made a small place for myself in the story of America and the history of my times.”

--French President Emmanuel Macron raised eyebrows in Australia by calling prime minister Malcolm Turnbull’s wife, Lucy, “delicious.”

Wrapping up a joint news conference during his brief Australian visit, Mr. Macron moved to thank the Turnbulls for their hospitality.

“I want to thank you for your welcome, thank you and your delicious wife for your warm welcome,” he said.

Most felt Macron may have simply slipped up in his use of English, since the French word for delicious – delicieux – also translates as “delightful.”

--The European continent has had some strange weather.  After the coldest winter since 2012, April was the warmest since 1981, 10.8 degrees Fahrenheit above average in southern Germany, Poland and the Balkans.  [Great for Germany in terms of record solar power generation. The cold winter had depleted Europe’s gas stores, though they’ve recovered.]

--I had no idea that a few weeks ago, parts of the Hawaiian island of Kauai were hit by up to 50 inches of rain in 24 hours, unofficially the biggest rainfall in the United States ever recorded.

But the problem is, the rain wasn’t throughout the entire island, yet tourists have been cancelling their reservations amid stories of heavy damage.  It was really an isolated area.  So check before you just write your dream vacation or honeymoon off.

That said, some scientists are saying this was the first major storm in Hawaii linked to climate change.

“The flooding on Kauai is consistent with an extreme rainfall that comes with a warmer atmosphere,” said Chip Fletcher, a leading expert from the University of Hawaii on the impact of climate change on Pacific island communities.

How bad was the flooding?  “Members of a bison herd were displaced or carried off by floodwaters, and some were rescued from the ocean after swimming for their lives.”

Kawika Winter, a natural resource manager, who is involved in research on climate change and community resilience, said, “In the Pacific Islands, we don’t have the luxury of debating whether climate change is real. Climate change is affecting us, and has been for some time....The warmer atmosphere is holding more moisture and that builds up until it meet with cold dry air, creating this massive unstable system, which causes what some meteorologists are now referring to as a ‘rain bomb.’”

This week, a study in the journal Nature Climate Change said that California can expect more volatile weather – swinging from dry to wet years – because of climate change.

Mark Zuckerberg, by the way, has landholdings on the North Shore of Kauai and pledged $1 million to help the island recover.

Kauai has weathered a number of tsunamis over the years, including one in 1957 that hit it with waves “up to 52 feet high.”  Hurricane Iniki, the most powerful to strike the islands in recorded history, killed six people in 1992 and caused damage totaling $3 billion. [Associated Press]

And now we have the Kilauea eruption and a 6.9 earthquake at  the epicenter late tonight.

--The following is a tragic story that maybe one day will save one of you.  A California couple was honeymooning in Bora Bora, staying in one of those hotel huts that are over the water. The husband, John, thought the water was a lot deeper than it actually was and dove into it, and his head hit the sand.  John suffered a spinal cord injury that has left him unable to walk.

--For 108 years, the Boy Scouts of America’s flagship program has simply been known as the Boy Scouts.  But with thousands of girls now entering the ranks, the name is being changed to Scouts BSA.  The change will take effect next February.  Did I ever tell you I was the worst Boy Scout ever?  Similar to me being the worst door-to-door book salesman (while in college, in Oklahoma and Kansas).

--After more than 60 years of government service, an aging C-130 Hercules National Guard plane was to be retired in Arizona, where it was being flown for a last time, only to sickeningly crash onto a Georgia highway on Wednesday, killing all nine Puerto Rican Guardsmen on board.

Puerto Rico’s fleet of C-130s is now down to three usable aircraft (two others in maintenance).

It’s too early to say what might have caused the plane to drop out of the sky, nose first onto Highway 21 after taking off from Savannah/Hilton Head International Airport.  The plane last received maintenance at the military base in Savannah in April.

All nine crew members had helped with hurricane recovery efforts as part of the 198th Fighter Squadron, which flies out of Base Muniz in the northern coastal city of Carolina.  The squadron used the plane to rescue Americans from the British Virgin Islands after Hurricane Irma, and later supplied food and water to Puerto Ricans desperate for help after Hurricane Maria.

Miraculously, the plane did not hit any cars or homes.

Poor Puerto Rico simply can’t catch a break.  Our thoughts and prayers go out to the victims’ families.

---

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

God bless America.

---

Gold $1316
Oil $69.79

Returns for the week 4/30-5/4

Dow Jones  -0.2%  [24262]
S&P 500  -0.2%  [2663]
S&P MidCap  +0.3%
Russell 2000  +0.6%
Nasdaq  +1.3%  [7209]

Returns for the period 1/1/18-5/4/18

Dow Jones  -1.9%
S&P 500  -0.4%
S&P MidCap  -0.2%
Russell 2000  +2.0%
Nasdaq  +4.4%

Bulls N/A  [48.0 / 19.6 prior week]
Bears

Have a great week.

Brian Trumbore

 



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Week in Review

05/05/2018

For the week 4/30-5/4

[Posted 11:30 PM ET, Friday]

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

Edition 995

*The issues on the home front continue.  I came over to my parents' place to watch Mom for the night today, and shortly thereafter we had a power failure that lasted a number of hours.  At least JCP&L took care of it in fairly short order as these things go.  But it’s been stressful times.  Dr. Bortrum is still in rehab, though at least he is doing well. Anyway….

Trump World

I know the Trump supporters want to point to various successes, such as the economy, and potentially on the foreign policy front, but then the occupier of the Oval Office, and some of his associates, keep sticking their foot in their mouth.  The “truth” has become a casualty.

Wednesday night in a shocker, Rudy Giuliani, newly named to be part of President Trump’s legal team, gave an interview to Fox News host Sean Hannity and said the president had reimbursed Trump attorney Michael Cohen for the $130,000 Cohen paid porn star Stormy Daniels, thus contradicting the president’s earlier statements that he knew nothing about the arrangement or payment.

“I’m giving you a fact that you don’t know,” Giuliani said.  “It’s not campaign money. No campaign finance violation. They funneled through a law firm and the president repaid it.”

Giuliani added that Trump “didn’t know about the specifics of it as far as I know but he did know about the general arrangement that Michael would take care of things like this.”

“The president reimbursed that over a period of several months,” he added, and mentioned that Cohen had a $35,000 monthly retainer with Trump.

Trump, asked last month aboard Air Force One about the $130,000, said “No,” he wasn’t aware of it.

Cohen has said he used his own money for the payment to Daniels less than two weeks before the 2016 election as part of a nondisclosure agreement she signed not to talk about the alleged sexual affair she had with Trump in 2006.

President Trump, in a series of tweets Thursday, defended reimbursing the $130,000 to Cohen, arguing that it’s “common among celebrities and people of wealth” and that no campaign money was used.

“Mr. Cohen, an attorney, received a monthly retainer, not from the campaign and having nothing to do with the campaign, from which he entered into, through reimbursement, a private contract between two parties, known as a non-disclosure agreement, or NDA.  These agreements are very common among celebrities and people of wealth. In this case it is in full force and effect and will be used in Arbitration for damages against Ms. Clifford (Daniels).

“The agreement was used to stop the false and extortionist accusations made by her about an affair despite already having signed a detailed letter admitting that there was no affair.

“Prior to this violation by Ms. Clifford and her attorney, this was a private agreement.  Money from the campaign, or campaign contributions, played no roll* (sic) in this transaction.”

*Ed. from the self-proclaimed ‘first in his class’ at Wharton student, as Trump stated this week at the swearing in of Mike Pompeo as secretary of state.

Meanwhile, the New York Times reported on questions that Mueller wants to ask Trump, such as in the firing of former FBI director James Comey.

“Those are all questions intended to trap him in some weight and contradicting what is in fact a very, very solid explanation of what happened.  He fired Comey because Comey would not, among other things, say that he wasn’t a target of the investigation,” Rudy Giuliani said.

Wednesday also saw a report in POLITICO that Ivanka Trump is a target of the probe, leading Giuliani to wax on about her and the differences between men and women.

“Ivanka Trump?  I think I would get on my charger and go right into – run into their offices with a lance if they go after Ivanka,” he said.

Giuliani, though, had a different standard for Ivanka’s husband, Jared Kushner, also a reported target.  “Jared is a fine man, you know that.  But men are, you know, disposable. A fine woman like Ivanka, come on.”

Thursday, Giuliani told ABC News that there was a “50/50” chance the Special Counsel Robert Mueller would subpoena President Trump in order to compel him to testify in the Russia probe, Giuliani adding, “But I got to prepare for that 50 percent.”

Back to the issue of the $130,000, Giuliani said Thursday, “I think the investigation with him [Michael Cohen] largely fell apart, with the loss of the campaign finance possible violation which never existed in the first place, but they sure thought it did.”

The former NYC mayor also said: “They’re going to close the investigation within a month and a half or two months of the interview.  We’ll get all the questions in advance, we’ll knock it down to about half of what they wanted to ask.”

In an interview with Reuters, Giuliani thought if Trump agreed to a sit down with Mueller’s team, it should be limited to a few hours.  Asked what questions might be appropriate, Giuliani suggested two: “Was there some agreement with the Russians?  Was there any meeting of Trump with the Russians?” 

What became clear the past few days is that President Trump and Giuliani hatched this high-risk plan to disclose on live television that the president had reimbursed Cohen after all, but according to all the news sources, this left senior aides in the White House and the rest of his legal team “stunned,” as described in the account from the Wall Street Journal.

