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Week in Review

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06/29/2019

For the week 6/24-6/28

[Posted 10:45 PM ET, Friday]

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

Edition 1,055

I am literally posting this column as President Trump and Chinese President Xi Jinping are about to sit down for their working lunch and chat over the trade issue, at least as far as I can tell from the schedule, Osaka being 13 hours ahead, and I haven’t seen any presidential tweets as yet, so I’ll unpack it all next time.  We always need a few days, and more tweets, anyway, before we can begin to, maybe, figure out what the latest positions and stances are...on both sides.

Here’s what we do know from observing President Trump just the past two weeks.  As with so many other issues in the 2 ½ years of his presidency, Trump flip-flopped on Immigration and Customs Enforcement raids, Mexican tariffs and Iran.  In all three cases he went from hard-line to employing a soft touch.  Personally, I called him out on stupidly telegraphing the threat of deportation raids, which he then pulled back on last Saturday at the urging of Nancy Pelosi.  And we’ll see how Iran acts the next few weeks.  But this endless game of brinkmanship will at some point backfire.

For now, as European Commission President Jean-Claude Juncker told reporters: “Since Mr. Trump is U.S. president, G20 meetings change more and more.  But the G20 is not just about Trump’s moods.  Others also have sensitivities,” Juncker drawing attention to the U.S.-China trade tensions that were contributing to a global economic slowdown.

And there was Trump today, sitting with Russian President Vladimir Putin. Asked by a reporter whether he would raise the issue of election meddling during their meeting, held on the sidelines of the G20, Trump said: “Yes, of course I will,” drawing a laugh from Putin.

Trump, smirking, then turned to Putin to give the directive twice, as he pointed a finger at the Russian leader.

“Don’t meddle in the election, please,” Trump said.

The president then pointed to the press in an attempt to further lighten the mood.  “Get rid of them.  Fake news is a great term, isn’t it?  You don’t have this problem in Russia but we do,” Trump said. 

To which Putin responded, in English: “We also have. It’s the same.”

Of course in Russia, if Putin really does have a problem with a journalist, or dissident, he has them killed (see Boris Nemtsov, regarding the latter), or at best jailed for a long, long time.

I’ve been arguing that June was a critical month for President Trump. But June is essentially over and the month gets an ‘Incomplete,’ owing to the China trade issue and Iran.

But the following is kind of along the theme I’ve been espousing the past four weeks in particular.

Thomas L. Friedman / New York Times

“If you’re keeping score at home on the Trump foreign policy, let me try to put it in a nutshell: The president has engaged America in a grand struggle to reshape the modern behavior of two of the world’s oldest civilizations – Persia and China – at the same time.

“Pressing both to change is not crazy.  What’s crazy is the decision to undertake such a huge endeavor without tightly defined goals, without allies to achieve those goals, without a strong and coherent national security team and without a plan on how to sync up all of President Trump’s competing foreign policy objectives.

“After all, Trump is unilaterally breaking the 2015 denuclearization deal with Iran’s dictator while trying to entice North Korea’s dictator, Kim Jong Un, into a denuclearization deal that he’s supposed to trust the U.S. president will honor.  Trump is sanctioning China on trade while trying to enlist its help to denuclearize North Korea.  Trump is imposing steel and aluminum tariffs on America’s European allies while needing their help to confront China on trade and Iran on nukes....

“But we are where we are, and I will give Trump credit for one thing: He has imposed real pain on Iran – virtually choking off all of its oil production through sanctions – and on China – with $250 billion on tariffs on its exports to the U.S. and a total ban on products from its biggest telecom equipment company, Huawei.  In short, Trump has created real leverage for transactional or transformational deals with both countries.

“A president who acts just a little crazy can be good at times. Who else would have squeezed Beijing and Tehran this hard and at once?  But a president who acts a lot crazy – who creates pain without clear goals, who always insists on being seen to win and the other guy being seen to lose, with no compromise escape route – is not good.

“Does Trump want regime change in Iran or just a change of behavior?  Does he want to shrink the trade deficit with China or just get fair access for our companies?  It’s not clear to me and doesn’t seem clear to him....

“This is no ordinary moment. This is a big one, folks.  What’s at stake with Trump and China is what kind of global economy we’re going to have going forward.  What’s at stake with Iran is what kind of global nuclear nonproliferation regime we’re going to have going forward.

“The stakes simply could not be bigger, which is why I believe 2019 will be a pivotal year – like 1945 and 1989.  I just hope it ends as well.”

Trump World

--The photo, via the Associated press, of the father and daughter lying face down in the muddy water along the banks of the Rio Grande will be remembered for a long time, like the photo of the little girl whose clothes were burned off in a napalm attack in Vietnam, and the photo of a bleeding Syrian child pulled from the rubble in Aleppo after an airstrike, or a 1993 shot of a starving toddler in the Sudan, a vulture nearby.

Oscar Alberto Martinez Ramirez died with his 23-month-old daughter, Valeria, as they tried to cross from Mexico to the United States, the image representing the dangers migrants face on their passage.  Martinez, Valeria and her mother arrived last weekend in the border city of Matamoros, Mexico, hoping to apply for asylum in the U.S.

But the international bridge was closed until Monday, officials told them, and as they walked along the banks of the river, the water appeared manageable.  The three of them began to swim across, with Valeria on her father’s back, tucked under his shirt.  The mother followed behind, on the back of a family friend, she later told government officials.

The trek went tragically wrong, the mother, seeing her husband and daughter struggling ahead, turning back to the Mexico side.  Father and daughter then sank into the river and were swept away.

One result of the press coverage that then ensued was that the pressure was then on the Democratic-controlled House to send President Trump a bipartisan $4.6 billion Senate-drafted measure to care for migrant refugees detained at the southern border.

The bill passed on a bipartisan 305 to 102 vote, capping a skirmish in which die-hard House liberals came out on the losing end in a battle with the White House, the GOP-controlled Senate and Democratic moderates, led by Speaker Nancy Pelosi.

Pelosi abandoned a plan to require more stringent care requirements for detained migrant families and children.

House progressives were furious Pelosi caved to the GOP, but any bill containing their demands didn’t have a chance at becoming law.  Changing asylum laws would have to wait.

Pelosi said in a statement: “In order to get resources to the children fastest, we will reluctantly pass the Senate bill.”

The legislation contains more than $1 billion to shelter and feed migrants detained by the border patrol and almost $3 billion to care for unaccompanied migrant children who are turned over to the Department of Health and Human Services.

--Related to the above, the acting head of U.S. Customs and Border Protection, John Sanders, announced his resignation amid the growing outcry over reports that more than 300 children were held in a remote Border Patrol station in unsanitary conditions.

--A divided Supreme Court halted the Trump administration’s plans to ask U.S. residents on the 2020 census whether they are citizens.  Chief Justice John Roberts, in a strongly worded opinion, said Commerce Secretary Wilbur ross hadn’t explained his real reasons for adding the citizenship question.

“If judicial review is to be more than an empty ritual, it must demand something better than the explanation offered for the action taken in this case,” Roberts wrote. 

In the 5-4 decision, Roberts was joined by the court’s four liberal justices – Ginsburg, Breyer, Kagan and Sotomayor.

Trump then tweeted:

“Seems totally ridiculous that our government, and indeed Country, cannot ask a basic question of Citizenship in a very expensive, detailed and important Census, in this case for 2020.  I have asked the lawyers if they can delay the Census, no matter how long, until the....

“....United States Supreme Court is given additional information from which it can make a final and decisive decision on this very critical matter. Can anyone really believe that as a great Country, we are not able to ask whether or not someone is a Citizen.  Only in America!”

Commerce Secretary Ross has said that including a citizenship question on the decennial survey that counts the entire U.S. population would help the Justice Department in its efforts to comply with the Voting Rights Act, which Chief Justice Roberts wrote “seems to have been contrived.”

--Former Special Counsel Robert Mueller will testify in front of the House Judiciary Committee and the House Intelligence Committee in mid-July.

--Former Secretary of State Rex Tillerson, in testimony he gave to the House Foreign Affairs Committee in May and just released Thursday, described a string of secret meetings, hidden dinners and undisclosed conversations with world leaders conducted by presidential son-in-law Jared Kushner – and concealed from America’s top diplomat.

In under-oath testimony, Tillerson described one embarrassing episode, where he didn’t even know his Mexican counterpart was in Washington until he walked into a restaurant and discovered Luis Videgaray dining with Kushner.

In his testimony, Tillerson was asked, “When you first came on board, what was Mr. Kushner’s role described to you as?”

“No one really described what he was going to be doing,” Tillerson responded.

“It’s the president’s prerogative” to have special advisors, Tillerson testified.  “But...it presents special challenges to everyone if others who are trying to effect foreign policy with a country and move the agenda forward are not fully aware of other conversations that are going on that might be causing your counter-party in that country to take certain actions or behave a certain way, and you’re not clear as to why, why did they do that.”

--President Trump said of the latest accusation of sexual violence by E. Jean Carroll, a longtime advice columnist for Elle magazine, that she was “totally lying.”  “I’ll say it with great respect: Number one, she’s not my type.  Number two, it never happened.”

--Trump Tweets:

“At the request of Democrats, I have delayed the Illegal Immigration Removal Process (Deportation) for two weeks to see if the Democrats and Republicans can get together and work out a solution to the Asylum and Loophole problems at the Southern Border.  If not, Deportations start!”

“I am in Japan at the G-20, representing our Country well, but I heard it was not a good day for Sleepy Joe or Crazy Bernie.  One is exhausted, the other is nuts – so what’s the big deal?”

“The Stock Market went up massively from the day after I won the Election, all the way up to the day that I took office, because of the enthusiasm for the fact that I was going to be President.  That big Stock Market increase must be credited to me.  If Hillary won – a Big Crash!”

“Too bad the Dems in Congress won’t do anything at all about Border Security.  They want Open Borders, which means crime. But we are getting it done, including building the Wall!  More people than ever before are coming because the USA Economy is so good, the best in history.”

“China gets 91% of its Oil from the Straight (sic), Japan 62%, & many other countries likewise.  So why are we protecting the shipping lanes for other countries (many years) for zero compensation.  All of these countries should be protecting their own ships on what has always been...

“...a dangerous journey.  We don’t even need to be there in that the U.S. has just become (by far) the largest producer of Energy anywhere in the world!  The U.S. request for Iran is very simple – No Nuclear Weapons and No Further Sponsoring of Terror!”

“Women’s soccer player, @mpinoe, just stated that she is ‘not going to the F...ing White House if we win.’  Other than the NBA, which now refuses to call owners, owners (please explain that I just got Criminal Justice Reform passed, Black unemployment is at its lowest level...

“...in our Country’s history, and the poverty index is also best number EVER), leagues and teams love coming to the White House.  I am a big fan of the American Team, and Women’s Soccer, but Megan should WIN first before she TALKS! Finish the job!  We haven’t yet...

“...invited Megan or the team, but I am now inviting the TEAM, win or lose. Megan should never disrespect our Country, the White House, or our Flag, especially since so much has been done for her & the team. Be proud of the Flag that you wear. The USA is doing GREAT!”

[Megan Rapinoe scored the two U.S. goals today in a 2-1 win over France, sending the U.S. into the semifinals.]

“Stock Market is on track to have the best June in over 50 years! Thank you Mr. President!”

Wall Street and China Trade War

While the major indexes fell on Wall Street this week, the month was the best June for the S&P 500 since 1955, +6.9%, after May’s -6.6% swoon.  It was the best June for the Dow Jones since 1938.  Credit goes to the Federal Reserve, for the most part, for its dovish stance on interest rates, as much as President Trump likes to rip the chairman. 

We also had lots of economic data this week.  Tuesday, the S&P CoreLogic Case-Shiller home price index for April (remember, this one has a lag) came in unchanged, month-over-month, for the 20-city index, and up only 2.5% year-over-year, a seven-year low.  Seattle, which had been among the best markets, was 20th in April, with home prices unchanged yoy.  Las Vegas was first, 7.1% (but this market peaked in August, up 13.9%).

We also had data on May new-home sales, which came in at a disappointing annualized level of 626,000, down 7.8% and well below expectations.

Durable goods (big ticket items) were down 1.3% in May, up 0.3% ex-transportation, the headline number worse than forecast.

Today, we had data on May personal consumption, 0.5%, above estimates, and consumption, 0.4%, in line.  The Federal Reserve’s closely followed personal consumption expenditures index was 0.2% on both headline and core (ex-food and energy), 1.5% and 1.6% year-over-year, respectively.,

And today we had a key reading on Chicago manufacturing for June and this was a major disappointment, 49.7 (50 the dividing line between growth and contraction), far below expectations of 54.0 and the first sub-50 reading in 2 ½ years.

Lastly, we had our final reading on GDP for the first quarter, 3.1%, unchanged from the prior look, though personal consumption was revised down to a not so good 0.9% annual rate (consumer spending accounting for more than 2/3s of U.S. economic output), vs. 2.5% in the fourth quarter.

Add it all up and suddenly the Atlanta Fed’s GDPNow barometer for the second quarter is at only 1.5%.  We will receive our first official look at Q2 GDP end of July, with a lot more data before then, such as next week, when we get June ISM readings on manufacturing and the service sector, as well as June’s critical jobs report.

Then there is the aforementioned Fed, or rather President Trump’s treatment of Fed Chairman Jerome Powell.  In an interview with Fox Business Network, Trump criticized Powell again, comparing him unfavorably with European Central Bank President Mario Draghi, expressing further concern that Fed policy is hurting the U.S. economy allowing the dollar to get too strong.

“We should have Draghi instead of our Fed person,” Trump said.  Mr. Powell “is not doing a good job,” adding, “He has to lower interest rates for us to compete with China.”

The Fed voted to hold the line on rates last week, but most market experts now expect the Fed to cut interest rates at least once in the months ahead.

Trump then said, “He’s trying to prove how tough he is because he’s not going to get pushed around,” Trump said Wednesday.  “Here’s a guy, nobody ever heard of him before and now, I made him, and he wants to show how tough he is.  OK.  Let him show how tough he is.”

Trump added: “I have the right to demote him, I have the right to fire him,” though Fed governors can only be removed “for cause.”  Could Powell be demoted, though?  No one seems to know the definitive answer to that one.

Trump tweeted on Monday:

“Despite a Federal Reserve that doesn’t know what it is doing...we are on course to have one of the best Months of June in U.S. history...

“...Think of what it could have been if the Fed had gotten it right. Thousands of points higher on the Dow, and GDP in the 4’s or even 5’s.  Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us.  Blew it!”

For his part, Powell caused a market dip on Tuesday when he said that while many Fed officials find the case for a somewhat more accommodative policy has strengthened, “we are mindful that monetary policy should not overreact to any individual data point or short-term swing sentiment.”

Powell also reiterated that the Fed is “insulated from short-term political pressures,” and that its policymakers are wrestling with whether to cut interest rates as President Trump has demanded.

“The Fed is insulated from short-term political pressures – what is often referred to as our ‘independence,’” Powell said in a speech at the Council on Foreign Relations in New York.

But he said he and his colleagues are “grappling” with whether current risks to the economy warrant a rate cut.

Separately Tuesday, St. Louis Fed President James Bullard, a dove on interest-rate policy, told Bloomberg Television he does not think a cut of half a percentage point is warranted when the Federal Open Market Committee meets again in July, even though he had pushed to lower rates last week.

Dallas Fed Bank President Robert Kaplan, a non-voting member this year, said today that he is not backing interest rate cuts until he sees a clearer picture of the economy.  “I don’t want to be cutting rates to do fine-tuning.  I’d rather be adjusting policy if I thought there was some material deterioration,” Kaplan said.

Meanwhile, as of July 1, the United States will have experienced the longest economic expansion on record, ten years and running.

On the trade front...as we await tonight’s headlines, President Trump arrived in Osaka for the G20, saying there would be “very big” trade deals to announce with India and Japan, after trashing both of them on his flight over.  Trump had tweeted earlier that Indian tariffs recently announced against the U.S. were “unacceptable” and “must be withdrawn.”

But sitting next to Indian Prime Minister Narendra Modi on Friday, Trump said, “I think we’ll continue to get along with India.  I think we’re going to have some very big things to announce, very big trade deals.”

All India was doing was responding to its removal from a group of developing nations eligible for preferential tariffs on goods imported to the U.S., so New Delhi retaliated.

