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05/12/2018

For the week 5/7-5/11

[Posted 11:30 PM ET, Friday]

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Edition 996

Dr. Bortrum returned from rehab today...it will take him a while to get a new column up, and things aren’t going to be the same at home from here on, but he’s getting around.  I just want to thank my brother for giving me a break from night patrol.  I’m back doing that duty the next few nights, or until we find a permanent solution.  Bro and I have earned our certificates in care-giving the past three weeks.  I also seem to have semi-converted him to Coors Light.

Trump World

I wrote the following in this space last March 31:

“But as the first quarter was wrapping up, it struck me that the second quarter could potentially be monumental on the foreign policy front, and thus roil global markets further.

“In the next three months, we are supposed to have a Trump-Kim summit, after Kim’s historic summit with South Korea’s President Moon Jae-in. China will be looming over both of them.

“President Trump seems certain to scuttle the Iran nuclear deal, which next has a May deadline for either extending the sanctions relief and keeping the deal in place, or putting the sanctions back on and starting over, with unknown consequences.

“And also over the next three months, no one should be surprised to see Russian President Putin create a new crisis, especially in the Baltics, as he defends Russia’s honor...at least that is how he’ll frame it.  Also, remember the name Kaliningrad.

“These are three massively important theaters, and throw in Israel, which is rapidly being surrounded.

“Again, this could all come to a head in just the next 90 days. How will President Trump respond? Who will be the last one in his ear?”

---

Well, it’s been an interesting first six weeks of the quarter, seven more to go, and they’ll be monumental, one way or another.  Markets will take a tumble over renewed trade concerns, of this I’m virtually certain.

As for Iran and North Korea, I went on record from the day the nuclear accord with Tehran was signed as saying “it was over,” just like it was over in Syria when the United States failed to work with Turkey on a no-fly zone, years prior to the emergence of ISIS, the massive migration to Europe and the involvement of Russia.

The Iran deal was an immediate failure because I told you, once it was signed, that it was too late to ever change it because European commercial interests, let alone those of Russia and China, would take over.  When candidate Donald Trump talked of scuttling the deal, I said that wouldn’t work because by then Europe would be too well-entrenched.  And that’s exactly what we’ve seen this week already.

I never for a minute liked the deal.  I also understand what President Trump is doing.  But my bet is the strategy won’t work.  He had Europe, specifically the U.K., Germany and France, ready to insist on new restrictions for Iran’s nuclear and ballistic missiles programs, for starters, but Trump once again acted with his gut.

Regarding North Korea, we now start the clock until June 12.  I’m just astounded no one (outside of think tanks and Florida Republican Sen. Marco Rubio) is talking about China’s role in all this.  It’s become all about them and no one gets it.  Kim Jong Un could, quite possibly, make some major concessions.  But Chinese President Xi Jinping will gain bigly.  China will lord over the South China Sea, and take Taiwan, and the United States will do nothing except float some ships through the straits from time to time; our fighter pilots buzzed by Xi’s boys and targeted with lasers.  Trump’s “great friend” Xi is toying with The Donald.

And Japan has to be s---ting bricks.  They, and yours truly, are no doubt deeply concerned President Trump could make some major concessions of his own, to the detriment of our allies.

South Korea?  I have to admit I’m shocked, but their people are way over-the-top with optimism.  They are lost.  At some point they’ll get a reality check.

That’s where I’m at today.  I’ve studied this situation closely for years and years, long before I started “Week in Review.”  I’ve been to the region multiple times.  I’ve had flights delayed while China conducted missile tests (think Fujian province) that are intended one day to be the real thing...the target, Taiwan’s air fields, for starters.

As for President Trump setting such a high bar for the June summit, I’ve given up.  We know who he is. I hope he gets it right.  I have faith in Mike Pompeo.  But will Trump listen.

Iran Deal

President Trump withdrew the U.S. from the landmark nuclear deal with Iran and five other world powers on Tuesday, isolating the country from its closest European allies, putting the agreement on life support and setting up a new showdown with Tehran.

“It is clear to me this deal cannot prevent an Iranian nuclear bomb under the decaying and rotten structure of the current agreement – the Iran deal is defective at its core,” Trump said in his speech. “I am announcing today that the United States will withdraw from the Iran nuclear deal.”

“America will not be held hostage by nuclear blackmail,” he added.

Trump said that intelligence published last week by the Israeli government, which revealed an Iranian archive documenting their experimentation with nuclear weapons technology up until 2003, offered “definitive proof” that the premise on which the Iran deal was clinched was “a lie.”

“The fact is, this was a horrible, one-sided deal that should have never, ever been made,” he said.  “A constructive deal could easily have been struck at the time. But it wasn’t. At the heart of the Iran deal was a giant fiction.”

Trump added: “The agreement was so poorly negotiated that even if Iran fully complies, the regime could still be on the verge of a nuclear breakout in just a short period of time.”  Trump warned of a nuclear arms race across the Middle East should the deal remain intact: “everyone would want their weapons ready by the time Iran had theirs.”

While Iran has abided by the terms of the deal, formally known as the Joint Comprehensive Plan of Action, since it was first implemented in 2016, the administration and its fellow critics believe Iran has done so because the deal structurally favors them: that on the front end, Tehran received a windfall of sanctions relief, and on the back end, the ability to grow the size and efficiency of their nuclear infrastructure.

Iran’s President Rouhani responded in a speech to the nation that Tehran would, for now, remain within the accord, and would negotiate with Russia and China – “the world’s two super powers” on a path forward. But he said that Iran would prepare to resume uranium enrichment as a contingency.

“Iran is a country that adheres to its commitments,” Rouhani said, “and the U.S. is a country that has never adhered to its commitments.”

Supreme Leader Ayatollah Ali Khamenei said the Islamic republic’s commitment to the deal would depend on Europe’s guarantees about its implementation.

“Without the sufficient guarantees from the three European states, continuation of the nuclear agreement is not logical,” Khamenei said in a speech on Wednesday.

Khamenei also suggested the U.S. is seeking regime change in the country.  “He threatened the [political] system and the nation.  On behalf of the nation, I tell him: Mr. Trump! You cannot do a damn thing,” he said.  “When you are dead and your body is eaten up by ants and snakes, the Islamic Republic will remain strong.”

Israeli Prime Minister Benjamin Netanyahu stated in a speech: “Israel thanks President Trump for his courageous decision.”

France has condemned as “unacceptable” a U.S. move to re-impose sanctions on companies trading with Iran.  French Foreign Minister Jean-Yves Le Drian said European companies should not have to pay for the U.S. decision.

At week’s end, France, Britain and Germany continue to say they will work with Iran to try to salvage the agreement; having failed in their lobbying effort to get Trump to remain in the deal.

As I said for years would be the case, a number of French firms have signed billion dollar agreements with Iran since the accord was signed in 2015, including Airbus, oil giant Total, and carmakers Renault and Peugeot.  They would have to wind up investments by November or face U.S. sanctions.

Overall, the three EU countries with the deepest exposure to Iran are France, Germany and Italy.  The value of trade between the EU and Iran has soared from $9.2bn in 2015 to $25bn last year.

[China, India, Japan and South Korea buy most of Iran’s 2.5 million barrels of oil exported each day.]

Opinion...all sides....

David Ignatius / Washington Post

“So what’s next with Iran?  Even in you think President Trump has made a big mistake in withdrawing from the nuclear agreement, as I do, that’s not the end of the story. Where does this bumpy road lead?

“What’s distressing about the Iran question is that nobody in this administration seems to have a good answer.  Trump’s move was a chest-thumping political decision, not a clearly articulated strategy.

“As unwise as Trump’s action was, it was probably inevitable, given his overblown rhetoric about ‘the worst deal ever made.’ This lie was repeated so often that it became part of the political landscape. That’s one of the problems with the president. Once he makes pledges, he seems determined to follow through, regardless of the damage. The path ahead begins with the need for a clear policy toward the future of Iran – and not the vague notion of regime change that’s bandied about. Whatever Trump may fantasize, intelligence professionals say this is not a pre-revolutionary moment in Iran. The economy is weak but not crumbling; the population is restless but not marching in the streets; the regime has fissures, but the military and security services appear solid.

“An inflection point for Iran may lie ahead, after the death of 78-year-old Supreme Leader Ali Khamenei, but that could be years away. And his passing, when it comes, could raise as many dangers for the United States and its allies as opportunities. Think of an Iranian Saddam Hussein.

“Good policy toward Iran should begin with a realistic assessment of the country.  I’ve visited Tehran twice, and each time was struck by two things: Iran is a modern and sophisticated society, rich with promise, and its people dislike the reactionary clerics who run the country’s political system. It’s a nation yearning to be normal, and for its revolutionary nightmare to end.

“That was one strategic rationale for President Barack Obama’s nuclear deal: It offered the prospect of gradual normalization and growth, under the relatively moderate leadership of President Hassan Rouhani. One of the deal’s weaknesses, alas, was that Rouhani could never curb the regional subversion campaign run by Iran’s Revolutionary Guard Corps.

“A sane Iran policy would bet on the people and not the regime; it would avoid a risky war that would make Iraq look like a cakewalk. It would promote the rise of a strong and stable democratic Iran as an American national interest. And it would seek an eventual accommodation between a post-revolutionary Iran and a modernizing Saudi Arabia.

“A second essential requirement is to avoid shooting Europe when we’re supposedly aiming at Iran. The most dangerous consequence of Trump’s policy is that it may force a confrontation with Europe by making its companies choose between doing business with Iran and the United States. Some Trump supporters may think this sounds smart, but it isn’t. It creates ill will, to no good purpose. And it may be a loser in international courts.

“A third key task is to plan for economic instability in Iran and the Persian Gulf region.  Iran is hustling to export oil while it can; traders in the bazaar are rushing to get money out of the country; the Iranian currency will weaken; unemployment and dislocation will grow. Trump may think he can benefit from economic chaos, and perhaps over time he will. But right now, the last thing the Middle East needs is another failed state – especially when it might widen the sectarian wars in Iraq, Syria, Yemen and Lebanon, like a zipper being ripped open.

“Trump has almost guaranteed that normalcy won’t come anytime soon for Iran. By withdrawing from the nuclear agreement, he has put that country on a slow boil. Trump may hope to bend Iranian behavior without war. But there’s no sign that he has a plan for how to accomplish that, nor a strategy for ending the wars in Syria and Yemen....

“The strangest aspect of Trump’s gamble on Iran is that it’s so reminiscent of President George W. Bush’s decision to invade Iraq in 2003. We’re doing it again – transforming a manageable problem into a freewheeling, uncontrolled one. As Gen. David H. Petraeus said on the way to Baghdad in 2003, ‘Tell me how this ends.’”

From Defense One:

“President Trump’s decision to stop participating in the Iran nuclear deal gives the U.S. a ‘more compelling’ case as it tries to curb various Iranian behaviors, Defense Secretary James Mattis told lawmakers Wednesday.

“ ‘The administration’s been in place for over a year, and for over a year we’ve attempted to work with allies to address the shortcomings of it,’ Mattis told the Senate Appropriations defense subcommittee.  ‘So I think we now have the opportunity to move forward to address those shortcomings and make it more compelling.’”

But last October, it was Mattis himself who told lawmakers that it was in America’s interest to remain in the deal.

On Wednesday, he said: “We will work with  our allies and try to bring Iran back into more responsible behavior, at the same time addressing all five of the threats that Iran constitutes: the nuclear issue which is foremost; certainly the terrorism issue that I just cited; the ballistic missile efforts they have; the cyber attacks they’ve been conducting; and then threats to international commerce.”

Daniel Henninger / Wall Street Journal

“It has been written or said maybe a million times that President Obama’s ‘signature’ foreign-policy achievement was the Iran nuclear deal. Now they are calling President Trump’s withdrawal from the deal foreign-policy ‘vandalism.’ Someone’s ox is getting gored.

“In his first year, President Trump overturned most of Mr. Obama’s signature regulatory initiatives – also denounced as vandalism – and now the liberated U.S. and world economies are booming. Prudence, a dying virtue, suggests a wait-and-see attitude toward Mr. Trump’s reversal of the Iran deal. A year from now, the world may be safer without it.

“Another signature legacy of the Obama presidency was that after 2010, many of its major initiatives were never sent to Congress. Instead Mr. Obama submitted his biggest policy ideas for the approval of foreign governments, or to no one.

“The Iran nuclear deal is just that – a deal Mr. Obama did with the mullahs, Russia, Germany, France, the U.K. and China, with no formal instrument of ratification. But to listen to its defenders, you’d think it was the Ten Commandments.

“The Paris climate agreement is an ‘accord’ with so little domestic support that even some Democrats would have voted ‘no’ if Mr. Obama had submitted it to the Senate for approval....

“Mr. Trump’s assault on – and now dismantling of – the Obama nuclear deal is a case study in the persistence of a status quo that simply will not question itself unless, figuratively speaking, you blow it up.

“The global status quo is the accretion of every police action – zillions of them – in the nearly 75 years since the end of World War II. Much of that policy, and the people behind it, kept the peace and allowed the postwar world to flourish. It has been a magnificent achievement.

“But its public representatives, especially in Europe and the U.S., have become a perpetual self-preservation machine, a case study in the dangers of bureaucracies that admit no reality other than what they do.

“The U.K.’s implementation of Brexit has proved difficult, but why deny that it was a cri de coeur against the  bland, trust-us arrogance of the European Commission’s bureaucracies?  Presumably, ‘our democracy’ hasn’t turned into a one-way street, yet.  The media, once the main interrogator of status quos, has become the primary apologist for virtually every iteration of the bureaucracy’s products, such as the Iran deal.  About the only thing most of the media disrupts anymore is existing social norms.

“One has to be pretty obtuse to refuse to admit the deficiencies in the nuclear deal, notably its omission of Iran’s active missile-production program or its diversion of post-sanctions revenue away from internal economic development and toward imposing regional hegemony from Tehran to the Mediterranean.

“Iran’s own people staged public protests across the country last weekend, explicitly citing the subservience of their needs to the mullahs’ militarized spending. But in Europe’s foreign ministries and John Kerry’s world, even this dissent must bow to the sacred status of their ‘nuclear deal.’....

“Twice since October, President Trump made clear his intention to withdraw from the deal unless its weaknesses were addressed. High-level officials from the State Department shuttled nonstop between Berlin, Paris and London to get movement on these issues. They got nothing.

“Europe’s foreign-policy elites, taking their cues from Germany’s placid Angela Merkel, acted as though their high-toned inertia would make the Trump administration’s concerns just...go away. By last weekend, the three European nations’ best effort consisted of British Foreign Secretary Boris Johnson’s fatuous grandstanding on American television.

“Is the Trump wrecking-ball tactic beyond criticism? Hardly. Does every Trump detonation of the status quo work?  No. His brinkmanship in bilateral trade negotiations is damaging U.S. agricultural and manufacturing interests.

“But the alternative to what the Trump team is doing now on Iran and North Korea has been to rationalize doing next to nothing – an increasingly familiar default. With or without its partners, the Obama Iran deal is about to be revised and renamed.”

Edward Luce / Financial Times

“Remember the Eighth of May.  History may recall it as the day the U.S. abandoned its belief in allies. Donald Trump’s exit from the Iran agreement puts Washington – rather than Tehran – in violation of an international deal. For the first time in decades, the U.S. is acting without a European partner.

“The 2003 Iraq war was backed by Britain, Spain and others – along with halfhearted efforts to coax France and Germany. Mr. Trump, by contrast, has isolated America from the rest of the West without serious effort at all. Who else could unify the post-Brexit UK with Europe?

“The first casualty of Mr. Trump’s move is any semblance of a global order. The U.S. now finds itself in a lonely group with Israel and Saudi Arabia on one side of a toxic international breach. On the other are China, Russia, Europe and Iran. To that list we should almost certainly add Japan, India, Australia and Canada. It is hard to see how the gap will not widen. Mr. Trump was deaf to the unanimous pleading of America’s closest allies.  Two of their leaders, France’s Emmanuel Macron and Germany’s Angela Merkel, even trekked to Washington in the past fortnight to press their case. They came away with nothing.

“A third senior ally, Boris Johnson, Britain’s foreign secretary, pointed out that the world had ‘no Plan B’ to the Iran nuclear deal.  That was another way of saying that the alternative to ‘jaw jaw’ is ‘war war.’

“Mr. Trump has landed Europe with a dilemma it had done its best to avoid. He is giving America’s leading NATO allies a choice between upholding a deal they brokered – and that Iran has honored – or signing up to an America First war party over which they have no influence. The first will trigger U.S. sanctions on European banks and energy companies that continue to do business with Iran.  The second would mean forfeiting their best judgment and risking a Middle Eastern conflict that would hurt Europe far more than America. Falling in line with the U.S. would also come at a steep political cost.  Mr. Macron’s domestic poll ratings fell after his ‘flattery offensive’ on Mr. Trump.

“It would also mean embracing Mr. Trump’s alternative take on reality. The U.S. president said on Tuesday that the 2015 nuclear deal would soon bring Iran to the brink of developing nuclear weapons. Europe’s leaders point out that Iran was within three months of achieving nuclear breakout before the deal was struck. The agreement put that clock back to at least a year. Iran agreed to unscheduled inspections and strict limits on its nuclear research and enrichment activities for 10 to 15 years. Mr. Trump has handed Iran the pretext to restart its nuclear program at any time. The same applies to Mr. Trump’s claim that the deal had spurred a Middle Eastern nuclear arms race.  No such race was taking place. It might start now.

“Europe’s response will largely hinge on how Iran reacts. Hassan Rouhani, Iran’s president, said on Tuesday that the ball was in Europe’s court. If the three Ms – Merkel, May and Macron – find a way to sustain the deal, Iran is likely to stick to it. That fork leads to a deepening western split. Washington would levy sanctions on European entities. Europe would be forced to retaliate.

“For years, America’s allies have chafed at Washington’s imposition of secondary sanctions. The fallout over Iran may be the unilateral straw that breaks the camel’s back.  It goes without saying that Russia, China and others will continue to do business with Iran.  They will also reciprocate in the event of U.S. financial penalties.