White House press secretary Sarah Sanders, who for months has told reporters that Trump had no knowledge of the payment, said Thursday that the first time she learned the president had reimbursed Mr. Cohen was from Giuliani’s interview on Wednesday.

Trump reportedly added Giuliani to his legal team because he wanted a stronger TV presence who could adopt a more aggressive approach to the Mueller investigation.

But then...Friday morning...on his way to Dallas for a speech at the National Rifle Association convention, Trump talked to reporters and totally undercut his attorney, Mr. Giuliani, saying he would eventually get the facts right regarding the payment to Stormy.

Giuliani, who joined Trump’s legal team last month, “started a day ago,” Trump said.  “He’s a great guy. He’ll get his facts straight.”

In the tweets following Giuliani’s interview on Fox News, though, Trump backed Giuliani. But, on Friday, the president said that everything said about the transaction “has been said incorrectly.”

“It’s actually very simple,” the president said, without elaborating.  Trump said the media got it wrong.  Then Giuliani issued a statement trying to clarify his remarks and only made it worse.

Editorial / Wall Street Journal

“Most storms pass eventually. This week Donald Trump tried to ensure that Stormy Daniels doesn’t rain down permanent distraction on his Presidency, though at the cost of further damage to his credibility.

“Mr. Trump contradicted his previous statements that he had no knowledge of payments that his lawyer had made to Ms. Daniels – the pornographic-movie actress whose real name is Stephanie Clifford – to quell stories of an alleged affair.

“Speaking in his new role as Mr. Trump’s lawyer, former New York City Mayor Rudy Giuliani disclosed that Mr. Trump made a series of payments to reimburse lawyer Michael Cohen, who had paid Ms. Clifford $130,000 as part of a non-disclosure agreement late in the 2016 presidential campaign....

“The apparent reason for these contortions (Ed. in Trump’s explanatory tweets) is the possibility that the payments if made by Mr. Cohen would have exceeded federal campaign-finance donation limits. We have long criticized the arcana of campaign-finance rules, but they are the law and carry real criminal penalties. That is why presidential candidates hire squads of lawyers to flyspeck donations during a campaign.

“Messrs. Trump and Giuliani are arguing that Mr. Trump’s payments to Ms. Clifford were made for reasons that fall outside Mr. Trump’s presidential campaign. And perhaps these admissions will lessen Mr. Trump’s legal vulnerability.

“What remains is the political damage. Attempting to quiet a similar storm in 1998, President Bill Clinton said, ‘I did not have sexual relations with that woman, Miss Lewinsky.’  Many of Mr. Clinton’s political supporters were unmoved by the allegations against him. Similarly now, Mr. Trump’s most ardent backers believe these charges aren’t relevant to his public initiatives as President.

“That may be true regarding whether Mr. Trump had an affair more than a decade ago. Voters in 2016 knew Mr. Trump was no choir boy, and the irony is that news of an affair would probably have made no difference in his race against Hillary Clinton, who was Bill Clinton’s wife and chief defender.

“But Mr. Trump’s public deceptions are surely relevant to his job as President, and the attempted cover-up has done greater harm than any affair would have. Mr. Trump asked Americans, not least his supporters, to believe his claims about the payments. They were false and conveniently so in putting the onus on Mr. Cohen. Now, as more of the story has emerged, he wants everyone to believe a new story that he could have told the first time.

“Mr. Trump is compiling a record that increases the likelihood that few will believe him during a genuine crisis – say, a dispute over speaking with special counsel Robert Mueller or a nuclear showdown with Kim Jong Un. Mr. Trump should worry that Americans will stop believing anything he says.”

Trumpets....

--Emmet Flood replaced the “retiring” Ty Cobb on President Trump’s legal team, Cobb having taken a cooperative approach toward the Russia investigation. Cobb had worked to bring the investigation to a speedy close by turning over more than 20,000 documents requested by Robert Mueller.  Cobb was also amenable to the prospect of Trump being interviewed.

Cobb has routinely urged Trump not to fire Mueller or any other top Justice Department officials. Flood is a longtime Washington lawyer who down the road could succeed current White House counsel Don McGahn.  Flood helped represent Bill Clinton in the impeachment proceedings.

The Wall Street Journal reported that back on March 5, Mueller and John Dowd, then Mr. Trump’s lead outside attorney, held a meeting and discussed a possible interview.  “During the conversation, Mr. Mueller said that if Mr. Trump refused an interview, the special counsel’s office would give him a grand jury subpoena in an attempt to compel his testimony.”

Dowd vowed to fight a subpoena “all the way to the Supreme Court” – a legal battle that would take years to play out, “while assuring Mueller the president would never talk to him under those circumstances.”

--Trump tweets: “There was no Collusion (it is a Hoax) and there is no Obstruction of Justice (that is a setup & trap). What there is is Negotiations going on with North Korea over Nuclear War, Negotiations going on with China over Trade Deficits, Negotiations on NAFTA, and much more. Witch Hunt!”

“A Rigged System – They don’t want to turn over Documents to Congress. What are they afraid of?  Why so much redacting? Why such unequal ‘justice?’ At some point I will have no choice but to use the powers granted to the Presidency and get involved!”

“So disgraceful that the questions concerning the Russian Witch Hunt were ‘leaked’ to the media. No questions on Collusion. Oh, I see...you have a made up, phony crime, Collusion, that never existed, and an investigation begun with illegally leaked classified information. Nice!”

--Trump’s former doctor, Harold Bornstein, told CNN he did not write a 2015 letter declaring the then-Republican presidential candidate’s “astonishing, excellent” health.  “[Trump] dictated that whole letter,” Bornstein said.

Bornstein also said that Trump’s bodyguard, Keith Schiller, and a Trump Organization lawyer had carried out a “raid” on his offices in February 2017, removing all of then-President Trump’s medical records.  It wasn’t clear why Bornstein made this allegation now, but he added the president was no doubt upset over Bornstein’s revelation that the president used a drug to help grow his hair.

Back to the 2015 report, Trump had tweeted weeks ahead of its release that Bornstein’s medical report would show “perfection.”

There was nothing illegal about the president getting hold of his records once he was in office.  It’s just the manner, if true, that was so Trumpian.

Wall Street

Earnings are great, perhaps up 24% on the S&P 500, somewhere in that range, and revenues, most encouragingly, are up 8% or so for the first quarter thus far.  That’s strong.

But commodities are up, wages too (though still not as much as they should  be), and investors are always looking ahead and see  margin pressures on the horizon, perhaps.  So some think, this is as good as it gets, because the economic data has been so-so of late.

And then there’s the trade issue…self-inflicted at that.  Of course there are some trade imbalances between the United States and its partners, but the master deal-maker in the White House just doesn’t understand the topic and he has been making things worse by the day.

Start with the premise, free trade has elevated living standards around the world, and thus literally billions more can now buy our goods…and U.S. consumers have gotten a good deal in return in lower prices.  No doubt, some of the dislocations have been severe, and not good, and President Trump is right to try and cut better deals with some countries.

But trade is not the zero-sum game he makes it out to be.  And I hope he’s learned his lesson with China in terms of dealing with his buddy, President Xi Jinping.  I keep saying, this guy is hardly a friend of the United States, and he proved it this week by refusing to meet with the high-powered trade delegation that President Trump sent to Beijing, ditto China’s vice president.  My initial reading of it as I go to post and the first stories emerge is that it was a mini-disaster, with the U.S. asking for $200 billion in Chinese trade concessions and China in turn asking for an easing of national-security reviews of Chinese companies trying to do business, or make acquisitions in this country.  Mission not accomplished.

The Chinese are bastards, witness some of the news down below on the military front.  Some of us have known for a long time that China is the ultimate threat to our country (Florida Republican Sen. Marco Rubio sure gets it), but President Trump doesn’t.  And some in Corporate America don’t either.

Trump, playing carnival barker, said on Friday, “We’re going to have some incredible trade deals announced,” once again adding he had “great respect” for President Xi.  Trump then told reporters, “That’s why we’re being so nice, because we have a great relationship.”

They’re freakin’ shining lasers in our fighter pilots’ eyes, Mr. President!

Meanwhile, you have the new deadline of June 1 for the likes of Europe, Mexico and Canada when it comes to the steel and aluminum tariffs, President Trump having issued a 30-day extension on his original deadline.  My man in the know on the steel front, Brad K., a steel pool manufacturer, noted all such companies face across the board price increases of 9-11%. Companies and manufacturers plan ahead.  Steel buyers of all grades have nowhere to turn for a lower price.  “For a full week, the lone mill I buy directly from won’t respond/reply to any update I ask for.  Buying mill direct provides ability to see where one’s order is, while in process.  Unlike sneakers, where a clerk goes back to mystery room where by luck your size is found, steel in process spans weeks involving stages that are documented. My May steel tonnage...nothing. Perhaps they are out of my size?”

It’s a classic example of Trump’s rhetoric and unintended consequences.

Editorial / Wall Street Journal

“When in doubt about government policy, businesses get cautious.  They hold back investment or slow down purchases. This is one of the great lessons of the last administration.   Barack Obama imposed record levels of regulation and periodically threatened new taxes. Mr. Trump has reduced those threats, but his tariffs and antitrade rhetoric are creating new worries.