The biggie though, of course, was the U.S.-China trade war.  We heard prior to the meeting between Trump and Xi that the Chinese president would be presenting a list of demands, including the removal of the ban on telecommunications giant Huawei Technologies Co. Ltd., according to the Wall Street Journal, citing Chinese officials with knowledge of Xi’s plan.  Beijing also wants the U.S. to lift all punitive tariffs and drop efforts to get China to buy even more U.S. exports than Beijing said it would when the two leaders last met in December.

Monday, Vice-Minister of Commerce Wang Shouwen, a top deputy on the negotiating team, laid out China’s position ahead of the talks, suggesting that Beijing should not be the only side to make concessions.

“We should meet each other halfway, which means that both sides will need to compromise and make concessions, and not just one side,” Wang said in Beijing,

But it would seem as if we are headed to a truce of several months while talks resume, averting the next round of tariffs on an additional $300bn of Chinese imports, which if applied would extend punitive tariffs to virtually all the country’s shipments to the U.S.  According to reports, the delay in additional tariffs was Xi’s price for meeting in Osaka.

Trump had reiterated on Wednesday that he was prepared to impose additional tariffs on China if the talks failed, but suggested the additional duties could start at 10, not 25 percent.

Just a reminder...currently, the administration has imposed 25 percent tariffs on $250bn worth of Chinese goods.

Europe and Asia

With the quarter winding up, next week we’ll begin to see a slew of month- and quarter-end data, but this week it was virtually non-existent for both Europe and Asia.

There was a flash reading on June inflation for the EA19, 1.2%, same as May, and vs. 2.0% a year ago.  Ex-food and energy, the core figure was also 1.2%, unchanged year-over-year.  So once again, nothing that will stop the European Central Bank from taking a further accommodative stance in the coming months, as offered up by ECB President Mario Draghi the other week.

Brexit: Boris Johnson, the decided favorite to become Britain’s next prime minister, said the chances of Britain leaving the European Union without a deal are “a million-to-one” even as he repeated his promise to leave the bloc without a deal by the end of October.

The race between himself and foreign minister Jeremy Hunt to replace Prime Minister Theresa May heated up, Hunt stepping up his criticism of Johnson.

But the EU has maintained steadfastly, and again this week, it is not renegotiating the deal it struck with Theresa May, which the British parliament then rejected three times.  Parliament, though, is opposed to a no-deal, hard Brexit.  And whoever wins between Johnson and Hunt will have just three months to convince the EU, and parliament, to perhaps tweak the deal to all sides’ satisfaction, this while the one critical element of Brexit, the issue of the Irish border, is the likely stumbling block.

Johnson keeps saying the chances of leaving without an agreement are remote because there is a new mood on both the continent and in parliament to pass a revised deal, but this is just a lie.  He also has no clue how he’d offer to change the deal.

Then today, Johnson said he was preparing an emergency budget including aggressive tax cuts, and a “Trump-style” moratorium on all new regulations, if there is a no-deal Brexit.

The budget is usually put forward in October or November, but assuming he’s elected, Johnson wants to push it up to September to ensure the economy is cranking prior to October 31.

As for Jeremy Hunt, he also wants Brexit to happen at the end of October but would extend the deadline if a deal was in sight.  Hunt’s point is if Britain just plows ahead with a no-deal exit, it would be handing the next general election to Labour leader Jeremy Corbyn.  Parliament would stop the effort to exit in such a wild fashion, Corbyn will become prime minister in a snap election, and there will be no Brexit at all, Hunt says.

Needless to say, Britain’s business leaders are scared to death of exiting the EU without a deal, warning it would cripple the economy.  For starters, the UK auto industry said a no-deal Brexit would be a “knockout blow.”

As for Jeremy Corbyn, he has said the Labour Party would not allow a new government to preside over a no-deal.

Johnson, in turn, has said he wouldn’t rule out suspending parliament until the Brexit deadline to prevent lawmakers from blocking a no-deal withdrawal from the bloc.  Can you imagine if this scenario played out? 

Finally, Mr. Johnson garnered some headlines last weekend because of a domestic dispute with his live-in girlfriend, Carrie Symonds, with police called to their address in London when a neighbor said he was worried for the safety of both after hearing loud shouting.

Johnson said it was “simply unfair” to involve “loved ones” in the debate.  He is in the midst of divorcing his second wife.  Supporters of Johnson said the neighbor who called the incident in to police was politically motivated.

Street Bytes

--As noted above, June was outstanding, up 6.9% in June on the S&P 500, best June since 1955, coming after May’s fall.  The S&P also had its best first half since 1997, +17.3%.

On the week, though, stocks fell for the first time in four weeks, the Dow Jones  down 0.5% to 26599, while the S&P fell 0.3% to 2941, 13 points shy of its record high, and Nasdaq lost 0.3%.  [But the Russell 2000 rose 1.1% on the week.]

Before you know it, corporate earnings for the second quarter will be rolling in.

--U.S. Treasury Yields

6-mo. 2.09%  2-yr. 1.75%  10-yr. 2.01%  30-yr. 2.53%        

--The Federal Reserve announced the results of its annual “stress tests” on the financial strength of the 18 largest banks in the United States, revealing that each had enough capital to justify paying some of it out to shareholders, i.e., increased dividends and/or share repurchases, though it is limiting the amount Credit Suisse can return to investors because of how it measures potential losses.

The stress tests examine how the largest banks would fare in a severe economic downturn or sudden shock to the global financial markets; i.e., the need to have enough capital to weather a repeat of the 2008 financial crisis.

--Crude oil is trading on three things these days: inventories, OPEC and Iran.  Regarding the first factor, on Wednesday the Energy Information Administration reported inventories declined by 12.8 million barrels to 469.9 million barrels in the week ended June 21, far greater than what had been projected, though inventories are currently about 5% above the five-year average for this time of year, according to the EIA’s data.

As for OPEC, the cartel is getting together next week in Vienna where it is assumed OPEC and its allies, including Russia, will elect to roll over a deal on cutting supplies, while discussing deepening the curbs that have been in place since Jan. 1.

It was then that the deal was struck to curb output by 1.2 million barrels per day, which expires June 30.  But it hasn’t worked as well as intended because of increases in production from the likes of the U.S. and Canada that have offset the cuts.

--Gold rallied to a six-year high on Tuesday, $1438, on the back of a weakening U.S. dollar and heightened geopolitical tensions, before closing the week at $1412.  The precious metal often moves inversely with the value of the dollar, because a cheaper dollar makes gold more attractive to investors who buy using other currencies.  The dollar fell after the Federal Reserve signaled it would cut interest rates.

--The Federal Aviation Administration (FAA) uncovered a possible new flaw in Boeing’s troubled 737 MAX aircraft that is likely to push back test flights, the FAA saying it identified the “potential risk” during simulator tests, but did not reveal any details.

The story first leaked after the market closed on Wednesday and I glanced at the share price in after-hours trading, $374 at 4:50 p.m., thinking, ‘why isn’t it falling on this significant news?’

Well it fell to $347 in pre-market trading Thursday, before finishing the week at $363.

In a tweet, the  FAA said: “On the most recent issue, the FAA’s process is designed to discover and highlight potential risks.  The FAA recently found a potential risk that Boeing must mitigate.”

Last month, the FAA indicated that approval of Boeing’s software fix to the 737 MAX could come in late June, which would have allowed for test flights in early July.

Reuters, which first reported the new issue, said during an FAA pilot simulation in which the anti-stall prevention system was activated, it took longer than expected to recover the aircraft.

Other sources said the problem was linked to the aircraft’s computing power and whether the processor lacked enough capacity to keep up.

If regulators are unsatisfied with the fix, the microprocessor unit would have to be replaced and the grounding could stretch on months longer.

A week ago I wrote of Captain Chesley Sullenberger’s Congressional testimony on the 737 MAX wherein he said that the crashes of the Ethiopian and Lion Air planes “are demonstrable evidence that our current system of design and certification has failed us.”

Well, Thursday, United and Southwest Airlines extended flight cancellations related to the grounding of the aircraft as the timeline for its return remains unclear.  United pulled the plane from its schedule through Sept. 3, while Southwest, which had already removed the aircraft from its schedule through early September, pushed its date back to Oct. 1.

Southwest, with more 737 MAX jets in its fleet than United and American, said it’s been canceling about 150 flights per day.  United said it will be canceling 60 a day in August.

--Apple Inc. suffered a big blow with the news that chief designer, Jony Ive, was leaving to start his own company, LoveFrom.  Ive, working with co-founder Steve Jobs, designed 1998’s iMac, which kick-started a prolific and profitable two decades unlike any other in Silicon Valley history.

Ive then designed the revolutionary iPod and iPhone, and was there with the Apple Watch and AirPods following Jobs’ death.

Apple CEO Tim Cook said: “Jony is one of a kind. The work on the original iMac was sort of the point at which people began to pay attention to Apple again on something other than how badly economically the company was doing.”

Today Apple is financially secure, but Ive’s departure raises questions about its future.  By Apple’s outsized standards, the design team is small, just a few dozen people out of an organization that now employs 132,000.  But the team wields tremendous influence, and Ive’s contributions are found in literally every product the company has shipped the past 20 years.

Separately, Apple is shifting manufacturing of its new Mac Pro computer to China from the U.S., the Journal reported today, citing people familiar with the matter.  Apple has tapped contractor Quanta Computer Inc. to manufacture the $6,000 desktop and is ramping up production at a factory near Shanghai.

“Like all of our products, the new Mac Pro is designed and engineered in California and includes components from several countries including the United States,” an Apple spokesman said.  “Final assembly is only one part of the manufacturing process.”

Last week, Apple asked its major suppliers to assess the cost implications of moving 15%-30% of their production capacity from China to Southeast Asia as it prepares for a restructuring of its supply chain, according to a Nikkei Asian Review report.

--FedEx Corp. beat Wall Street estimates for its quarterly profit on Tuesday, but the company warned its fiscal 2020 performance would be hurt by trade uncertainty and non-renewal of a contract with Amazon, sending the shares down 2%.

FedEx gets about a third of its revenue from overseas and it’s in the crosshairs of the Chinese government after two packages destined for Huawei addresses in Asia were diverted to the United States.  FedEx said the packages were “misrouted in error.”

Earlier, FedEx decided not to renew its contract with Amazon for U.S. cargo delivery through FedEx Express, the unit that delivers packages on planes.  But the company said Amazon represented less than 1.3% of its total revenue in the last calendar year.

Adjusted net income fell to $1.32 billion, or $5.01 per share, for the fourth-quarter ended May 31, better than forecast, while revenue rose to $17.8 billion from $17.3bn, basically in line.

Separately, FedEx announced it was suing the U.S. government, saying it should not be held liable if it inadvertently shipped products that violated a Trump administration ban on exports to some Chinese companies, referring to the Huawei episode.  There have been fears China would retaliate by blacklisting FedEx.

In court filings, FedEx said it should not be expected to enforce the export ban, and could not reasonably be held liable for shipping products that it did not know about.  Export restriction rules “essentially deputize FedEx to police the contents of the millions of packages it ships daily even though doing so is a virtually impossible task, logistically, economically, and in many cases, legally,” it said.

In the latest incident, PCMag said its writer in Britain had attempted to send a Huawei P30 handset to a colleague in the U.S.  FedEx returned the phone and told the sender that it could not deliver the package because of a “U.S. government issue” with Huawei and the Chinese government, PCMag reported.  FedEx responded by saying publicly that it would deliver all products made by Huawei to addresses other than those of Huawei and affiliates placed on the U.S. national security blacklist.

On Sunday, Huawei tweeted it was not within FedEx’s rights to prevent the delivery and said the courier had a “vendetta.”

--Bloomberg reported that several Huawei Technologies Co. employees have collaborated on at least 10 research projects with Chinese armed forces personnel over the past decade.  Huawei workers teamed with members of various organs of China’s People’s Liberation Army (PLA) in projects spanning artificial intelligence to radio communications, Bloomberg said.

A Huawei spokesman told Bloomberg, “Huawei does not have any collaboration or partnerships with the PLA-affiliated institutions.  Huawei only develops and produces communications products that conform to civil standards worldwide, and does not customize products for the military.”

Meanwhile, some of the large U.S. tech companies that the Trump administration has been targeting as part of its ban on exports to Huawei, such as Qualcomm Inc. and Micron Technology, are finding ways to resume some shipments to the blacklisted tech giant.

Micron, one of the world’s largest makers of memory chips, said it had determined some shipments were in compliance with U.S. law, while Qualcomm, the leading supplier of wireless chips, resumed some shipments of radio-frequency components to Huawei.  Intel is also shipping some of its products, according to the Wall Street Journal.

The U.S. companies are looking to fulfill contracts, while remaining compliant with Commerce Department restrictions.

--Nike Inc. posted higher sales in the latest quarter, boosted by strong demand in both the U.S. and China, executives saying the trade dispute hadn’t hurt the sneaker giant’s business.

CEO Mark Parker said in a conference call: “We have not seen any impact on our business to date, and we continue to see strong momentum.”

Nike produces about 25% of its global apparel and footwear in China.  But the company can source from factories in other countries to mitigate the impact of any potential tariffs for the U.S. market.

For the company’s fourth quarter, total sales rose 4% to $10.18 billion.  Revenue in the North American market, which accounts for the majority of total sales, rose 7% to $4.17 billion. Sales in China climbed 16% to $1.7 billion.

But the company fell short of the Street’s earnings expectations for the quarter, though for the full year, Nike earned $4 billion, on total revenue of $39.1 billion, up 11% over the prior year.

--Elon Musk is at it again.  Musk wrote in an internal email that was quickly “leaked” that Tesla Inc. could be on the verge of a quarterly record for vehicle deliveries, though the electric carmaker would need to go “all out” in the last few days to achieve the goal.

“There is a lot of speculation regarding our vehicle deliveries this quarter,” Musk told employees in the email Tuesday.  “The reality is that we are on track to set an all-time record, but it will be very close.  However, if we go all out, we can definitely do it!”

The company has forecast it will deliver 90,000 to 100,000 cars in the second quarter after handing over just 63,000 vehicles to customers in the first three months of the year.

So as is typical, Tesla shares rose on the news, $9, before closing down $0.50 on the day, which shows you just how much sentiment has changed regarding Tesla’s outlook.  From an all-time high of $387 to Friday’s close of $223.50.

--Maureen Callahan / New York Post...on Facebook....

“Just when it seems Facebook can’t get more sinister, more Orwellian or more mercenary, it does – announcing its own branded global cryptocurrency.

“Does this strike anyone else as terrifying?  A company that has operated with impunity, under zero federal regulations, whose CEO, Mark Zuckerberg, has been called – in a hapless act of political theater – to explain his shadowy practices before Congress, yet has never offered specific correctives to any of his outfit’s failings or overreaches or unintended consequences, makes its next big move this?

“As declarations go, it’s astonishing.  Zuckerberg is out for nothing less than dominion over us all.

“If you’re one of the site’s 2.6 billion users, Facebook’s operators know where you are all the time, whether you’re logged on or not.  They know what you’re buying, even if you’re in a brick-and-mortar shop. They scan photos you upload for biometrics.  They mine your data and sell it to advertisers, but they won’t say how much of it, only that it’s a small amount, promise.

“Facebook’s not the product.  We are.

“Fake news, authoritarian propaganda, abuse by genocidal forces or ruthless dictators, Russian interference in our most recent presidential election – whoops, says Facebook.

“They do, after all, move fast and break things.

“Facebook outsources the monitoring and taking down of dark materials – murders, child pornography and all manner of depravity – to contractors, and as The Verge reported last week, employees at a company called Cognizant were overworked, underpaid and ill-equipped to view such traumatizing content all day every day, with even their bathroom breaks surveilled and limited.

“Earlier this month, Business Insider reported that 68 percent of shareholders want Zuckerberg out as chairman. But that doesn’t matter, because Zuckerberg holds so much controlling stock that he simply ignored the vote.

“And that is everything we need to know....

“(As for its new project, Libra), guess who Facebook is going after...?  Poor people in failed states who have no access to traditional forms of banking, let alone wealth building.  Surely the impetus here is humanitarian.

“As to what institutions are going to back Facebook’s currency – which was created in secret, and which will eventually exist in the physical world as an alternative to U.S. currency, accessed through its own ATMs – that remains unclear.

“What is undeniable is Zuckerberg’s ambition.  His power is presidential, if not more so, because it remains untrammeled, unregulated and borderless.  If there was ever a moment to break up Facebook, as co-founder Chris Hughes and Sen. Elizabeth Warren have called for, it is now.”

--Ford Motor is disclosing more details for its massive cuts in its European operations, some 12,000 jobs eliminated and six plants by the end of 2020, including a previously announced facility in South Wales, as well as a transmission plant in France, and an assembly plant in St. Petersburg, Russia.