“Such tit-for-tat will not occur in isolation. The knock-on impact on Mr. Trump’s trade talks with China, and hopes of sustaining China’s pressure on North Korea’s Kim Jong Un to denuclearize, would be radically uncertain. Asia – like Europe and the Middle East – is watching Mr. Trump’s evolution with mounting anxiety. It is unclear how he thinks his Iran brinkmanship could boost prospects of a serious nuclear deal with Mr. Kim....

“The parallels with the build-up to the Iraq war are troubling. Few countries wish to see a repeat of that blunder. On Tuesday, Mr. Trump all but declared war on Iran. That will be consequential enough. The collateral damage to America’s global standing may be even worse.”

Bret Stephens / New York Times

“The (Iranian) regime might calculate that a strategy of confrontation with the West could whip up useful nationalist fervors. But it would have to tread carefully: Ordinary Iranians are already furious that their government has squandered the proceeds of the nuclear deal on propping up the Assad regime. The conditions that led to the so-called Green movement of 2009 are there once again.  Nor will it help Iran if it tries to start a war with Israel and comes out badly bloodied.

“All this means the administration is in a strong position to negotiate a viable deal.  But it missed an opportunity last month when it failed to deliver a crippling blow to Bashar al-Assad, Iran’s puppet in Syria, for his use of chemical weapons. Trump’s appeals in his speech to the Iranian people also sounded hollow from a president who isn’t exactly a tribune of liberalism and has disdained human rights as a tool of U.S. diplomacy. And the U.S. will need to mend fences with its European partners to pursue a coordinated diplomatic approach.

“The goal is to put Iran’s rulers to a fundamental choice. They can opt to have a functioning economy, free of sanctions and open to investment, at the price of permanently, verifiably and irreversibly forgoing a nuclear option and abandoning their support for terrorists.  Or they can pursue their nuclear ambitions at the cost of economic ruin and possible war. But they are no longer entitled to Barack Obama’s sweetheart deal of getting sanctions lifted first, retaining their nuclear options for later, and sponsoring terrorism throughout.

“Trump’s courageous decision to withdraw from the nuclear deal will clarify the stakes for Tehran. Now we’ll see whether the administration is capable of following through.”

Trumpets....          

--Rudy Giuliani resigned from his law firm after his partners got fed up with his bloviating defense of President Trump during his over-the-top media appearances, as first reported by the New York Times.

Giuliani had taken a leave of absence from the firm, Greenberg Traurig, one of the nation’s largest and most respected, to defend Trump in Robert Mueller’s probe and other controversies, including the $130,000 payoff to porn star Stormy Daniels.

But the firm said he quit, with the chairman, Richard Rosenbaum, saying: “After recognizing that this work is all consuming and is lasting longer than initially anticipated, Rudy has determined it is best for him to resign.”

Giuliani said it “is in everyone’s best interest that I make it a permanent resignation” so that he could focus on the Russia probe.

The firm’s partners have been cringing at some of Giuliani’s remarks, especially regarding the payment that Trump fixer Michael Cohen made to Daniels to keep her quiet about a one-night stand she said she had with Trump in 2006, the Times reported.

Giuliani said that such payments were made all the time, including at his firm.

“That was money that was paid by his lawyer, the way I would do, out of his law firm funds,” he said on Fox News.  “Michael would take care of things like this like I take care of this with my clients.”

Late Thursday, the firm gave the Times a statement about those comments.

“We can’t speak for Mr. Giuliani with respect to what was intended by his remarks. Speaking for ourselves, we would not condone payments of the nature alleged to have been made or otherwise without the knowledge and direction of a client.”

Cohen initially said that Trump didn’t know about the payment to Daniels – as did the president himself last month.

But Giuliani blew that story out of the water when he said that Trump had reimbursed Cohen.

--Emblematic of the problems facing Michael Cohen, a watchdog group, Public Citizen, filed complaints with Congress and the Justice Department, saying Cohen broke federal ethics and lobbying laws by failing to register as a lobbyist while collecting big sums from companies with business before the Trump administration.

Swiss-based drug maker Novartis and AT&T acknowledged making huge payments to a Cohen shell company in exchange for information on Trump and the administration.  Novartis paid Cohen’s firm $1.2 million for a one-year period; AT&T paid Cohen $600,000.

In AT&T’s case the payment was related to its proposed merger with Time Warner and Cohen’s advice on how to handle the administration, which then had the Justice Department sue to block the deal.  Novartis was looking for insight on the administration’s plans for healthcare, including how to approach the White House when it came to the Affordable Care Act.  Both companies have said they have cooperated with special counsel Robert Mueller’s office, and both admitted to making “a big mistake,” as CEO Randall Stephenson wrote in a memo to employees, announcing the “retirement” of Senior Executive Vice President Bob Quinn, a lawyer who took over the D.C. office in October 2016.  It was his office that hired Cohen. 

This is a huge embarrassment for the companies, having spent shareholder money and gaining little in return, at least that we know of.

Another client, Korean Aerospace Industries, paid Cohen’s firm $150,000 for legal advice on accounting standards.

Meanwhile, the times reported that Cohen used the shell company, Essential Consultants L.L.C., for an array of business activities that went far beyond what was previously known. Transactions totaling at least $4.4 million flowed through it from the time shortly before Trump was elected president until last January, financial records show.

Among the previously unreported transactions were payments last year totaling about $500,000 from Columbus Nova, an investment firm in New York whose biggest client is a company controlled by Viktor Vekselberg, a Russian oligarch.

Vekselberg was apparently questioned by the feds about donations he gave to Trump’s inaugural fund and campaign.

--A report by the Senate Intelligence Committee found there is no evidence that Russian interference in the 2016 presidential election affected the actual vote count, which confirms a January 2017 assessment by U.S. intelligence agencies.

However, the committee concluded that hackers affiliated with the Russian Government “conducted an unprecedented, coordinated cyber campaign against state election infrastructure.”

“Russian actors scanned databases for vulnerabilities, attempted intrusions, and in a small number of cases successfully penetrated a voter registration database,” the panel found. “This activity was part of a larger campaign to prepare to undermine confidence in the voting process.”

No one should feel good over security for the 2018 and 2020 election cycles.

--Sen. John McCain urged his fellow senators to vote against President Trump’s pick to head the CIA due to her “refusal to acknowledge torture’s immorality.”

Gina Haspel, who in 2002 ran a black-site prison where an Al Qaeda militant was tortured, was nominated for the position after Mike Pompeo was tapped to replace former Secretary of State Rex Tillerson.

McCain said in a statement on Wednesday, “I believe Gina Haspel is a patriot who loves our country and has devoted her professional life to its service and defense.  However, Ms. Haspel’s role in overseeing the use of torture by Americans is disturbing. Her refusal to acknowledge torture’s immorality is disqualifying.”

McCain, who was tortured by the North Vietnamese in the late 1960s, added that “the methods we employ to keep our nation safe must be as right and just as the values we aspire to live up to and promote in the world.”

Haspel tried to reassure Senators on Wednesday by saying she would not carry out presidential orders she found morally objectionable.

She also vowed never to restore an interrogation program, and acknowledged the spy agency learned “tough lessons” from its use of harsh techniques like sleep deprivation and waterboarding.

Haspel, however, refused to weigh in on the morality of the torture despite repeated questions from the committee.

“I’m not going to sit here with benefit of hindsight and judge the very good people who made hard decisions, who were running the agency, in very extraordinary circumstances at the time,” she said.

Personally, I support Haspel’s nomination.

--Homeland Security Secretary Kirstjen Nielsen almost quit after President Trump slammed her for failing to secure the border during a cabinet meeting Wednesday, according to multiple reports.

According to the New York Times, Nielsen is unhappy in her job and told colleagues after the meeting that she shouldn’t stay on if Trump doesn’t think she’s effective – going so far as to pen a letter of resignation but never actually sending it.

Trump’s blowup at Nielsen reportedly came during a discussion about illegal border crossings and why Mexico wasn’t doing more to stop them.  Some of the cabinet members then pointed out the U.S. relies on the labor of workers who cross the border each day, which Trump acknowledged – only to continue to rant about the issue, berating Nielsen in the process.

Trump, according to the Times, believes Nielsen and other officials are fighting his recent order to separate more border-hopping parents from their kids.

Wall Street / Trade

There was some important inflation data this week...producer and consumer prices for April, and they were both tame, which gave investors a reason to buy stocks because the numbers didn’t give the Federal Reserve an excuse to hike interest rates more than anticipated, the Street waffling between two and three more hikes the rest of the year.  The data this week argues two.

The PPI was up 0.1%, 0.2% ex-food and energy; 2.6% year-over-year, 2.3% on core. The CPI was up 0.2%, 0.1% on core; 2.5% and 2.1%, respectively, yoy. 

The Fed will tighten in June and then the data (and possibly geopolitics) will lead them the rest of the year...one or two more.

On the trade front, talks between the U.S. and China must lead to an outcome that “benefits American businesses and workers,” President Trump told his counterpart, Xi Jinping, in a call on Tuesday.

Xi in turn called for continued communication during their escalating trade dispute to achieve a “mutually beneficial” result rather than a much-dreaded trade war.

Trump “affirmed his commitment to ensuring that the trade and investment relationship between the United States and China is balanced and benefits American businesses and workers,” according to a readout provided by the White House.

Xi said that “the teams of both sides can maintain communication and strive to find a solution to the problems that exist, so as to achieve mutually beneficial and win-win results,” according to a report in Chinese state media.

In other words, more of the same...as in nothing. As in the U.S. trade mission to Beijing the week before, led by Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, was a waste of time and fuel.

There is still no specific date for the bulk of the tariffs China has threatened to impose in response to U.S. trade actions, but Chinese importers have been cancelling purchases of corn and cut orders for pork while dramatically reducing new soybean purchases, according to the Dept. of Agriculture.  In 2017, China was the second-biggest customer for U.S. agricultural products, spending nearly $20 billion.

The U.S. will finalize its punitive tariff list of $50 billion worth of Chinese products later this month.  President Trump has threatened to impose tariffs on another $100 billion in Chinese goods as well.

And the Treasury Department is planning to introduce proposals on May 21 to restrict Chinese investment in the U.S. and U.S. investment in China.

As for the steel and aluminum tariffs on the European Union, Canada and Mexico, the White House had granted a 30-day reprieve as it seeks to extract concessions from trading partners who have resisted those demands, while initial agreements with Argentina, Australia and Brazil need to be finalized in the same time frame.  Though now in the case of the larger EU players, you have the potential for layering on trade actions involving the re-imposition of sanctions on Iran.

And there is NAFTA, with a new agreement having a May 17 deadline...at least for now, according to House Speaker Paul Ryan due to the congressional calendar.  Talks broke down Friday with many issues still outstanding.

Republican Sen. Pat Toomey (Penn.) / Wall Street Journal

“The Trump administration will soon unveil a ‘new’ North American Free Trade Agreement.  U.S. trade negotiators have sought, among other things, to limit its duration, impose new domestic content requirements on certain products, and weaken investor legal protections. Even with these protectionist features, congressional Democrats are unlikely to vote for President Trump’s NAFTA 2.0. He will need the support of pro-trade Republicans like me to ensure passage of any new agreement.

“To pressure us into voting for an agreement that diminishes free trade, some in the administration suggest offering a grim choice: either approve a diminished NAFTA, or the president will unilaterally withdraw the U.S. from the existing NAFTA, leaving no NAFTA at all.

“If presented with this ultimatum, I will vote ‘no,’ urge my colleagues to do likewise, and oppose any effort by the administration to withdraw unilaterally. Pulling out of NAFTA by executive fiat would be economically harmful and unconstitutional.

“The Framers reserved trade policy for Congress, which has the express authority to establish tariffs and regulate commerce with foreign nations.  A president who unilaterally withdrew from NAFTA would be directly regulating foreign commerce, imposing significant disruptions on the economy, and infringing on Congress’ status as a coequal branch of government....

“Unilateral executive withdrawal would amount to the president creating new law by himself.  NAFTA became operative when Congress passed implementing legislation in 1993. Nowhere in the 1993 law, or in any other relevant statute, has Congress delegated to the president authority to terminate a free-trade agreement. A president can no more repeal NAFTA than he can repeal ObamaCare or create a new NAFTA without Congress’ approval....

“Rather than trying to coerce free-trade Republicans into voting for an agreement that weakens trade and the economy, the administration can accept the advice from many members of Congress and others to modernize NAFTA in ways that expand trade opportunities without curtailing American consumers’ freedom.”

Europe and Asia....

Literally zero broad economic news of import for both after last week’s deluge.

Eurobits....

--The populist rebellion that started with Brexit, and then moved on to Donald Trump, has landed its biggest blow on the European continent.

Italy has succumbed to the forces of nationalism and protectionism that emerged over the past two years as the biggest threat to the political order, as the anti-establishment Five Star Movement, led by 31-year-old Luigi Di Maio, is forming a governing alliance with the anti-immigrant League, led by fellow college dropout Matteo Salvini, 45.

There are big issues to be settled, such as who will be prime minister, but the alliance received the blessing of former prime minister Silvio Berlusconi, leader of the center-right, who had been adamantly opposed to any alliance with Five Star, Berlusconi still a kingmaker of sorts.

Salvini and Di Maio said they are taking until Monday to finish their plan to form a government in Rome.  Among the issues to be reconciled are the League’s promise of a flat tax at 15 percent for people and businesses, while Five Star has offered a citizens’ income to poorer Italians. Both want to scrap the pension reform that helped weather the debt crisis but upset voters.

The League is also looking for curbs on immigration and both parties favor a more assertive stance towards the EU.

Meanwhile, talk of a “citizens’ income” is scary for bond investors, who already have to deal with Italy’s 130%+ debt to GDP ratio, second-biggest in Europe after Greece. That said, the yield on the country’s 10-year is 1.86%, more than a point lower than the U.S., which is nuts, but it has everything to do with the European Central Banks’ ongoing zero interest rate policy and quantitative easing.

The fear is the policies of League and Five Star will lead to another crisis and a clash with Brussels, which is already dealing with the U.K. and Brexit, as well as ornery Eastern Europe countries, and there could be renewed calls for Italy to exit the EU.

Italy has been stuck in political limbo since the March 4 election, with the center-right bloc, including the League, gaining the most seats, but Five Star was the largest single party.

--France has been roiled by labor issues, a backlash in part against reforms proposed by President Emmanuel Macron. Particularly hard hit has been Air France, whose French unions called on management to resume talks over a pay dispute four days after the chief executive’s surprise resignation sent the strike-hit carrier deeper into turmoil.  Pilots, cabin crew and ground staff in France were on strike for a 15th day since February on Tuesday and Air France said one in five flights would be cancelled.  The strikes have cost the carrier nearly $400 million thus far.

Air France has offered workers a pay raise of 2 percent in 2018 and a further 5 percent over the following three years, but French unions, which are demanding 5 percent this year, have complained management isn’t serious about talks.

France’s finance minister, Bruno Le Maire, said the government will not bail out the airline.  He added Air France must become more competitive or it risks being further outpaced by rivals.

The French government owns 14.3% of the Air France-KLM parent group.

--BT, the British Telecom Group, is cutting 13,000 jobs in the biggest jobs cull in a decade, mostly managerial and back-office jobs, while moving to a smaller London bae in an attempt to rebuild from an accounting scandal.

CEO Gavin Patterson said radical action was “absolutely critical” if BT was to deliver the next-generation fiber and mobile networks Britain needs.

Street Bytes

--The above-mentioned tame inflation data helped stocks to their best gain since March, with the Dow Jones up 2.3% to 24831, the S&P 500 up 2.4% and Nasdaq 2.7%. The Dow and S&P are back in the black for the year, while Nasdaq is up 7%...tech stocks recovering nicely from their February/March swoon.

--U.S. Treasury Yields

6-mo. 2.04%  2-yr. 2.53%  10-yr. 2.97%  30-yr. 3.10%

The yield on the 10-yr. has finished the last four weeks between 2.95% and 2.97%.  The spread between the two- and 10-yr. is at its narrowest since Sept. 2007.

--Oil prices hit their highest level since 2014, over $70 on the U.S. benchmark I list each week below (West Texas Intermediate, or WTI). Oil has been surging on speculation the U.S. was exiting the Iran nuclear deal, with the re-imposition of sanctions.

Previously, international sanctions have cut Iranian exports by around 1 million barrels a day, but as it seems the U.S. is going it alone, the impact won’t be as great, perhaps 250,000-350,000 barrels a day.  We’ll have to wait to see how this all plays out with Germany, France and the U.K., among others.

Separately, you have a dispute between the oil ministers of Iran and Saudi Arabia, with Iran desiring oil at $60 to $65 a barrel, while the Saudis are seeking to push oil to $80 a barrel to fund economic reforms.

Meanwhile, in the U.S., oil production continues to march higher, with the rig count at a three-year high, according to oil-field services firm Baker Hughes.

Bank of America Merrill Lynch head of commodities research, Francisco Blanch, says, “Looking into the next 18 months, we expect global oil supply and demand balances to tighten.”  He said oil prices could rally to $100 a barrel next year.

--President Trump on Friday blasted drugmakers and healthcare “middlemen” for making prescription drugs unaffordable for Americans, but healthcare stocks rose as it became clear the administration had avoided taking aggressive and direct measures to cut drug prices.  Trump, speaking from the Rose Garden, said his administration would take aim at the “middlemen” in the drug industry who became “very very rich,” an apparent reference to health insurers and pharmacy benefit managers.

Trump also said the pharmaceutical industry is making an “absolute fortune” at the expense of American taxpayers. Foreign governments “extort” unreasonably low prices from U.S. drugmakers, Trump added.  But, again, the bark was bigger than the bite.

--Ford Motor said it would suspend production of its profit-driving F-150 pickup at its big plant in Dearborn, Michigan (as well as another plant in Kansa City, Mo.), bringing to a temporary halt all production of the nation’s bestselling vehicle.

The move is the result of a fire at a parts supplier in Michigan (Meridian Lightweight Technologies) that shook the entire North American auto industry.  Production at General Motors, Fiat Chrysler, BMW and Mercedes is also disrupted as a result.

But for Ford this is huge, with F-150 production forecast to be out for several weeks.  It is estimated the two plants produce some 10,000 to 15,000 F-150s a week, according to AutoData Corp. and analyst Jamie Albertine.