“Mr. Trump and his trade apologists claim all of this is merely canny negotiating, and perhaps the President even believes it. But CEOs can’t make decisions out of his head.  They have to decide to invest or not, or make purchases or not, based on commercial reality.  And the evidence is growing that Mr. Trump’s trade policies are harming U.S. manufacturers and reducing the economic growth he promised voters.”

Moving along, the Federal Reserve held one of its Open Market Committee meetings and signaled it is getting more confident in the inflation outlook as it prepares for further increases in short-term interest rates in the coming months.

The Fed said on Wednesday that price growth has moved close to its target and is likely to stay there in the medium term.

Policymakers dropped language in previous post-meeting statements that said they were closely monitoring inflation. “Inflation on a 12-month basis is expected to run near the Committee’s symmetric 2 percent objective over the medium term,” adding that the risks to the outlook were “roughly balanced.”

Headline inflation is now at the Fed’s target of 2 percent and rates are going up another quarter-point at its next meeting on June 12-13, this much is certain. The question is do we get one or two more hikes the rest of the year after June.

Ian Shepherdson, economist at Pantheon Macroeconomics, was one of many pointing to use of the word “symmetric” in the Fed statement, concluding that he doesn’t expect a reaction to higher inflation over the summer.  [An expected surge in health-care related data could lift the core PCE inflation barometer above 2%, but then it is expected to fall back towards year end.]

The biggest issue is does the economy overheat, and towards that end, the April jobs report, released today, was tame, the economy adding 164,000 jobs, below consensus, while the unemployment rate ticked down to 3.9%, the lowest since 2000, and the underemployment rate, U6, was 7.8%, its lowest since Dec. 2001.  Average hourly earnings rose just 0.1%, but are up 2.6% year-over-year.

Separately, March personal income was 0.3%, while consumption was 0.4%, both as expected.  The aforementioned personal consumption expenditures index (PCE), the Fed’s preferred inflation barometer, came in at 2.0%, while the core rate, ex-food and energy, was 1.9%.

The ISM readings on manufacturing and services were solid, 57.3 and 56.8, but down from prior readings, ditto Chicago for April, 57.6,

Europe and Asia

We had the final April PMI figures for the eurozone (EA19), courtesy of IHS Markit, and the composite index was 55.1, vs. 55.2 in March (50 being the dividing line between growth and contraction). The manufacturing PMI for the EA19 was 56.2 last month, vs. 56.6 in March, while the services reading was 54.7 vs. 54.9 in March.

Germany’s manufacturing PMI was 58.1 in April, a 9-mo. low, with services at 53.0, a 19-mo. low.
Spain came in at 54.4 mfg., a 7-mo. low, and 55.6 on services.
France was 53.8 mfg., 57.4 services.
Italy 53.5 mfg., a 15-mo. low, 52.6 services.

So eurozone economic activity is still robust, but growth has downshifted some.

Chris Williamson / Chief Economist, IHS Markit:

“The final PMI numbers confirm the marked, broad-based fading of the eurozone’s growth spurt so far this year. The headline index has fallen from an eleven-and-a-half year peak in January to a 15-month low in April. Despite the drop, the PMI is not yet at a worryingly low level, but the survey details hint at further easing in the coming months.

“While the expansion signaled by April’s PMI is disappointing relative to the elevated levels seen at the start of the year, the survey remains indicative of the eurozone economy growing at a robust quarterly rate of 0.5-0.6%. Employment growth is also still booming, with the rate of job creation in the service sector at its highest for over a decade.

“Employment is a lagging indicator, however, and two reliable leading indicators have turned down, suggesting that both output and hiring trends will weaken further, at least into May. First, backlogs of uncompleted orders grew at the slowest rate for eight months. Second, companies’ expectations about future output hit a five-month low. Any further deterioration could herald new concerns among policymakers regarding the economic outlook.”

Separately, GDP was up by 0.4% in the euro area for the first quarter, per a flash estimate from Eurostat, up 2.5% vs. the first quarter of 2017.  Not too shabby.

A flash estimate on euro area annual inflation for April ticked down to 1.2% from March’s 1.3%, and vs. 1.9% in April 2017. The core rate, ex-food and energy, was just 1.1%, so the euro bond market rallied (for a day) as it’s yet another data point that keeps the European Central Bank on hold. While it will eventually end its bond-buying program should growth continue at a solid pace, the ECB is not raising its benchmark interest rate off the zero mark until well into 2019.

Euro area unemployment came in at 8.5% for March, stable compared with February 2018 and down from 9.4% in March 2017.  [Germany was at 3.4%, France 8.8%, Spain 16.1% and Italy 11.0%.]

One more, the volume of retail trade rose just 0.1% in the euro area in March compared with February, up 0.8% year-over-year.

The European Union issued an upbeat economic outlook for the eurozone Thursday, but warned of rising risks from President Trump’s protectionist trade policies, which the EU’s executive – the European Commission – described as an “unambiguously negative risk.”

Eurobits....

--On the Brexit front, Prime Minister Theresa May is facing a crisis after pro-Brexit ministers paired up with Conservative hardliners to demand a clean break from the European Union’s customs system, while Mrs. May favors a compromise solution. It is still possible that rebels in her party could destroy her government.

As noted in Bloomberg: “It was a reflection of May’s impossible position: Before she can even start trying to sell a deal to the EU, she has to find a proposal that both her Cabinet and Parliament will support. Both are fundamentally split, with each side strong enough to block a plan, but not to push one through.

“May has so far survived by avoiding a final confrontation with either side.  So it was no surprise that the so-called ‘War Cabinet’ put off its decision once again on Wednesday afternoon....

“May reiterated that she wanted to leave the EU’s customs union, and then set out once again her red lines for any new deal: There should be no hard border between Ireland and Northern Ireland, no border between Northern Ireland and the rest of the U.K., Britain should be able to negotiate its own trade deals, and trade with the EU should be as frictionless as possible.”

For its part, the EU is growing impatient.

Turning to Asia...we had the April PMI readings for China. The official government reading on manufacturing was 51.4 vs. 51.5 in March, with the service sector at 54.8 vs. 54.6.

The private Caixin–Markit manufacturing index rose to 51.1 vs. 51.0, so uniformity with the government figure, while the Caixin services reading was 52.9, up from 52.3 in March.

But with a trade war between China and the U.S. still brewing, export orders fell for the first time since November 2016 last month.  Companies said concerns over future export sales as well as subdued demand had weighed on their outlook for the coming 12 months.

In Japan, the April PMI on manufacturing was 53.8 vs. 53.1 the prior month, with the service number rising solidly to 52.5 from 50.9.

[Two other manufacturing PMIs for April...Taiwan was at 54.8, but South Korea was 48.4, contraction mode.]

Street Bytes

--Stocks finished mixed, with the Dow Jones and S&P 500 losing 0.2%, while Nasdaq picked up 1.3%.

--U.S. Treasury Yields

6-mo. 2.02%  2-yr. 2.50%  10-yr. 2.95%  30-yr. 3.12%

--Most major automakers posted lower U.S. sales in April with demand weakening some.  But overall, Autodata said the sales pace was still at an annualized 17.15 million, the eighth straight month over 17m, which is very solid, and compared with 17.04 million a year ago.  Last year, U.S. auto sales fell 2% after hitting a record high of 17.55 million units in 2016.

Ford reported a 4.7% decline in sales compared to April 2017, with retail sales to consumers down 2.6%.  The best-selling F-Series pickup truck saw sales rise 3.5%, however, with SUV and passenger car sales down 4.6% and 15% respectively.

No. 1 General Motors announced last month it would no longer report monthly sales and instead will just post them on a quarterly basis. [Ford said it would continue to post monthly figures.]

Fiat Chrysler was alone among the top sellers in the U.S. in posting an overall sales increase of 5%, but this was due to higher fleet sales to rental car companies and government agencies.  Ram pickup truck sales were down 9%.

Toyota posted a 4.7% decline in sales, with a 1.5% increase in SUV and pickup truck sales offset by a 12.7% drop in passenger car sales.

Honda Motor Co. saw April sales decline 9.2%, with car sales off 14.4%.  The all-new version of the flagship Accord plunged 19.3%, despite mostly rave reviews.

Nissan Motor Co.’s sales fell 28%, with passenger car sales plunging 35%.

So you look at the Japanese sales for passenger cars in the U.S. these days and they are troubling for Toyota, Honda and Nissan, the sedan being the bread-and-butter car for them since they entered the U.S. market decades ago.

The companies have resorted to deep discounting, as in the case of Toyota’s Camry.  It sold nearly 30,000 last month in the U.S. but with an average incentive of $2,483, according to analysis by Jefferies.  That’s a big bite for a car with a suggested retail price of $23,495.

Nissan’s offered incentives on its Altima of $3,445 in April, according to Jefferies, yet sales fell 49% over a year ago.

Now if gas prices at the pump continue to rise, we could see a different story down the road, though today’s SUVs, especially crossovers, are more fuel efficient than past models.

--Tesla CEO Elon Musk picked up a lot of publicity Wednesday for all the wrong reasons, as he was a total asshole on the company’s earnings conference call with analysts, especially when pressed for details on its cash-burn rate.

Tesla burned through another $1 billion in the first quarter, but the electric-car maker will generate cash in the second half of the year as it gains traction producing the Model 3, Musk told shareholders.  Tesla said it is resolving production issues that have plagued the cheapest vehicle and said it would be producing 5,000 a week in about two months.