At the same time, Ford said it is freshening and expanding its vehicle line-up in Europe and will introduce at least three new models in the next five years, including a Mustang-inspired fully-electric performance utility.

--Deutsche Bank AG is looking to cut between 15,000 and 20,000 jobs, or more than one in six full-time positions globally, according to the Wall Street Journal today, with senior executives looking to accelerate DB’s downsizing in another pullback from its global ambitions.  Should the bank carry through with such deep cuts they would take place over more than a year and spread across regions and businesses, sources told the Journal.

Aside from troubles with its core businesses, DB faces a wide-ranging probe by U.S. law enforcement into money laundering allegations.  Additionally, U.S. House committees have demanded details of the bank’s lending relationship with President Trump and others close to his administration and businesses.

But Deutsche Bank’s U.S. subsidiary did pass the Federal Reserve’s stress tests.  Last year, it was the only bank subject to the tests to outright fail one leg of the exam, with regulators citing capital deficiencies and poor risk controls.

--AbbVie Inc. agreed to buy Allergan PLC for about $63 billion in a bet by the two drugmakers that a combination will deliver new sources of growth, each struggling to do so on its own.

The companies’ portfolios have some overlap in treatments for brain, women’s health, stomach and other disorders; AbbVie looking to Allergan’s nearly $16 billion in yearly revenue as a source of cash for further acquisitions and new products.

Shares in AbbVie fell about 8% following the news, while Allergan gained 28% over last Friday’s close.

--Bill Gates admitted twice in recent interviews that Microsoft’s failure to become Apple’s chief iOS rival was his “greatest mistake,” losing out to Google in the process, which launched Android to rival Apple’s iOS.

“In the software world, particularly for platforms, these are winner-take-all markets,” Gates said in an interview with venture capital firm Village Global.  “So the greatest mistake ever is whatever mismanagement I engaged in that caused Microsoft not to be what Android is.  Android is the standard non-Apple phone platform. ...There’s room for exactly one non-Apple operating system.”

Microsoft was the leader in the computer industry, but Apple took over the smartphone era when it debuted its iPhone in 2007, with Google following with Android in 2008.  Windows Mobile, launched in 2000, then quickly fell behind Apple and Google.

Gates told the Economic Club in Washington, D.C., that the antitrust trial it faced at the time was a major distraction.  Plus the company failed to assign staff to work on mobile.

“Our other assets like Windows and Office are still very strong, so we are a leading company,” Gates said in the Village Global interview.  “If we had gotten that one right, we would be the leading company, but oh well.”

In 2017, Gates admitted another regret...that Control-Alt-Delete wasn’t just a single key.

--Emergency service numbers for the Netherlands were knocked out for about four hours on Monday, the government launching an inquiry into telecom company KPN which is responsible for the network that connects national police, ambulance and fire department emergency numbers.  KPN said they did not believe it was a security breach.

The thing is three KPN backup systems failed.  Thankfully, there were no reports of serious mishaps as a result of the outage, but picture, at one point, emails were going out listing an alternate phone number for emergency services that turned to be a newspaper tip line.

KPN, which was privatized in the 1990s, is the country’s largest telecoms group, ahead of subsidiaries of Vodafone and T-Mobile.  It was in a similar outage in 2012 that two people died as a result.

--NBCUniversal made good on its promise to pull its popular sitcom “The Office” from Netflix and offer it on its own streaming service in 2021.  The company announced it has reached a five-year deal to put the series on the new service, which is expected to be launched in 2020.  Netflix has the rights to “The Office” through next year.

“The Office,” which starred Steve Carell and ran on NBC’s broadcast network from 2005 to 2013, has become one of the most popular offerings on Netflix, along with “Friends,” with Nielsen reporting subscribers streamed 52 million minutes of the 208 episodes in 2018.

NBCUniversal is said to be paying $100 million a year to its studio, Universal Television, for the rights to the show.  According to a CNBC report, Netflix offered $90 million a year.

Foreign Affairs

Iran: Monday, President Trump signed an executive order imposing sanctions on Supreme Leader Ayatollah Ali Khamenei and other senior figures, following last week’s shoot down of a U.S. drone, with Trump calling off a retaliatory air strike minutes before impact.  The president said he decided at the last minute that too many people would die.

So Thursday, Tehran warned it was ready to violate its commitments to the 2015 nuclear deal for the first time.

Iran has said it will accumulate enough low-enriched uranium to breach the 300 kilogram limit set out in the accord unless European countries find a way to help it sidestep U.S. sanctions.  It expected to reach that level Thursday or shortly thereafter.

The leaders of both countries promised they would not back down in a confrontation that has led them to the brink of war.

Wednesday, President Trump said any conflict would be short-lived and would not involve ground troops.

Asked if a war was brewing, Trump said in a Fox television interview: “I hope we don’t, but we’re in a very strong position if something should happen.

“I’m not talking boots on the ground... I’m just saying if something would happen, it wouldn’t last very long.”

Hours earlier, Ayatollah Khamenei said his country would not bow to U.S. pressure.  In his first public comments since sanctions were imposed on him, Khamenei said Iran “would not give up.”

“The graceful Iranian nation has been accused and insulted by the world’s most vicious regime, the U.S., which is a source of wars, conflicts and plunder.  The Iranian nation won’t give up over such insults,” he said in a speech to a crowd in Tehran.

Khamenei added Iran ruled out any negotiations with Washington.  “Iran has been accused and insulted” and “wronged by oppressive sanctions,” Khamenei said, “but not weakened and will remain powerful.”

“It is like you hold a weapon, so the other side does not dare come close,” the ayatollah said, and then the Americans order Iran to drop the weapon “so I can do whatever I want to you.”

Tuesday, Trump had tweeted: “Iran leadership doesn’t understand the words ‘nice’ or ‘compassion,’ they never have.  Sadly, the thing they do understand is Strength and Power, and the USA is by far the most powerful Military Force in the world.”

Iranian President Hassan Rouhani described the White House as “mentally retarded,” an insult Iran has used in the past about President Trump, adding, “Tehran’s strategic patience does not mean we have fear.”

Iran says there is no point negotiating with Washington when it has abandoned a deal that was already reached.

Britain, France and Germany were expected to announce tomorrow the launch of a financial mechanism designed to help European firms trade with Iran without facing U.S. sanctions.  The thought behind the financial vehicle, known as INSTEX, is that Iran would then decide not to breach its nuclear deal commitments.

But under the terms of a 2015 UN Security Council Resolution, 2231, which endorsed the accord, any Iranian violation could trigger the “snap back” of multilateral economic penalties, further escalating tensions.

The president of Iraq, Barhim Salih, warned both the U.S. and its allies on Wednesday that Iraq would not allow its territory to be used to attack the other side.

“We are asking everybody to cool it down,” Salih said in a speech in London.  “Enough is enough.  We cannot afford another war.”

At the G20 today, Trump said of Iran that he was hopeful.

“We have a lot of time – there’s no rush, they can take their time.  There is absolutely no time pressure.  Hopefully in the end it’s going to work out.  If it does, great, if it doesn’t, you’ll be hearing about it.”

---

Last Friday, I wrote of how embarrassing it was that the U.S. lost a Global Hawk reconnaissance drone  to an inferior Iranian missile system, and in Thursday’s Wall Street Journal, Taylor Dinerman wrote:

“The loss of a large Global Hawk reconnaissance drone to an Iranian missile last week should be a wake-up call.  America’s unmanned aerial vehicles are very useful, but they’re also vulnerable.”

Yup, you knew that.  What I didn’t know, as your editor, is that while I knew it wasn’t Iran’s sophisticated S-300 system (via Russia) that shot down the drone, I didn’t know until Dinerman’s piece that the drone was probably taken out by an SA-5, a 1970s Soviet long-range missile.  Good grief.

Editorial / The Economist

“For nearly four years Iran’s path to a nuclear weapon was blocked.  The deal it signed with America and other powers in 2015 limited its nuclear program to civilian uses, such as power-generation, and subjected them to the toughest inspection regime in history.  The experts agreed that Iran was complying and that its nuclear activities were contained.  But then President Donald Trump ditched the nuclear deal and Iran resumed stockpiling low-enriched uranium. It is now poised to breach the 300kg cap set by the agreement.  Iran may hesitate before crossing that line, but it is also threatening to increase the enrichment level of its uranium, bringing it closer to the stuff that goes into a bomb.

“Fortunately, Iran is not about to become a nuclear-weapons power.  Its breakout time is over a year.  But it is once again using its nuclear program to heap pressure on America.  That adds an explosive new element to an already-volatile mix.  America accuses Iran of attacking six ships in the Strait of Hormuz since May.  On June 20th Iran shot down an American spy drone.  America insisted the aircraft was above international waters, not Iran’s, and sent warplanes to strike back.  Ten minutes before they were due to hit targets inside Iran Mr. Trump called them off and contented himself with a cyber-attack instead.

“Neither Mr. Trump, nor America’s allies, nor Iran wants a big new war in the Middle East.  Yet Mr. Trump’s strategy of applying ‘maximum pressure’ on Iran is making the prospect more likely – because each side, issuing ever-wilder threats, could end up misreading the other’s red lines.  The president’s room for maneuver is shrinking.  As Iran turns more belligerent, calls for action will grow, not least from his own party.  Before things escalate out of control, both sides need to begin talking. That is not as unlikely as it sounds.

“Mr. Trump’s Iran strategy is based on the premise that Barack Obama gave too much away too easily when he negotiated the deal in 2015.  Last year the president set out to get better terms by reneging on the agreement and reimposing the sanctions that have crippled Iran’s economy.  This, his advisers argue, will force a weakened Iran to accept a new deal that lasts longer than the old one, most of which expires by 2030.  They also want curbs on Iran’s missile program and an end to its violent meddling in the region.  Mike Pompeo, the secretary of state, sees recent Iranian aggression as a sign that the strategy is working.

“Hard-hitting sanctions brought Iran to the negotiating table in 2015, but they are unlikely to lead to the transformation Mr. Trump wants.  One reason is that he has discredited Hassan Rouhani, Iran’s president and a champion of the nuclear deal.  Hardliners are now calling the shots. Another is that America is acting alone.  In 2015, in a rare moment of international unity, it had the support of its European allies as well as Russia and China.

“Maximum pressure comes with extra risks, to boot.  The mullahs and their Islamic Revolutionary Guard Corps want to prove their mettle by showing that Mr. Trump’s actions have costs – for everyone.  On top of the attacks on ships and drones, Iranian proxies have hit pipelines in Saudi Arabia and are suspected of having struck Iraqi bases hosting American troops....

“Hawks like John Bolton, Mr. Trump’s national security adviser, retort that if Iran wants war, that is what it will get – especially if it shows signs of dashing for a nuclear bomb, which could trigger disastrous proliferation in the Middle East.  But this is the riskiest calculation of all.  Having pulled out of a working deal, America may not win the backing of European allies for strikes. China and Russia would vehemently oppose any action at all.

“Perhaps sanctions or war will cause the regime to crumble. But that is hardly a strategy: Cuba has resisted sanctions for decades.  More probably, a defeated Iran would heed the lesson of nuclear-armed North Korea and redouble its efforts to get a bomb.  Attacking Iran’s nuclear facilities would not destroy its know-how, as even Mr. Bolton admits. If, as is likely, Iran barred international inspectors, its program would move underground, literally and figuratively, making it very hard to stop.

“The alternative to today’s course is talks between America and Iran.  Just now that looks far-fetched.  Iran’s foreign ministry says American sanctions imposed on Ayatollah Ali Khamenei, the supreme leader, and other top officials this week mark ‘the permanent closure of the path of diplomacy.’  Mr. Rouhani has suggested that the White House is ‘mentally handicapped’ – after which Mr. Trump threatened ‘obliteration.’

“But optimists will remember similar clashes between America’s president and Kim Jong Un, North Korea’s despot, before they met in Singapore and ‘fell in love,’ as Mr. Trump put it. When he is not threatening to annihilate the mullahs, Mr. Trump is offering to talk without preconditions and to ‘make Iran great again.’  He does not want the prospect of war in the Middle East looming over his re-election campaign.  Likewise, in Iran the economy is shrinking, prices are rising and people are becoming fed up.   Pressure is growing on Mr. Khamenei to justify his intransigence.  Love could yet bloom....

“As Mr. Trump seems to realize, biting everything off in one go is unrealistic. A new deal cannot solve all the problems posed by Iran or normalize ties with America after decades of enmity.  It may not even lift all of America’s sanctions.  Neither did the first agreement.  But, if done right, a deal would put Iran’s nuclear program back in a box, making it easier to tackle all those other problems without causing a war.”

David Graham / Defense One

“On Friday, after pulling back a strike on targets in Iran – with 10 minutes to go, by his account – President Donald Trump explained his decision on Twitter, saying that an estimated death toll of 150 was ‘not proportionate to shooting down an unmanned drone.’

“On Tuesday, after Iranian President Hassan Rouhani offered a rather Trumpian assessment of Trump and his administration, the president tweeted, ‘Any attack by Iran on anything American will be met with great and overwhelming force.  In some areas, overwhelming will mean obliteration.’

“So which one is it: proportional responses or obliteration for any attack?  Reading the president’s statements, it’s impossible to know what Trump’s Iran policy is – and it’s clear that Trump doesn’t know either.

“Detailed assessments of either approach seem pointless when no policy lasts longer than the life span of a tweet...

“It is tempting to compare this to President Barack Obama’s failed ‘red line’ of chemical-weapons use in Syria, which he did not enforce, but the situations are actually substantially different.  Obama laid out a clear policy and then found that he couldn’t enforce it.  Trump hasn’t laid out a clear policy in the first place....

“In fairness to Trump, Iran is a foreign-policy puzzle that has confounded multiple American presidents.  But Trump has made his own situation more difficult.  His ranks of advisers are full of temps, including the secretary of defense.  He doesn’t trust the advisers he has, speaking dismissively of National Security Adviser John Bolton in public and reportedly discarding his advice in private.

“Presidents override the judgment of their aides all the time.  The problem is that Trump doesn’t appear to possess the knowledge or judgment to formulate a policy independent of their advice, because he never bothered to learn about Iran in the first place.  His policy from the start has been Iran is bad, and Obama’s nuclear deal with Iran was bad, and was formed largely from Fox News fulminations.  This is fine as far as it goes, which is not very far.  Trump’s lack of interest in boning up on the topics he deals with has popped up repeatedly, from health care (from ‘it’s going to be so easy’ to ‘Nobody knew health care could be so complicated’) to border security to trade policy.

“But that ignorance and indecision is nowhere so dangerous as when the nation stands on the brink of a shooting war. It’s impossible for Iran to know what the White House’s view is, raising the chances that it will miscalculate, and set off an escalating conflict.  While keeping the Iranians off guard might seem advantageous – Richard Nixon’s ‘madman theory’ – the abortive strike means they may be confused but also less afraid.  Meanwhile, there’s no way for allies to know how to support the U.S. position, which keeps changing.  Not even the U.S. military knows what Trump wants.”

Editorial / Wall Street Journal

“The great weakness of Donald Trump’s foreign policy is its volatility.  He is unpredictable to a fault.  He has doubted his own Venezuela policy from the first week he signed off on it.  He called Kim Jong Un crazy but now says he’s a swell guy.  He signed a trade deal with Mexico then threatened it with new tariffs.

“On Iran he has adopted a policy goal favored by hawkish Sen. Lindsey Graham but wants to use only the means of isolationist Sen. Rand Paul to achieve it.  He warned that ‘if Iran wants to fight, that will be the official end of Iran,’ but he lets Iran shoot down a drone and interfere with international shipping.

“If Mr. Trump’s real policy is Mr. Paul’s, then he should be honest with Americans and return to the Obama nuclear deal.  In the meantime, Iran appears to be calling Mr. Trump’s bluff.”

A few days later...in a separate Journal editorial:

“Mr. Trump seems to believe Iran’s leadership is under severe political and economic pressure at home and may look for relief by agreeing to renegotiate.  But he also has to respond if Iran decides to escalate the violence against U.S. assets on a gamble that Mr. Trump doesn’t want to get into a shooting war as he gears up to run for re-election.

“Now would be a good moment for Europe to get off the fence and join the U.S. pressure campaign.  European diffidence is giving Tehran’s leaders hope they can ride out Mr. Trump in the expectation that he will lose in 2020.

“The same goes for the many Democratic presidential candidates who keep saying they’ll return without conditions to the 2015 nuclear deal. That also gives the Ayatollah reason to think he can wait out Mr. Trump.  Democrats can fairly criticize Mr. Trump for being unpredictable, even erratic, but not for being right about Iranian behavior.”