Several thousand workers will be laid off temporarily.

--The 23 largest airlines in the U.S. reported a combined profit of $15.5 billion, including $4.6 billion from baggage fees (another $2.9 billion from reservation change fees) last year, according to the U.S. Bureau of Transportation Statistics, the fifth consecutive year of after-tax profits, continuing the rebound from nearly a decade of losses following 9/11.

The industry’s biggest year was 2015, owing to low fuel costs, which led to combined profits of nearly $25 billion, the bureau said.

The nation’s airline industry also added 450 new planes last year.  [Hugo Martin / Los Angeles Times]

--I’ve been writing extensively on the plight of Chinese telecom company ZTE and its problems since the Commerce Department banned American companies from selling components to ZTE, the fourth-largest seller of phones in the U.S., and on Wednesday, the Shenzhen-based company disclosed in a regulatory filing that “major operating activities of the Company have ceased,” though the extent of the halt to ZTE’s many businesses isn’t totally clear.  It is involved in consumer electronics, telecommunications infrastructure and cloud computing.

The company has been warning for weeks that the U.S. sales ban has threatened its survival.

The Commerce Department in April had put the ban in place after finding ZTE violated the terms of a 2017 settlement over the evasion of U.S. sanctions against Iran and North Korea.

ZTE depends on U.S. companies such as Qualcomm for semiconductors for its phones, as well as an array of American suppliers for components used in its networking equipment.

--Walmart has agreed to pay $16bn for a majority stake in Indian ecommerce company Flipkart, a record foreign direct investment for India that will pit it against U.S. rival Amazon.

Walmart is buying 77 percent of Flipkart.  Calling India “one of the most attractive retail markets in the world,” Walmart chief executive Doug McMillon said that it was backing “the company that is leading the transformation of ecommerce in the market.”

Flipkart has been facing a strong challenge in the Indian ecommerce market from Amazon, which considers India its main target market in Asia.  While the market is small thus far, analysts expect it to grow significantly in the next five years.

--Walt Disney Co. saw a 23 percent earnings increase for the second quarter compared to 2017 thanks in large part to the success of Marvel Studios’ hit, Black Panther.

Disney reported fiscal second-quarter net earnings of $2.94 billion for the three months ending March 31.

“It’s clear from the recent results, as well as from the slate ahead, that our studio has and will continue to raise the bar in terms of both creative and commercial success,” Disney CEO Bob Iger said on the earnings call.  “The incredible performance of Marvel’s Black Panther is just one of many examples.”

Black Panther has earned $1.34 billion worldwide since its opening Feb. 16.

Disney’s studio revenues grew 21% overall to $2.45 billion. And now you have the April release of “Avengers: Infinity War,” which has already grossed $1 billion, and isn’t reflected in this week’s quarterly release.

Disney also reported a big boost from its theme parks business, which rose 13% to $4.88 billion in revenue. Growth at Walt Disney World Resort, Disneyland Paris and Hong Kong Disneyland Resort gave the segment a lift.

But Disney is now facing a showdown with cable giant Comcast Corp. over its purchase of Rupert Murdoch’s 21st Century Fox. Disney is hoping to buy the bulk of Fox, including the film and TV studio, for $52.4 billion, pending regulatory approval; the deal having been first announced in December. Bob  Iger views the acquisition as a major component in his drive to make Disney a more powerful competitor in the face of growing competition from tech giants including Netflix, Amazon and Apple.  Disney wants to have more film and TV content for two streaming services – a Disney-branded offering set to launch next year, and an ESPN streaming service that launched in April.  Iger insists, though, the Fox deal is not make-or-break for the digital strategy.

The ESPN streaming service, dubbed ESPN+, is a bid to draw online viewers as the network continues to be squeezed by cord cutting and the rising cost of televising major sports.

Operating income for Disney’s cable networks business declined 4% in the quarter to $1.73 billion, reflecting decreases at ESPN and a loss at digital platform BAMTech.  But overall media networks revenue, which includes ABC and cable channels, grew 3%.

But now Comcast is preparing an all-cash, hostile, offer to outbid Disney, after previously getting rebuffed by Fox.  Comcast last fall had offered more than $60bn for the Fox assets, but Murdoch was cool to the offer by Comcast Chairman Brian Roberts.

Comcast recently formalized its $31bn bid to buy all of European satellite-TV provider Sky, which Fox has been trying to buy for nearly 17 months. Fox owns 39% of Sky – which provides TV service in Britain, Ireland, Italy, Germany and Austria – but British regulators have balked at the Murdoch family’s offer, concerned it would give them too much influence in British media, beyond what it already has.

Meanwhile, back to Marvel’s “Avengers: Infinity War,” after two weeks the film had grossed over $1 billion globally, accomplishing the feat in just 11 days, one day fewer than “Star Wars: The Force Awakens” in 2015. As of last weekend, the cumulative domestic take from “Infinity War” stood at $450.8 million.

In a ComScore audience survey, 33% of first weekend ticket holders said they would see the film again, three times the norm, according to ComScore’s Paul Dergarabedian.

“Black Panther” is up to a cumulative domestic take of $693.1 million.

--Nestle is paying $7.15bn for the rights to market products of Starbucks outside its shops as the Swiss group fights to strengthen its position in the global coffee sector.  Starbucks and Nestle will work together on marketing strategies and innovation.  Starbucks’ out-of-shop sales generate $2bn in annual revenues.

Nestle is the world’s largest food and drinks company but it is weak in the U.S. coffee market with brands like Nescafe and Nespresso. 

Kevin Johnson, president and CEO of Starbucks, said: “This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestle.”

500 Starbucks employees will move to Nestle, but operations will continue to be located in Seattle.

--Warren Buffett and Berkshire Hathaway Inc. Vice Chairman Charlie Munger answered questions from shareholders, journalists and analysts at Berkshire’s annual meeting in Omaha, Nebraska. The weekend known as “Woodstock for Capitalists” is unique in corporate America, a celebration of Buffett’s success at a conglomerate whose businesses range from GEICO insurance to the BNSF railroad to See’s candies to Ginsu knives.

Buffett said on the issue of U.S.-China trade: “In August, I will be 88, in a year that ends in an 8. Eight is a lucky number in China. ...The United States and China are going to be the two super-powers of the world, economically and in other ways for a long, long time.  We have a lot of common interests and like any two big economic entities there are times when there will be tensions. But it is a win-win situation when the world trades. ...It’s really not the worst thing in the world (to run a trade deficit).”

Separately, shares in Apple continued to benefit, hitting new all-time highs this week after last Friday’s revelation that Buffett’s Berkshire had bought 75 million more shares of the company, raising its total stake in the iPhone maker to nearly 242 million shares; Apple now Berkshire’s No. 1 stock holding, eclipsing long-time top holding Wells Fargo, which Buffett is convinced is in the process of a turnaround following years of scandels.  [I love WFC’s new commercial, admitting its mistakes, but remembering its origins as it looks forward.]

--The U.S. Postal Service on Friday reported a second-quarter net loss of $1.3 billion, up from $562 million a year ago.  Much of the loss was attributable to rising retiree health benefits, compensation expenses and an increase in transportation costs.

Revenue from shipping and packages actually grew by $445 million, or 9.5 percent. First-class and marketing mail revenue fell by a combined $181 million compared to last year’s second quarter.

The retiree health benefit obligations haven’t been funded properly for years and now total more than $38bn.

--One item from last week I didn’t have a chance to note, profits at the New York Times jumped by two-thirds in the first quarter of 2018 compared with the same period a year ago, thanks to a boom  in digital subscribers.

The results show the paper is still riding the high of the so-called “Trump bump,” a surge in readership among some of the U.S. president’s favorite media targets.

Net income rose to $21.9 million from $13.2m in the same quarter a year earlier. Total revenue rose to $413.9m from $398.8m.

The Times had a net increase of 139,000 in digital-only subscriptions, a 25.5 percent increase over a year earlier, bringing the total to close to 2.8m.  Subscription revenues rose by 7.5 percent.

Someone tell President Trump it’s not failing.

--California is set to become the first state to require solar panels on all newly built single-family houses.  The mandate is expected to save buyers money in the long run but also raise their upfront costs at a time when housing affordability is steep.  Needless to say, the solar industry in California is stoked. 

--Meanwhile, California’s economy has surpassed that of the United Kingdom to become the world’s fifth largest, according to federal data made public last weekend. California’s gross domestic product rose by $127 billion from 2016 to 2017, surpassing $2.7 trillion.  At the same time, the U.K.’s economic output slightly shrank over that time when measured in U.S. dollars, due in part to exchange rate fluctuations.

The data demonstrate not just California’s sheer size but the economy’s diversity, from Silicon Valley, to Hollywood, to the state being the nation’s salad bowl in the Central Valley agricultural heartland.

Following the Great Recession, California had dropped to tenth in the world, but the rebound since has added 2 million jobs and $700bn in GDP. The state has 12% of the U.S. population but contributed 16% of the country’s job growth between 2012 and 2017.  Its share of the national economy grew from 12.8% to 14.2% over that five-year period, according to state economists.  The U.K., by the way, has 25 million more people than California.

--The pilots of the Southwest Airlines jet that suffered a midair engine explosion had to use hand signals to communicate because of the deafening roar, they said in a new interview for ABC’s “20/20.” 

Co-pilot Darren Ellisor:

“We were passing through about 32,000 feet when we heard a large bang and a rapid decompression.  The aircraft yawed and banked to the left a little over 40 degrees and we had a very severe vibration from the number one engine. There was shaking, everything. And that all kinda happened all at once.”

Pilot Tammie Jo Shults said the trouble reminded her of rough military flights.

“My first thoughts were actually, ‘Oh, here we go’ – just because it seemed like a flashback to some of the Navy flying that we had done,” she said.

And in the panic, the two aviators couldn’t even hear each other as they tried to land the plane.

“Darren is just very easy to communicate with and we had to use hand signals because it was loud and it was just hard to communicate for a lot of different reasons,” Shults said.

--SeaWorld attendance and revenue jumped last quarter, a sharp reversal of the slide that has dogged the company in recent years since the CNN documentary “Blackfish.”

More than 3.2 million people visited SeaWorld parks during the first three months of the year, up nearly 15% over year ago levels, SeaWorld Entertainment Inc. reported Tuesday.

Quarterly revenue rose 16.5% to more than $217 million, up from $186.4 million in the year-earlier quarter.  But the first quarter provides a limited view of park performance as just five of SeaWorld’s 12 parks are open for the full three months.

That said, the company is hoping for a continued rebound after the opening this year of major attractions, such as the Electric Eel roller coast in San Diego, which debuted this week. And the Orlando, Fla., park has a new river rafting ride called Infinity Falls.

--Anheuser-Busch InBev SA joined Molson Coors and Heineken in reporting sharply lower U.S. beer volume in the first quarter compared with a year earlier as drinkers turn to other alcoholic beverages such as wine or whiskey.

AB InBev said its volumes fell 4.1% in North America, partly due to weakness in its Bud and Bud Light brands (similar to last week, when Molson Coors reported slower sales of Miller Lite and Coors Light).

But in the case of AB InBev, they reported strong volumes in Mexico, Colombia (note to Steve G., you’re having an impact here), and Argentina.

As for Bud Light, America’s best-selling beer, in 2017, according to Euromonitor, AB InBev reported it sold 1.1 million gallons of the brand in the quarter, off 16% from 2012.

And demographics are not in the industry’s favor. Back in 2006, nearly 65% of alcohol consumed by Americans aged 21 to 27 was beer, according to data from AB InBev. By 2016, that percentage had fallen to 43%.

Beer’s share of the U.S. alcohol market by value fell to 45.6% in 2017, from 48.2% in 2010, according to Euromonitor.  Spirits’ share jumped to 31.7% from 29.6%, while wine held its ground at 19.7%.  [Saabira Chaudhuri and Nick Kostov / Wall Street Journal]

--An internal investigation by NBCUniversal’s legal team exonerated NBC News management of any wrongdoing regarding the conduct of Matt Lauer.

The report, released five months after NBC News fired Lauer, the former “Today” show star, followed a complaint about inappropriate sexual behavior with a subordinate.

But there are cries that the network should not have been investigating itself and instead should have conducted an independent inquiry, though NBC said two law firms had been consulted and reviewed the report.

The report concluded NBC News did not have a hostile work environment. Cough cough.

--Christiane Amanpour was officially tabbed to replace Charlie Rose on PBS stations across the country, a move in the works for five months, ever since PBS stations began replaying Amanpour’s CNN International program.

Those half-hour Amanpour rebroadcasts were an interim replacement for Rose’s 11 p.m. talk show, which was cancelled last fall after women came forward to accuse him of sexual harassment.

Amanpour is now expanding to an hour, the changes to take place in July.

[I had a brain cramp last week and had Charlie Rose at ABC, rather than formerly CBS, until Chris in Connecticut corrected me...thank you, Chris. This is what happens when you’re an NBC guy.]

Foreign Affairs

Iran, part II...Israel:  Israel accused Iran’s Quds Force – the elite overseas operations arm of Iran’s Revolutionary Guard Corps (IRGC) – of launching 20 rockets from its military positions in Syria on Thursday morning, that then were either shot down or fell short of a nearby military base in the Golan Heights.  Israel then retaliated, striking 70 military targets belonging to Iran inside Syria, in what the Israeli military called its largest-ever operation inside Syria.   

Iran’s buildup in Syria, inching ever closer to Israel, has been cause for alarm for months.  Israeli Prime Minister Benjamin Netanyahu met Russian President Putin in Moscow this week, Israel having informed Russia prior to carrying out the strikes on Iranian forces, the Israeli military said. [There was a report later that Russia then warned Iran.]  Russia wants to avoid a broader confrontation that would endanger the gains it has made in the region.

Meanwhile, Iran’s hardliners are taking advantage of the U.S. withdrawal from the nuclear deal, blasting President Rouhani for not abandoning what’s left of the agreement. Rouhani won election back in 2013 by promising to bring Iran back into the global economy, and the accord was a landmark breakthrough in bringing rapprochement with the West while limiting Iran’s nuclear capabilities.

But the moderates have lost credibility, and now Rouhani has to pivot, warning of consequences for the U.S. that would lead to “historic regret.”  In the Iranian Parliament on Wednesday, lawmakers burned the American flag.

Thursday, in his first official comment since the clash in Syria, Rouhani said Iran does not want “new tensions” in the Middle East.  Earlier, the deputy head of Iran’s national security council said: “Iran does not have any connection to the missiles fired at Israel. If Iran did it we would have announced it immediately. When [ISIS] attacks Iranian targets in Syria we responded and made it known. Iran does not have any military presence in Syria and it was the Syrian army that fired missiles.”

The deputy head of Iran’s Revolutionary Guards, Hossein Salami, said diplomacy will not help Iran and that resistance is the only way forward.

“Iran’s enemies are not seeking military confrontation,” he said. “They want to pressure our country by economic isolation...Resistance is the only way to confront these enemies, not diplomacy,” Salami was quoted as saying by the Fars new agency.

Lebanon: The country held its first elections in nine years and Hezbollah and its political allies expanded their share of seats in Parliament, increasing their political clout at the expense of the country’s Western-backed prime minister, Saad Hariri.

Iran backs Hezbollah, which maintains Lebanon’s most powerful military force and is considered a terrorist organization by the United States.

The number of seats held by Hezbollah remained unchanged, but victories by allies who support its vast arsenal increased the chances the group would play a key role in a coalition government and diminished the prospects for legislation that would limit its power.

But the election dealt a big blow to Hariri, the country’s most prominent Sunni Muslim politician and an ally of the West. His Future Movement group saw its parliamentary share shrink by about a third, from 33 seats to 21, in the 128-member body.

In Lebanon’s complex system, the prime minister must be a Sunni, the speaker of Parliament a Shiite and the president is a Maronite Christian; thus Hariri is still expected to remain prime minister.

The problem is, Lebanon’s leaders have been counting on international aid to prop up its economy, which is dealing with the burden of nearly 1 million refugees from neighboring Syria, but with Hezbollah’s showing, such aid won’t be easily forthcoming.

Iraq: Parliamentary elections are being held on Saturday, and coincidentally, this week Prime Minister Haider al-Abadi announced the capture of five high-level Islamic State members earlier this year in a raid coordinated with the U.S.-led coalition.

The election itself will be confusing, though the “list” headed by Abadi, the Nasr list, is expected to get the most votes. Then a coalition needs to be cobbled together, and this process can go on for months, as has happened in the past. The three leading contenders to be prime minister are all Shias.

North Korea: President Trump announced that he will meet with Kim Jong Un on June 12 in Singapore for a first ever summit between leaders of the two countries.

“The highly anticipated meeting between Kim Jong Un and myself will take place in Singapore on June 12th. We will both try to make it a very special moment for World Peace!” Trump tweeted.

Trump’s announcement came just hours after three Americans who had been held prisoner in North Korea arrived back in the U.S., having been released by Kim.  Trump said on their arrival that he believed Kim wanted to bring North Korea “into the real world” and had high hopes for their planned meeting.

“I think we have a very good chance of doing something very meaningful,” Trump said.  “My proudest achievement will be – this is part of it – when we denuclearize that entire peninsula.”

[Disgustingly, the president also said Kim “did a great service” in returning the hostages, which must have left the parents of Otto Warmbier seething.]

Earlier this week, China, Japan and South Korea held their first summit in three years, meeting in Tokyo in a gesture of solidarity against the backdrop of historic diplomatic moves by North Korea and a push for the Hermit Kingdom to give up its nukes. Chinese Premier Li Keqiang made the first state visit by a Chinese official to Japan since 2010.

Japanese Prime Minister Shinzo Abe said his nation would normalize ties with North Korea if the nuclear and missile issues are resolved comprehensively.  Japan is also insisting on an accounting of 13 Japanese citizens abducted by North Korea decades ago.

And Kim Jong Un made a surprise visit to China, meeting President Xi Jinping in the northeast city of Dalian.  Images of the two leaders showed them strolling along a beach in the port city.

President Xi wants to make sure Kim understands that China is not to be sidelined when Kim meets with Donald Trump.

Last weekend, North Korea criticized what it called “misleading” claims that President Trump’s policy of maximum political pressure and sanctions is what drove the North to the negotiating table.  A Foreign Ministry spokesman warned the claims are a “dangerous attempt” to ruin a budding détente on the Korean peninsula.