After Tesla released its shareholder letter, that contained the positives, the shares dropped after the quarterly call as Musk cut off several analysts’ questions, calling them “so dry” and “not cool.”

In the letter Musk wrote: “We have good visibility of our path to fully ramp and stabilize Model 3 production this year. The path to an electrified revolution is not easy, but what we’re trying to achieve is worth fighting for.”

But the company has gone through more than $1 billion+ in cash for the third time in the last four quarters.  Tesla had $2.67 billion in cash on hand at the end of the first quarter.  Tesla did say problems plaguing its battery module line have been resolved.

So Musk said he won’t need to go back to equity or debt markets this year for additional funds, which analysts still doubt.  One well-known figure, Tony Sacconaghi of Sanford C. Bernstein, who rates Tesla the equivalent of a hold, asked a question about whether the company could reach its 25% gross margin target on the Model 3.  Musk replied, “Don’t make a federal case out of it,” after the CFO pointed out some roadblocks, like higher labor costs and recently imposed tariffs.

When Sacconaghi questioned the issue of raising more capital, Musk told the call operator: “Excuse me.  Next. Next. Boring, bonehead questions are not cool. Next?”

After another analyst inquired as to the number of Model 3 reservation holders, Musk said “We’re going to YouTube,” referring to the owner of a channel who lobbied Musk ahead of time for the chance to ask questions on behalf of retail investors.

“Sorry,” Musk said, “these questions are so dry. They’re killing me.”

--The country’s No. 3 and No. 4 wireless carriers by subscribers, T-Mobile US Inc. and Sprint Corp. signed the merger agreement that had eluded them for years.  The $26.5 billion all-stock union has long been rumored, with the last aborted attempt in 2014 after government officials told executives they weren’t likely to approve the deal.

So why will they now? The deal would leave the U.S. with three national wireless network operators, a scenario that Obama administration regulators opposed.  Sprint and T-Mobile said they don’t expect the proposed merger to close until next year.

[Verizon would have a customer base of 116 million, Sprint/T-Mobile 100 million, and AT&T 93 million.  On the revenue front, Verizon $88 billion in annuals sales, the combined company $74 billion, and AT&T $71 billion.]

Sprint and T-Mobile argue their situation is different from a few years ago. There are other smaller competitors, such as Comcast and Altice USA, now selling their customers cellphone plans that compete for wireless customers, though they still rely on Sprint and Verizon to run their networks.

Sprint and T-Mobile are also highlighting their plans to speed the rollout of fifth-generation, or 5G, networks in the U.S. and pledged to create U.S. jobs, two themes that should curry favor with the White House.

--Apple announced it would buy back an additional $100 billion in stock, part of a previously announced $252 billion it has brought back that had been held overseas under the new tax law. Investors have been wondering since the January announcement just what Apple would do with the haul.  But Apple didn’t provide a timeline for the repurchase.  The company also increased its dividend by 16 percent to 73 cents a share.

There are lots of critics of buybacks, which are seen by some as nothing more than manipulating the share price vs. reinvesting in the company and its employees.

Meanwhile, Apple said its profit increased 25 percent to $13.8 billion for the quarter, $2.73 a share, or six cents better than the Street projected. Revenue rose 16 percent to $61.1 billion.

The three months ending in March were Apple’s first full quarter selling its flagship iPhone X  There were concerns, mainly on the results of Apple’s suppliers, that the X, and its sister iPhone 8 and 8 Plus had failed to meet expectations, and Apple sold 52 million iPhones in the quarter, or 3 percent more than a year earlier.  But iPhone revenue was up 14 percent because of an increase in the average price.

The iPhone accounts for 62 percent of the company’s overall revenue and CEO Tim Cook said, “I don’t buy the view that the market is saturated.”

As for China, which I’ve been harping on for years, Apple said revenue in mainland China, Taiwan and Hong Kong had risen 21 percent to $13 billion, the largest increase in 10 quarters.

Apple’s services revenue, which includes iCloud and Apple Music subscriptions and its share of app sales, rose 31 percent to $9.2 billion.  Apple said consumers had paid for more than 270 million subscriptions for its services or ones sold via its App Store, up from roughly 170 million a year earlier.

The division that includes Apple’s smartwatches and AirPods wireless earbuds also saw revenue rise 38% to $3.95 billion in the period.

So all in all, an excellent report and the shares rallied.  But the smartphone market is clearly stagnating, worldwide, so it’s incumbent that Apple continue to grow its services revenues (much like Amazon needs its cloud division, which has a much-higher profit margin than its consumer biz, needs it to grow at a healthy clip).

As for Apple and China, I am not changing my stance one iota.  In today’s trade environment, it’s tension city.  Apple can be severely impacted and is at the whims of one President Xi Jinping.

--Chinese smartphone maker Xiaomi has filed to list on Hong Kong’s stock market, in a move that is expected to raise up to $10bn, which would be the world’s biggest debut in 2018, and the largest since fellow China tech giant Alibaba’s $25bn raise in 2014.

The decision to list in Hong Kong is a huge boost for that market as it competes against the likes of New York and Shanghai.

Xiaomi, aside from being a major player in China, has taken on Samsung for dominance in India.

--McDonald’s continues to rock and roll, beating revenue and profit expectations in the first quarter, and posting an 11th consecutive quarter of same-store sales growth.  But although U.S. comp store growth was a solid 2.9%, it was driven by menu price increases and higher-priced menu items, not by customer visits.

Plus 2.9% was less than the 4.5% McDonald’s posted in the fourth quarter.

Global comp sales rose 5.5%, well ahead of analysts’ forecasts.

About now I have a hankering for a Big Mac.

--Shares in Snap, parent of Snapchat, slumped more than 22% to hit a new record low after the company confirmed Wall Street fears that a controversial redesign of its flagship disappearing photo and video app has caused a drop in audience numbers.  The stock, now $11, is down more than 35% from its initial public offering price of $17.  [The day of its debut, March 2017, the shares hit a high of $29.44.]

--For all the talk on the campaign trail about pledging to bring about jobs in the coal industry, just 800, net, have been created since Trump’s inauguration.

But the industry is doing well as some of the bigger players like Peabody Energy and Alpha Natural Resources have emerged from bankruptcy, or had their assets bought by other companies.  The new companies are slimmed down, but with a greater chance of survival, even as the amount of electricity generated from coal in the US dropped by 2 percent last year, and is expected to fall further this year.

The difference has come from a surge in demand in international markets, for  use in both power plants and blast furnaces to make steel.  Demand is up from the likes of India, South Korea and Japan. The pickup in coal used for the production of steel has nothing to do with Trump administration policies, but rather a confluence of factors, including a severe cyclone that hit eastern Australia last year, causing widespread disruption to much of the country’s “met” coal production, and it has struggled to make up for the shortfall.

Separately, China has been curbing its production, even as demand has grown, to help meet pollution targets.  [Ed Crooks / Financial Times]

--Back to the issue of share buybacks, Goldman Sachs analysts estimated capital expenditures, capex, will rise 11 percent this year among S&P 500 companies, similar to the growth rate for dividends and research and development budgets, but there would be a 23 percent increase in spending on buybacks, as a result of corporate tax reform.

--Volkswagen’s former chief executive faces U.S. charges for his alleged role in the automaker’s emissions-cheating scandal that cost VW $billions in penalties and damaged its reputation.

Martin Winterkorn, who served as Volkswagen’s CEO from 2007 to 2015, was charged with conspiracy and wire fraud.  Last month, the company ousted CEO Matthias Muller, who had replaced Winterkorn, after he lost favor with shareholders.

Winterkorn faces serious jail time.

--CBS, amid the public melodrama concerning a possible merger with Viacom and National Amusements, their holding company, reported revenues for the first quarter that set a record, $3.76 billion, up 13%, with earnings per share handily topping estimates.  CEO Les Moonves promised record results for the year.

CBS took care to emphasize the success of its streaming services, CBS All Access and Showtime, which are expanding “while others are just entering this business.”

--Shares in Molson Coors touched a four-year low on Wednesday after the beer giant behind brands like Coors Light, Miller Lite and Molson Canadian reported slipping sales as liquor and craft beers continue to grab market share.

Molson Coors’ sales dropped 4.8% in the three months to the end of March, coming in at $2.33bn, with adjusted earnings down 40%.  The company said its U.S. brand volume declined 3.8% over the quarter.

--Facebook’s data practices continue to cause problems, and this time within the company.

Jan Koum, chief executive of the popular chat app WhatsApp, which Facebook purchased for $19 billion in 2014, is leaving the company after Facebook has repeatedly tried to use WhatsApp members’ personal data, according to the Washington Post.

Koum, who didn’t announce a departure data, will also step down from Facebook’s board of directors.

The original scandal involving Cambridge Analytica (which went out of business this week) led to WhatsApp co-founder Brian Acton to delete his profile on the social network.

--Google parent Alphabet Inc. said its workers earned a median pay package of more than $197,000 last year, the fourth-highest pay among the hundreds of companies in the S&P 500 index that have disclosed those figures.  Alphabet’s median pay was about 18% lower than at rival internet giant Facebook Inc., where employees earned a median salary of $240,000.