At week’s end, France was asking Trump to suspend some sanctions on Iran to make room for negotiations to defuse the confrontation.  At the same time, senior diplomats from Britain, France, Germany, China and Russia met with Iranian officials in Vienna today, the co-signatories to the Iran deal warning Tehran to stick to the terms of the accord.

Iran has said its main demand was to sell its oil at the same levels that it did before Washington withdrew from the deal.  But Iran has grown impatient over the promise to create the trade mechanism, INSTEX, which Europe admits today is still not ready to accept transactions.

As for the U.S., special envoy Brian Hook said today the United States will sanction any country that imports Iranian oil and there are no exemptions in place.

Israel / Palestinians: Arab politicians and commentators greeted President Trump’s $50 billion Middle East economic vision with a mixture of derision and exasperation, although some in the Gulf called for it to be given a chance.  In Israel, a spokesman for Prime Minister Benjamin Netanyahu described Palestinians’ rejection of the “peace to prosperity” plan as tragic.

Trump’s son-in-law, Jared Kushner, presented the plan at a conference in Bahrain on Tuesday and Wednesday, a blueprint that envisions a global investment fund to lift the Palestinian and neighboring Arab economies and is part of broader efforts to revive the peace process.

“We don’t need the Bahrain meeting to build our country, we need peace, and the sequence of (the plan) – economic revival followed by peace is unrealistic and an illusion,” Palestinian Finance Minister Shukri Bishara said on Sunday.

The Trump administration has said a political solution would be unveiled later.  Because of this, Arab leaders have denounced Kushner’s proposals as a “colossal waste of time,” “non-starter,” “dead on arrival.”

The Palestinian Authority said Kushner’s “abstract promises” were an attempt to bribe Palestinians into accepting Israeli occupation.

For his part, Kushner told Reuters in an interview, “The plan would invest about $50 billion in the region. It would create a million jobs in the West Bank and Gaza. It would take their unemployment rate from about 30 percent to the single digits. It would reduce their poverty rate by half, if it’s implemented correctly.  It’s a ten-year plan....

“We view our job as to try.  It’s very easy to find reasons why this could fail – we think about that all the time – but our job is to try to be more optimistic and to come up with situations that could maybe change the paradigm and I hope that by seeing this plan that we’ve spent a lot of time working on for a better economic future for the Palestinian people and for the region, people will start to look at this problem through a slightly different lens and maybe that leads to some badly needed breakthroughs.”

Syria: Among the world’s true heroes are Syria’s White Helmets, the civil defense workers who fearlessly are the first on the scene after an airstrike, for example. The other day, two of the White Helmets were among eight civilians killed in Russian and regime air strikes in Idlib province, according to the Syrian Observatory for Human Rights.

The rescue group said a “double-tap attack” by Russian warplanes had “targeted” rescue workers repeatedly as they were evacuating injured civilians from the town of Khan Sheikhoun.

The latest war crime came nearly a week after regime air strikes on an ambulance in the town of Maaret al-Numan killed three rescue workers.

“The world continues to fail to protect us and other humanitarian workers,” the group said in a statement on social media.

No Trump tweets on this topic.

Turkey: The ruling AK Party suffered a big defeat, losing control of Istanbul after a re-run of the city’s mayoral election, a stinging blow to President Erdogan.

What was even more startling was that the opposition party candidate, Ekrem Imamoglu, had a lead of 775,000 votes, with nearly all the ballots counted, a massive increase on the margin of 13,000 he achieved in the earlier election, a victory annulled after the AKP alleged irregularities.

The result ends 25 years of AKP rule in Istanbul.  Erdogan congratulated Imamoglu.  But the president has previously said that “whoever wins Istanbul wins Turkey.”

Erdogan has been in power, either as prime minister or president, since 2003, so the defeat is amplifying talk of a post-Erdogan era, though national elections are not scheduled until 2023.

Clearly, a vote will have to be held much earlier.

Afghanistan: Two U.S. soldiers were killed during a military operation here on Wednesday, bringing to nine the number of American military fatalities in the country this year.

The two, part of a Special Forces team, were killed by small-arms fire in the south of the country; the soldiers engaged in a fierce firefight with Taliban militants, a defense official saying the combatants were mere yards apart at one point.

Meanwhile, a seventh round of peace talks between the United States and the Taliban is set to begin this weekend in Qatar’s capital of Doha, where U.S. and Taliban negotiators have been trying to hammer out a deal.

The focus of the talks has been a Taliban demand for the withdrawal of U.S. and other foreign forces and a U.S. demand the Taliban guarantee that Afghanistan won’t be used as a base for militant attacks.

But the Taliban has long refused to talk to the Afghan government, and clearly there has been no let-up in the fighting, as the Taliban has vowed to sustain the fight until their objectives were reached.  This whole ‘peace process’ is absurd.

There are still about 20,000 foreign troops in the country, most of them American (about 14,000), as part of the U.S.-led NATO mission to train, assist and advise Afghan forces.

China: Prior to talks between Presidents’ Xi and Trump, a Chinese spokesman for the Foreign Ministry said China would not allow the Group of 20 to discuss the Hong Kong issue, with China saying the matter is an internal affair.  Demonstrations have continued to be held over the proposed legislation that would have allowed people to be extradited to the mainland to face trial in courts controlled by the Communist Party.

Separately, last weekend, the official People’s Daily reported that China will need to spend $440 billion over three years to improve village sanitation and clean up its heavily polluted rural environment.

The funds would be required to meet state targets to build clean rural toilets, treat household waste, and construct village sewage treatment plants, said the Communist Party journal.

Yes, the government is promoting a “toilet revolution.”

China’s “war on pollution,” now in its sixth year, has up to now focused primarily on improving air quality in industrialized cities along the east coast, but few inroads have been made to tackle the serious issues in rural areas, the government knowing it has to change “bad habits.”  Don’t try too hard to imagine what this involves.

North Korea: A senior North Korean diplomat said on Thursday that time was running out for the United States to formulate a new strategy to revive denuclearization talks.  Kim Jong Un has said a third summit between himself and Donald Trump would only be possible if Washington adopted a more flexible approach, setting a year-end deadline.

The U.S. is in behind-the-scenes talks with North Korea, with President Trump holding talks in Seoul this weekend with South Korean President Moon Jae-in.

Kim and Trump have now exchanged letters, North Korea’s official news agency saying Trump’s letter had “excellent content” and Kim would “seriously contemplate” it, without elaborating.

But there are few signs the U.S. and the North are any closer to a deal, and the U.S. Defense Intelligence Agency Director Lieutenant General Robert Ashley told Fox News in an interview on Monday that the U.S. intel community does not believe Kim Jong Un is ready to denuclearize.

As for China, during Xi’s first-ever visit to Pyongyang the other week, he promised Kim that China was determined to support the country’s new “strategic path,” whatever that is.  Most importantly, Xi is clearly siding with Kim against Washington.  The issue is how much desperately needed economic aid China will supply.

As I go to post, however, the U.S. special envoy for North Korea, Steven Biegun, said the United States is ready to hold constructive talks with North Korea to follow through on a denuclearization agreement reached by the two countries last year in Singapore.  President Trump having just tweeted, “While (in South Korea tomorrow with President Moon), if Chairman Kim of North Korea sees this, I would meet him at the Border/DMA just to shake his hand and say Hello(?)!”

Japan: Tokyo said on Thursday that Japan and the United States have not discussed revising the U.S.-Japan security treaty after President Trump renewed his criticism of the defense pact in a television interview.  

“We have a treaty with Japan.  If Japan is attacked, we will fight World War III. We will go in and we will protect them and we will fight with our lives and with our treasure.  We will fight at all costs, right?” Trump told Fox on Wednesday.  “But it we’re attacked, Japan doesn’t have to help us at all. They can watch it on a Sony television, the attack.”

Japan’s top government spokesman said the two governments “have not discussed revising the U.S.-Japan Security Treaty at all.  The obligations of the United States and Japan...are balanced between both countries.”

Friday at the G20, Trump and Japanese Prime Minister Shinzo Abe “reaffirmed their commitment to U.S.-Japan coordination on shared security challenges,” according to the White House.

Russia: President Vladimir Putin said in an interview with the Financial Times prior to the G20 summit said that liberal values were obsolete because they had been rejected by the majority of the people in Western nations.  Putin told the FT that German Chancellor Angela Merkel had made a cardinal mistake by adopting a liberal policy towards immigration from the Middle East.

Separately, Russia’s Deputy Foreign Minister Sergei Ryabkov warned of a new Cuban missile crisis on Russia’s border, as Washington’s deployment of land-based missile systems riles up the Russkies, especially when this is coupled with U.S. withdrawal from the INF arms control treaty.

It was in 1962 that the Soviet Union, responding to a U.S. missile deployment in Turkey, sent ballistic missiles to Cuba.

France: As you saw today if you caught some of the Women’s World Cup action, France has been hit with a dangerous heat wave, temperatures above 40C (104F) in some parts of the country at week’s end.  Parts of northeastern Spain experienced temps of about 113F.  In Switzerland, Geneva is expected to hit 96F on Sunday. 

France was traumatized by a heatwave in 2003 which was blamed for 15,000 extra deaths, there being a lack of air conditioning across the country.

Random Musings

--Presidential tracking polls....

Gallup: 43% approval of President Trump’s job performance, 55% disapproval; 89% Republicans, 37% Independents (June 3-16).
Rasmussen:  49% approval, 50% disapproval.

--Before I continue...just a note.  I’m still a Republican. But I’m going to cover the Democrats’ presidential nominating process dispassionately, simply making observations and trying to figure out, just like all of you, who will emerge from the pack.  I certainly have a personal fave or two, among the moderates, but one thing I’m not going to do is be like some of the Fox News nightly hosts who just rip anything Democrat because they wear the capital ‘D’ attached to their name.

That said there is one thing I think all of us who watched the debates Wednesday and Thursday can agree on.  The moderators were beyond awful.  I miss Tim Russert after watching some of these clowns.  [Fox’s Chris Wallace should be tabbed to moderate all of the debates, regardless of the network.]

OK...so I watched all but ten minutes of the first round in Miami, and all of last night’s round two, and while everyone has a different opinion, in round one I’m with those who said Julian Castro broke through to an extent, perhaps placing himself in the first ten (of 20, 24), while the woman I think is the best pure candidate for the Dems, if they are to have a shot at defeating Donald Trump, Sen. Amy Klobuchar, certainly did nothing to hurt her cause, which is the main goal in these early gatherings.  Ohio Rep. Tim Ryan, on the other hand, needs to resume his day job...I thought he’d do better.

The one I found interesting the first round was Hawaii Rep. Tulsi Gabbard.  I’ve seen her a lot over the last few years, and I appreciate her foreign policy acumen, even though I strongly disagree with her at times, but in viewing her Wednesday I kept thinking, 2020 lacks a legitimate third party candidate and she fits the bill.  [An authentic, classic ‘independent’ third party ticket would be Sen. Rand Paul and Gabbard.]

The debates showcased a split in the Party between the far-left and the moderates, the former led by Elizabeth Warren (and Bernie Sanders), Warren saying to loud applause Wednesday that she supports replacing private medical insurance with government-run healthcare, saying of her rivals: “There are a lot of politicians who say, ‘oh, it’s just not possible’...what they’re really telling you is, they just won’t fight for it....

“Well, healthcare is a basic human right and I will fight for basic human rights.”

But Sen. Klobuchar, representing the more moderate wing, countered: “I am just simply concerned about kicking half of America off of their health insurance in four years.”

So then last night, round two, Sen. Kamala Harris shined, scoring points throughout and launching a brutal attack on Joe Biden.  Harris assailed the former vice president for touting his past work with racist senators and having once opposed a policy to foster diversity in schools.

“And it was not only that,” Harris said, winding up her fastball, “but you also worked with them [racist senators] to oppose bussing.

“And there was a little girl in California who was part of the second class to integrate her public school and she was bussed to school every day.  And that little girl was me.”

POW! ZOOM! BAM!

Biden bristled: “It’s a mischaracterisation of my position across the board.  I did not praise racists.  That is not true.”

But then when Harris pressed him, Biden got all tied up, stupidly talking about the issue being one of states’ rights, and, well, you know, that was kind of the subtext of the Civil War, sports fans.  Not exactly the right reply for 2019 and a Democratic Party presidential debate.

Back to healthcare, there were further divisions Thursday as in round one, with Sen. Bernie Sanders arguing that Americans are ready to embrace a universal system, while Pete Buttigieg said, “I would call it Medicare for all who want it.”

Here’s the bottom line, as far too many tried to make too much of the first of at least six debates this year for the Dems.

There is clearly a group of five front-runners: Biden, Sanders, Warren, Harris and Buttigieg.

Is it possible for Klobuchar or Booker to break through?  Sure, though my senator, Booker, needs to stop talking about his Newark experience as if he’s doing something heroic by living there.  Whatever.

We have a long, long way to go, with lots of stumbles along the way. 

--No doubt Mayor Buttigieg has been distracted by the killing of a black man in his city of South Bend, Indiana, the police officer involved responding to reports of a suspicious person going through cars around 3:30 a.m. when the victim was spotted inside a vehicle.

When confronted, 54-year-old Eric Jack Logan approached Sgt. Ryan O’Neill with a 6- to 8-inch blade, O’Neill then firing twice, killing Logan.  The shooting was not recorded on the officer’s body camera.

In Thursday’s debate, Buttigieg handled a question on the issue with honesty.  Most viewers had to respect that.

--It just hit me who Democratic candidate Marianne Williamson, the goddess of love, reminds me of...actress MacKenzie Phillips.  [And Kate McKinnon already has Williamson down pat.  We need Marianne to survive at least into SNL’s fall season for this sole reason.]

--In a major blow to election reformers, the Supreme Court on Thursday rejected efforts to rein in electoral map manipulation by politicians aimed at entrenching one party in power, a practice known as gerrymandering that critics have said warps democracy.

In a landmark 5-4 ruling that will reverberate for years, the justices ruled for the first time that federal judges do not have the authority to curb the partisan practice – a decision that is likely to embolden state lawmakers to intensify use of it.

The court ruled along ideological lines in the decision written by Chief Justice John Roberts, conservatives in the majority, liberals in dissent.

The court sided with Republican lawmakers in North Carolina and Democratic legislators in Maryland who drew electoral district boundaries that had been challenged by voters as so politically biased that they violated Constitutional rights.

In the decision, Roberts said the court was not condoning excessive gerrymandering, which can yield election results that “seem unjust,” but added that it is an inherently political act reserved for legislatures, not courts, whose review would appear political.  The Constitution allows courts to forbid the practice, like it does racial discrimination in political map-drawing, Roberts allowed, though, “You can take race out of politics,” he said from the bench, “but you can’t take politics out of politics.”

Or as the Wall Street Journal opines:

“Partisan gerrymandering can be ugly, in other words, but not every problem is the Supreme Court’s job to fix.”

--From Adam Elmahrek and Paul Pringle / Los Angeles Times:

Contractors with white ancestry were awarded hundreds of millions of dollars in government contracts reserved for minorities by making unsubstantiated claims to being Native American, a Times investigation found.  To qualify for the minority contracting programs, they used membership in unrecognized Cherokee groups that federally recognized tribes and Native American experts consider illegitimate.

“Two years ago, when the mayor’s office in St. Louis announced a $311,000 contract to tear down an old shoe factory, it made a point of identifying the demolition company as minority owned.

“That was welcome news. The Missouri city was still grappling with racial tensions from the 2014 fatal police shooting of Michael Brown, a black 18-year-old, in nearby Ferguson. After angry protests, elected officials had pledged to set aside more government work for minority-owned firms.

“There was only one problem.

“Bil Buell, the owner of Premier Demolition Inc., has no verifiable claim to being a member of a minority group.  His ancestors are identified as white in census and other government records.  And his claim to being a Native American rests on his membership in a self-described Cherokee group that is not recognized as a legitimate tribe.

“The case highlights a major failure in the nation’s efforts to help disadvantaged Americans by steering municipal, state and federal contracts to qualified minority-owned companies.  In many instances, government agencies have not vetted those companies to protect the interests of taxpayers and legitimate minority contractors.

“Since 2000, the federal government and authorities in 18 states, including California, have awarded more than $300 million under minority contracting programs to companies whose owners made unsubstantiated claims of being Native American, a Los Angeles Times investigation found.