North Korea wants to strengthen Kim’s position going into the summit, with Pyongyang claiming it is Kim himself who is the driver of the current situation.

“The U.S. is deliberately provoking the DPRK at the time when the situation on the Korean peninsula is moving toward peace and reconciliation,” the spokesman was quoted as saying.  [DPRK stands for the Democratic People’s Republic of Korea, the North’s formal name.]

Separately, the New York Times reported that South Korean President Moon Jae-in handed Kim Jong Un a USB drive that contained charts and video clips laying out a “new economic map for the Korean Peninsula,” including new railways and power plants for the impoverished North, should Kim abandon his nuclear activities, according to South Korean officials.

Moon is betting that Kim wants to become North Korea’s Deng Xiaoping, who oversaw the liberalization of China.

What you realize when you look at the North’s economy is that the key is electricity. As noted in the Times’ piece:

“Lacking cash for oil imports, North Korea produces all its electricity from hydroelectric dams and coal-burning power plants.  But the country’s power industry is trapped in a vicious cycle, energy experts say. Chronic electricity shortages make it difficult to produce coal and transport it to power plants. People in search of firewood for heat and cooking have denuded their hills, causing floods and droughts and making silt pile up at dams. That cuts down hydroelectric generation.”

One expert told the Times, “Reunification can start with reconnecting energy and transport lines of the two Koreas.”

China:  In a classic example of today’s China under leader-for-life Xi Jinping, last Saturday the White House accused the Chinese government of “Orwellian nonsense” for ordering 36 airline companies to purge their websites of references to Macau, Taiwan and Hong Kong as separate countries.  The Chinese Ministry of Foreign Affairs then shot back on Sunday.

“No matter what the U.S. side says, nothing will alter the objective fact that there is only one China in the world, and that the Hong Kong, Macau and Taiwan regions are inseparable parts of Chinese territory,” a spokesman said.  He added, “It must be pointed out that foreign firms doing business in China should respect China’s sovereignty and territorial integrity, abide by Chinese laws and respect the national feelings of the Chinese people.”

Previously, Chinese officials temporarily suspended the Chinese website of Marriott International, accusing the hotel chain of listing Tibet, Taiwan, Hong Kong and Macau as separate countries.

Russia: Opposition politician Alexei Navalny was released from police custody after being detained in central Moscow on Saturday as anti-government rallies took place across Russia.

Navalny, who was barred from running in the election on what he says was a false pretext, was detained soon after showing up on Moscow’s Pushkin Square, where young people were chanting “Russia without Putin!” and “Putin is a Thief!”

Meanwhile, Vladimir Putin took the oath of office on Monday for a fourth term as Russian president and promised to pursue an economic growth agenda that would boost living standards across the country, which is what he says every year in his annual address.

“A new qualify of life, well-being, security and people’s health – that’s what’s primary today,” said Vlad the Impaler.

But Russia’s economy remains heavily reliant on oil and gas exports and the current price of the former is helping in terms of the budget.

Putin acknowledged the challenges facing Russia were formidable, “but we all remember well that, for more than a thousand years of history, Russia has often faced epochs of turmoil and trials, and has always revived as a phoenix, reached heights that others could not.”

He also formally asked parliament to confirm Dmitry Medvedev to continue as prime minister, the job he’s held since giving up the presidency to Putin.

Putin has effectively been the leader of Russia for all of the 21st century. He stepped down from the presidency in 2008 because of term limits, but was named prime minister and continued to steer the country until he returned as president in 2012.

Anne Applebaum / Washington Post...on Russia’s “fake news”....

“A recent survey of the three main Russian television channels produced some stark analysis of what Russians are hearing about Europe.  Researchers examined newscasts and political talk shows from summer 2014 to December 2017. They found that negative news about Europe appeared on the three channels an average 18 times per day. The percentage of negative to positive news about European countries is 85 percent to 15 percent; for some European countries the ratio is even more skewed – perhaps because its most recent presidential election featured Marine Le Pen, a clearly pro-Russian candidate who lost to a pro-European one – France was depicted negatively most often.

“Most of the stories, ranging from big new events to local murders to sheer inventions (‘the German government is taking children away from their families and giving them to gay couples’) fit into a particular set of narratives. Daily life in Europe is depicted as frightening and chaotic; Europeans are weak, with declining morality and no common values; terrorism keeps people paralyzed with fear; the refugee crisis is getting worse all the time; sanctions on Russia have backfired and are now undermining the European economy and destroying the welfare state. Russia, in the version of the world depicted here, does not need a welfare state, since its citizens are so much hardier....

“The uses of this kind of coverage aren’t hard to guess. Clearly, it is not in the Russian state’s interest for the Russian nation to admire Europe, not for its democracy or its rule of law, and certainly not for its high standards of living. The memory of the Maidan protest of 2014 – young Ukrainians protesting in Kiev, waving European flags and calling for an end to corruption – is still fresh enough to be frightening in Moscow. If the Putin regime can undermine the idea of ‘Europe’ and make it unattractive to Russians – most of whom have long identified themselves as Europeans – then it removes a source of hope, and a possible model. If Europe is crazy, twisted, dangerous and dying, then surely Russians are better off under their corrupt authoritarian system.

“There could be a more sinister purpose to this relentless bad news as well, particularly as it echoes equally harsh coverage of the United States and Ukraine.  If Russia were expecting or planning some kind of conflict with Europe – diplomatic, economic, political, even military – this is exactly the strategy Russian leaders would use: Portray Russia’s neighbors as simultaneously aggressive and weak, decadent and dangerous; show Europe as a society that a stronger, better Russia could – and should – easily crush. Perhaps this is overly pessimistic. But otherwise it’s hard to explain why Moscow would go to the trouble.”

Afghanistan: The Taliban launched two attacks on bases in the western province of Farah today, killing more than 30 police. The region is vital to the opium trade and smuggling routes into neighboring Iran.

Malaysia: In a seismic shift in the politics of this place, the long-ruling Barisan Nasional coalition led by Prime Minister Najib Razak was defeated in elections by a bloc led by former prime minister Mahathir Mohamad, who won a simple majority in parliament, 122 out of 222 seats, enough to form the next government.  It was a huge upset.

The thing is, Mahathir is 92 years old!  However, he has promised to hand over power to Anwar Ibrahim, an opposition veteran – whom Dr. Mahathir ordered prosecuted years earlier – once Ibrahim is released from prison in June after being convicted of sodomy.

Dr. Mahathir had campaigned on an anticorruption platform, and his election clears the way for a new investigation into Najib’s alleged misappropriation of money from 1MDB.

Congrats to this country for staging a democratic election, even as the election council tried to rig it.

[And fascinating stuff as I go to post here...the people are convinced Najib is fleeing, knowing he is about to be arrested, sooner than later, and they’re scrambling to find him.]

Random Musings

--Presidential tracking polls....

Gallup: 42% approval of President Trump’s performance, 52% disapproval [May 6]
Rasmussen: 49% approval, 49% disapproval

A new CNN national poll has President Trump with a 41% approval number, 53% disapprove. 

In this survey, 57% say things are going well in the country, 40% badly (right track / wrong track), very important for the mid-term election.  52% approve of the president’s handling of the economy, 42% disapprove.

In the critical generic survey of registered voters, 47% back their Democratic candidate for the House, 44% back the Republican, within the margin of error.  Back in February, the Democrats had a 16-point margin.

[Separately, 71% believe the payment to Stormy Daniels was made to protect the Trump campaign.]

--West Virginia State Attorney General Patrick Morrisey won the GOP Senate primary Tuesday, and Republicans everywhere are exhaling.  Republicans, including President Trump, fiercely opposed the candidacy of ex-convict and former Massey Energy CEO Don Blankenship, who served a one-year sentence on a misdemeanor conviction related to a mine explosion that claimed 29 lives.

Morrissey’s win likely gives the GOP a shot against Democratic Sen. Joe Manchin, who won his primary, in November’s general election.  Morrissey beat Blankenship, who finished third, and Rep. Evan Jenkins.

Blankenship, a bad guy in so many respects, would have sunk Republicans’ chances at taking the seat, after Trump won the state with 68% of the vote in 2016.

Trump tweeted prior to the primary, “Don Blankenship, currently running for Senate, can’t win the General Election in your State...No way! Remember Alabama. Vote Rep. Jenkins or A.G. Morrisey!”

--In New Jersey, the Republican senate candidate, Bob Hugin, has a steep hill to climb in his race against incumbent Democratic Sen. Bob Menendez.  Hugin, who stepped down as executive chairman of Celgene in February, reported compensation of $48.4 million in 2017 ($19.5m and $14.3m in 2015 and ’16, respectively).

Hugin lent his campaign $7.5 million and it will be interesting to see if he can bankroll a comeback against the tainted Menendez.  Menendez maintains a double-digit lead.

--In a stunning development, New York Attorney General Eric Schneiderman, a darling of the #MeToo movement and both state and national Democrats, resigned just three hours after a New Yorker article detailed allegations he had physically abused four women with whom he was romantically involved. Two of the four went public, and with New York Dem. Gov. Andrew Cuomo immediately calling for his resignation, Schneiderman did so, while denying the claims.

Schneiderman took more than 100 legal actions against President Trump, including as a party to the $25 million settlement of fraud claims against Trump University, and the A.G. helped wring big penalties in the wake of the financial crisis from the likes of JPMorgan Chase and Bank of America, along with other banks that had packaged and sold bad mortgages.

Editorial / Wall Street Journal

“Eric Schneiderman’s fall from power as New York Attorney General was so swift on Monday evening that it’s tempting to bid good riddance and move on. But  in resigning amid compelling and detailed accounts in the New Yorker that he abused four women, sometimes violently, Mr. Schneiderman said in a statement that, ‘While these allegations are unrelated to my professional conduct or the operations of the office, they will effectively prevent me from leading the office’s work at this time. I therefore resign my office.’

“Mr. Schneiderman surely would have been forced to resign if he hadn’t done so within hours of the article’s publication. But he is wrong that his private acts are unrelated to the way he conducted his office. In both his private and public life, he showed his willingness to abuse his power.

“In private life, he did so by slapping and choking women, according to their accounts. Two of them bravely went on the record by name.  Mr. Schneiderman said he ‘strongly’ contests their claims, but in a statement to the New Yorker before he resigned he conceded that ‘in the privacy of intimate relationships, I have engaged in role-playing and other consensual sexual activity.  I have not assaulted anyone.’

“We suppose that depends on the meaning of the word assault. According to Michelle Manning Barish, she once responded to him yanking her across the street by saying, ‘Jaywalking is against the law.’

“She says Mr. Schneiderman replied, ‘I am the law.’ She adds that ‘if there is a sentence that sums him up, it’s that.’

“The same applies to Mr. Schneiderman as attorney general, though his choice of targets typically pleased his progressive allies.  He sat on potentially exculpatory evidence in his civil case against Hank Greenberg, the former AIG CEO.  Mr. Greenberg eventually settled on terms far easier than he had been offered 12 years earlier....

“Mr. Schneiderman’s ‘professional’ targets may be less sympathetic than the women he abused, but the ability to prosecute is the most fearsome power the government has and shouldn’t be politicized no matter the target.  One place to start protecting against abuses is by repealing the Martin Act.

“Like Elliot Spitzer before him, Mr. Schneiderman’s lack of restraint in private life was all too similar to his behavior in public life. Even progressive New Yorkers should ask whether it is wise to put so much power in the hands of men who are so unstable.”

The Manhattan District Attorney’s office said Monday night it was probing Schneiderman after the assault allegations.  Ironically, Schneiderman had been looking into D.A. Cy Vance’s office, concerning how he handled sexual assault allegations against Harvey Weinstein in 2015.

--One of the true dirtballs in New York politics, former New York state  Assembly Speaker Sheldon Silver, was found guilty on Friday of selling his office for $4 million in kickbacks – affirming a 2015 conviction on the same charges that had been overturned on appeal.

A jury found Silver, 74, guilty of all seven counts against him, including mail fraud and money laundering.  He faces as much as 130 years in prison when sentenced on July 13.

Show this asshole no mercy, Judge.  It was Silver who single-handedly denied then-Mayor Michael Bloomberg’s quest for a separate stadium for the New York Jets on the West Side of Manhattan, which would have been awesome.

Understand Silver scarfed up $4 million in kickbacks over a single decade, plus $1 million on illegal gains from investing it.

--Arizona Republican Sen. John McCain said he’s sorry he chose then-Alaska governor Sarah Palin to be his running mate in the presidential race he lost to Barack Obama.  He told the New York Times that if he could do it over he would have picked former Sen. Joseph Lieberman of Connecticut.  Lieberman told The Times that he hadn’t known McCain felt that way. “It touched me greatly,” he said.

Hell, I wanted McCain to pick Lieberman back then, too.

Meanwhile, as he prepares for the launch of his book, and death, McCain loathes President Trump so much that he doesn’t want Trump invited to his funeral.  Instead, Vice President Mike Pence, who served with McCain in Congress, will be asked to attend, with former presidents George W. Bush and Barack Obama asked to give eulogies.

Trump’s long-running feud with McCain has its roots in the early days of the 2016 race, when the senator criticized Trump for disparaging Mexican immigrants in the June 2015 speech in which he declared his candidacy.

Three weeks later, Trump called McCain “incompetent” and dismissed his experience as a prisoner of war in Vietnam.

“He’s not a war hero,” Trump told an Iowa crowd. “He’s a war hero because he was captured. I like people that weren’t captured.”

--Retired Marine Lt. Col. Oliver North, a central figure of the Iran-Contra scandal, and a fixture on Fox News, will become the president of the National Rifle Association. NRA executive vice president and CEO Wayne LaPierre said in a statement: “This is the most exciting news for our members since Charlton Heston became President of our Association.

“Oliver North is a legendary warrior for American freedom, a gifted communicator and skilled leader.  In these times, I can think of no one better suited to serve as our President,” he added.

North is retiring “effective immediately” from Fox News.

--Yikes...do not use a hot tub at a cheap motel.

From the New York Post:

“An Indiana family’s vacation to Florida reportedly left a mom with a deadly flesh-eating bacteria.”

The woman, 50, died Saturday, nearly two months after returning from Clearwater, Fla., with an infection known as necrotizing fasciitis, news station WRTV reported.  The flesh-eating disease.

The woman’s family said they believe the virus may have been from a hot tub at the local Days Inn hotel.

The husband told news station WFLA: “My thing is nobody else [in the family] got it, the flesh-eating bacteria.  No one else got it but she was the only one who got in the hot tub.”

It wasn’t until they were back in Indianapolis that the mom noticed a nickel-size sore on her buttocks. Doctors tried to treat it with antibiotics and suggested a heating pad.  But it continued to get worse...until she died.

--Christian Davenport / Washington Post

“When Elon Musk and his team at SpaceX were looking to make their Falcon 9 rocket even more powerful, they came up with a creative idea – keep the propellant at super-cold temperatures to shrink its size, allowing them to pack more of it into the tanks.

“But the approach comes with a major risk, according to some safety experts. At those extreme temperatures, the propellant would need to be loaded just before takeoff – while astronauts are aboard.  An accident, or a spark, during this maneuver, known as ‘load-and-go,’ could set off an explosion.

“The proposal has raised alarms for members of Congress and NASA safety advisers as the agency and SpaceX prepare to launch humans into orbit as early as this year. One watchdog group labeled load-and-go a ‘potential safety risk.’ A NASA advisory group warned in a letter that the method was ‘contrary to booster safety criteria that has been in place for over 50 years.’

“Concerns at NASA over the astronauts’ safety hit a high point when, in September 2016, a SpaceX Falcon 9 rocket blew up while it was being fueled ahead of an engine test.  No one was hurt, but the payload, a multimillion-dollar satellite, was lost. The question on many people’s minds at NASA instantly became: What if astronauts were on board?”

But, as some connected to NASA have said, it is a risk-taking organization, though it has lost its swagger because it is dealing with the “scar tissue” of two shuttle disasters that claimed 14 lives.

Davenport:

“In a recent speech, Robert Lightfoot, the former acting NASA administrator, lamented in candid terms how the agency, with society as a whole, has become too risk-averse. He charged the agency with recapturing some of the youthful swagger that sent men to the moon during the Apollo era.

“ ‘I worry, to be perfectly honest, if we would have ever launched Apollo in our environment here today,’ he said during a speech at the Space Symposium last month, ‘if Buzz [Aldrin] and Neil [Armstrong] would have ever been able to go to the moon in the risk environment we have today.’”

*Musk and SpaceX did successfully launch a Falcon 9 today with a Bangladeshi telecommunications satellite payload.

Finally:

“Before the very first shuttle flight, NASA estimated that the chance of death was between 1 in 500 and 1 in 5,000.  Later, after the agency had compiled data from shuttle flights, it went back and came up with a very different number.

“The chance of death was actually 1 in 12.”

This week NASA launched a spacecraft to land on Mars and explore the mysteries of the red planet. A robotic geologist armed with a hammer and quake monitor was launched Saturday from California rather than Florida’s Cape Canaveral, the first interplanetary mission ever to depart from the U.S. West Coast.

The spacecraft will take more than six months to get to Mars and start its unprecedented geological excavations, traveling 300 million miles to get there.

InSight will dig deeper into Mars than ever before – nearly 16 feet – to take the planet’s temperature.

The $1 billion mission involves scientists from the U.S., France, Germany and elsewhere in Europe.

---

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

God bless America.

---

Gold $1318
Oil $70.51

Returns for the week 5/7-5/11

Dow Jones  +2.3%  [24831]
S&P 500  +2.4%  [2727]
S&P MidCap  +2.2%
Russell 2000  +2.6%
Nasdaq  +2.7%  [7402]

Returns for the period 1/1/18-5/11/18

Dow Jones  +0.5%
S&P 500  +2.0%
S&P MidCap  +2.0%
Russell 2000  +4.6%
Nasdaq  +7.2%

Bulls 43.1
Bears
20.6 [the prior week, which was unavailable last time, had a split of 43.6 / 20.8]

Have a great week.

Brian Trumbore

*Next WIR will be abbreviated...not sure where I’m posting from...and it could be delayed until early Sat. a.m.