The highest median pay reported in the S&P 500 so far was by Incyte Corp., a Wilmington, Del., biotech firm with 1,208 employees. Incyte’s median pay was about $253,000.  Vertex Pharmaceuticals was third highest, below Facebook and above Alphabet, at more than $211,000.  [Douglas MacMillan / Wall Street Journal]

--To me, Macau’s gambling revenues have always been a good barometer for China’s economy.  But President Xi’s crackdown on corruption led to a big downfall in 2015-16, with Macau now firmly in recovery mode.

Gaming revenues jumped 27.6 percent year on year in April, the 21st consecutive month of growth.  Total revenues are up 22.2 percent for the first four months, according to the city’s Gaming Inspection and Coordination Bureau.

--From Jo Craven McGinty of the Wall Street Journal:

“When the left engine of Southwest Flight 1380 broke apart last week, shattering a window of the aircraft and causing the Boeing 737 to lose cabin pressure, the pilots pushed the nose of the plane down and zoomed from 32,500 feet to 10,000 feet in about eight minutes.

“The abrupt dive led some passengers to describe the change in altitude as a free fall. But pilots appear to have executed a perfect emergency descent.

“The reason for the steep drop was straightforward: Without enough oxygen, everyone aboard the plane could lose consciousness.

“At 35,000 feet, the duration of useful consciousness – the length of time pilots can perform their duties efficiently while deprived of adequate oxygen – is no more than 60 seconds. At 30,000 feet, they can hang on for as long as three minutes. At 10,000 feet, the air is breathable.

“Masks provide pilots with pressurized oxygen that could last several hours, but passengers receive only 10 to 20 minutes of oxygen with no pressure. At more than 30,000 feet, even with the air flowing, they’re in an emergency situation, so when an airplane’s cabin depressurizes, the goal is to quickly descend to an altitude where people can breathe.

“ ‘You can’t do it slower,’ said Chris Manno, a former Air Force pilot who now flies 737s for American Airlines.  ‘You have to get to a habitable altitude as soon as possible.’”

--Guitar-maker Gibson Brands Inc. filed for bankruptcy protection Tuesday as the company has struggled with its debt load after a series of acquisitions. Gibson said it will continue to operate during the proceedings as it focuses on reorganizing around its core businesses, musical instruments, vs. the Gibson’s Innovations business, which had acquired various equipment makers, like Royal Phillips’s home-entertainment systems, and TEAC and Onkyo stereos.

--“Avengers: Infinity War” kicked off the summer movie season, giving Walt Disney Co. the largest North American and global debuts in history. The film took in a record $630 million worldwide, according to ComScore Inc.  An estimated $250 million of that was collected in U.S. and Canadian theaters, better than expected, while the film also earned $380 million overseas.

And the movie had yet to open in China, the second biggest box office, where it debuts May 11.

“Infinity War” cost $300 million to make, according to Bloomberg Intelligence, and many millions more to market.

--What a mess at NBC News, the latest being the Tom Brokaw debacle.  A third woman came forward to accuse the veteran anchor of making an unwanted advance toward her when she was a young reporter many years ago. Freelance writer Mary Reinholz alleges Brokaw French kissed her inside her L.A. home during the 1960s.

“Brokaw made a pass at me 50 years ago...I pulled away, reminding him that he was married and a tryst was out of the question,” Reinholz wrote in a piece for the Villager.

“He said, ‘Yes, it would be unfair to Meredith,’ meaning his wife.”

But do you believe this detailed account from 50 years ago?  I sure as heck don’t.

Meanwhile, some female staffers at NBC News are complaining they felt under huge pressure to sign the “women’s letter” defending Brokaw against sexual harassment allegations, including that of former colleague Linda Vester. 

115 women signed the letter hailing Brokaw as “a man of tremendous decency and integrity.” Rachel Maddow, Mika Brzezinski, Andrea Mitchell and Maria Shriver were among those backing the former anchor after he angrily denied Vester’s claims, likening them to “a drive by shooting.”

But some said the women were signing without knowing the facts, and it would scare future women from coming forward.  Megyn Kelly cautioned: “You don’t know what you don’t know.”

NBC said it won’t be launching a full internal investigation.

[Separately, the Charlie Rose scandal at CBS News continues to explode.]

--We note the passing of designer Art Paul, 93, who created Playboy’s famous tuxedoed bunny head logo.

Paul was a freelance illustrator when he started working with Playboy founder Hugh Hefner as the magazine’s first employee in the 1950s.  He said he came up with the bunny logo in about an hour.  Paul also hired other artists to create illustrations for Playboy, including Salvador Dali, Andy Warhol and Shel Silverstein. He was the magazine’s art director until he retired in 1982.

Paul told the Chicago Sun-Times, “We didn’t think it would be such a success right from the beginning, just Hefner and I putting it together. Hef was kind to me. I think I gave him a lot. He gave me a lot.”

Christie Hefner said, “Art deserves the credit for the illustrator’s liberation. He helped redefine the whole notion of commercial art as being able to be as well-regarded and legitimate as high art.”

--I loved this story from the AP.  “A 7-Eleven in California has found a way to keep people from panhandling and loitering outside the store: crank up classical music.

“Sukhi Sandhu, who owns the franchise in Modesto, said his customers tell him they feel safer since he started blasting symphonies and occasional operas over outdoor speakers.

“ ‘Once the music started, the riffraff left,’ said Manuel Souza, who’s homeless and jokingly referred to himself as part of the riffraff.  The loud music makes it hard ‘to hang out and gossip and joke around’ near the store.”

I’m surprised the riffraff doesn’t hang around to weigh in on the question: “Which is better? Rachmaninoff’s Piano Concerto No. 2 or No. 3?”  Personally, I go with 2.

Foreign Affairs

Iran: In a brilliant performance on Monday, Israeli Prime Minister Benjamin Netanyahu, standing in front of a screen with the words “Iran Lied,” revealed a cache of documents he says prove Iran lied to the world and continued to work to create a nuclear weapon, even after the nuclear deal with the world.

Presenting 55,000 pages of documents and 183 CDs obtained in a bold mission by the Mossad, Netanyahu said Iran hid an ‘atomic archive’ of documents on its nuclear program.

“These files conclusively prove that Iran was brazenly lying when it said it never had a nuclear weapons program,” he said.  “The nuclear deal is based on lies. It is based on Iranian lies and Iranian deception.”

“This is a terrible deal which should never have been concluded and in a few days’ time President Trump will make his decision on what to do with the nuclear deal.  I’m sure he will do the right thing. The right thing for the U.S., the right thing for Israel, and the right thing for the peace of the world.”

Visiting in Israel Sunday, U.S. Secretary of State Mike Pompeo said the United States will cancel the Iran nuclear deal if it is not fixed.  “We remain deeply concerned about Iran’s dangerous escalation of threats toward Israel and the region.”

President Trump has signaled he will withdraw from the Iran nuclear agreement by May 12 if it is not renegotiated and changed. Those changes have included proposals to limit Iran’s ballistic missile program, which Tehran says it has as a defensive deterrent.

Netanyahu said a day after his presentation that he was not seeking a military confrontation with Iran.

Boris Johnson, the British foreign secretary, argued that the new Israeli intelligence only underscored the need to keep the nuclear deal and preserve access for inspectors to look inside Iranian research facilities.

“The Israeli prime minister’s presentation on Iran’s past research into nuclear weapons technology underlines the importance of keeping the Iran nuclear deal’s constraints on Tehran’s nuclear ambitions,” Mr. Johnson said.

“The Iran nuclear deal is based on tough verification, including measures that allow inspectors from the International Atomic Energy Agency (IAEA) unprecedented access to Iran’s nuclear program.”

France said some of the information had been disclosed in 2002, and stressed the importance of continuing the deal.  The U.S., though, said the documents were proof the deal had not been built on good faith.

An Iranian Foreign Ministry spokesman said Netanyahu’s allegations that Tehran had lied about its nuclear ambitions were “worn-out, useless and shameful.”

Foreign Minister Javad Zarif said the documents were a rehash of old allegations already dealt with by the IAEA, which has been tasked with investigating Iran’s nuclear past. That report from 2015, which found some activities in 2003 “relevant to the development of a nuclear explosive device,” also found “no credible indications of activities in Iran relevant to the development of a nuclear explosive device after 2009.”

Netanyahu accused Iran of conducting a secret nuclear weapons program, dubbed Project Amad, and said it had continued to pursue nuclear weapons knowledge after the project was shuttered in 2003.

But the Israeli leader did not provide evidence that Iran had violated the accord since it went into effect in early 2016, though he insisted that Project Amad had continued at the Iranian Defense Ministry – citing the head of the program as saying: “Special activities will be carried out under the title of scientific know-how developments.”

The White House initially responded to Netanyahu’s allegations by saying they were consistent with its understanding that Iran “has” a “robust, clandestine nuclear weapons” program.

However, it later corrected the statement by changing the tense of the verb to “had,” blaming a “clerical error.”

What is clear is that Netanyahu has an audience of one: President Trump.

At week’s end, at the same time it is clear Britain, France and Germany have all agreed that the current nuclear accord remains the best way of stopping Tehran from getting nukes, though the three have called on Iran to limit its regional influence and curb its missile program.

The Jerusalem Post reported on Tuesday that the Iranian regime is “quaking in its boots,” after Prime Minister Netanyahu’s revelations on the documents appropriated by the Mossad, according to former ex-Pentagon Iran expert, Harold Rhode, who spent 28 years at the Pentagon and studied in Iran before the 1979 revolution there.