“The minority-owned certifications and contract work were issued in every West Coast state, New Mexico and Idaho, Texas and four Southern states, several states in the Midwest and as far east as Pennsylvania, The Times found.”

Actually, “William Wages, whose brother-in-law is House Minority Leader Kevin McCarthy, says he is one-eighth Cherokee. Wages’ company, Vortex Construction, has won more than $7 million in federal contracts set aside for minorities....

“Census and birth records available to The Times dating to 1850 show no Cherokees among his ancestors.”

This should infuriate everyone.  Offenders should also face life in prison, at best, for such massive, “premeditated,” crime, including insurance fraud. 

--Speaking of corruption and fraud, how about California Republican Rep. Duncan Hunter, darling of the far-right?    Hunter had previously been accused of misusing campaign funds, but now details are emerging and prosecutors said in court papers that he was having multiple extramarital affairs and now his wife may testify against him at trial to save herself.

Hunter was first indicted by a grand jury in August 2018 on various criminal counts, his wife, Margaret, also accused of taking more than $200,000 in campaign funds to pay for such expenses as private school tuition for their children, a holiday in Italy (“Three Coins in the Foun-tain....”) and expensive meals.

But Hunter won re-election in his San Diego County district anyway, only now prosecutors detail a series of five “intimate personal relationships” they said Hunter had between 2009 and 2016, in which he spent campaign funds on social occasions.  A couple of these liaisons involved female lobbyists.

As prosecutors put it: “Simply put, carrying out a sequence of romantic liaisons is so far removed from any legitimate campaign or congressional activity as to rebut any argument that Hunter believed these were proper uses of campaign funds,” they wrote.

Hunter’s attorney filed court papers Monday seeking to have the charges dropped or moved the case to another venue, like Greenland or Kazakhstan...or so I imagine.

I’m sorry, but this cracks me up given how sanctimonious he has appeared over the years.

--Editorial / Wall Street Journal

“The Supreme Court on Monday delivered another victory for free speech by striking down the Lanham Act’s prohibition on ‘immoral’ and ‘scandalous’ trademarks.  All nine justices agreed to some degree that the law’s broad scope offends the First Amendment, which sends the message that governments can’t use expansive statutory language to restrict speech they dislike.

“Fashion designer Erik Brunetti (Iancu v. Brunetti) sued the U.S. Patent and Trademark Office for denying a trademark for his streetwear line ‘FUCT,’ putatively short for Friends U Can’t Trust.  The government claimed the trademark violated the 1946 Lanham Act because it was ‘vulgar,’ ‘highly offensive’ and carried ‘decidedly negative sexual connotations.’....

“The majority showed judicial modesty by rejecting the invitation to rewrite the law in order to rescue it.  But as Justice Samuel Alito notes in his concurrence, the Court’s decision does not prevent Congress from adopting a more tailored law ‘that precludes the registration of marks containing vulgar terms that play no real part in the expression of ideas.’....

“(Justice Alito noted) that the Court’s ruling ‘is not based on moral relativism,’ but on the recognition that ‘a law banning speech deemed by government officials to be ‘immoral’ or ‘scandalous’ can easily be exploited for illegitimate ends.’  Look at college campuses or efforts in Congress to regulate political speech to see how right he is.”

--NASA’s Curiosity rover has detected another methane “spike” on Mars, in what could be a sign of life.

According to the New York Times, which published an email written by senior NASA scientists, the rover detected “startlingly high amounts of methane in the Martian air.”  

No guarantees, boys and girls.  Still no actual Martians or B-movie-like space monsters spotted by Marscam, which should they ever show up would no doubt go viral, but it’s a hopeful sign.

---

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

A special salute to Ret. Army Staff Sgt. David Bellavia, the first living Iraq war veteran to receive the Medal of Honor.  Five others who fought there were awarded the medal posthumously.

God bless America.

---

Gold $1412
Oil $58.20

Returns for the week 6/24-6/28

Dow Jones  -0.5% [26599]
S&P 500  -0.3%  [2941]
S&P MidCap  +0.9%
Russell 2000  +1.1%
Nasdaq  -0.3%  [8006]

Returns for the period 1/1/19-6/28/19

Dow Jones  +14.0%
S&P 500  +17.4%
S&P MidCap  +17.0%
Russell 2000  +16.2%
Nasdaq  +20.7%

Bulls 50.5
Bears 18.4

Have a great week....and a Happy Fourth! 

Brian Trumbore

 



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Week in Review

06/29/2019

For the week 6/24-6/28

[Posted 10:45 PM ET, Friday]

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

Edition 1,055

I am literally posting this column as President Trump and Chinese President Xi Jinping are about to sit down for their working lunch and chat over the trade issue, at least as far as I can tell from the schedule, Osaka being 13 hours ahead, and I haven’t seen any presidential tweets as yet, so I’ll unpack it all next time.  We always need a few days, and more tweets, anyway, before we can begin to, maybe, figure out what the latest positions and stances are...on both sides.

Here’s what we do know from observing President Trump just the past two weeks.  As with so many other issues in the 2 ½ years of his presidency, Trump flip-flopped on Immigration and Customs Enforcement raids, Mexican tariffs and Iran.  In all three cases he went from hard-line to employing a soft touch.  Personally, I called him out on stupidly telegraphing the threat of deportation raids, which he then pulled back on last Saturday at the urging of Nancy Pelosi.  And we’ll see how Iran acts the next few weeks.  But this endless game of brinkmanship will at some point backfire.

For now, as European Commission President Jean-Claude Juncker told reporters: “Since Mr. Trump is U.S. president, G20 meetings change more and more.  But the G20 is not just about Trump’s moods.  Others also have sensitivities,” Juncker drawing attention to the U.S.-China trade tensions that were contributing to a global economic slowdown.

And there was Trump today, sitting with Russian President Vladimir Putin. Asked by a reporter whether he would raise the issue of election meddling during their meeting, held on the sidelines of the G20, Trump said: “Yes, of course I will,” drawing a laugh from Putin.

Trump, smirking, then turned to Putin to give the directive twice, as he pointed a finger at the Russian leader.

“Don’t meddle in the election, please,” Trump said.

The president then pointed to the press in an attempt to further lighten the mood.  “Get rid of them.  Fake news is a great term, isn’t it?  You don’t have this problem in Russia but we do,” Trump said. 

To which Putin responded, in English: “We also have. It’s the same.”

Of course in Russia, if Putin really does have a problem with a journalist, or dissident, he has them killed (see Boris Nemtsov, regarding the latter), or at best jailed for a long, long time.

I’ve been arguing that June was a critical month for President Trump. But June is essentially over and the month gets an ‘Incomplete,’ owing to the China trade issue and Iran.

But the following is kind of along the theme I’ve been espousing the past four weeks in particular.

Thomas L. Friedman / New York Times

“If you’re keeping score at home on the Trump foreign policy, let me try to put it in a nutshell: The president has engaged America in a grand struggle to reshape the modern behavior of two of the world’s oldest civilizations – Persia and China – at the same time.

“Pressing both to change is not crazy.  What’s crazy is the decision to undertake such a huge endeavor without tightly defined goals, without allies to achieve those goals, without a strong and coherent national security team and without a plan on how to sync up all of President Trump’s competing foreign policy objectives.

“After all, Trump is unilaterally breaking the 2015 denuclearization deal with Iran’s dictator while trying to entice North Korea’s dictator, Kim Jong Un, into a denuclearization deal that he’s supposed to trust the U.S. president will honor.  Trump is sanctioning China on trade while trying to enlist its help to denuclearize North Korea.  Trump is imposing steel and aluminum tariffs on America’s European allies while needing their help to confront China on trade and Iran on nukes....

“But we are where we are, and I will give Trump credit for one thing: He has imposed real pain on Iran – virtually choking off all of its oil production through sanctions – and on China – with $250 billion on tariffs on its exports to the U.S. and a total ban on products from its biggest telecom equipment company, Huawei.  In short, Trump has created real leverage for transactional or transformational deals with both countries.

“A president who acts just a little crazy can be good at times. Who else would have squeezed Beijing and Tehran this hard and at once?  But a president who acts a lot crazy – who creates pain without clear goals, who always insists on being seen to win and the other guy being seen to lose, with no compromise escape route – is not good.

“Does Trump want regime change in Iran or just a change of behavior?  Does he want to shrink the trade deficit with China or just get fair access for our companies?  It’s not clear to me and doesn’t seem clear to him....

“This is no ordinary moment. This is a big one, folks.  What’s at stake with Trump and China is what kind of global economy we’re going to have going forward.  What’s at stake with Iran is what kind of global nuclear nonproliferation regime we’re going to have going forward.

“The stakes simply could not be bigger, which is why I believe 2019 will be a pivotal year – like 1945 and 1989.  I just hope it ends as well.”

Trump World

--The photo, via the Associated press, of the father and daughter lying face down in the muddy water along the banks of the Rio Grande will be remembered for a long time, like the photo of the little girl whose clothes were burned off in a napalm attack in Vietnam, and the photo of a bleeding Syrian child pulled from the rubble in Aleppo after an airstrike, or a 1993 shot of a starving toddler in the Sudan, a vulture nearby.

Oscar Alberto Martinez Ramirez died with his 23-month-old daughter, Valeria, as they tried to cross from Mexico to the United States, the image representing the dangers migrants face on their passage.  Martinez, Valeria and her mother arrived last weekend in the border city of Matamoros, Mexico, hoping to apply for asylum in the U.S.

But the international bridge was closed until Monday, officials told them, and as they walked along the banks of the river, the water appeared manageable.  The three of them began to swim across, with Valeria on her father’s back, tucked under his shirt.  The mother followed behind, on the back of a family friend, she later told government officials.

The trek went tragically wrong, the mother, seeing her husband and daughter struggling ahead, turning back to the Mexico side.  Father and daughter then sank into the river and were swept away.

One result of the press coverage that then ensued was that the pressure was then on the Democratic-controlled House to send President Trump a bipartisan $4.6 billion Senate-drafted measure to care for migrant refugees detained at the southern border.

The bill passed on a bipartisan 305 to 102 vote, capping a skirmish in which die-hard House liberals came out on the losing end in a battle with the White House, the GOP-controlled Senate and Democratic moderates, led by Speaker Nancy Pelosi.

Pelosi abandoned a plan to require more stringent care requirements for detained migrant families and children.

House progressives were furious Pelosi caved to the GOP, but any bill containing their demands didn’t have a chance at becoming law.  Changing asylum laws would have to wait.

Pelosi said in a statement: “In order to get resources to the children fastest, we will reluctantly pass the Senate bill.”

The legislation contains more than $1 billion to shelter and feed migrants detained by the border patrol and almost $3 billion to care for unaccompanied migrant children who are turned over to the Department of Health and Human Services.

--Related to the above, the acting head of U.S. Customs and Border Protection, John Sanders, announced his resignation amid the growing outcry over reports that more than 300 children were held in a remote Border Patrol station in unsanitary conditions.

--A divided Supreme Court halted the Trump administration’s plans to ask U.S. residents on the 2020 census whether they are citizens.  Chief Justice John Roberts, in a strongly worded opinion, said Commerce Secretary Wilbur ross hadn’t explained his real reasons for adding the citizenship question.

“If judicial review is to be more than an empty ritual, it must demand something better than the explanation offered for the action taken in this case,” Roberts wrote. 

In the 5-4 decision, Roberts was joined by the court’s four liberal justices – Ginsburg, Breyer, Kagan and Sotomayor.

Trump then tweeted:

“Seems totally ridiculous that our government, and indeed Country, cannot ask a basic question of Citizenship in a very expensive, detailed and important Census, in this case for 2020.  I have asked the lawyers if they can delay the Census, no matter how long, until the....

“....United States Supreme Court is given additional information from which it can make a final and decisive decision on this very critical matter. Can anyone really believe that as a great Country, we are not able to ask whether or not someone is a Citizen.  Only in America!”

Commerce Secretary Ross has said that including a citizenship question on the decennial survey that counts the entire U.S. population would help the Justice Department in its efforts to comply with the Voting Rights Act, which Chief Justice Roberts wrote “seems to have been contrived.”

--Former Special Counsel Robert Mueller will testify in front of the House Judiciary Committee and the House Intelligence Committee in mid-July.

--Former Secretary of State Rex Tillerson, in testimony he gave to the House Foreign Affairs Committee in May and just released Thursday, described a string of secret meetings, hidden dinners and undisclosed conversations with world leaders conducted by presidential son-in-law Jared Kushner – and concealed from America’s top diplomat.

In under-oath testimony, Tillerson described one embarrassing episode, where he didn’t even know his Mexican counterpart was in Washington until he walked into a restaurant and discovered Luis Videgaray dining with Kushner.

In his testimony, Tillerson was asked, “When you first came on board, what was Mr. Kushner’s role described to you as?”

“No one really described what he was going to be doing,” Tillerson responded.

“It’s the president’s prerogative” to have special advisors, Tillerson testified.  “But...it presents special challenges to everyone if others who are trying to effect foreign policy with a country and move the agenda forward are not fully aware of other conversations that are going on that might be causing your counter-party in that country to take certain actions or behave a certain way, and you’re not clear as to why, why did they do that.”

--President Trump said of the latest accusation of sexual violence by E. Jean Carroll, a longtime advice columnist for Elle magazine, that she was “totally lying.”  “I’ll say it with great respect: Number one, she’s not my type.  Number two, it never happened.”

--Trump Tweets:

“At the request of Democrats, I have delayed the Illegal Immigration Removal Process (Deportation) for two weeks to see if the Democrats and Republicans can get together and work out a solution to the Asylum and Loophole problems at the Southern Border.  If not, Deportations start!”

“I am in Japan at the G-20, representing our Country well, but I heard it was not a good day for Sleepy Joe or Crazy Bernie.  One is exhausted, the other is nuts – so what’s the big deal?”

“The Stock Market went up massively from the day after I won the Election, all the way up to the day that I took office, because of the enthusiasm for the fact that I was going to be President.  That big Stock Market increase must be credited to me.  If Hillary won – a Big Crash!”

“Too bad the Dems in Congress won’t do anything at all about Border Security.  They want Open Borders, which means crime. But we are getting it done, including building the Wall!  More people than ever before are coming because the USA Economy is so good, the best in history.”

“China gets 91% of its Oil from the Straight (sic), Japan 62%, & many other countries likewise.  So why are we protecting the shipping lanes for other countries (many years) for zero compensation.  All of these countries should be protecting their own ships on what has always been...

“...a dangerous journey.  We don’t even need to be there in that the U.S. has just become (by far) the largest producer of Energy anywhere in the world!  The U.S. request for Iran is very simple – No Nuclear Weapons and No Further Sponsoring of Terror!”

“Women’s soccer player, @mpinoe, just stated that she is ‘not going to the F...ing White House if we win.’  Other than the NBA, which now refuses to call owners, owners (please explain that I just got Criminal Justice Reform passed, Black unemployment is at its lowest level...

“...in our Country’s history, and the poverty index is also best number EVER), leagues and teams love coming to the White House.  I am a big fan of the American Team, and Women’s Soccer, but Megan should WIN first before she TALKS! Finish the job!  We haven’t yet...

“...invited Megan or the team, but I am now inviting the TEAM, win or lose. Megan should never disrespect our Country, the White House, or our Flag, especially since so much has been done for her & the team. Be proud of the Flag that you wear. The USA is doing GREAT!”

[Megan Rapinoe scored the two U.S. goals today in a 2-1 win over France, sending the U.S. into the semifinals.]

“Stock Market is on track to have the best June in over 50 years! Thank you Mr. President!”

Wall Street and China Trade War

While the major indexes fell on Wall Street this week, the month was the best June for the S&P 500 since 1955, +6.9%, after May’s -6.6% swoon.  It was the best June for the Dow Jones since 1938.  Credit goes to the Federal Reserve, for the most part, for its dovish stance on interest rates, as much as President Trump likes to rip the chairman. 

We also had lots of economic data this week.  Tuesday, the S&P CoreLogic Case-Shiller home price index for April (remember, this one has a lag) came in unchanged, month-over-month, for the 20-city index, and up only 2.5% year-over-year, a seven-year low.  Seattle, which had been among the best markets, was 20th in April, with home prices unchanged yoy.  Las Vegas was first, 7.1% (but this market peaked in August, up 13.9%).

We also had data on May new-home sales, which came in at a disappointing annualized level of 626,000, down 7.8% and well below expectations.

Durable goods (big ticket items) were down 1.3% in May, up 0.3% ex-transportation, the headline number worse than forecast.