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Week in Review

05/12/2018

For the week 5/7-5/11

[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 996

Dr. Bortrum returned from rehab today...it will take him a while to get a new column up, and things aren’t going to be the same at home from here on, but he’s getting around.  I just want to thank my brother for giving me a break from night patrol.  I’m back doing that duty the next few nights, or until we find a permanent solution.  Bro and I have earned our certificates in care-giving the past three weeks.  I also seem to have semi-converted him to Coors Light.

Trump World

I wrote the following in this space last March 31:

“But as the first quarter was wrapping up, it struck me that the second quarter could potentially be monumental on the foreign policy front, and thus roil global markets further.

“In the next three months, we are supposed to have a Trump-Kim summit, after Kim’s historic summit with South Korea’s President Moon Jae-in. China will be looming over both of them.

“President Trump seems certain to scuttle the Iran nuclear deal, which next has a May deadline for either extending the sanctions relief and keeping the deal in place, or putting the sanctions back on and starting over, with unknown consequences.

“And also over the next three months, no one should be surprised to see Russian President Putin create a new crisis, especially in the Baltics, as he defends Russia’s honor...at least that is how he’ll frame it.  Also, remember the name Kaliningrad.

“These are three massively important theaters, and throw in Israel, which is rapidly being surrounded.

“Again, this could all come to a head in just the next 90 days. How will President Trump respond? Who will be the last one in his ear?”

---

Well, it’s been an interesting first six weeks of the quarter, seven more to go, and they’ll be monumental, one way or another.  Markets will take a tumble over renewed trade concerns, of this I’m virtually certain.

As for Iran and North Korea, I went on record from the day the nuclear accord with Tehran was signed as saying “it was over,” just like it was over in Syria when the United States failed to work with Turkey on a no-fly zone, years prior to the emergence of ISIS, the massive migration to Europe and the involvement of Russia.

The Iran deal was an immediate failure because I told you, once it was signed, that it was too late to ever change it because European commercial interests, let alone those of Russia and China, would take over.  When candidate Donald Trump talked of scuttling the deal, I said that wouldn’t work because by then Europe would be too well-entrenched.  And that’s exactly what we’ve seen this week already.

I never for a minute liked the deal.  I also understand what President Trump is doing.  But my bet is the strategy won’t work.  He had Europe, specifically the U.K., Germany and France, ready to insist on new restrictions for Iran’s nuclear and ballistic missiles programs, for starters, but Trump once again acted with his gut.

Regarding North Korea, we now start the clock until June 12.  I’m just astounded no one (outside of think tanks and Florida Republican Sen. Marco Rubio) is talking about China’s role in all this.  It’s become all about them and no one gets it.  Kim Jong Un could, quite possibly, make some major concessions.  But Chinese President Xi Jinping will gain bigly.  China will lord over the South China Sea, and take Taiwan, and the United States will do nothing except float some ships through the straits from time to time; our fighter pilots buzzed by Xi’s boys and targeted with lasers.  Trump’s “great friend” Xi is toying with The Donald.

And Japan has to be s---ting bricks.  They, and yours truly, are no doubt deeply concerned President Trump could make some major concessions of his own, to the detriment of our allies.

South Korea?  I have to admit I’m shocked, but their people are way over-the-top with optimism.  They are lost.  At some point they’ll get a reality check.

That’s where I’m at today.  I’ve studied this situation closely for years and years, long before I started “Week in Review.”  I’ve been to the region multiple times.  I’ve had flights delayed while China conducted missile tests (think Fujian province) that are intended one day to be the real thing...the target, Taiwan’s air fields, for starters.

As for President Trump setting such a high bar for the June summit, I’ve given up.  We know who he is. I hope he gets it right.  I have faith in Mike Pompeo.  But will Trump listen.

Iran Deal

President Trump withdrew the U.S. from the landmark nuclear deal with Iran and five other world powers on Tuesday, isolating the country from its closest European allies, putting the agreement on life support and setting up a new showdown with Tehran.

“It is clear to me this deal cannot prevent an Iranian nuclear bomb under the decaying and rotten structure of the current agreement – the Iran deal is defective at its core,” Trump said in his speech. “I am announcing today that the United States will withdraw from the Iran nuclear deal.”

“America will not be held hostage by nuclear blackmail,” he added.

Trump said that intelligence published last week by the Israeli government, which revealed an Iranian archive documenting their experimentation with nuclear weapons technology up until 2003, offered “definitive proof” that the premise on which the Iran deal was clinched was “a lie.”

“The fact is, this was a horrible, one-sided deal that should have never, ever been made,” he said.  “A constructive deal could easily have been struck at the time. But it wasn’t. At the heart of the Iran deal was a giant fiction.”

Trump added: “The agreement was so poorly negotiated that even if Iran fully complies, the regime could still be on the verge of a nuclear breakout in just a short period of time.”  Trump warned of a nuclear arms race across the Middle East should the deal remain intact: “everyone would want their weapons ready by the time Iran had theirs.”

While Iran has abided by the terms of the deal, formally known as the Joint Comprehensive Plan of Action, since it was first implemented in 2016, the administration and its fellow critics believe Iran has done so because the deal structurally favors them: that on the front end, Tehran received a windfall of sanctions relief, and on the back end, the ability to grow the size and efficiency of their nuclear infrastructure.

Iran’s President Rouhani responded in a speech to the nation that Tehran would, for now, remain within the accord, and would negotiate with Russia and China – “the world’s two super powers” on a path forward. But he said that Iran would prepare to resume uranium enrichment as a contingency.

“Iran is a country that adheres to its commitments,” Rouhani said, “and the U.S. is a country that has never adhered to its commitments.”

Supreme Leader Ayatollah Ali Khamenei said the Islamic republic’s commitment to the deal would depend on Europe’s guarantees about its implementation.

“Without the sufficient guarantees from the three European states, continuation of the nuclear agreement is not logical,” Khamenei said in a speech on Wednesday.

Khamenei also suggested the U.S. is seeking regime change in the country.  “He threatened the [political] system and the nation.  On behalf of the nation, I tell him: Mr. Trump! You cannot do a damn thing,” he said.  “When you are dead and your body is eaten up by ants and snakes, the Islamic Republic will remain strong.”

Israeli Prime Minister Benjamin Netanyahu stated in a speech: “Israel thanks President Trump for his courageous decision.”

France has condemned as “unacceptable” a U.S. move to re-impose sanctions on companies trading with Iran.  French Foreign Minister Jean-Yves Le Drian said European companies should not have to pay for the U.S. decision.

At week’s end, France, Britain and Germany continue to say they will work with Iran to try to salvage the agreement; having failed in their lobbying effort to get Trump to remain in the deal.

As I said for years would be the case, a number of French firms have signed billion dollar agreements with Iran since the accord was signed in 2015, including Airbus, oil giant Total, and carmakers Renault and Peugeot.  They would have to wind up investments by November or face U.S. sanctions.

Overall, the three EU countries with the deepest exposure to Iran are France, Germany and Italy.  The value of trade between the EU and Iran has soared from $9.2bn in 2015 to $25bn last year.

[China, India, Japan and South Korea buy most of Iran’s 2.5 million barrels of oil exported each day.]

Opinion...all sides....

David Ignatius / Washington Post

“So what’s next with Iran?  Even in you think President Trump has made a big mistake in withdrawing from the nuclear agreement, as I do, that’s not the end of the story. Where does this bumpy road lead?

“What’s distressing about the Iran question is that nobody in this administration seems to have a good answer.  Trump’s move was a chest-thumping political decision, not a clearly articulated strategy.

“As unwise as Trump’s action was, it was probably inevitable, given his overblown rhetoric about ‘the worst deal ever made.’ This lie was repeated so often that it became part of the political landscape. That’s one of the problems with the president. Once he makes pledges, he seems determined to follow through, regardless of the damage. The path ahead begins with the need for a clear policy toward the future of Iran – and not the vague notion of regime change that’s bandied about. Whatever Trump may fantasize, intelligence professionals say this is not a pre-revolutionary moment in Iran. The economy is weak but not crumbling; the population is restless but not marching in the streets; the regime has fissures, but the military and security services appear solid.

“An inflection point for Iran may lie ahead, after the death of 78-year-old Supreme Leader Ali Khamenei, but that could be years away. And his passing, when it comes, could raise as many dangers for the United States and its allies as opportunities. Think of an Iranian Saddam Hussein.

“Good policy toward Iran should begin with a realistic assessment of the country.  I’ve visited Tehran twice, and each time was struck by two things: Iran is a modern and sophisticated society, rich with promise, and its people dislike the reactionary clerics who run the country’s political system. It’s a nation yearning to be normal, and for its revolutionary nightmare to end.

“That was one strategic rationale for President Barack Obama’s nuclear deal: It offered the prospect of gradual normalization and growth, under the relatively moderate leadership of President Hassan Rouhani. One of the deal’s weaknesses, alas, was that Rouhani could never curb the regional subversion campaign run by Iran’s Revolutionary Guard Corps.

“A sane Iran policy would bet on the people and not the regime; it would avoid a risky war that would make Iraq look like a cakewalk. It would promote the rise of a strong and stable democratic Iran as an American national interest. And it would seek an eventual accommodation between a post-revolutionary Iran and a modernizing Saudi Arabia.

“A second essential requirement is to avoid shooting Europe when we’re supposedly aiming at Iran. The most dangerous consequence of Trump’s policy is that it may force a confrontation with Europe by making its companies choose between doing business with Iran and the United States. Some Trump supporters may think this sounds smart, but it isn’t. It creates ill will, to no good purpose. And it may be a loser in international courts.

“A third key task is to plan for economic instability in Iran and the Persian Gulf region.  Iran is hustling to export oil while it can; traders in the bazaar are rushing to get money out of the country; the Iranian currency will weaken; unemployment and dislocation will grow. Trump may think he can benefit from economic chaos, and perhaps over time he will. But right now, the last thing the Middle East needs is another failed state – especially when it might widen the sectarian wars in Iraq, Syria, Yemen and Lebanon, like a zipper being ripped open.

“Trump has almost guaranteed that normalcy won’t come anytime soon for Iran. By withdrawing from the nuclear agreement, he has put that country on a slow boil. Trump may hope to bend Iranian behavior without war. But there’s no sign that he has a plan for how to accomplish that, nor a strategy for ending the wars in Syria and Yemen....

“The strangest aspect of Trump’s gamble on Iran is that it’s so reminiscent of President George W. Bush’s decision to invade Iraq in 2003. We’re doing it again – transforming a manageable problem into a freewheeling, uncontrolled one. As Gen. David H. Petraeus said on the way to Baghdad in 2003, ‘Tell me how this ends.’”

From Defense One:

“President Trump’s decision to stop participating in the Iran nuclear deal gives the U.S. a ‘more compelling’ case as it tries to curb various Iranian behaviors, Defense Secretary James Mattis told lawmakers Wednesday.

“ ‘The administration’s been in place for over a year, and for over a year we’ve attempted to work with allies to address the shortcomings of it,’ Mattis told the Senate Appropriations defense subcommittee.  ‘So I think we now have the opportunity to move forward to address those shortcomings and make it more compelling.’”

But last October, it was Mattis himself who told lawmakers that it was in America’s interest to remain in the deal.

On Wednesday, he said: “We will work with  our allies and try to bring Iran back into more responsible behavior, at the same time addressing all five of the threats that Iran constitutes: the nuclear issue which is foremost; certainly the terrorism issue that I just cited; the ballistic missile efforts they have; the cyber attacks they’ve been conducting; and then threats to international commerce.”

Daniel Henninger / Wall Street Journal

“It has been written or said maybe a million times that President Obama’s ‘signature’ foreign-policy achievement was the Iran nuclear deal. Now they are calling President Trump’s withdrawal from the deal foreign-policy ‘vandalism.’ Someone’s ox is getting gored.

“In his first year, President Trump overturned most of Mr. Obama’s signature regulatory initiatives – also denounced as vandalism – and now the liberated U.S. and world economies are booming. Prudence, a dying virtue, suggests a wait-and-see attitude toward Mr. Trump’s reversal of the Iran deal. A year from now, the world may be safer without it.

“Another signature legacy of the Obama presidency was that after 2010, many of its major initiatives were never sent to Congress. Instead Mr. Obama submitted his biggest policy ideas for the approval of foreign governments, or to no one.

“The Iran nuclear deal is just that – a deal Mr. Obama did with the mullahs, Russia, Germany, France, the U.K. and China, with no formal instrument of ratification. But to listen to its defenders, you’d think it was the Ten Commandments.

“The Paris climate agreement is an ‘accord’ with so little domestic support that even some Democrats would have voted ‘no’ if Mr. Obama had submitted it to the Senate for approval....

“Mr. Trump’s assault on – and now dismantling of – the Obama nuclear deal is a case study in the persistence of a status quo that simply will not question itself unless, figuratively speaking, you blow it up.

“The global status quo is the accretion of every police action – zillions of them – in the nearly 75 years since the end of World War II. Much of that policy, and the people behind it, kept the peace and allowed the postwar world to flourish. It has been a magnificent achievement.

“But its public representatives, especially in Europe and the U.S., have become a perpetual self-preservation machine, a case study in the dangers of bureaucracies that admit no reality other than what they do.

“The U.K.’s implementation of Brexit has proved difficult, but why deny that it was a cri de coeur against the  bland, trust-us arrogance of the European Commission’s bureaucracies?  Presumably, ‘our democracy’ hasn’t turned into a one-way street, yet.  The media, once the main interrogator of status quos, has become the primary apologist for virtually every iteration of the bureaucracy’s products, such as the Iran deal.  About the only thing most of the media disrupts anymore is existing social norms.

“One has to be pretty obtuse to refuse to admit the deficiencies in the nuclear deal, notably its omission of Iran’s active missile-production program or its diversion of post-sanctions revenue away from internal economic development and toward imposing regional hegemony from Tehran to the Mediterranean.

“Iran’s own people staged public protests across the country last weekend, explicitly citing the subservience of their needs to the mullahs’ militarized spending. But in Europe’s foreign ministries and John Kerry’s world, even this dissent must bow to the sacred status of their ‘nuclear deal.’....

“Twice since October, President Trump made clear his intention to withdraw from the deal unless its weaknesses were addressed. High-level officials from the State Department shuttled nonstop between Berlin, Paris and London to get movement on these issues. They got nothing.

“Europe’s foreign-policy elites, taking their cues from Germany’s placid Angela Merkel, acted as though their high-toned inertia would make the Trump administration’s concerns just...go away. By last weekend, the three European nations’ best effort consisted of British Foreign Secretary Boris Johnson’s fatuous grandstanding on American television.

“Is the Trump wrecking-ball tactic beyond criticism? Hardly. Does every Trump detonation of the status quo work?  No. His brinkmanship in bilateral trade negotiations is damaging U.S. agricultural and manufacturing interests.

“But the alternative to what the Trump team is doing now on Iran and North Korea has been to rationalize doing next to nothing – an increasingly familiar default. With or without its partners, the Obama Iran deal is about to be revised and renamed.”

Edward Luce / Financial Times

“Remember the Eighth of May.  History may recall it as the day the U.S. abandoned its belief in allies. Donald Trump’s exit from the Iran agreement puts Washington – rather than Tehran – in violation of an international deal. For the first time in decades, the U.S. is acting without a European partner.

“The 2003 Iraq war was backed by Britain, Spain and others – along with halfhearted efforts to coax France and Germany. Mr. Trump, by contrast, has isolated America from the rest of the West without serious effort at all. Who else could unify the post-Brexit UK with Europe?

“The first casualty of Mr. Trump’s move is any semblance of a global order. The U.S. now finds itself in a lonely group with Israel and Saudi Arabia on one side of a toxic international breach. On the other are China, Russia, Europe and Iran. To that list we should almost certainly add Japan, India, Australia and Canada. It is hard to see how the gap will not widen. Mr. Trump was deaf to the unanimous pleading of America’s closest allies.  Two of their leaders, France’s Emmanuel Macron and Germany’s Angela Merkel, even trekked to Washington in the past fortnight to press their case. They came away with nothing.

“A third senior ally, Boris Johnson, Britain’s foreign secretary, pointed out that the world had ‘no Plan B’ to the Iran nuclear deal.  That was another way of saying that the alternative to ‘jaw jaw’ is ‘war war.’

“Mr. Trump has landed Europe with a dilemma it had done its best to avoid. He is giving America’s leading NATO allies a choice between upholding a deal they brokered – and that Iran has honored – or signing up to an America First war party over which they have no influence. The first will trigger U.S. sanctions on European banks and energy companies that continue to do business with Iran.  The second would mean forfeiting their best judgment and risking a Middle Eastern conflict that would hurt Europe far more than America. Falling in line with the U.S. would also come at a steep political cost.  Mr. Macron’s domestic poll ratings fell after his ‘flattery offensive’ on Mr. Trump.

“It would also mean embracing Mr. Trump’s alternative take on reality. The U.S. president said on Tuesday that the 2015 nuclear deal would soon bring Iran to the brink of developing nuclear weapons. Europe’s leaders point out that Iran was within three months of achieving nuclear breakout before the deal was struck. The agreement put that clock back to at least a year. Iran agreed to unscheduled inspections and strict limits on its nuclear research and enrichment activities for 10 to 15 years. Mr. Trump has handed Iran the pretext to restart its nuclear program at any time. The same applies to Mr. Trump’s claim that the deal had spurred a Middle Eastern nuclear arms race.  No such race was taking place. It might start now.

“Europe’s response will largely hinge on how Iran reacts. Hassan Rouhani, Iran’s president, said on Tuesday that the ball was in Europe’s court. If the three Ms – Merkel, May and Macron – find a way to sustain the deal, Iran is likely to stick to it. That fork leads to a deepening western split. Washington would levy sanctions on European entities. Europe would be forced to retaliate.

“For years, America’s allies have chafed at Washington’s imposition of secondary sanctions. The fallout over Iran may be the unilateral straw that breaks the camel’s back.  It goes without saying that Russia, China and others will continue to do business with Iran.  They will also reciprocate in the event of U.S. financial penalties.