Rhode told the Post that when things are not going well in Iran, you have lots of infighting between Iranian Revolutionary Guard Corps officials and rival ayatollahs, who attack each other in a public blame game that expresses how exposed and vulnerable they feel their rule has become.

Israel “humiliated the Iranian government by capturing all of this material,” Rhode said, and many Iranians were laughing at the Islamic regime on social media.

According to Rhode and his sources in Iran, the protests there, which the media stopped covering, continue.

Thursday, Iranian Foreign Minister Javad Zarif said Iran will not “renegotiate or add onto” the accord.

David M. Halbfinger / New York Times

“In three bold moves this week – with F-15s, a PowerPoint presentation and the passage of a contentious new law – Prime Minister Benjamin Netanyahu has strengthened his hand in trying to foil Iran’s strategic ambitions, while potentially pulling the two nations closer to direct conflict.

“In Syria late Sunday, F-15s, widely assumed to be Israel’s, struck facilities where Iran and its proxies had entrenched themselves. The attack on a storage site near Hama destroyed 200 missiles and killed at least 16 people, 11 of them Iranians.

“In Tel Aviv the next evening, Mr. Netanyahu gave a bravura PowerPoint performance on live television from inside the Defense Ministry, flaunting the booty pilfered from a secret Tehran warehouse by an intrepid Mossad team – evidence, he said, of Iranian deceit about its long-running efforts to develop a nuclear bomb....

“Even as Mr. Netanyahu was speaking, his coalition in Parliament was pushing through a bill that would shift the power to go to war or carry out a military operation from the full cabinet to the smaller security cabinet – and, under ‘extreme circumstances,’ allow the prime minister and defense minister alone to order such action.

“In short order, Mr. Netanyahu had managed to exploit important political, military and intelligence advantages to advance his agenda on both the nuclear and conventional fronts, intensify the pressure on Iran, and free his hand under Israeli law to take the country to war without cabinet approval.

“Taken together, his moves have prompted longtime observers of the prime minister, whom they have long credited with a healthy aversion to all-out warfare, to ask if he may have turned to a grim new way of thinking....

“Crucially, the show of force in Syria and the show-and-tell of spycraft both come as Iran is constrained from plunging into a shooting war with Israel, either by itself or by proxy. Its own public is increasingly restive. Its close ally in Lebanon, Hezbollah, which might otherwise be counted on to retaliate against Israel, is reined in, at least for the moment, by elections on May 6, in which it is fielding candidates.

“Most of all, with President Trump set to announce his decision on the nuclear agreement by May 12, Iran is unlikely to give Mr. Trump any fresh excuses to quit it.”

Bret Stephens / New York Times

“As for Iran’s current compliance, of  course it’s complying. The deal gave Iran the best of all worlds. It weakened UN restrictions on its right to develop, test and field ballistic missiles – a critical component for a nuclear weapons capability that the Iranians haven’t fully mastered. It lifted restrictions on Iran’s oil exports and eased other sanctions, pumping billions of dollars into a previously moribund economy. And it allows Iran to produce all the nuclear fuel it wants come the end of the next decade.

“Yes, Iran is permanently enjoined from building a nuclear weapon, even after the limitations on uranium enrichment expire. But why believe this regime will be faithful to the deal at its end when it was faithless to it at its beginning?

“Netanyahu’s revelations were plainly timed to influence Donald Trump’s decision, expected later this month, on whether to stay in the Iran deal. Trump is under pressure from the French, British and Germans to stay in it, on the view that, if nothing else, the agreement has kept Iran from racing toward a bomb.

“But the deal now in place allows Iran to amble toward a bomb, even as it uses the financial benefits of the agreement to fund (in the face of domestic upheaval and at a steep cost to its own economy) its militancy in Iraq, Lebanon, Yemen and especially in Syria. And Iran’s own nuclear history suggests the country’s leaders have always been cautious in the face of credible American threats, which is one reason they shelved much of their nuclear program in 2003 after the U.S. invaded Iraq.

“ ‘When the Iranians fear American power, they either back down or they stall,’ says Mark Dubowitz, an expert on Iran sanctions at the Foundation for Defense of Democracies. ‘When they don’t fear American power, they push forward. With Trump, the question is: Are they going to feel American power, or American mush?’

“I opposed the Iran deal, but immediately after it came into effect, I believed that we should honor it scrupulously and enforce it unsparingly. Monday’s news is that Iran didn’t honor its end of the bargain… Punitive sanctions combined with a credible threat of military force should follow.”

Israel: From the Jerusalem Post: “Even Palestinian Authority President Mahmoud Abbas’ diplomatic friends condemned him.

“Friends and foes alike blasted Abbas as an ‘antisemite’ and a ‘Holocaust denier,’ after he charged that the Nazis killed Jews in the Holocaust because they were money lenders.

“ ‘The Holocaust did not occur in a vacuum, it was the result of thousands of years of persecution,’ UN Special Coordinator for the Middle East Peace Process Nickolay Mladenov said on Wednesday.

“ ‘This is why attempts to rewrite, downplay or deny it are dangerous.’

“Mladenov along with the European Union, Sweden, Germany and US officials from both the Trump and Obama administrations spoke out sharply against Abbas’ words spoken Monday night to the Palestinian National Council in Ramallah.

“Abbas chose to ‘repeat some of the most contemptuous anti-Semitic slurs, including the suggestion that the social behavior of Jews was the cause for the Holocaust,’ Mladenov said.

“Israeli leaders have long charged Abbas with antisemitism, but it is unusual for the UN to do so, given its strong support for the Palestinian cause....

“Prime Minister Benjamin Netanyahu said, ‘Abu Mazen [Abbas] gave another anti-Semitic speech. With utmost ignorance and brazen gall, he claimed that European Jews were persecuted and murdered not because they were Jews, but because they gave loans with interest.

“ ‘Abu Mazen again recited the most contemptible anti-Semitic canards.  Apparently the Holocaust denier is still a Holocaust denier. I call on the international community to condemn Abu Mazen’s severe antisemitism; the time has come for it to pass from the world.’”

North Korea: Friday, President Trump said a date and place had been set for the summit with Kim Jong Un, but gave no further details.  We did learn South Korean President Moon would travel to the White House for a briefing with Trump on May 22, prior to the Big One.

During the week Trump linked his threats to kill the Iran nuclear agreement with his hopes to strike a deal with North Korea, saying Kim Jong Un should know that the U.S. will walk away if it doesn’t think its partners are committed to compliance.

“I think it sends the right message,” Trump told reporters at the White House.  Others believe that Pyongyang will receive a different message: That the United States can’t be trusted to keep its commitments, so don’t worry about compliance.

Trump tweeted this week: “Headline: ‘Kim Prepared to Cede Nuclear Weapons if U.S. Pledges Not to Invade’ – from the Failing New York Times. Also, will shut down Nuclear Test Site in May.”

Later, Trump ordered the Pentagon to prepare options for reducing the number of U.S. troops in South Korea, as first reported by the New York Times. While reducing U.S. troop levels is not intended to be a bargaining chip in the summit between Trump and Kim, if a peace treaty between the two Koreas is signed, it could diminish the need for the 23,500 U.S. soldiers currently stationed on the peninsula.

Meanwhile, following the summit between South Korean President Moon Jae-in and Kim Jong Un last Friday, 78 percent of respondents to a Korea Research Center poll say they trust the North Korean leader, which is staggering.  Just a month-and-a-half ago, the figure was 10 percent!  President Moon’s approval rating, 86 percent, is a record for all South Korean presidents in history.

But the commitment to denuclearize, which was raised in the Korea summit, does not explicitly refer to North Korea halting its nuclear activities but rather to the aim of “a nuclear-free Korean peninsula.”

David Ignatius / Washington Post

“President Trump deserves credit for seizing the moment for negotiations with North Korea.  But some little-noticed documents reveal that Kim Jong Un has been planning his denuclearization offer and opening to the United States for the past five years.

“The diplomatic pace is accelerating now as Trump and the Korean leader prepare for their summit. There’s talk that North Korea may soon release three American prisoners, and Pyongyang has announced plans for a theatrical demolition of a nuclear test site later this month, with American observers watching.

“How did this extraordinary Korean détente happen? It’s a complicated story, but it appears that Kim has been the main driver. He has relentlessly pursued a dual strategy: to obtain a usable nuclear weapon, and then pivot toward dialogue and modernization of his economy. He sought his nuclear deterrent with almost reckless determination, but he has been surprisingly nimble in making the turn toward diplomacy.

“Would Kim have moved toward negotiations regardless of who was president? We’ll never know.  But there’s no denying that Trump’s confrontational approach created an opportunity for crisis diplomacy – and that he was bold enough to embrace Kim’s offer of direct talks....

“Kim’s regime explicitly put denuclearization on the table in a June 16, 2013, statement by the National Defense Commission (NDC).  Though the statement had the usual rhetoric, calling the United States a ‘war arsonist’ at one point, it also included this remarkable language: ‘The denuclearization of the Korean Peninsula is the behest of our leader’ and ‘must be carried out...without fail.’ The statement also urged ‘high-level talks between the DPRK [North Korea] and the U.S. authorities to...establish peace and security in the region.’....