Today, we had data on May personal consumption, 0.5%, above estimates, and consumption, 0.4%, in line.  The Federal Reserve’s closely followed personal consumption expenditures index was 0.2% on both headline and core (ex-food and energy), 1.5% and 1.6% year-over-year, respectively.,

And today we had a key reading on Chicago manufacturing for June and this was a major disappointment, 49.7 (50 the dividing line between growth and contraction), far below expectations of 54.0 and the first sub-50 reading in 2 ½ years.

Lastly, we had our final reading on GDP for the first quarter, 3.1%, unchanged from the prior look, though personal consumption was revised down to a not so good 0.9% annual rate (consumer spending accounting for more than 2/3s of U.S. economic output), vs. 2.5% in the fourth quarter.

Add it all up and suddenly the Atlanta Fed’s GDPNow barometer for the second quarter is at only 1.5%.  We will receive our first official look at Q2 GDP end of July, with a lot more data before then, such as next week, when we get June ISM readings on manufacturing and the service sector, as well as June’s critical jobs report.

Then there is the aforementioned Fed, or rather President Trump’s treatment of Fed Chairman Jerome Powell.  In an interview with Fox Business Network, Trump criticized Powell again, comparing him unfavorably with European Central Bank President Mario Draghi, expressing further concern that Fed policy is hurting the U.S. economy allowing the dollar to get too strong.

“We should have Draghi instead of our Fed person,” Trump said.  Mr. Powell “is not doing a good job,” adding, “He has to lower interest rates for us to compete with China.”

The Fed voted to hold the line on rates last week, but most market experts now expect the Fed to cut interest rates at least once in the months ahead.

Trump then said, “He’s trying to prove how tough he is because he’s not going to get pushed around,” Trump said Wednesday.  “Here’s a guy, nobody ever heard of him before and now, I made him, and he wants to show how tough he is.  OK.  Let him show how tough he is.”

Trump added: “I have the right to demote him, I have the right to fire him,” though Fed governors can only be removed “for cause.”  Could Powell be demoted, though?  No one seems to know the definitive answer to that one.

Trump tweeted on Monday:

“Despite a Federal Reserve that doesn’t know what it is doing...we are on course to have one of the best Months of June in U.S. history...

“...Think of what it could have been if the Fed had gotten it right. Thousands of points higher on the Dow, and GDP in the 4’s or even 5’s.  Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us.  Blew it!”

For his part, Powell caused a market dip on Tuesday when he said that while many Fed officials find the case for a somewhat more accommodative policy has strengthened, “we are mindful that monetary policy should not overreact to any individual data point or short-term swing sentiment.”

Powell also reiterated that the Fed is “insulated from short-term political pressures,” and that its policymakers are wrestling with whether to cut interest rates as President Trump has demanded.

“The Fed is insulated from short-term political pressures – what is often referred to as our ‘independence,’” Powell said in a speech at the Council on Foreign Relations in New York.

But he said he and his colleagues are “grappling” with whether current risks to the economy warrant a rate cut.

Separately Tuesday, St. Louis Fed President James Bullard, a dove on interest-rate policy, told Bloomberg Television he does not think a cut of half a percentage point is warranted when the Federal Open Market Committee meets again in July, even though he had pushed to lower rates last week.

Dallas Fed Bank President Robert Kaplan, a non-voting member this year, said today that he is not backing interest rate cuts until he sees a clearer picture of the economy.  “I don’t want to be cutting rates to do fine-tuning.  I’d rather be adjusting policy if I thought there was some material deterioration,” Kaplan said.

Meanwhile, as of July 1, the United States will have experienced the longest economic expansion on record, ten years and running.

On the trade front...as we await tonight’s headlines, President Trump arrived in Osaka for the G20, saying there would be “very big” trade deals to announce with India and Japan, after trashing both of them on his flight over.  Trump had tweeted earlier that Indian tariffs recently announced against the U.S. were “unacceptable” and “must be withdrawn.”

But sitting next to Indian Prime Minister Narendra Modi on Friday, Trump said, “I think we’ll continue to get along with India.  I think we’re going to have some very big things to announce, very big trade deals.”

All India was doing was responding to its removal from a group of developing nations eligible for preferential tariffs on goods imported to the U.S., so New Delhi retaliated.

The biggie though, of course, was the U.S.-China trade war.  We heard prior to the meeting between Trump and Xi that the Chinese president would be presenting a list of demands, including the removal of the ban on telecommunications giant Huawei Technologies Co. Ltd., according to the Wall Street Journal, citing Chinese officials with knowledge of Xi’s plan.  Beijing also wants the U.S. to lift all punitive tariffs and drop efforts to get China to buy even more U.S. exports than Beijing said it would when the two leaders last met in December.

Monday, Vice-Minister of Commerce Wang Shouwen, a top deputy on the negotiating team, laid out China’s position ahead of the talks, suggesting that Beijing should not be the only side to make concessions.

“We should meet each other halfway, which means that both sides will need to compromise and make concessions, and not just one side,” Wang said in Beijing,

But it would seem as if we are headed to a truce of several months while talks resume, averting the next round of tariffs on an additional $300bn of Chinese imports, which if applied would extend punitive tariffs to virtually all the country’s shipments to the U.S.  According to reports, the delay in additional tariffs was Xi’s price for meeting in Osaka.

Trump had reiterated on Wednesday that he was prepared to impose additional tariffs on China if the talks failed, but suggested the additional duties could start at 10, not 25 percent.

Just a reminder...currently, the administration has imposed 25 percent tariffs on $250bn worth of Chinese goods.

Europe and Asia

With the quarter winding up, next week we’ll begin to see a slew of month- and quarter-end data, but this week it was virtually non-existent for both Europe and Asia.

There was a flash reading on June inflation for the EA19, 1.2%, same as May, and vs. 2.0% a year ago.  Ex-food and energy, the core figure was also 1.2%, unchanged year-over-year.  So once again, nothing that will stop the European Central Bank from taking a further accommodative stance in the coming months, as offered up by ECB President Mario Draghi the other week.

Brexit: Boris Johnson, the decided favorite to become Britain’s next prime minister, said the chances of Britain leaving the European Union without a deal are “a million-to-one” even as he repeated his promise to leave the bloc without a deal by the end of October.

The race between himself and foreign minister Jeremy Hunt to replace Prime Minister Theresa May heated up, Hunt stepping up his criticism of Johnson.

But the EU has maintained steadfastly, and again this week, it is not renegotiating the deal it struck with Theresa May, which the British parliament then rejected three times.  Parliament, though, is opposed to a no-deal, hard Brexit.  And whoever wins between Johnson and Hunt will have just three months to convince the EU, and parliament, to perhaps tweak the deal to all sides’ satisfaction, this while the one critical element of Brexit, the issue of the Irish border, is the likely stumbling block.

Johnson keeps saying the chances of leaving without an agreement are remote because there is a new mood on both the continent and in parliament to pass a revised deal, but this is just a lie.  He also has no clue how he’d offer to change the deal.

Then today, Johnson said he was preparing an emergency budget including aggressive tax cuts, and a “Trump-style” moratorium on all new regulations, if there is a no-deal Brexit.

The budget is usually put forward in October or November, but assuming he’s elected, Johnson wants to push it up to September to ensure the economy is cranking prior to October 31.

As for Jeremy Hunt, he also wants Brexit to happen at the end of October but would extend the deadline if a deal was in sight.  Hunt’s point is if Britain just plows ahead with a no-deal exit, it would be handing the next general election to Labour leader Jeremy Corbyn.  Parliament would stop the effort to exit in such a wild fashion, Corbyn will become prime minister in a snap election, and there will be no Brexit at all, Hunt says.

Needless to say, Britain’s business leaders are scared to death of exiting the EU without a deal, warning it would cripple the economy.  For starters, the UK auto industry said a no-deal Brexit would be a “knockout blow.”

As for Jeremy Corbyn, he has said the Labour Party would not allow a new government to preside over a no-deal.

Johnson, in turn, has said he wouldn’t rule out suspending parliament until the Brexit deadline to prevent lawmakers from blocking a no-deal withdrawal from the bloc.  Can you imagine if this scenario played out? 

Finally, Mr. Johnson garnered some headlines last weekend because of a domestic dispute with his live-in girlfriend, Carrie Symonds, with police called to their address in London when a neighbor said he was worried for the safety of both after hearing loud shouting.

Johnson said it was “simply unfair” to involve “loved ones” in the debate.  He is in the midst of divorcing his second wife.  Supporters of Johnson said the neighbor who called the incident in to police was politically motivated.

Street Bytes

--As noted above, June was outstanding, up 6.9% in June on the S&P 500, best June since 1955, coming after May’s fall.  The S&P also had its best first half since 1997, +17.3%.

On the week, though, stocks fell for the first time in four weeks, the Dow Jones  down 0.5% to 26599, while the S&P fell 0.3% to 2941, 13 points shy of its record high, and Nasdaq lost 0.3%.  [But the Russell 2000 rose 1.1% on the week.]

Before you know it, corporate earnings for the second quarter will be rolling in.

--U.S. Treasury Yields

6-mo. 2.09%  2-yr. 1.75%  10-yr. 2.01%  30-yr. 2.53%        

--The Federal Reserve announced the results of its annual “stress tests” on the financial strength of the 18 largest banks in the United States, revealing that each had enough capital to justify paying some of it out to shareholders, i.e., increased dividends and/or share repurchases, though it is limiting the amount Credit Suisse can return to investors because of how it measures potential losses.

The stress tests examine how the largest banks would fare in a severe economic downturn or sudden shock to the global financial markets; i.e., the need to have enough capital to weather a repeat of the 2008 financial crisis.

--Crude oil is trading on three things these days: inventories, OPEC and Iran.  Regarding the first factor, on Wednesday the Energy Information Administration reported inventories declined by 12.8 million barrels to 469.9 million barrels in the week ended June 21, far greater than what had been projected, though inventories are currently about 5% above the five-year average for this time of year, according to the EIA’s data.

As for OPEC, the cartel is getting together next week in Vienna where it is assumed OPEC and its allies, including Russia, will elect to roll over a deal on cutting supplies, while discussing deepening the curbs that have been in place since Jan. 1.

It was then that the deal was struck to curb output by 1.2 million barrels per day, which expires June 30.  But it hasn’t worked as well as intended because of increases in production from the likes of the U.S. and Canada that have offset the cuts.

--Gold rallied to a six-year high on Tuesday, $1438, on the back of a weakening U.S. dollar and heightened geopolitical tensions, before closing the week at $1412.  The precious metal often moves inversely with the value of the dollar, because a cheaper dollar makes gold more attractive to investors who buy using other currencies.  The dollar fell after the Federal Reserve signaled it would cut interest rates.

--The Federal Aviation Administration (FAA) uncovered a possible new flaw in Boeing’s troubled 737 MAX aircraft that is likely to push back test flights, the FAA saying it identified the “potential risk” during simulator tests, but did not reveal any details.

The story first leaked after the market closed on Wednesday and I glanced at the share price in after-hours trading, $374 at 4:50 p.m., thinking, ‘why isn’t it falling on this significant news?’

Well it fell to $347 in pre-market trading Thursday, before finishing the week at $363.

In a tweet, the  FAA said: “On the most recent issue, the FAA’s process is designed to discover and highlight potential risks.  The FAA recently found a potential risk that Boeing must mitigate.”

Last month, the FAA indicated that approval of Boeing’s software fix to the 737 MAX could come in late June, which would have allowed for test flights in early July.

Reuters, which first reported the new issue, said during an FAA pilot simulation in which the anti-stall prevention system was activated, it took longer than expected to recover the aircraft.

Other sources said the problem was linked to the aircraft’s computing power and whether the processor lacked enough capacity to keep up.

If regulators are unsatisfied with the fix, the microprocessor unit would have to be replaced and the grounding could stretch on months longer.

A week ago I wrote of Captain Chesley Sullenberger’s Congressional testimony on the 737 MAX wherein he said that the crashes of the Ethiopian and Lion Air planes “are demonstrable evidence that our current system of design and certification has failed us.”

Well, Thursday, United and Southwest Airlines extended flight cancellations related to the grounding of the aircraft as the timeline for its return remains unclear.  United pulled the plane from its schedule through Sept. 3, while Southwest, which had already removed the aircraft from its schedule through early September, pushed its date back to Oct. 1.

Southwest, with more 737 MAX jets in its fleet than United and American, said it’s been canceling about 150 flights per day.  United said it will be canceling 60 a day in August.

--Apple Inc. suffered a big blow with the news that chief designer, Jony Ive, was leaving to start his own company, LoveFrom.  Ive, working with co-founder Steve Jobs, designed 1998’s iMac, which kick-started a prolific and profitable two decades unlike any other in Silicon Valley history.

Ive then designed the revolutionary iPod and iPhone, and was there with the Apple Watch and AirPods following Jobs’ death.

Apple CEO Tim Cook said: “Jony is one of a kind. The work on the original iMac was sort of the point at which people began to pay attention to Apple again on something other than how badly economically the company was doing.”

Today Apple is financially secure, but Ive’s departure raises questions about its future.  By Apple’s outsized standards, the design team is small, just a few dozen people out of an organization that now employs 132,000.  But the team wields tremendous influence, and Ive’s contributions are found in literally every product the company has shipped the past 20 years.

Separately, Apple is shifting manufacturing of its new Mac Pro computer to China from the U.S., the Journal reported today, citing people familiar with the matter.  Apple has tapped contractor Quanta Computer Inc. to manufacture the $6,000 desktop and is ramping up production at a factory near Shanghai.

“Like all of our products, the new Mac Pro is designed and engineered in California and includes components from several countries including the United States,” an Apple spokesman said.  “Final assembly is only one part of the manufacturing process.”

Last week, Apple asked its major suppliers to assess the cost implications of moving 15%-30% of their production capacity from China to Southeast Asia as it prepares for a restructuring of its supply chain, according to a Nikkei Asian Review report.

--FedEx Corp. beat Wall Street estimates for its quarterly profit on Tuesday, but the company warned its fiscal 2020 performance would be hurt by trade uncertainty and non-renewal of a contract with Amazon, sending the shares down 2%.

FedEx gets about a third of its revenue from overseas and it’s in the crosshairs of the Chinese government after two packages destined for Huawei addresses in Asia were diverted to the United States.  FedEx said the packages were “misrouted in error.”

Earlier, FedEx decided not to renew its contract with Amazon for U.S. cargo delivery through FedEx Express, the unit that delivers packages on planes.  But the company said Amazon represented less than 1.3% of its total revenue in the last calendar year.

Adjusted net income fell to $1.32 billion, or $5.01 per share, for the fourth-quarter ended May 31, better than forecast, while revenue rose to $17.8 billion from $17.3bn, basically in line.

Separately, FedEx announced it was suing the U.S. government, saying it should not be held liable if it inadvertently shipped products that violated a Trump administration ban on exports to some Chinese companies, referring to the Huawei episode.  There have been fears China would retaliate by blacklisting FedEx.

In court filings, FedEx said it should not be expected to enforce the export ban, and could not reasonably be held liable for shipping products that it did not know about.  Export restriction rules “essentially deputize FedEx to police the contents of the millions of packages it ships daily even though doing so is a virtually impossible task, logistically, economically, and in many cases, legally,” it said.

In the latest incident, PCMag said its writer in Britain had attempted to send a Huawei P30 handset to a colleague in the U.S.  FedEx returned the phone and told the sender that it could not deliver the package because of a “U.S. government issue” with Huawei and the Chinese government, PCMag reported.  FedEx responded by saying publicly that it would deliver all products made by Huawei to addresses other than those of Huawei and affiliates placed on the U.S. national security blacklist.

On Sunday, Huawei tweeted it was not within FedEx’s rights to prevent the delivery and said the courier had a “vendetta.”

--Bloomberg reported that several Huawei Technologies Co. employees have collaborated on at least 10 research projects with Chinese armed forces personnel over the past decade.  Huawei workers teamed with members of various organs of China’s People’s Liberation Army (PLA) in projects spanning artificial intelligence to radio communications, Bloomberg said.

A Huawei spokesman told Bloomberg, “Huawei does not have any collaboration or partnerships with the PLA-affiliated institutions.  Huawei only develops and produces communications products that conform to civil standards worldwide, and does not customize products for the military.”

Meanwhile, some of the large U.S. tech companies that the Trump administration has been targeting as part of its ban on exports to Huawei, such as Qualcomm Inc. and Micron Technology, are finding ways to resume some shipments to the blacklisted tech giant.