“Such tit-for-tat will not occur in isolation. The knock-on impact on Mr. Trump’s trade talks with China, and hopes of sustaining China’s pressure on North Korea’s Kim Jong Un to denuclearize, would be radically uncertain. Asia – like Europe and the Middle East – is watching Mr. Trump’s evolution with mounting anxiety. It is unclear how he thinks his Iran brinkmanship could boost prospects of a serious nuclear deal with Mr. Kim....

“The parallels with the build-up to the Iraq war are troubling. Few countries wish to see a repeat of that blunder. On Tuesday, Mr. Trump all but declared war on Iran. That will be consequential enough. The collateral damage to America’s global standing may be even worse.”

Bret Stephens / New York Times

“The (Iranian) regime might calculate that a strategy of confrontation with the West could whip up useful nationalist fervors. But it would have to tread carefully: Ordinary Iranians are already furious that their government has squandered the proceeds of the nuclear deal on propping up the Assad regime. The conditions that led to the so-called Green movement of 2009 are there once again.  Nor will it help Iran if it tries to start a war with Israel and comes out badly bloodied.

“All this means the administration is in a strong position to negotiate a viable deal.  But it missed an opportunity last month when it failed to deliver a crippling blow to Bashar al-Assad, Iran’s puppet in Syria, for his use of chemical weapons. Trump’s appeals in his speech to the Iranian people also sounded hollow from a president who isn’t exactly a tribune of liberalism and has disdained human rights as a tool of U.S. diplomacy. And the U.S. will need to mend fences with its European partners to pursue a coordinated diplomatic approach.

“The goal is to put Iran’s rulers to a fundamental choice. They can opt to have a functioning economy, free of sanctions and open to investment, at the price of permanently, verifiably and irreversibly forgoing a nuclear option and abandoning their support for terrorists.  Or they can pursue their nuclear ambitions at the cost of economic ruin and possible war. But they are no longer entitled to Barack Obama’s sweetheart deal of getting sanctions lifted first, retaining their nuclear options for later, and sponsoring terrorism throughout.

“Trump’s courageous decision to withdraw from the nuclear deal will clarify the stakes for Tehran. Now we’ll see whether the administration is capable of following through.”

Trumpets....          

--Rudy Giuliani resigned from his law firm after his partners got fed up with his bloviating defense of President Trump during his over-the-top media appearances, as first reported by the New York Times.

Giuliani had taken a leave of absence from the firm, Greenberg Traurig, one of the nation’s largest and most respected, to defend Trump in Robert Mueller’s probe and other controversies, including the $130,000 payoff to porn star Stormy Daniels.

But the firm said he quit, with the chairman, Richard Rosenbaum, saying: “After recognizing that this work is all consuming and is lasting longer than initially anticipated, Rudy has determined it is best for him to resign.”

Giuliani said it “is in everyone’s best interest that I make it a permanent resignation” so that he could focus on the Russia probe.

The firm’s partners have been cringing at some of Giuliani’s remarks, especially regarding the payment that Trump fixer Michael Cohen made to Daniels to keep her quiet about a one-night stand she said she had with Trump in 2006, the Times reported.

Giuliani said that such payments were made all the time, including at his firm.

“That was money that was paid by his lawyer, the way I would do, out of his law firm funds,” he said on Fox News.  “Michael would take care of things like this like I take care of this with my clients.”

Late Thursday, the firm gave the Times a statement about those comments.

“We can’t speak for Mr. Giuliani with respect to what was intended by his remarks. Speaking for ourselves, we would not condone payments of the nature alleged to have been made or otherwise without the knowledge and direction of a client.”

Cohen initially said that Trump didn’t know about the payment to Daniels – as did the president himself last month.

But Giuliani blew that story out of the water when he said that Trump had reimbursed Cohen.

--Emblematic of the problems facing Michael Cohen, a watchdog group, Public Citizen, filed complaints with Congress and the Justice Department, saying Cohen broke federal ethics and lobbying laws by failing to register as a lobbyist while collecting big sums from companies with business before the Trump administration.

Swiss-based drug maker Novartis and AT&T acknowledged making huge payments to a Cohen shell company in exchange for information on Trump and the administration.  Novartis paid Cohen’s firm $1.2 million for a one-year period; AT&T paid Cohen $600,000.

In AT&T’s case the payment was related to its proposed merger with Time Warner and Cohen’s advice on how to handle the administration, which then had the Justice Department sue to block the deal.  Novartis was looking for insight on the administration’s plans for healthcare, including how to approach the White House when it came to the Affordable Care Act.  Both companies have said they have cooperated with special counsel Robert Mueller’s office, and both admitted to making “a big mistake,” as CEO Randall Stephenson wrote in a memo to employees, announcing the “retirement” of Senior Executive Vice President Bob Quinn, a lawyer who took over the D.C. office in October 2016.  It was his office that hired Cohen. 

This is a huge embarrassment for the companies, having spent shareholder money and gaining little in return, at least that we know of.

Another client, Korean Aerospace Industries, paid Cohen’s firm $150,000 for legal advice on accounting standards.

Meanwhile, the times reported that Cohen used the shell company, Essential Consultants L.L.C., for an array of business activities that went far beyond what was previously known. Transactions totaling at least $4.4 million flowed through it from the time shortly before Trump was elected president until last January, financial records show.

Among the previously unreported transactions were payments last year totaling about $500,000 from Columbus Nova, an investment firm in New York whose biggest client is a company controlled by Viktor Vekselberg, a Russian oligarch.

Vekselberg was apparently questioned by the feds about donations he gave to Trump’s inaugural fund and campaign.

--A report by the Senate Intelligence Committee found there is no evidence that Russian interference in the 2016 presidential election affected the actual vote count, which confirms a January 2017 assessment by U.S. intelligence agencies.

However, the committee concluded that hackers affiliated with the Russian Government “conducted an unprecedented, coordinated cyber campaign against state election infrastructure.”

“Russian actors scanned databases for vulnerabilities, attempted intrusions, and in a small number of cases successfully penetrated a voter registration database,” the panel found. “This activity was part of a larger campaign to prepare to undermine confidence in the voting process.”

No one should feel good over security for the 2018 and 2020 election cycles.

--Sen. John McCain urged his fellow senators to vote against President Trump’s pick to head the CIA due to her “refusal to acknowledge torture’s immorality.”

Gina Haspel, who in 2002 ran a black-site prison where an Al Qaeda militant was tortured, was nominated for the position after Mike Pompeo was tapped to replace former Secretary of State Rex Tillerson.

McCain said in a statement on Wednesday, “I believe Gina Haspel is a patriot who loves our country and has devoted her professional life to its service and defense.  However, Ms. Haspel’s role in overseeing the use of torture by Americans is disturbing. Her refusal to acknowledge torture’s immorality is disqualifying.”

McCain, who was tortured by the North Vietnamese in the late 1960s, added that “the methods we employ to keep our nation safe must be as right and just as the values we aspire to live up to and promote in the world.”

Haspel tried to reassure Senators on Wednesday by saying she would not carry out presidential orders she found morally objectionable.

She also vowed never to restore an interrogation program, and acknowledged the spy agency learned “tough lessons” from its use of harsh techniques like sleep deprivation and waterboarding.

Haspel, however, refused to weigh in on the morality of the torture despite repeated questions from the committee.

“I’m not going to sit here with benefit of hindsight and judge the very good people who made hard decisions, who were running the agency, in very extraordinary circumstances at the time,” she said.

Personally, I support Haspel’s nomination.

--Homeland Security Secretary Kirstjen Nielsen almost quit after President Trump slammed her for failing to secure the border during a cabinet meeting Wednesday, according to multiple reports.

According to the New York Times, Nielsen is unhappy in her job and told colleagues after the meeting that she shouldn’t stay on if Trump doesn’t think she’s effective – going so far as to pen a letter of resignation but never actually sending it.

Trump’s blowup at Nielsen reportedly came during a discussion about illegal border crossings and why Mexico wasn’t doing more to stop them.  Some of the cabinet members then pointed out the U.S. relies on the labor of workers who cross the border each day, which Trump acknowledged – only to continue to rant about the issue, berating Nielsen in the process.

Trump, according to the Times, believes Nielsen and other officials are fighting his recent order to separate more border-hopping parents from their kids.

Wall Street / Trade

There was some important inflation data this week...producer and consumer prices for April, and they were both tame, which gave investors a reason to buy stocks because the numbers didn’t give the Federal Reserve an excuse to hike interest rates more than anticipated, the Street waffling between two and three more hikes the rest of the year.  The data this week argues two.

The PPI was up 0.1%, 0.2% ex-food and energy; 2.6% year-over-year, 2.3% on core. The CPI was up 0.2%, 0.1% on core; 2.5% and 2.1%, respectively, yoy. 

The Fed will tighten in June and then the data (and possibly geopolitics) will lead them the rest of the year...one or two more.

On the trade front, talks between the U.S. and China must lead to an outcome that “benefits American businesses and workers,” President Trump told his counterpart, Xi Jinping, in a call on Tuesday.

Xi in turn called for continued communication during their escalating trade dispute to achieve a “mutually beneficial” result rather than a much-dreaded trade war.

Trump “affirmed his commitment to ensuring that the trade and investment relationship between the United States and China is balanced and benefits American businesses and workers,” according to a readout provided by the White House.

Xi said that “the teams of both sides can maintain communication and strive to find a solution to the problems that exist, so as to achieve mutually beneficial and win-win results,” according to a report in Chinese state media.

In other words, more of the same...as in nothing. As in the U.S. trade mission to Beijing the week before, led by Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, was a waste of time and fuel.

There is still no specific date for the bulk of the tariffs China has threatened to impose in response to U.S. trade actions, but Chinese importers have been cancelling purchases of corn and cut orders for pork while dramatically reducing new soybean purchases, according to the Dept. of Agriculture.  In 2017, China was the second-biggest customer for U.S. agricultural products, spending nearly $20 billion.

The U.S. will finalize its punitive tariff list of $50 billion worth of Chinese products later this month.  President Trump has threatened to impose tariffs on another $100 billion in Chinese goods as well.

And the Treasury Department is planning to introduce proposals on May 21 to restrict Chinese investment in the U.S. and U.S. investment in China.

As for the steel and aluminum tariffs on the European Union, Canada and Mexico, the White House had granted a 30-day reprieve as it seeks to extract concessions from trading partners who have resisted those demands, while initial agreements with Argentina, Australia and Brazil need to be finalized in the same time frame.  Though now in the case of the larger EU players, you have the potential for layering on trade actions involving the re-imposition of sanctions on Iran.

And there is NAFTA, with a new agreement having a May 17 deadline...at least for now, according to House Speaker Paul Ryan due to the congressional calendar.  Talks broke down Friday with many issues still outstanding.

Republican Sen. Pat Toomey (Penn.) / Wall Street Journal

“The Trump administration will soon unveil a ‘new’ North American Free Trade Agreement.  U.S. trade negotiators have sought, among other things, to limit its duration, impose new domestic content requirements on certain products, and weaken investor legal protections. Even with these protectionist features, congressional Democrats are unlikely to vote for President Trump’s NAFTA 2.0. He will need the support of pro-trade Republicans like me to ensure passage of any new agreement.

“To pressure us into voting for an agreement that diminishes free trade, some in the administration suggest offering a grim choice: either approve a diminished NAFTA, or the president will unilaterally withdraw the U.S. from the existing NAFTA, leaving no NAFTA at all.

“If presented with this ultimatum, I will vote ‘no,’ urge my colleagues to do likewise, and oppose any effort by the administration to withdraw unilaterally. Pulling out of NAFTA by executive fiat would be economically harmful and unconstitutional.

“The Framers reserved trade policy for Congress, which has the express authority to establish tariffs and regulate commerce with foreign nations.  A president who unilaterally withdrew from NAFTA would be directly regulating foreign commerce, imposing significant disruptions on the economy, and infringing on Congress’ status as a coequal branch of government....

“Unilateral executive withdrawal would amount to the president creating new law by himself.  NAFTA became operative when Congress passed implementing legislation in 1993. Nowhere in the 1993 law, or in any other relevant statute, has Congress delegated to the president authority to terminate a free-trade agreement. A president can no more repeal NAFTA than he can repeal ObamaCare or create a new NAFTA without Congress’ approval....

“Rather than trying to coerce free-trade Republicans into voting for an agreement that weakens trade and the economy, the administration can accept the advice from many members of Congress and others to modernize NAFTA in ways that expand trade opportunities without curtailing American consumers’ freedom.”

Europe and Asia....

Literally zero broad economic news of import for both after last week’s deluge.

Eurobits....

--The populist rebellion that started with Brexit, and then moved on to Donald Trump, has landed its biggest blow on the European continent.

Italy has succumbed to the forces of nationalism and protectionism that emerged over the past two years as the biggest threat to the political order, as the anti-establishment Five Star Movement, led by 31-year-old Luigi Di Maio, is forming a governing alliance with the anti-immigrant League, led by fellow college dropout Matteo Salvini, 45.

There are big issues to be settled, such as who will be prime minister, but the alliance received the blessing of former prime minister Silvio Berlusconi, leader of the center-right, who had been adamantly opposed to any alliance with Five Star, Berlusconi still a kingmaker of sorts.

Salvini and Di Maio said they are taking until Monday to finish their plan to form a government in Rome.  Among the issues to be reconciled are the League’s promise of a flat tax at 15 percent for people and businesses, while Five Star has offered a citizens’ income to poorer Italians. Both want to scrap the pension reform that helped weather the debt crisis but upset voters.

The League is also looking for curbs on immigration and both parties favor a more assertive stance towards the EU.

Meanwhile, talk of a “citizens’ income” is scary for bond investors, who already have to deal with Italy’s 130%+ debt to GDP ratio, second-biggest in Europe after Greece. That said, the yield on the country’s 10-year is 1.86%, more than a point lower than the U.S., which is nuts, but it has everything to do with the European Central Banks’ ongoing zero interest rate policy and quantitative easing.

The fear is the policies of League and Five Star will lead to another crisis and a clash with Brussels, which is already dealing with the U.K. and Brexit, as well as ornery Eastern Europe countries, and there could be renewed calls for Italy to exit the EU.

Italy has been stuck in political limbo since the March 4 election, with the center-right bloc, including the League, gaining the most seats, but Five Star was the largest single party.

--France has been roiled by labor issues, a backlash in part against reforms proposed by President Emmanuel Macron. Particularly hard hit has been Air France, whose French unions called on management to resume talks over a pay dispute four days after the chief executive’s surprise resignation sent the strike-hit carrier deeper into turmoil.  Pilots, cabin crew and ground staff in France were on strike for a 15th day since February on Tuesday and Air France said one in five flights would be cancelled.  The strikes have cost the carrier nearly $400 million thus far.

Air France has offered workers a pay raise of 2 percent in 2018 and a further 5 percent over the following three years, but French unions, which are demanding 5 percent this year, have complained management isn’t serious about talks.

France’s finance minister, Bruno Le Maire, said the government will not bail out the airline.  He added Air France must become more competitive or it risks being further outpaced by rivals.

The French government owns 14.3% of the Air France-KLM parent group.

--BT, the British Telecom Group, is cutting 13,000 jobs in the biggest jobs cull in a decade, mostly managerial and back-office jobs, while moving to a smaller London bae in an attempt to rebuild from an accounting scandal.

CEO Gavin Patterson said radical action was “absolutely critical” if BT was to deliver the next-generation fiber and mobile networks Britain needs.

Street Bytes

--The above-mentioned tame inflation data helped stocks to their best gain since March, with the Dow Jones up 2.3% to 24831, the S&P 500 up 2.4% and Nasdaq 2.7%. The Dow and S&P are back in the black for the year, while Nasdaq is up 7%...tech stocks recovering nicely from their February/March swoon.

--U.S. Treasury Yields

6-mo. 2.04%  2-yr. 2.53%  10-yr. 2.97%  30-yr. 3.10%

The yield on the 10-yr. has finished the last four weeks between 2.95% and 2.97%.  The spread between the two- and 10-yr. is at its narrowest since Sept. 2007.

--Oil prices hit their highest level since 2014, over $70 on the U.S. benchmark I list each week below (West Texas Intermediate, or WTI). Oil has been surging on speculation the U.S. was exiting the Iran nuclear deal, with the re-imposition of sanctions.

Previously, international sanctions have cut Iranian exports by around 1 million barrels a day, but as it seems the U.S. is going it alone, the impact won’t be as great, perhaps 250,000-350,000 barrels a day.  We’ll have to wait to see how this all plays out with Germany, France and the U.K., among others.

Separately, you have a dispute between the oil ministers of Iran and Saudi Arabia, with Iran desiring oil at $60 to $65 a barrel, while the Saudis are seeking to push oil to $80 a barrel to fund economic reforms.

Meanwhile, in the U.S., oil production continues to march higher, with the rig count at a three-year high, according to oil-field services firm Baker Hughes.

Bank of America Merrill Lynch head of commodities research, Francisco Blanch, says, “Looking into the next 18 months, we expect global oil supply and demand balances to tighten.”  He said oil prices could rally to $100 a barrel next year.

--President Trump on Friday blasted drugmakers and healthcare “middlemen” for making prescription drugs unaffordable for Americans, but healthcare stocks rose as it became clear the administration had avoided taking aggressive and direct measures to cut drug prices.  Trump, speaking from the Rose Garden, said his administration would take aim at the “middlemen” in the drug industry who became “very very rich,” an apparent reference to health insurers and pharmacy benefit managers.

Trump also said the pharmaceutical industry is making an “absolute fortune” at the expense of American taxpayers. Foreign governments “extort” unreasonably low prices from U.S. drugmakers, Trump added.  But, again, the bark was bigger than the bite.

--Ford Motor said it would suspend production of its profit-driving F-150 pickup at its big plant in Dearborn, Michigan (as well as another plant in Kansa City, Mo.), bringing to a temporary halt all production of the nation’s bestselling vehicle.

The move is the result of a fire at a parts supplier in Michigan (Meridian Lightweight Technologies) that shook the entire North American auto industry.  Production at General Motors, Fiat Chrysler, BMW and Mercedes is also disrupted as a result.

But for Ford this is huge, with F-150 production forecast to be out for several weeks.  It is estimated the two plants produce some 10,000 to 15,000 F-150s a week, according to AutoData Corp. and analyst Jamie Albertine.

Several thousand workers will be laid off temporarily.