“Despite the talk of denuclearization, Kim’s regime drove defiantly toward the nuclear weapons capability that the statements claimed he was ready to give up. This push culminated in a series of nuclear and missile tests last year, after Trump became president. Despite Trump’s bellicose threats, the North Koreans kept testing.

“Late last year, Kim declared, in effect, ‘mission accomplished.’ After a missile launch on Nov. 29, he proclaimed ‘with pride that now we have finally realized the great historic cause of completing the state nuclear force.’

“On New Year’s Day came the pivot.  Kim said that although ‘the nuclear button is on my office desk all the time,’ and that his missiles could target all of America, he now wanted to stress ‘the building of a prosperous country’ and a diplomatic outreach to South Korea.

“Kim proposed that North Korea attend the PyeongChang Olympics to ‘ease the acute military tension’ and ‘create a peaceful environment on the Korean Peninsula.’ From that proposal flowed the extraordinary chain of meetings, confidence-building measures and public promises about denuclearization – and the pathway to the expected Trump-Kim summit.

“Last month, Kim said at a Workers’ Party plenum that the byunglin line* had triumphed and that he was shifting to a ‘new strategic line’ devoted to boosting the economy.

“Kim is like an illusionist who tells you what trick he’s going to do, and then does it before your eyes, daring you to guess the secret. Trump sees himself as a clever, confrontational deal-maker, but he may have met his match with the kid from Pyongyang.”

*Kim’s announced dual strategy of strengthening his nuclear weapons capability while also improving North Korea’s impoverished economy.

Walter Russell Mead / Wall Street Journal

“One of the world’s oldest and ugliest frozen conflicts, dating back to 1950, appears to be thawing. North and South Korea are vowing to end their state of war. Kim Jong Un is offering one concession after another on his nuclear program, while progress continues toward a summit between Mr. Kim and President Trump.

“At the same time, the U.S. and its Middle Eastern allies are tightening the screws on Iran. America’s newly confirmed secretary of state, Mike Pompeo, made his first trip to the region in his new role this week. As he orchestrated a series of anti-Iranian statements with Arab and Israeli leaders, bunker-busting bombs (presumably Israel’s) hit Iranian bases in Syria.

“These developments are closely related. Throughout Mr. Trump’s tenure, his foreign-policy team has juggled two crises: First, North Korea’s progress on missiles that could carry its nuclear weapons to the U.S. mainland threatened to upset the balance of power in Northeast Asia. If Mr. Kim destroyed Tokyo, would the U.S. really retaliate and put the American homeland at risk?

“Second, the Obama administration’s bungled attempt to stabilize the Middle East by softening its approach to Iran had the opposite effect. Longtime American allies became jittery about Iran’s imperial ambitions, even as sectarian war and jihadist violence erupted across Syria and Iraq.

“The dilemma for the White House was that neither challenge could be ignored, but managing two explosive crises, one at each end of Asia, would stretch America’s political and military capacities to the limit. Complicating matters further, North Korea is a client of China, while Iran is an ally of Russia. An aggressive approach risked pitting the U.S. against Beijing and Moscow at the same time.

“The big question was whether one of the two crises could be put on hold.  In his unconventional way, Mr. Trump has been probing to see whether China or Russia is willing to cooperate. With China, he linked trade negotiations to Beijing’s help on the Korea issue, even as he raised the temperature by signaling that U.S. military action against Mr. Kim was on the table.  With Russia, Mr. Trump has consistently spoken of his desire for better relations and made clear that Moscow’s help with Iran could lead to sanctions relief.

“Mr. Trump seems to have believed initially that Russia would be more likely to choose engagement, but Moscow has so far stuck by Iran. China, in contrast, has twisted Mr. Kim’s arm to de-escalate. This makes sense: Although a rising China may be a greater long-term threat to the U.S. than a declining Russia, China has more powerful motives for working with the U.S. than Russia does....

“China and the U.S. also have some interests in common in the Middle East. They both want low oil prices and a stable geopolitical environment. If disruption in the region jacks up energy prices, China loses, given that it is the world’s largest energy importer, and Russia wins, since high prices would prop up its shaky economy and make Vladimir Putin’s foreign ambitions more affordable. Whenever Chinese leaders reflect on these truths, it is a good day for Washington and a bad day for Moscow.

“Mr. Kim’s concessions thus far do not mean that the nuclear standoff on the Korean Peninsula is over. China may be interested in preventing North Korea’s missile program from destabilizing East Asia, but forcing Pyongyang to give up its existing arsenal would be much harder. Still, even a temporary freeze of the missile program gives the U.S. breathing room to focus its efforts on the Middle East.

“The early signs are that the Trump administration intends to make the most of this North Korean opportunity. By responding positively to Mr. Kim’s overtures and continuing preparations for the promised summit, the White House is signaling its appreciation for China’s help and paving the way for intense negotiations with Beijing and Pyongyang over both security and trade. That will let the U.S. ratchet up the pressure even further in the Middle East. Moscow and Tehran would be well-advised to study their copies of ‘The Art of the Deal.’”

Victor Cha / Washington Post

“The footage of smiles, hugs and handshakes between the leaders of North and South Korea made for great television. But it also demonstrated that puzzling together peace on the Korean Peninsula still requires two missing pieces: Kim Jong Un’s true intentions regarding his nuclear weapons and President Trump’s ability to persuade the North Korean leader to part with his armaments. Thus, the Korea summit has only raised the stakes for the expected summit between Trump and Kim in May or June....

“But what his summit highlights is the indispensability of the United States to a diplomatic solution for peace and an end to the nuclear crisis on the peninsula. The Koreans can declare peace, but a treaty that would end the 1953 Korean War armistice would require the United States (and China) as a signatory. And it is hard to imagine that Trump would sign such a piece of paper without the end of the nuclear weapons program in North Korea.

“The summit unfortunately did not bring greater clarity to this piece of the puzzle. While the two Korean leaders confirmed the common goal of complete denuclearization and a nuclear-free Korean Peninsula, their statements fall far short of previous commitments by Pyongyang to abandon ‘all nuclear weapons and existing nuclear programs’ in the 2005 denuclearization agreement I worked on as the U.S. deputy head of delegation to the Six Party talks for President George W. Bush. Nor do the statements come close to North Korea’s commitment in a previous inter-Korean agreement in 1992 to forswear the development and possession of nuclear weapons, as well as to prohibit reprocessing and enrichment facilities in their countries.

“Perhaps Kim is saving this agenda item for his meetings with the United States. Or perhaps he never intends to give away his weapons and instead wants to have his cake and eat it, too – in the form of a peace treaty that would make it harder for the United States to carry out a preventive military attack, a photo op with the U.S. leader that legitimizes him as ruler of the newest nuclear weapons state, and the promise of lifting economic sanctions, all in return for a cap on nuclear weapons production and ban on missile testing....

“(The) stakes and the expectations have only been made higher by the Korea summit. Trump needs to respect South Korean desires for a peaceful diplomatic solution, but he should also maintain economic sanctions pressure on the North Korean regime, while at the same time compelling Kim to drop his weapons and embrace open-market forces that could have deleterious effects for his own autocratic rule.

“Moreover, given the hype Trump has created around the meeting with his own tweets, he cannot break his own cardinal rule, which is never to want a deal more than your counterpart. This meeting will be a clear test of the president’s self-proclaimed negotiating skills, and the stakes could not be higher because failure would mean the end of diplomacy and a return to discussions of military options. After all, the only thing after a summit is a cliff.”

China: The White House said on Thursday it was prepared to take measures against China’s stationing of military equipment on islands in the South China Sea, as Beijing has evaded questions on whether it has installed new missiles on outposts also claimed by Vietnam and the Philippines.

“We’re well aware of China’s militarization of the South China Sea. We’ve raised concerns directly with the Chinese about this, and there will be near-term and long-term consequences,” White House spokeswoman Sarah Sanders told reporters.

CNBC reported that the Chinese installed anti-ship and air defenses on the islands over the last 30 days, citing sources close to U.S. intelligence.

If the information is verified, it could provoke renewed tensions between countries bordering the strategically vital maritime region.

Separately, Chinese military personnel are targeting American flight crews in the skies over the east African nation of Djibouti using a high-powered laser, in a new show of Chinese harassment, according to Pentagon officials.

On Taiwan, the Dominican Republic’s government announced it is establishing diplomatic relations with Beijing and breaking ties with Taipei, another setback for Taiwan in the Caribbean and Latin America. Panama dropped its long-time ties with Taipei last year and established relations with mainland China, which considers Taiwan to be Chinese territory.

The number of countries that maintain full diplomatic ties with Taiwan has now been reduced to 19, mainly small, developing countries, 10 of them in Latin America.

Beijing has been seeking to increase pressure on Taiwan’s independence-leaning President Tsai Ing-wen.

Afghanistan: A 22-year-old U.S. service member was killed Monday during a combat operation in eastern Afghanistan, weeks before his deployment was scheduled to end.

“Spc. Gabriel D. Conde, of Loveland, Colorado, was killed while supporting Operation Freedom’s Sentinel and died as a result of “enemy small arms fire.”

Earlier, a wave of attacks killed nearly 40 people, including nine journalists in a double-suicide attack in Kabul. 

Separately, a U.S. government watchdog report (the Special Inspector General for Afghanistan Reconstruction) said Afghan security forces had declined sharply over the past 12 months, by about 10% to just under 300,000.  The defense ministry rejected the findings, telling the BBC the army had enough soldiers to fight the militants.