Micron, one of the world’s largest makers of memory chips, said it had determined some shipments were in compliance with U.S. law, while Qualcomm, the leading supplier of wireless chips, resumed some shipments of radio-frequency components to Huawei.  Intel is also shipping some of its products, according to the Wall Street Journal.

The U.S. companies are looking to fulfill contracts, while remaining compliant with Commerce Department restrictions.

--Nike Inc. posted higher sales in the latest quarter, boosted by strong demand in both the U.S. and China, executives saying the trade dispute hadn’t hurt the sneaker giant’s business.

CEO Mark Parker said in a conference call: “We have not seen any impact on our business to date, and we continue to see strong momentum.”

Nike produces about 25% of its global apparel and footwear in China.  But the company can source from factories in other countries to mitigate the impact of any potential tariffs for the U.S. market.

For the company’s fourth quarter, total sales rose 4% to $10.18 billion.  Revenue in the North American market, which accounts for the majority of total sales, rose 7% to $4.17 billion. Sales in China climbed 16% to $1.7 billion.

But the company fell short of the Street’s earnings expectations for the quarter, though for the full year, Nike earned $4 billion, on total revenue of $39.1 billion, up 11% over the prior year.

--Elon Musk is at it again.  Musk wrote in an internal email that was quickly “leaked” that Tesla Inc. could be on the verge of a quarterly record for vehicle deliveries, though the electric carmaker would need to go “all out” in the last few days to achieve the goal.

“There is a lot of speculation regarding our vehicle deliveries this quarter,” Musk told employees in the email Tuesday.  “The reality is that we are on track to set an all-time record, but it will be very close.  However, if we go all out, we can definitely do it!”

The company has forecast it will deliver 90,000 to 100,000 cars in the second quarter after handing over just 63,000 vehicles to customers in the first three months of the year.

So as is typical, Tesla shares rose on the news, $9, before closing down $0.50 on the day, which shows you just how much sentiment has changed regarding Tesla’s outlook.  From an all-time high of $387 to Friday’s close of $223.50.

--Maureen Callahan / New York Post...on Facebook....

“Just when it seems Facebook can’t get more sinister, more Orwellian or more mercenary, it does – announcing its own branded global cryptocurrency.

“Does this strike anyone else as terrifying?  A company that has operated with impunity, under zero federal regulations, whose CEO, Mark Zuckerberg, has been called – in a hapless act of political theater – to explain his shadowy practices before Congress, yet has never offered specific correctives to any of his outfit’s failings or overreaches or unintended consequences, makes its next big move this?

“As declarations go, it’s astonishing.  Zuckerberg is out for nothing less than dominion over us all.

“If you’re one of the site’s 2.6 billion users, Facebook’s operators know where you are all the time, whether you’re logged on or not.  They know what you’re buying, even if you’re in a brick-and-mortar shop. They scan photos you upload for biometrics.  They mine your data and sell it to advertisers, but they won’t say how much of it, only that it’s a small amount, promise.

“Facebook’s not the product.  We are.

“Fake news, authoritarian propaganda, abuse by genocidal forces or ruthless dictators, Russian interference in our most recent presidential election – whoops, says Facebook.

“They do, after all, move fast and break things.

“Facebook outsources the monitoring and taking down of dark materials – murders, child pornography and all manner of depravity – to contractors, and as The Verge reported last week, employees at a company called Cognizant were overworked, underpaid and ill-equipped to view such traumatizing content all day every day, with even their bathroom breaks surveilled and limited.

“Earlier this month, Business Insider reported that 68 percent of shareholders want Zuckerberg out as chairman. But that doesn’t matter, because Zuckerberg holds so much controlling stock that he simply ignored the vote.

“And that is everything we need to know....

“(As for its new project, Libra), guess who Facebook is going after...?  Poor people in failed states who have no access to traditional forms of banking, let alone wealth building.  Surely the impetus here is humanitarian.

“As to what institutions are going to back Facebook’s currency – which was created in secret, and which will eventually exist in the physical world as an alternative to U.S. currency, accessed through its own ATMs – that remains unclear.

“What is undeniable is Zuckerberg’s ambition.  His power is presidential, if not more so, because it remains untrammeled, unregulated and borderless.  If there was ever a moment to break up Facebook, as co-founder Chris Hughes and Sen. Elizabeth Warren have called for, it is now.”

--Ford Motor is disclosing more details for its massive cuts in its European operations, some 12,000 jobs eliminated and six plants by the end of 2020, including a previously announced facility in South Wales, as well as a transmission plant in France, and an assembly plant in St. Petersburg, Russia.

At the same time, Ford said it is freshening and expanding its vehicle line-up in Europe and will introduce at least three new models in the next five years, including a Mustang-inspired fully-electric performance utility.

--Deutsche Bank AG is looking to cut between 15,000 and 20,000 jobs, or more than one in six full-time positions globally, according to the Wall Street Journal today, with senior executives looking to accelerate DB’s downsizing in another pullback from its global ambitions.  Should the bank carry through with such deep cuts they would take place over more than a year and spread across regions and businesses, sources told the Journal.

Aside from troubles with its core businesses, DB faces a wide-ranging probe by U.S. law enforcement into money laundering allegations.  Additionally, U.S. House committees have demanded details of the bank’s lending relationship with President Trump and others close to his administration and businesses.

But Deutsche Bank’s U.S. subsidiary did pass the Federal Reserve’s stress tests.  Last year, it was the only bank subject to the tests to outright fail one leg of the exam, with regulators citing capital deficiencies and poor risk controls.

--AbbVie Inc. agreed to buy Allergan PLC for about $63 billion in a bet by the two drugmakers that a combination will deliver new sources of growth, each struggling to do so on its own.

The companies’ portfolios have some overlap in treatments for brain, women’s health, stomach and other disorders; AbbVie looking to Allergan’s nearly $16 billion in yearly revenue as a source of cash for further acquisitions and new products.

Shares in AbbVie fell about 8% following the news, while Allergan gained 28% over last Friday’s close.

--Bill Gates admitted twice in recent interviews that Microsoft’s failure to become Apple’s chief iOS rival was his “greatest mistake,” losing out to Google in the process, which launched Android to rival Apple’s iOS.

“In the software world, particularly for platforms, these are winner-take-all markets,” Gates said in an interview with venture capital firm Village Global.  “So the greatest mistake ever is whatever mismanagement I engaged in that caused Microsoft not to be what Android is.  Android is the standard non-Apple phone platform. ...There’s room for exactly one non-Apple operating system.”

Microsoft was the leader in the computer industry, but Apple took over the smartphone era when it debuted its iPhone in 2007, with Google following with Android in 2008.  Windows Mobile, launched in 2000, then quickly fell behind Apple and Google.

Gates told the Economic Club in Washington, D.C., that the antitrust trial it faced at the time was a major distraction.  Plus the company failed to assign staff to work on mobile.

“Our other assets like Windows and Office are still very strong, so we are a leading company,” Gates said in the Village Global interview.  “If we had gotten that one right, we would be the leading company, but oh well.”

In 2017, Gates admitted another regret...that Control-Alt-Delete wasn’t just a single key.

--Emergency service numbers for the Netherlands were knocked out for about four hours on Monday, the government launching an inquiry into telecom company KPN which is responsible for the network that connects national police, ambulance and fire department emergency numbers.  KPN said they did not believe it was a security breach.

The thing is three KPN backup systems failed.  Thankfully, there were no reports of serious mishaps as a result of the outage, but picture, at one point, emails were going out listing an alternate phone number for emergency services that turned to be a newspaper tip line.

KPN, which was privatized in the 1990s, is the country’s largest telecoms group, ahead of subsidiaries of Vodafone and T-Mobile.  It was in a similar outage in 2012 that two people died as a result.

--NBCUniversal made good on its promise to pull its popular sitcom “The Office” from Netflix and offer it on its own streaming service in 2021.  The company announced it has reached a five-year deal to put the series on the new service, which is expected to be launched in 2020.  Netflix has the rights to “The Office” through next year.

“The Office,” which starred Steve Carell and ran on NBC’s broadcast network from 2005 to 2013, has become one of the most popular offerings on Netflix, along with “Friends,” with Nielsen reporting subscribers streamed 52 million minutes of the 208 episodes in 2018.

NBCUniversal is said to be paying $100 million a year to its studio, Universal Television, for the rights to the show.  According to a CNBC report, Netflix offered $90 million a year.

Foreign Affairs

Iran: Monday, President Trump signed an executive order imposing sanctions on Supreme Leader Ayatollah Ali Khamenei and other senior figures, following last week’s shoot down of a U.S. drone, with Trump calling off a retaliatory air strike minutes before impact.  The president said he decided at the last minute that too many people would die.

So Thursday, Tehran warned it was ready to violate its commitments to the 2015 nuclear deal for the first time.

Iran has said it will accumulate enough low-enriched uranium to breach the 300 kilogram limit set out in the accord unless European countries find a way to help it sidestep U.S. sanctions.  It expected to reach that level Thursday or shortly thereafter.

The leaders of both countries promised they would not back down in a confrontation that has led them to the brink of war.

Wednesday, President Trump said any conflict would be short-lived and would not involve ground troops.

Asked if a war was brewing, Trump said in a Fox television interview: “I hope we don’t, but we’re in a very strong position if something should happen.

“I’m not talking boots on the ground... I’m just saying if something would happen, it wouldn’t last very long.”

Hours earlier, Ayatollah Khamenei said his country would not bow to U.S. pressure.  In his first public comments since sanctions were imposed on him, Khamenei said Iran “would not give up.”

“The graceful Iranian nation has been accused and insulted by the world’s most vicious regime, the U.S., which is a source of wars, conflicts and plunder.  The Iranian nation won’t give up over such insults,” he said in a speech to a crowd in Tehran.

Khamenei added Iran ruled out any negotiations with Washington.  “Iran has been accused and insulted” and “wronged by oppressive sanctions,” Khamenei said, “but not weakened and will remain powerful.”

“It is like you hold a weapon, so the other side does not dare come close,” the ayatollah said, and then the Americans order Iran to drop the weapon “so I can do whatever I want to you.”

Tuesday, Trump had tweeted: “Iran leadership doesn’t understand the words ‘nice’ or ‘compassion,’ they never have.  Sadly, the thing they do understand is Strength and Power, and the USA is by far the most powerful Military Force in the world.”

Iranian President Hassan Rouhani described the White House as “mentally retarded,” an insult Iran has used in the past about President Trump, adding, “Tehran’s strategic patience does not mean we have fear.”

Iran says there is no point negotiating with Washington when it has abandoned a deal that was already reached.

Britain, France and Germany were expected to announce tomorrow the launch of a financial mechanism designed to help European firms trade with Iran without facing U.S. sanctions.  The thought behind the financial vehicle, known as INSTEX, is that Iran would then decide not to breach its nuclear deal commitments.

But under the terms of a 2015 UN Security Council Resolution, 2231, which endorsed the accord, any Iranian violation could trigger the “snap back” of multilateral economic penalties, further escalating tensions.

The president of Iraq, Barhim Salih, warned both the U.S. and its allies on Wednesday that Iraq would not allow its territory to be used to attack the other side.

“We are asking everybody to cool it down,” Salih said in a speech in London.  “Enough is enough.  We cannot afford another war.”

At the G20 today, Trump said of Iran that he was hopeful.

“We have a lot of time – there’s no rush, they can take their time.  There is absolutely no time pressure.  Hopefully in the end it’s going to work out.  If it does, great, if it doesn’t, you’ll be hearing about it.”

---

Last Friday, I wrote of how embarrassing it was that the U.S. lost a Global Hawk reconnaissance drone  to an inferior Iranian missile system, and in Thursday’s Wall Street Journal, Taylor Dinerman wrote:

“The loss of a large Global Hawk reconnaissance drone to an Iranian missile last week should be a wake-up call.  America’s unmanned aerial vehicles are very useful, but they’re also vulnerable.”

Yup, you knew that.  What I didn’t know, as your editor, is that while I knew it wasn’t Iran’s sophisticated S-300 system (via Russia) that shot down the drone, I didn’t know until Dinerman’s piece that the drone was probably taken out by an SA-5, a 1970s Soviet long-range missile.  Good grief.

Editorial / The Economist

“For nearly four years Iran’s path to a nuclear weapon was blocked.  The deal it signed with America and other powers in 2015 limited its nuclear program to civilian uses, such as power-generation, and subjected them to the toughest inspection regime in history.  The experts agreed that Iran was complying and that its nuclear activities were contained.  But then President Donald Trump ditched the nuclear deal and Iran resumed stockpiling low-enriched uranium. It is now poised to breach the 300kg cap set by the agreement.  Iran may hesitate before crossing that line, but it is also threatening to increase the enrichment level of its uranium, bringing it closer to the stuff that goes into a bomb.

“Fortunately, Iran is not about to become a nuclear-weapons power.  Its breakout time is over a year.  But it is once again using its nuclear program to heap pressure on America.  That adds an explosive new element to an already-volatile mix.  America accuses Iran of attacking six ships in the Strait of Hormuz since May.  On June 20th Iran shot down an American spy drone.  America insisted the aircraft was above international waters, not Iran’s, and sent warplanes to strike back.  Ten minutes before they were due to hit targets inside Iran Mr. Trump called them off and contented himself with a cyber-attack instead.

“Neither Mr. Trump, nor America’s allies, nor Iran wants a big new war in the Middle East.  Yet Mr. Trump’s strategy of applying ‘maximum pressure’ on Iran is making the prospect more likely – because each side, issuing ever-wilder threats, could end up misreading the other’s red lines.  The president’s room for maneuver is shrinking.  As Iran turns more belligerent, calls for action will grow, not least from his own party.  Before things escalate out of control, both sides need to begin talking. That is not as unlikely as it sounds.

“Mr. Trump’s Iran strategy is based on the premise that Barack Obama gave too much away too easily when he negotiated the deal in 2015.  Last year the president set out to get better terms by reneging on the agreement and reimposing the sanctions that have crippled Iran’s economy.  This, his advisers argue, will force a weakened Iran to accept a new deal that lasts longer than the old one, most of which expires by 2030.  They also want curbs on Iran’s missile program and an end to its violent meddling in the region.  Mike Pompeo, the secretary of state, sees recent Iranian aggression as a sign that the strategy is working.

“Hard-hitting sanctions brought Iran to the negotiating table in 2015, but they are unlikely to lead to the transformation Mr. Trump wants.  One reason is that he has discredited Hassan Rouhani, Iran’s president and a champion of the nuclear deal.  Hardliners are now calling the shots. Another is that America is acting alone.  In 2015, in a rare moment of international unity, it had the support of its European allies as well as Russia and China.

“Maximum pressure comes with extra risks, to boot.  The mullahs and their Islamic Revolutionary Guard Corps want to prove their mettle by showing that Mr. Trump’s actions have costs – for everyone.  On top of the attacks on ships and drones, Iranian proxies have hit pipelines in Saudi Arabia and are suspected of having struck Iraqi bases hosting American troops....

“Hawks like John Bolton, Mr. Trump’s national security adviser, retort that if Iran wants war, that is what it will get – especially if it shows signs of dashing for a nuclear bomb, which could trigger disastrous proliferation in the Middle East.  But this is the riskiest calculation of all.  Having pulled out of a working deal, America may not win the backing of European allies for strikes. China and Russia would vehemently oppose any action at all.

“Perhaps sanctions or war will cause the regime to crumble. But that is hardly a strategy: Cuba has resisted sanctions for decades.  More probably, a defeated Iran would heed the lesson of nuclear-armed North Korea and redouble its efforts to get a bomb.  Attacking Iran’s nuclear facilities would not destroy its know-how, as even Mr. Bolton admits. If, as is likely, Iran barred international inspectors, its program would move underground, literally and figuratively, making it very hard to stop.

“The alternative to today’s course is talks between America and Iran.  Just now that looks far-fetched.  Iran’s foreign ministry says American sanctions imposed on Ayatollah Ali Khamenei, the supreme leader, and other top officials this week mark ‘the permanent closure of the path of diplomacy.’  Mr. Rouhani has suggested that the White House is ‘mentally handicapped’ – after which Mr. Trump threatened ‘obliteration.’

“But optimists will remember similar clashes between America’s president and Kim Jong Un, North Korea’s despot, before they met in Singapore and ‘fell in love,’ as Mr. Trump put it. When he is not threatening to annihilate the mullahs, Mr. Trump is offering to talk without preconditions and to ‘make Iran great again.’  He does not want the prospect of war in the Middle East looming over his re-election campaign.  Likewise, in Iran the economy is shrinking, prices are rising and people are becoming fed up.   Pressure is growing on Mr. Khamenei to justify his intransigence.  Love could yet bloom....