--The 23 largest airlines in the U.S. reported a combined profit of $15.5 billion, including $4.6 billion from baggage fees (another $2.9 billion from reservation change fees) last year, according to the U.S. Bureau of Transportation Statistics, the fifth consecutive year of after-tax profits, continuing the rebound from nearly a decade of losses following 9/11.

The industry’s biggest year was 2015, owing to low fuel costs, which led to combined profits of nearly $25 billion, the bureau said.

The nation’s airline industry also added 450 new planes last year.  [Hugo Martin / Los Angeles Times]

--I’ve been writing extensively on the plight of Chinese telecom company ZTE and its problems since the Commerce Department banned American companies from selling components to ZTE, the fourth-largest seller of phones in the U.S., and on Wednesday, the Shenzhen-based company disclosed in a regulatory filing that “major operating activities of the Company have ceased,” though the extent of the halt to ZTE’s many businesses isn’t totally clear.  It is involved in consumer electronics, telecommunications infrastructure and cloud computing.

The company has been warning for weeks that the U.S. sales ban has threatened its survival.

The Commerce Department in April had put the ban in place after finding ZTE violated the terms of a 2017 settlement over the evasion of U.S. sanctions against Iran and North Korea.

ZTE depends on U.S. companies such as Qualcomm for semiconductors for its phones, as well as an array of American suppliers for components used in its networking equipment.

--Walmart has agreed to pay $16bn for a majority stake in Indian ecommerce company Flipkart, a record foreign direct investment for India that will pit it against U.S. rival Amazon.

Walmart is buying 77 percent of Flipkart.  Calling India “one of the most attractive retail markets in the world,” Walmart chief executive Doug McMillon said that it was backing “the company that is leading the transformation of ecommerce in the market.”

Flipkart has been facing a strong challenge in the Indian ecommerce market from Amazon, which considers India its main target market in Asia.  While the market is small thus far, analysts expect it to grow significantly in the next five years.

--Walt Disney Co. saw a 23 percent earnings increase for the second quarter compared to 2017 thanks in large part to the success of Marvel Studios’ hit, Black Panther.

Disney reported fiscal second-quarter net earnings of $2.94 billion for the three months ending March 31.

“It’s clear from the recent results, as well as from the slate ahead, that our studio has and will continue to raise the bar in terms of both creative and commercial success,” Disney CEO Bob Iger said on the earnings call.  “The incredible performance of Marvel’s Black Panther is just one of many examples.”

Black Panther has earned $1.34 billion worldwide since its opening Feb. 16.

Disney’s studio revenues grew 21% overall to $2.45 billion. And now you have the April release of “Avengers: Infinity War,” which has already grossed $1 billion, and isn’t reflected in this week’s quarterly release.

Disney also reported a big boost from its theme parks business, which rose 13% to $4.88 billion in revenue. Growth at Walt Disney World Resort, Disneyland Paris and Hong Kong Disneyland Resort gave the segment a lift.

But Disney is now facing a showdown with cable giant Comcast Corp. over its purchase of Rupert Murdoch’s 21st Century Fox. Disney is hoping to buy the bulk of Fox, including the film and TV studio, for $52.4 billion, pending regulatory approval; the deal having been first announced in December. Bob  Iger views the acquisition as a major component in his drive to make Disney a more powerful competitor in the face of growing competition from tech giants including Netflix, Amazon and Apple.  Disney wants to have more film and TV content for two streaming services – a Disney-branded offering set to launch next year, and an ESPN streaming service that launched in April.  Iger insists, though, the Fox deal is not make-or-break for the digital strategy.

The ESPN streaming service, dubbed ESPN+, is a bid to draw online viewers as the network continues to be squeezed by cord cutting and the rising cost of televising major sports.

Operating income for Disney’s cable networks business declined 4% in the quarter to $1.73 billion, reflecting decreases at ESPN and a loss at digital platform BAMTech.  But overall media networks revenue, which includes ABC and cable channels, grew 3%.

But now Comcast is preparing an all-cash, hostile, offer to outbid Disney, after previously getting rebuffed by Fox.  Comcast last fall had offered more than $60bn for the Fox assets, but Murdoch was cool to the offer by Comcast Chairman Brian Roberts.

Comcast recently formalized its $31bn bid to buy all of European satellite-TV provider Sky, which Fox has been trying to buy for nearly 17 months. Fox owns 39% of Sky – which provides TV service in Britain, Ireland, Italy, Germany and Austria – but British regulators have balked at the Murdoch family’s offer, concerned it would give them too much influence in British media, beyond what it already has.

Meanwhile, back to Marvel’s “Avengers: Infinity War,” after two weeks the film had grossed over $1 billion globally, accomplishing the feat in just 11 days, one day fewer than “Star Wars: The Force Awakens” in 2015. As of last weekend, the cumulative domestic take from “Infinity War” stood at $450.8 million.

In a ComScore audience survey, 33% of first weekend ticket holders said they would see the film again, three times the norm, according to ComScore’s Paul Dergarabedian.

“Black Panther” is up to a cumulative domestic take of $693.1 million.

--Nestle is paying $7.15bn for the rights to market products of Starbucks outside its shops as the Swiss group fights to strengthen its position in the global coffee sector.  Starbucks and Nestle will work together on marketing strategies and innovation.  Starbucks’ out-of-shop sales generate $2bn in annual revenues.

Nestle is the world’s largest food and drinks company but it is weak in the U.S. coffee market with brands like Nescafe and Nespresso. 

Kevin Johnson, president and CEO of Starbucks, said: “This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestle.”

500 Starbucks employees will move to Nestle, but operations will continue to be located in Seattle.

--Warren Buffett and Berkshire Hathaway Inc. Vice Chairman Charlie Munger answered questions from shareholders, journalists and analysts at Berkshire’s annual meeting in Omaha, Nebraska. The weekend known as “Woodstock for Capitalists” is unique in corporate America, a celebration of Buffett’s success at a conglomerate whose businesses range from GEICO insurance to the BNSF railroad to See’s candies to Ginsu knives.

Buffett said on the issue of U.S.-China trade: “In August, I will be 88, in a year that ends in an 8. Eight is a lucky number in China. ...The United States and China are going to be the two super-powers of the world, economically and in other ways for a long, long time.  We have a lot of common interests and like any two big economic entities there are times when there will be tensions. But it is a win-win situation when the world trades. ...It’s really not the worst thing in the world (to run a trade deficit).”

Separately, shares in Apple continued to benefit, hitting new all-time highs this week after last Friday’s revelation that Buffett’s Berkshire had bought 75 million more shares of the company, raising its total stake in the iPhone maker to nearly 242 million shares; Apple now Berkshire’s No. 1 stock holding, eclipsing long-time top holding Wells Fargo, which Buffett is convinced is in the process of a turnaround following years of scandels.  [I love WFC’s new commercial, admitting its mistakes, but remembering its origins as it looks forward.]

--The U.S. Postal Service on Friday reported a second-quarter net loss of $1.3 billion, up from $562 million a year ago.  Much of the loss was attributable to rising retiree health benefits, compensation expenses and an increase in transportation costs.

Revenue from shipping and packages actually grew by $445 million, or 9.5 percent. First-class and marketing mail revenue fell by a combined $181 million compared to last year’s second quarter.

The retiree health benefit obligations haven’t been funded properly for years and now total more than $38bn.

--One item from last week I didn’t have a chance to note, profits at the New York Times jumped by two-thirds in the first quarter of 2018 compared with the same period a year ago, thanks to a boom  in digital subscribers.

The results show the paper is still riding the high of the so-called “Trump bump,” a surge in readership among some of the U.S. president’s favorite media targets.

Net income rose to $21.9 million from $13.2m in the same quarter a year earlier. Total revenue rose to $413.9m from $398.8m.

The Times had a net increase of 139,000 in digital-only subscriptions, a 25.5 percent increase over a year earlier, bringing the total to close to 2.8m.  Subscription revenues rose by 7.5 percent.

Someone tell President Trump it’s not failing.

--California is set to become the first state to require solar panels on all newly built single-family houses.  The mandate is expected to save buyers money in the long run but also raise their upfront costs at a time when housing affordability is steep.  Needless to say, the solar industry in California is stoked. 

--Meanwhile, California’s economy has surpassed that of the United Kingdom to become the world’s fifth largest, according to federal data made public last weekend. California’s gross domestic product rose by $127 billion from 2016 to 2017, surpassing $2.7 trillion.  At the same time, the U.K.’s economic output slightly shrank over that time when measured in U.S. dollars, due in part to exchange rate fluctuations.

The data demonstrate not just California’s sheer size but the economy’s diversity, from Silicon Valley, to Hollywood, to the state being the nation’s salad bowl in the Central Valley agricultural heartland.

Following the Great Recession, California had dropped to tenth in the world, but the rebound since has added 2 million jobs and $700bn in GDP. The state has 12% of the U.S. population but contributed 16% of the country’s job growth between 2012 and 2017.  Its share of the national economy grew from 12.8% to 14.2% over that five-year period, according to state economists.  The U.K., by the way, has 25 million more people than California.

--The pilots of the Southwest Airlines jet that suffered a midair engine explosion had to use hand signals to communicate because of the deafening roar, they said in a new interview for ABC’s “20/20.” 

Co-pilot Darren Ellisor:

“We were passing through about 32,000 feet when we heard a large bang and a rapid decompression.  The aircraft yawed and banked to the left a little over 40 degrees and we had a very severe vibration from the number one engine. There was shaking, everything. And that all kinda happened all at once.”

Pilot Tammie Jo Shults said the trouble reminded her of rough military flights.

“My first thoughts were actually, ‘Oh, here we go’ – just because it seemed like a flashback to some of the Navy flying that we had done,” she said.

And in the panic, the two aviators couldn’t even hear each other as they tried to land the plane.

“Darren is just very easy to communicate with and we had to use hand signals because it was loud and it was just hard to communicate for a lot of different reasons,” Shults said.

--SeaWorld attendance and revenue jumped last quarter, a sharp reversal of the slide that has dogged the company in recent years since the CNN documentary “Blackfish.”

More than 3.2 million people visited SeaWorld parks during the first three months of the year, up nearly 15% over year ago levels, SeaWorld Entertainment Inc. reported Tuesday.

Quarterly revenue rose 16.5% to more than $217 million, up from $186.4 million in the year-earlier quarter.  But the first quarter provides a limited view of park performance as just five of SeaWorld’s 12 parks are open for the full three months.

That said, the company is hoping for a continued rebound after the opening this year of major attractions, such as the Electric Eel roller coast in San Diego, which debuted this week. And the Orlando, Fla., park has a new river rafting ride called Infinity Falls.

--Anheuser-Busch InBev SA joined Molson Coors and Heineken in reporting sharply lower U.S. beer volume in the first quarter compared with a year earlier as drinkers turn to other alcoholic beverages such as wine or whiskey.

AB InBev said its volumes fell 4.1% in North America, partly due to weakness in its Bud and Bud Light brands (similar to last week, when Molson Coors reported slower sales of Miller Lite and Coors Light).

But in the case of AB InBev, they reported strong volumes in Mexico, Colombia (note to Steve G., you’re having an impact here), and Argentina.

As for Bud Light, America’s best-selling beer, in 2017, according to Euromonitor, AB InBev reported it sold 1.1 million gallons of the brand in the quarter, off 16% from 2012.

And demographics are not in the industry’s favor. Back in 2006, nearly 65% of alcohol consumed by Americans aged 21 to 27 was beer, according to data from AB InBev. By 2016, that percentage had fallen to 43%.

Beer’s share of the U.S. alcohol market by value fell to 45.6% in 2017, from 48.2% in 2010, according to Euromonitor.  Spirits’ share jumped to 31.7% from 29.6%, while wine held its ground at 19.7%.  [Saabira Chaudhuri and Nick Kostov / Wall Street Journal]

--An internal investigation by NBCUniversal’s legal team exonerated NBC News management of any wrongdoing regarding the conduct of Matt Lauer.

The report, released five months after NBC News fired Lauer, the former “Today” show star, followed a complaint about inappropriate sexual behavior with a subordinate.

But there are cries that the network should not have been investigating itself and instead should have conducted an independent inquiry, though NBC said two law firms had been consulted and reviewed the report.

The report concluded NBC News did not have a hostile work environment. Cough cough.

--Christiane Amanpour was officially tabbed to replace Charlie Rose on PBS stations across the country, a move in the works for five months, ever since PBS stations began replaying Amanpour’s CNN International program.

Those half-hour Amanpour rebroadcasts were an interim replacement for Rose’s 11 p.m. talk show, which was cancelled last fall after women came forward to accuse him of sexual harassment.

Amanpour is now expanding to an hour, the changes to take place in July.

[I had a brain cramp last week and had Charlie Rose at ABC, rather than formerly CBS, until Chris in Connecticut corrected me...thank you, Chris. This is what happens when you’re an NBC guy.]

Foreign Affairs

Iran, part II...Israel:  Israel accused Iran’s Quds Force – the elite overseas operations arm of Iran’s Revolutionary Guard Corps (IRGC) – of launching 20 rockets from its military positions in Syria on Thursday morning, that then were either shot down or fell short of a nearby military base in the Golan Heights.  Israel then retaliated, striking 70 military targets belonging to Iran inside Syria, in what the Israeli military called its largest-ever operation inside Syria.   

Iran’s buildup in Syria, inching ever closer to Israel, has been cause for alarm for months.  Israeli Prime Minister Benjamin Netanyahu met Russian President Putin in Moscow this week, Israel having informed Russia prior to carrying out the strikes on Iranian forces, the Israeli military said. [There was a report later that Russia then warned Iran.]  Russia wants to avoid a broader confrontation that would endanger the gains it has made in the region.

Meanwhile, Iran’s hardliners are taking advantage of the U.S. withdrawal from the nuclear deal, blasting President Rouhani for not abandoning what’s left of the agreement. Rouhani won election back in 2013 by promising to bring Iran back into the global economy, and the accord was a landmark breakthrough in bringing rapprochement with the West while limiting Iran’s nuclear capabilities.

But the moderates have lost credibility, and now Rouhani has to pivot, warning of consequences for the U.S. that would lead to “historic regret.”  In the Iranian Parliament on Wednesday, lawmakers burned the American flag.

Thursday, in his first official comment since the clash in Syria, Rouhani said Iran does not want “new tensions” in the Middle East.  Earlier, the deputy head of Iran’s national security council said: “Iran does not have any connection to the missiles fired at Israel. If Iran did it we would have announced it immediately. When [ISIS] attacks Iranian targets in Syria we responded and made it known. Iran does not have any military presence in Syria and it was the Syrian army that fired missiles.”

The deputy head of Iran’s Revolutionary Guards, Hossein Salami, said diplomacy will not help Iran and that resistance is the only way forward.

“Iran’s enemies are not seeking military confrontation,” he said. “They want to pressure our country by economic isolation...Resistance is the only way to confront these enemies, not diplomacy,” Salami was quoted as saying by the Fars new agency.

Lebanon: The country held its first elections in nine years and Hezbollah and its political allies expanded their share of seats in Parliament, increasing their political clout at the expense of the country’s Western-backed prime minister, Saad Hariri.

Iran backs Hezbollah, which maintains Lebanon’s most powerful military force and is considered a terrorist organization by the United States.

The number of seats held by Hezbollah remained unchanged, but victories by allies who support its vast arsenal increased the chances the group would play a key role in a coalition government and diminished the prospects for legislation that would limit its power.

But the election dealt a big blow to Hariri, the country’s most prominent Sunni Muslim politician and an ally of the West. His Future Movement group saw its parliamentary share shrink by about a third, from 33 seats to 21, in the 128-member body.

In Lebanon’s complex system, the prime minister must be a Sunni, the speaker of Parliament a Shiite and the president is a Maronite Christian; thus Hariri is still expected to remain prime minister.

The problem is, Lebanon’s leaders have been counting on international aid to prop up its economy, which is dealing with the burden of nearly 1 million refugees from neighboring Syria, but with Hezbollah’s showing, such aid won’t be easily forthcoming.

Iraq: Parliamentary elections are being held on Saturday, and coincidentally, this week Prime Minister Haider al-Abadi announced the capture of five high-level Islamic State members earlier this year in a raid coordinated with the U.S.-led coalition.

The election itself will be confusing, though the “list” headed by Abadi, the Nasr list, is expected to get the most votes. Then a coalition needs to be cobbled together, and this process can go on for months, as has happened in the past. The three leading contenders to be prime minister are all Shias.

North Korea: President Trump announced that he will meet with Kim Jong Un on June 12 in Singapore for a first ever summit between leaders of the two countries.

“The highly anticipated meeting between Kim Jong Un and myself will take place in Singapore on June 12th. We will both try to make it a very special moment for World Peace!” Trump tweeted.

Trump’s announcement came just hours after three Americans who had been held prisoner in North Korea arrived back in the U.S., having been released by Kim.  Trump said on their arrival that he believed Kim wanted to bring North Korea “into the real world” and had high hopes for their planned meeting.

“I think we have a very good chance of doing something very meaningful,” Trump said.  “My proudest achievement will be – this is part of it – when we denuclearize that entire peninsula.”

[Disgustingly, the president also said Kim “did a great service” in returning the hostages, which must have left the parents of Otto Warmbier seething.]

Earlier this week, China, Japan and South Korea held their first summit in three years, meeting in Tokyo in a gesture of solidarity against the backdrop of historic diplomatic moves by North Korea and a push for the Hermit Kingdom to give up its nukes. Chinese Premier Li Keqiang made the first state visit by a Chinese official to Japan since 2010.

Japanese Prime Minister Shinzo Abe said his nation would normalize ties with North Korea if the nuclear and missile issues are resolved comprehensively.  Japan is also insisting on an accounting of 13 Japanese citizens abducted by North Korea decades ago.

And Kim Jong Un made a surprise visit to China, meeting President Xi Jinping in the northeast city of Dalian.  Images of the two leaders showed them strolling along a beach in the port city.

President Xi wants to make sure Kim understands that China is not to be sidelined when Kim meets with Donald Trump.

Last weekend, North Korea criticized what it called “misleading” claims that President Trump’s policy of maximum political pressure and sanctions is what drove the North to the negotiating table.  A Foreign Ministry spokesman warned the claims are a “dangerous attempt” to ruin a budding détente on the Korean peninsula.