More than 8,000 U.S. special forces remain in the country backing Afghan troops.

Random Musings

--Presidential tracking polls....

Gallup: 42% approve of President Trump’s job performance, 53% disapprove. [Apr. 29...was 38/57 the prior week.]
Rasmussen: 51% approve, 49% disapprove

--Michael Gerson / Washington Post

“On a Saturday night in April, the rhetoric of our historical era reached a culminating, symbolic moment.

“In Washington – at the White House Correspondents’ Association dinner – comedian Michelle Wolf mocked the physical appearance of a Trump administration official, joked about feticide and compared the president’s daughter to ‘an empty box of tampons.’

“In Washington, Mich., President Trump gave an 80-minute speech in a stream-of-semi-consciousness style that mixed narcissism, nativism, ignorance, mendacity and malice.  He attacked the FBI, intelligence agencies, the Justice Department and his presidential predecessors.  ‘Any Hispanics in the room?’ he asked at one point, producing some boos.  Of the press: ‘These people, they hate your guts.’ Of his political opponents: ‘A vote for a Democrat in November, is a vote for open borders and crime. It’s very simple.’

“In both Washingtons, political discourse was dominated by the values and practices of reality television and social media: nasty, shallow, personal, vile, vindictive, graceless, classless, bullying, ugly, crass and simplistic. This is not merely change; it is digression. It is the triumph of the boors.  It is a discourse unworthy of a great country, and a sign that greatness of purpose and character is slipping way....

“For starters, I would deny that most people would have anything to do with such revolting garbage in their own lives. A guest at your dinner table like Wolf who profanely attacked other guests would be politely (or not so politely) asked to leave.  A neighbor who ranted like Trump about Mexicans and the FBI would be avoided like the plague. And yet people whom we could not trust to behave in civilized company now dominate American public discourse.  It is something Wolf would immediately recognize: a sad, sick joke....

“A great and memorable phrase encapsulates an argument.  ‘The world must be made safe for democracy’ expressed Woodrow Wilson’s vision of America’s role in the world.  Kennedy’s ‘Let them come to Berlin’ summarized America’s commitment to containing the Soviet Union. The Rev. Martin Luther King Jr.’s ‘I Have a Dream’ speech grew out of a compelling conception of fairness and justice.

“Trump’s signature phrase – ‘fake news’ – is an attack on the free press and a comfort to authoritarians everywhere. The memorable rallying cry of his campaign – ‘lock her up’ – was a call to jail his political opponent. His degraded language results from a degraded politics.  And the repair of our public life will eventually require a restoration of rhetoric.”

Peter Funt / Wall Street Journal

“(Michelle) Wolf’s material – most of which was laced with too much profanity to print here – wasn’t about the First Amendment, as some suggested. Nor was it about the #MeToo movement, which she attempted at one point to hide behind.  It was simply a Saturday Night Massacre of dignity and common sense.

“It helped prove two unfortunate truths: First, the notion of having working journalists dress up for ‘nerd prom,’ as they call it, and fawn over celebrity guests while listening to a hired comic roast the officials they cover each day was never a good idea.  Now, in the freewheeling age of social media, it’s completely bankrupt.

“Second, Mr. Trump was right to skip the event. No reasonable person, even among his harshest critics, would have expected him to sit through this....

“Through this misguided event, the Correspondents’ Association has given Donald Trump what he wants most: the last laugh.”

--President Trump once mocked Republican Sen. John McCain, saying he wasn’t a war hero because he was captured after his plane was shot down over Vietnam: “I like people that weren’t captured.”

So McCain, in his final book, “The Restless Wave,” said of the president: “He has declined to distinguish the actions of our government from the crimes of despotic ones. The appearance of toughness, or a reality show facsimile of toughness, seems to matter more than any of our values.”

“I would like see us recover our sense that we are more alike than different,” McCain writes.

“We are citizens of a republic made of shared ideals forged in a new world to replace the tribal enmities that tormented the old one. Even in times of political turmoil such as these, we share that awesome heritage and the responsibility to embrace it.”

McCain, who knows his time is limited due to stage 4 cancer, writes: “ ‘The world is a fine place and worth the fighting for and I hate very much to leave it,’ spoke my hero, Robert Jordan, in ‘For Whom the Bell Tolls.’

“And I do, too. I hate to leave it. But I don’t have a complaint. Not one. It’s been quite a ride. I’ve known great passions, seen amazing wonders, fought in a war, and helped make a peace. I made a small place for myself in the story of America and the history of my times.”

--French President Emmanuel Macron raised eyebrows in Australia by calling prime minister Malcolm Turnbull’s wife, Lucy, “delicious.”

Wrapping up a joint news conference during his brief Australian visit, Mr. Macron moved to thank the Turnbulls for their hospitality.

“I want to thank you for your welcome, thank you and your delicious wife for your warm welcome,” he said.

Most felt Macron may have simply slipped up in his use of English, since the French word for delicious – delicieux – also translates as “delightful.”

--The European continent has had some strange weather.  After the coldest winter since 2012, April was the warmest since 1981, 10.8 degrees Fahrenheit above average in southern Germany, Poland and the Balkans.  [Great for Germany in terms of record solar power generation. The cold winter had depleted Europe’s gas stores, though they’ve recovered.]

--I had no idea that a few weeks ago, parts of the Hawaiian island of Kauai were hit by up to 50 inches of rain in 24 hours, unofficially the biggest rainfall in the United States ever recorded.

But the problem is, the rain wasn’t throughout the entire island, yet tourists have been cancelling their reservations amid stories of heavy damage.  It was really an isolated area.  So check before you just write your dream vacation or honeymoon off.

That said, some scientists are saying this was the first major storm in Hawaii linked to climate change.

“The flooding on Kauai is consistent with an extreme rainfall that comes with a warmer atmosphere,” said Chip Fletcher, a leading expert from the University of Hawaii on the impact of climate change on Pacific island communities.

How bad was the flooding?  “Members of a bison herd were displaced or carried off by floodwaters, and some were rescued from the ocean after swimming for their lives.”

Kawika Winter, a natural resource manager, who is involved in research on climate change and community resilience, said, “In the Pacific Islands, we don’t have the luxury of debating whether climate change is real. Climate change is affecting us, and has been for some time....The warmer atmosphere is holding more moisture and that builds up until it meet with cold dry air, creating this massive unstable system, which causes what some meteorologists are now referring to as a ‘rain bomb.’”

This week, a study in the journal Nature Climate Change said that California can expect more volatile weather – swinging from dry to wet years – because of climate change.

Mark Zuckerberg, by the way, has landholdings on the North Shore of Kauai and pledged $1 million to help the island recover.

Kauai has weathered a number of tsunamis over the years, including one in 1957 that hit it with waves “up to 52 feet high.”  Hurricane Iniki, the most powerful to strike the islands in recorded history, killed six people in 1992 and caused damage totaling $3 billion. [Associated Press]

And now we have the Kilauea eruption and a 6.9 earthquake at  the epicenter late tonight.

--The following is a tragic story that maybe one day will save one of you.  A California couple was honeymooning in Bora Bora, staying in one of those hotel huts that are over the water. The husband, John, thought the water was a lot deeper than it actually was and dove into it, and his head hit the sand.  John suffered a spinal cord injury that has left him unable to walk.

--For 108 years, the Boy Scouts of America’s flagship program has simply been known as the Boy Scouts.  But with thousands of girls now entering the ranks, the name is being changed to Scouts BSA.  The change will take effect next February.  Did I ever tell you I was the worst Boy Scout ever?  Similar to me being the worst door-to-door book salesman (while in college, in Oklahoma and Kansas).

--After more than 60 years of government service, an aging C-130 Hercules National Guard plane was to be retired in Arizona, where it was being flown for a last time, only to sickeningly crash onto a Georgia highway on Wednesday, killing all nine Puerto Rican Guardsmen on board.

Puerto Rico’s fleet of C-130s is now down to three usable aircraft (two others in maintenance).

It’s too early to say what might have caused the plane to drop out of the sky, nose first onto Highway 21 after taking off from Savannah/Hilton Head International Airport.  The plane last received maintenance at the military base in Savannah in April.

All nine crew members had helped with hurricane recovery efforts as part of the 198th Fighter Squadron, which flies out of Base Muniz in the northern coastal city of Carolina.  The squadron used the plane to rescue Americans from the British Virgin Islands after Hurricane Irma, and later supplied food and water to Puerto Ricans desperate for help after Hurricane Maria.

Miraculously, the plane did not hit any cars or homes.

Poor Puerto Rico simply can’t catch a break.  Our thoughts and prayers go out to the victims’ families.

---

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

God bless America.

---

Gold $1316
Oil $69.79

Returns for the week 4/30-5/4

Dow Jones  -0.2%  [24262]
S&P 500  -0.2%  [2663]
S&P MidCap  +0.3%
Russell 2000  +0.6%
Nasdaq  +1.3%  [7209]

Returns for the period 1/1/18-5/4/18

Dow Jones  -1.9%
S&P 500  -0.4%
S&P MidCap  -0.2%
Russell 2000  +2.0%
Nasdaq  +4.4%

Bulls N/A  [48.0 / 19.6 prior week]
Bears

Have a great week.

Brian Trumbore