North Korea wants to strengthen Kim’s position going into the summit, with Pyongyang claiming it is Kim himself who is the driver of the current situation.

“The U.S. is deliberately provoking the DPRK at the time when the situation on the Korean peninsula is moving toward peace and reconciliation,” the spokesman was quoted as saying.  [DPRK stands for the Democratic People’s Republic of Korea, the North’s formal name.]

Separately, the New York Times reported that South Korean President Moon Jae-in handed Kim Jong Un a USB drive that contained charts and video clips laying out a “new economic map for the Korean Peninsula,” including new railways and power plants for the impoverished North, should Kim abandon his nuclear activities, according to South Korean officials.

Moon is betting that Kim wants to become North Korea’s Deng Xiaoping, who oversaw the liberalization of China.

What you realize when you look at the North’s economy is that the key is electricity. As noted in the Times’ piece:

“Lacking cash for oil imports, North Korea produces all its electricity from hydroelectric dams and coal-burning power plants.  But the country’s power industry is trapped in a vicious cycle, energy experts say. Chronic electricity shortages make it difficult to produce coal and transport it to power plants. People in search of firewood for heat and cooking have denuded their hills, causing floods and droughts and making silt pile up at dams. That cuts down hydroelectric generation.”

One expert told the Times, “Reunification can start with reconnecting energy and transport lines of the two Koreas.”

China:  In a classic example of today’s China under leader-for-life Xi Jinping, last Saturday the White House accused the Chinese government of “Orwellian nonsense” for ordering 36 airline companies to purge their websites of references to Macau, Taiwan and Hong Kong as separate countries.  The Chinese Ministry of Foreign Affairs then shot back on Sunday.

“No matter what the U.S. side says, nothing will alter the objective fact that there is only one China in the world, and that the Hong Kong, Macau and Taiwan regions are inseparable parts of Chinese territory,” a spokesman said.  He added, “It must be pointed out that foreign firms doing business in China should respect China’s sovereignty and territorial integrity, abide by Chinese laws and respect the national feelings of the Chinese people.”

Previously, Chinese officials temporarily suspended the Chinese website of Marriott International, accusing the hotel chain of listing Tibet, Taiwan, Hong Kong and Macau as separate countries.

Russia: Opposition politician Alexei Navalny was released from police custody after being detained in central Moscow on Saturday as anti-government rallies took place across Russia.

Navalny, who was barred from running in the election on what he says was a false pretext, was detained soon after showing up on Moscow’s Pushkin Square, where young people were chanting “Russia without Putin!” and “Putin is a Thief!”

Meanwhile, Vladimir Putin took the oath of office on Monday for a fourth term as Russian president and promised to pursue an economic growth agenda that would boost living standards across the country, which is what he says every year in his annual address.

“A new qualify of life, well-being, security and people’s health – that’s what’s primary today,” said Vlad the Impaler.

But Russia’s economy remains heavily reliant on oil and gas exports and the current price of the former is helping in terms of the budget.

Putin acknowledged the challenges facing Russia were formidable, “but we all remember well that, for more than a thousand years of history, Russia has often faced epochs of turmoil and trials, and has always revived as a phoenix, reached heights that others could not.”

He also formally asked parliament to confirm Dmitry Medvedev to continue as prime minister, the job he’s held since giving up the presidency to Putin.

Putin has effectively been the leader of Russia for all of the 21st century. He stepped down from the presidency in 2008 because of term limits, but was named prime minister and continued to steer the country until he returned as president in 2012.

Anne Applebaum / Washington Post...on Russia’s “fake news”....

“A recent survey of the three main Russian television channels produced some stark analysis of what Russians are hearing about Europe.  Researchers examined newscasts and political talk shows from summer 2014 to December 2017. They found that negative news about Europe appeared on the three channels an average 18 times per day. The percentage of negative to positive news about European countries is 85 percent to 15 percent; for some European countries the ratio is even more skewed – perhaps because its most recent presidential election featured Marine Le Pen, a clearly pro-Russian candidate who lost to a pro-European one – France was depicted negatively most often.

“Most of the stories, ranging from big new events to local murders to sheer inventions (‘the German government is taking children away from their families and giving them to gay couples’) fit into a particular set of narratives. Daily life in Europe is depicted as frightening and chaotic; Europeans are weak, with declining morality and no common values; terrorism keeps people paralyzed with fear; the refugee crisis is getting worse all the time; sanctions on Russia have backfired and are now undermining the European economy and destroying the welfare state. Russia, in the version of the world depicted here, does not need a welfare state, since its citizens are so much hardier....

“The uses of this kind of coverage aren’t hard to guess. Clearly, it is not in the Russian state’s interest for the Russian nation to admire Europe, not for its democracy or its rule of law, and certainly not for its high standards of living. The memory of the Maidan protest of 2014 – young Ukrainians protesting in Kiev, waving European flags and calling for an end to corruption – is still fresh enough to be frightening in Moscow. If the Putin regime can undermine the idea of ‘Europe’ and make it unattractive to Russians – most of whom have long identified themselves as Europeans – then it removes a source of hope, and a possible model. If Europe is crazy, twisted, dangerous and dying, then surely Russians are better off under their corrupt authoritarian system.

“There could be a more sinister purpose to this relentless bad news as well, particularly as it echoes equally harsh coverage of the United States and Ukraine.  If Russia were expecting or planning some kind of conflict with Europe – diplomatic, economic, political, even military – this is exactly the strategy Russian leaders would use: Portray Russia’s neighbors as simultaneously aggressive and weak, decadent and dangerous; show Europe as a society that a stronger, better Russia could – and should – easily crush. Perhaps this is overly pessimistic. But otherwise it’s hard to explain why Moscow would go to the trouble.”

Afghanistan: The Taliban launched two attacks on bases in the western province of Farah today, killing more than 30 police. The region is vital to the opium trade and smuggling routes into neighboring Iran.

Malaysia: In a seismic shift in the politics of this place, the long-ruling Barisan Nasional coalition led by Prime Minister Najib Razak was defeated in elections by a bloc led by former prime minister Mahathir Mohamad, who won a simple majority in parliament, 122 out of 222 seats, enough to form the next government.  It was a huge upset.

The thing is, Mahathir is 92 years old!  However, he has promised to hand over power to Anwar Ibrahim, an opposition veteran – whom Dr. Mahathir ordered prosecuted years earlier – once Ibrahim is released from prison in June after being convicted of sodomy.

Dr. Mahathir had campaigned on an anticorruption platform, and his election clears the way for a new investigation into Najib’s alleged misappropriation of money from 1MDB.

Congrats to this country for staging a democratic election, even as the election council tried to rig it.

[And fascinating stuff as I go to post here...the people are convinced Najib is fleeing, knowing he is about to be arrested, sooner than later, and they’re scrambling to find him.]

Random Musings

--Presidential tracking polls....

Gallup: 42% approval of President Trump’s performance, 52% disapproval [May 6]
Rasmussen: 49% approval, 49% disapproval

A new CNN national poll has President Trump with a 41% approval number, 53% disapprove. 

In this survey, 57% say things are going well in the country, 40% badly (right track / wrong track), very important for the mid-term election.  52% approve of the president’s handling of the economy, 42% disapprove.

In the critical generic survey of registered voters, 47% back their Democratic candidate for the House, 44% back the Republican, within the margin of error.  Back in February, the Democrats had a 16-point margin.

[Separately, 71% believe the payment to Stormy Daniels was made to protect the Trump campaign.]

--West Virginia State Attorney General Patrick Morrisey won the GOP Senate primary Tuesday, and Republicans everywhere are exhaling.  Republicans, including President Trump, fiercely opposed the candidacy of ex-convict and former Massey Energy CEO Don Blankenship, who served a one-year sentence on a misdemeanor conviction related to a mine explosion that claimed 29 lives.

Morrissey’s win likely gives the GOP a shot against Democratic Sen. Joe Manchin, who won his primary, in November’s general election.  Morrissey beat Blankenship, who finished third, and Rep. Evan Jenkins.

Blankenship, a bad guy in so many respects, would have sunk Republicans’ chances at taking the seat, after Trump won the state with 68% of the vote in 2016.

Trump tweeted prior to the primary, “Don Blankenship, currently running for Senate, can’t win the General Election in your State...No way! Remember Alabama. Vote Rep. Jenkins or A.G. Morrisey!”

--In New Jersey, the Republican senate candidate, Bob Hugin, has a steep hill to climb in his race against incumbent Democratic Sen. Bob Menendez.  Hugin, who stepped down as executive chairman of Celgene in February, reported compensation of $48.4 million in 2017 ($19.5m and $14.3m in 2015 and ’16, respectively).

Hugin lent his campaign $7.5 million and it will be interesting to see if he can bankroll a comeback against the tainted Menendez.  Menendez maintains a double-digit lead.

--In a stunning development, New York Attorney General Eric Schneiderman, a darling of the #MeToo movement and both state and national Democrats, resigned just three hours after a New Yorker article detailed allegations he had physically abused four women with whom he was romantically involved. Two of the four went public, and with New York Dem. Gov. Andrew Cuomo immediately calling for his resignation, Schneiderman did so, while denying the claims.

Schneiderman took more than 100 legal actions against President Trump, including as a party to the $25 million settlement of fraud claims against Trump University, and the A.G. helped wring big penalties in the wake of the financial crisis from the likes of JPMorgan Chase and Bank of America, along with other banks that had packaged and sold bad mortgages.

Editorial / Wall Street Journal

“Eric Schneiderman’s fall from power as New York Attorney General was so swift on Monday evening that it’s tempting to bid good riddance and move on. But  in resigning amid compelling and detailed accounts in the New Yorker that he abused four women, sometimes violently, Mr. Schneiderman said in a statement that, ‘While these allegations are unrelated to my professional conduct or the operations of the office, they will effectively prevent me from leading the office’s work at this time. I therefore resign my office.’

“Mr. Schneiderman surely would have been forced to resign if he hadn’t done so within hours of the article’s publication. But he is wrong that his private acts are unrelated to the way he conducted his office. In both his private and public life, he showed his willingness to abuse his power.

“In private life, he did so by slapping and choking women, according to their accounts. Two of them bravely went on the record by name.  Mr. Schneiderman said he ‘strongly’ contests their claims, but in a statement to the New Yorker before he resigned he conceded that ‘in the privacy of intimate relationships, I have engaged in role-playing and other consensual sexual activity.  I have not assaulted anyone.’

“We suppose that depends on the meaning of the word assault. According to Michelle Manning Barish, she once responded to him yanking her across the street by saying, ‘Jaywalking is against the law.’

“She says Mr. Schneiderman replied, ‘I am the law.’ She adds that ‘if there is a sentence that sums him up, it’s that.’

“The same applies to Mr. Schneiderman as attorney general, though his choice of targets typically pleased his progressive allies.  He sat on potentially exculpatory evidence in his civil case against Hank Greenberg, the former AIG CEO.  Mr. Greenberg eventually settled on terms far easier than he had been offered 12 years earlier....

“Mr. Schneiderman’s ‘professional’ targets may be less sympathetic than the women he abused, but the ability to prosecute is the most fearsome power the government has and shouldn’t be politicized no matter the target.  One place to start protecting against abuses is by repealing the Martin Act.

“Like Elliot Spitzer before him, Mr. Schneiderman’s lack of restraint in private life was all too similar to his behavior in public life. Even progressive New Yorkers should ask whether it is wise to put so much power in the hands of men who are so unstable.”

The Manhattan District Attorney’s office said Monday night it was probing Schneiderman after the assault allegations.  Ironically, Schneiderman had been looking into D.A. Cy Vance’s office, concerning how he handled sexual assault allegations against Harvey Weinstein in 2015.

--One of the true dirtballs in New York politics, former New York state  Assembly Speaker Sheldon Silver, was found guilty on Friday of selling his office for $4 million in kickbacks – affirming a 2015 conviction on the same charges that had been overturned on appeal.

A jury found Silver, 74, guilty of all seven counts against him, including mail fraud and money laundering.  He faces as much as 130 years in prison when sentenced on July 13.

Show this asshole no mercy, Judge.  It was Silver who single-handedly denied then-Mayor Michael Bloomberg’s quest for a separate stadium for the New York Jets on the West Side of Manhattan, which would have been awesome.

Understand Silver scarfed up $4 million in kickbacks over a single decade, plus $1 million on illegal gains from investing it.

--Arizona Republican Sen. John McCain said he’s sorry he chose then-Alaska governor Sarah Palin to be his running mate in the presidential race he lost to Barack Obama.  He told the New York Times that if he could do it over he would have picked former Sen. Joseph Lieberman of Connecticut.  Lieberman told The Times that he hadn’t known McCain felt that way. “It touched me greatly,” he said.

Hell, I wanted McCain to pick Lieberman back then, too.

Meanwhile, as he prepares for the launch of his book, and death, McCain loathes President Trump so much that he doesn’t want Trump invited to his funeral.  Instead, Vice President Mike Pence, who served with McCain in Congress, will be asked to attend, with former presidents George W. Bush and Barack Obama asked to give eulogies.

Trump’s long-running feud with McCain has its roots in the early days of the 2016 race, when the senator criticized Trump for disparaging Mexican immigrants in the June 2015 speech in which he declared his candidacy.

Three weeks later, Trump called McCain “incompetent” and dismissed his experience as a prisoner of war in Vietnam.

“He’s not a war hero,” Trump told an Iowa crowd. “He’s a war hero because he was captured. I like people that weren’t captured.”

--Retired Marine Lt. Col. Oliver North, a central figure of the Iran-Contra scandal, and a fixture on Fox News, will become the president of the National Rifle Association. NRA executive vice president and CEO Wayne LaPierre said in a statement: “This is the most exciting news for our members since Charlton Heston became President of our Association.

“Oliver North is a legendary warrior for American freedom, a gifted communicator and skilled leader.  In these times, I can think of no one better suited to serve as our President,” he added.

North is retiring “effective immediately” from Fox News.

--Yikes...do not use a hot tub at a cheap motel.

From the New York Post:

“An Indiana family’s vacation to Florida reportedly left a mom with a deadly flesh-eating bacteria.”

The woman, 50, died Saturday, nearly two months after returning from Clearwater, Fla., with an infection known as necrotizing fasciitis, news station WRTV reported.  The flesh-eating disease.

The woman’s family said they believe the virus may have been from a hot tub at the local Days Inn hotel.

The husband told news station WFLA: “My thing is nobody else [in the family] got it, the flesh-eating bacteria.  No one else got it but she was the only one who got in the hot tub.”

It wasn’t until they were back in Indianapolis that the mom noticed a nickel-size sore on her buttocks. Doctors tried to treat it with antibiotics and suggested a heating pad.  But it continued to get worse...until she died.

--Christian Davenport / Washington Post

“When Elon Musk and his team at SpaceX were looking to make their Falcon 9 rocket even more powerful, they came up with a creative idea – keep the propellant at super-cold temperatures to shrink its size, allowing them to pack more of it into the tanks.

“But the approach comes with a major risk, according to some safety experts. At those extreme temperatures, the propellant would need to be loaded just before takeoff – while astronauts are aboard.  An accident, or a spark, during this maneuver, known as ‘load-and-go,’ could set off an explosion.

“The proposal has raised alarms for members of Congress and NASA safety advisers as the agency and SpaceX prepare to launch humans into orbit as early as this year. One watchdog group labeled load-and-go a ‘potential safety risk.’ A NASA advisory group warned in a letter that the method was ‘contrary to booster safety criteria that has been in place for over 50 years.’

“Concerns at NASA over the astronauts’ safety hit a high point when, in September 2016, a SpaceX Falcon 9 rocket blew up while it was being fueled ahead of an engine test.  No one was hurt, but the payload, a multimillion-dollar satellite, was lost. The question on many people’s minds at NASA instantly became: What if astronauts were on board?”

But, as some connected to NASA have said, it is a risk-taking organization, though it has lost its swagger because it is dealing with the “scar tissue” of two shuttle disasters that claimed 14 lives.

Davenport:

“In a recent speech, Robert Lightfoot, the former acting NASA administrator, lamented in candid terms how the agency, with society as a whole, has become too risk-averse. He charged the agency with recapturing some of the youthful swagger that sent men to the moon during the Apollo era.

“ ‘I worry, to be perfectly honest, if we would have ever launched Apollo in our environment here today,’ he said during a speech at the Space Symposium last month, ‘if Buzz [Aldrin] and Neil [Armstrong] would have ever been able to go to the moon in the risk environment we have today.’”

*Musk and SpaceX did successfully launch a Falcon 9 today with a Bangladeshi telecommunications satellite payload.

Finally:

“Before the very first shuttle flight, NASA estimated that the chance of death was between 1 in 500 and 1 in 5,000.  Later, after the agency had compiled data from shuttle flights, it went back and came up with a very different number.

“The chance of death was actually 1 in 12.”

This week NASA launched a spacecraft to land on Mars and explore the mysteries of the red planet. A robotic geologist armed with a hammer and quake monitor was launched Saturday from California rather than Florida’s Cape Canaveral, the first interplanetary mission ever to depart from the U.S. West Coast.

The spacecraft will take more than six months to get to Mars and start its unprecedented geological excavations, traveling 300 million miles to get there.

InSight will dig deeper into Mars than ever before – nearly 16 feet – to take the planet’s temperature.

The $1 billion mission involves scientists from the U.S., France, Germany and elsewhere in Europe.

---

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

God bless America.

---

Gold $1318
Oil $70.51

Returns for the week 5/7-5/11

Dow Jones  +2.3%  [24831]
S&P 500  +2.4%  [2727]
S&P MidCap  +2.2%
Russell 2000  +2.6%
Nasdaq  +2.7%  [7402]

Returns for the period 1/1/18-5/11/18

Dow Jones  +0.5%
S&P 500  +2.0%
S&P MidCap  +2.0%
Russell 2000  +4.6%
Nasdaq  +7.2%

Bulls 43.1
Bears
20.6 [the prior week, which was unavailable last time, had a split of 43.6 / 20.8]

Have a great week.

Brian Trumbore

*Next WIR will be abbreviated...not sure where I’m posting from...and it could be delayed until early Sat. a.m.