“As Mr. Trump seems to realize, biting everything off in one go is unrealistic. A new deal cannot solve all the problems posed by Iran or normalize ties with America after decades of enmity.  It may not even lift all of America’s sanctions.  Neither did the first agreement.  But, if done right, a deal would put Iran’s nuclear program back in a box, making it easier to tackle all those other problems without causing a war.”

David Graham / Defense One

“On Friday, after pulling back a strike on targets in Iran – with 10 minutes to go, by his account – President Donald Trump explained his decision on Twitter, saying that an estimated death toll of 150 was ‘not proportionate to shooting down an unmanned drone.’

“On Tuesday, after Iranian President Hassan Rouhani offered a rather Trumpian assessment of Trump and his administration, the president tweeted, ‘Any attack by Iran on anything American will be met with great and overwhelming force.  In some areas, overwhelming will mean obliteration.’

“So which one is it: proportional responses or obliteration for any attack?  Reading the president’s statements, it’s impossible to know what Trump’s Iran policy is – and it’s clear that Trump doesn’t know either.

“Detailed assessments of either approach seem pointless when no policy lasts longer than the life span of a tweet...

“It is tempting to compare this to President Barack Obama’s failed ‘red line’ of chemical-weapons use in Syria, which he did not enforce, but the situations are actually substantially different.  Obama laid out a clear policy and then found that he couldn’t enforce it.  Trump hasn’t laid out a clear policy in the first place....

“In fairness to Trump, Iran is a foreign-policy puzzle that has confounded multiple American presidents.  But Trump has made his own situation more difficult.  His ranks of advisers are full of temps, including the secretary of defense.  He doesn’t trust the advisers he has, speaking dismissively of National Security Adviser John Bolton in public and reportedly discarding his advice in private.

“Presidents override the judgment of their aides all the time.  The problem is that Trump doesn’t appear to possess the knowledge or judgment to formulate a policy independent of their advice, because he never bothered to learn about Iran in the first place.  His policy from the start has been Iran is bad, and Obama’s nuclear deal with Iran was bad, and was formed largely from Fox News fulminations.  This is fine as far as it goes, which is not very far.  Trump’s lack of interest in boning up on the topics he deals with has popped up repeatedly, from health care (from ‘it’s going to be so easy’ to ‘Nobody knew health care could be so complicated’) to border security to trade policy.

“But that ignorance and indecision is nowhere so dangerous as when the nation stands on the brink of a shooting war. It’s impossible for Iran to know what the White House’s view is, raising the chances that it will miscalculate, and set off an escalating conflict.  While keeping the Iranians off guard might seem advantageous – Richard Nixon’s ‘madman theory’ – the abortive strike means they may be confused but also less afraid.  Meanwhile, there’s no way for allies to know how to support the U.S. position, which keeps changing.  Not even the U.S. military knows what Trump wants.”

Editorial / Wall Street Journal

“The great weakness of Donald Trump’s foreign policy is its volatility.  He is unpredictable to a fault.  He has doubted his own Venezuela policy from the first week he signed off on it.  He called Kim Jong Un crazy but now says he’s a swell guy.  He signed a trade deal with Mexico then threatened it with new tariffs.

“On Iran he has adopted a policy goal favored by hawkish Sen. Lindsey Graham but wants to use only the means of isolationist Sen. Rand Paul to achieve it.  He warned that ‘if Iran wants to fight, that will be the official end of Iran,’ but he lets Iran shoot down a drone and interfere with international shipping.

“If Mr. Trump’s real policy is Mr. Paul’s, then he should be honest with Americans and return to the Obama nuclear deal.  In the meantime, Iran appears to be calling Mr. Trump’s bluff.”

A few days later...in a separate Journal editorial:

“Mr. Trump seems to believe Iran’s leadership is under severe political and economic pressure at home and may look for relief by agreeing to renegotiate.  But he also has to respond if Iran decides to escalate the violence against U.S. assets on a gamble that Mr. Trump doesn’t want to get into a shooting war as he gears up to run for re-election.

“Now would be a good moment for Europe to get off the fence and join the U.S. pressure campaign.  European diffidence is giving Tehran’s leaders hope they can ride out Mr. Trump in the expectation that he will lose in 2020.

“The same goes for the many Democratic presidential candidates who keep saying they’ll return without conditions to the 2015 nuclear deal. That also gives the Ayatollah reason to think he can wait out Mr. Trump.  Democrats can fairly criticize Mr. Trump for being unpredictable, even erratic, but not for being right about Iranian behavior.”

At week’s end, France was asking Trump to suspend some sanctions on Iran to make room for negotiations to defuse the confrontation.  At the same time, senior diplomats from Britain, France, Germany, China and Russia met with Iranian officials in Vienna today, the co-signatories to the Iran deal warning Tehran to stick to the terms of the accord.

Iran has said its main demand was to sell its oil at the same levels that it did before Washington withdrew from the deal.  But Iran has grown impatient over the promise to create the trade mechanism, INSTEX, which Europe admits today is still not ready to accept transactions.

As for the U.S., special envoy Brian Hook said today the United States will sanction any country that imports Iranian oil and there are no exemptions in place.

Israel / Palestinians: Arab politicians and commentators greeted President Trump’s $50 billion Middle East economic vision with a mixture of derision and exasperation, although some in the Gulf called for it to be given a chance.  In Israel, a spokesman for Prime Minister Benjamin Netanyahu described Palestinians’ rejection of the “peace to prosperity” plan as tragic.

Trump’s son-in-law, Jared Kushner, presented the plan at a conference in Bahrain on Tuesday and Wednesday, a blueprint that envisions a global investment fund to lift the Palestinian and neighboring Arab economies and is part of broader efforts to revive the peace process.

“We don’t need the Bahrain meeting to build our country, we need peace, and the sequence of (the plan) – economic revival followed by peace is unrealistic and an illusion,” Palestinian Finance Minister Shukri Bishara said on Sunday.

The Trump administration has said a political solution would be unveiled later.  Because of this, Arab leaders have denounced Kushner’s proposals as a “colossal waste of time,” “non-starter,” “dead on arrival.”

The Palestinian Authority said Kushner’s “abstract promises” were an attempt to bribe Palestinians into accepting Israeli occupation.

For his part, Kushner told Reuters in an interview, “The plan would invest about $50 billion in the region. It would create a million jobs in the West Bank and Gaza. It would take their unemployment rate from about 30 percent to the single digits. It would reduce their poverty rate by half, if it’s implemented correctly.  It’s a ten-year plan....

“We view our job as to try.  It’s very easy to find reasons why this could fail – we think about that all the time – but our job is to try to be more optimistic and to come up with situations that could maybe change the paradigm and I hope that by seeing this plan that we’ve spent a lot of time working on for a better economic future for the Palestinian people and for the region, people will start to look at this problem through a slightly different lens and maybe that leads to some badly needed breakthroughs.”

Syria: Among the world’s true heroes are Syria’s White Helmets, the civil defense workers who fearlessly are the first on the scene after an airstrike, for example. The other day, two of the White Helmets were among eight civilians killed in Russian and regime air strikes in Idlib province, according to the Syrian Observatory for Human Rights.

The rescue group said a “double-tap attack” by Russian warplanes had “targeted” rescue workers repeatedly as they were evacuating injured civilians from the town of Khan Sheikhoun.

The latest war crime came nearly a week after regime air strikes on an ambulance in the town of Maaret al-Numan killed three rescue workers.

“The world continues to fail to protect us and other humanitarian workers,” the group said in a statement on social media.

No Trump tweets on this topic.

Turkey: The ruling AK Party suffered a big defeat, losing control of Istanbul after a re-run of the city’s mayoral election, a stinging blow to President Erdogan.

What was even more startling was that the opposition party candidate, Ekrem Imamoglu, had a lead of 775,000 votes, with nearly all the ballots counted, a massive increase on the margin of 13,000 he achieved in the earlier election, a victory annulled after the AKP alleged irregularities.

The result ends 25 years of AKP rule in Istanbul.  Erdogan congratulated Imamoglu.  But the president has previously said that “whoever wins Istanbul wins Turkey.”

Erdogan has been in power, either as prime minister or president, since 2003, so the defeat is amplifying talk of a post-Erdogan era, though national elections are not scheduled until 2023.

Clearly, a vote will have to be held much earlier.

Afghanistan: Two U.S. soldiers were killed during a military operation here on Wednesday, bringing to nine the number of American military fatalities in the country this year.

The two, part of a Special Forces team, were killed by small-arms fire in the south of the country; the soldiers engaged in a fierce firefight with Taliban militants, a defense official saying the combatants were mere yards apart at one point.

Meanwhile, a seventh round of peace talks between the United States and the Taliban is set to begin this weekend in Qatar’s capital of Doha, where U.S. and Taliban negotiators have been trying to hammer out a deal.

The focus of the talks has been a Taliban demand for the withdrawal of U.S. and other foreign forces and a U.S. demand the Taliban guarantee that Afghanistan won’t be used as a base for militant attacks.

But the Taliban has long refused to talk to the Afghan government, and clearly there has been no let-up in the fighting, as the Taliban has vowed to sustain the fight until their objectives were reached.  This whole ‘peace process’ is absurd.

There are still about 20,000 foreign troops in the country, most of them American (about 14,000), as part of the U.S.-led NATO mission to train, assist and advise Afghan forces.

China: Prior to talks between Presidents’ Xi and Trump, a Chinese spokesman for the Foreign Ministry said China would not allow the Group of 20 to discuss the Hong Kong issue, with China saying the matter is an internal affair.  Demonstrations have continued to be held over the proposed legislation that would have allowed people to be extradited to the mainland to face trial in courts controlled by the Communist Party.

Separately, last weekend, the official People’s Daily reported that China will need to spend $440 billion over three years to improve village sanitation and clean up its heavily polluted rural environment.

The funds would be required to meet state targets to build clean rural toilets, treat household waste, and construct village sewage treatment plants, said the Communist Party journal.

Yes, the government is promoting a “toilet revolution.”

China’s “war on pollution,” now in its sixth year, has up to now focused primarily on improving air quality in industrialized cities along the east coast, but few inroads have been made to tackle the serious issues in rural areas, the government knowing it has to change “bad habits.”  Don’t try too hard to imagine what this involves.

North Korea: A senior North Korean diplomat said on Thursday that time was running out for the United States to formulate a new strategy to revive denuclearization talks.  Kim Jong Un has said a third summit between himself and Donald Trump would only be possible if Washington adopted a more flexible approach, setting a year-end deadline.

The U.S. is in behind-the-scenes talks with North Korea, with President Trump holding talks in Seoul this weekend with South Korean President Moon Jae-in.

Kim and Trump have now exchanged letters, North Korea’s official news agency saying Trump’s letter had “excellent content” and Kim would “seriously contemplate” it, without elaborating.

But there are few signs the U.S. and the North are any closer to a deal, and the U.S. Defense Intelligence Agency Director Lieutenant General Robert Ashley told Fox News in an interview on Monday that the U.S. intel community does not believe Kim Jong Un is ready to denuclearize.

As for China, during Xi’s first-ever visit to Pyongyang the other week, he promised Kim that China was determined to support the country’s new “strategic path,” whatever that is.  Most importantly, Xi is clearly siding with Kim against Washington.  The issue is how much desperately needed economic aid China will supply.

As I go to post, however, the U.S. special envoy for North Korea, Steven Biegun, said the United States is ready to hold constructive talks with North Korea to follow through on a denuclearization agreement reached by the two countries last year in Singapore.  President Trump having just tweeted, “While (in South Korea tomorrow with President Moon), if Chairman Kim of North Korea sees this, I would meet him at the Border/DMA just to shake his hand and say Hello(?)!”

Japan: Tokyo said on Thursday that Japan and the United States have not discussed revising the U.S.-Japan security treaty after President Trump renewed his criticism of the defense pact in a television interview.  

“We have a treaty with Japan.  If Japan is attacked, we will fight World War III. We will go in and we will protect them and we will fight with our lives and with our treasure.  We will fight at all costs, right?” Trump told Fox on Wednesday.  “But it we’re attacked, Japan doesn’t have to help us at all. They can watch it on a Sony television, the attack.”

Japan’s top government spokesman said the two governments “have not discussed revising the U.S.-Japan Security Treaty at all.  The obligations of the United States and Japan...are balanced between both countries.”

Friday at the G20, Trump and Japanese Prime Minister Shinzo Abe “reaffirmed their commitment to U.S.-Japan coordination on shared security challenges,” according to the White House.

Russia: President Vladimir Putin said in an interview with the Financial Times prior to the G20 summit said that liberal values were obsolete because they had been rejected by the majority of the people in Western nations.  Putin told the FT that German Chancellor Angela Merkel had made a cardinal mistake by adopting a liberal policy towards immigration from the Middle East.

Separately, Russia’s Deputy Foreign Minister Sergei Ryabkov warned of a new Cuban missile crisis on Russia’s border, as Washington’s deployment of land-based missile systems riles up the Russkies, especially when this is coupled with U.S. withdrawal from the INF arms control treaty.

It was in 1962 that the Soviet Union, responding to a U.S. missile deployment in Turkey, sent ballistic missiles to Cuba.

France: As you saw today if you caught some of the Women’s World Cup action, France has been hit with a dangerous heat wave, temperatures above 40C (104F) in some parts of the country at week’s end.  Parts of northeastern Spain experienced temps of about 113F.  In Switzerland, Geneva is expected to hit 96F on Sunday. 

France was traumatized by a heatwave in 2003 which was blamed for 15,000 extra deaths, there being a lack of air conditioning across the country.

Random Musings

--Presidential tracking polls....

Gallup: 43% approval of President Trump’s job performance, 55% disapproval; 89% Republicans, 37% Independents (June 3-16).
Rasmussen:  49% approval, 50% disapproval.

--Before I continue...just a note.  I’m still a Republican. But I’m going to cover the Democrats’ presidential nominating process dispassionately, simply making observations and trying to figure out, just like all of you, who will emerge from the pack.  I certainly have a personal fave or two, among the moderates, but one thing I’m not going to do is be like some of the Fox News nightly hosts who just rip anything Democrat because they wear the capital ‘D’ attached to their name.

That said there is one thing I think all of us who watched the debates Wednesday and Thursday can agree on.  The moderators were beyond awful.  I miss Tim Russert after watching some of these clowns.  [Fox’s Chris Wallace should be tabbed to moderate all of the debates, regardless of the network.]

OK...so I watched all but ten minutes of the first round in Miami, and all of last night’s round two, and while everyone has a different opinion, in round one I’m with those who said Julian Castro broke through to an extent, perhaps placing himself in the first ten (of 20, 24), while the woman I think is the best pure candidate for the Dems, if they are to have a shot at defeating Donald Trump, Sen. Amy Klobuchar, certainly did nothing to hurt her cause, which is the main goal in these early gatherings.  Ohio Rep. Tim Ryan, on the other hand, needs to resume his day job...I thought he’d do better.

The one I found interesting the first round was Hawaii Rep. Tulsi Gabbard.  I’ve seen her a lot over the last few years, and I appreciate her foreign policy acumen, even though I strongly disagree with her at times, but in viewing her Wednesday I kept thinking, 2020 lacks a legitimate third party candidate and she fits the bill.  [An authentic, classic ‘independent’ third party ticket would be Sen. Rand Paul and Gabbard.]

The debates showcased a split in the Party between the far-left and the moderates, the former led by Elizabeth Warren (and Bernie Sanders), Warren saying to loud applause Wednesday that she supports replacing private medical insurance with government-run healthcare, saying of her rivals: “There are a lot of politicians who say, ‘oh, it’s just not possible’...what they’re really telling you is, they just won’t fight for it....

“Well, healthcare is a basic human right and I will fight for basic human rights.”

But Sen. Klobuchar, representing the more moderate wing, countered: “I am just simply concerned about kicking half of America off of their health insurance in four years.”

So then last night, round two, Sen. Kamala Harris shined, scoring points throughout and launching a brutal attack on Joe Biden.  Harris assailed the former vice president for touting his past work with racist senators and having once opposed a policy to foster diversity in schools.

“And it was not only that,” Harris said, winding up her fastball, “but you also worked with them [racist senators] to oppose bussing.

“And there was a little girl in California who was part of the second class to integrate her public school and she was bussed to school every day.  And that little girl was me.”

POW! ZOOM! BAM!

Biden bristled: “It’s a mischaracterisation of my position across the board.  I did not praise racists.  That is not true.”

But then when Harris pressed him, Biden got all tied up, stupidly talking about the issue being one of states’ rights, and, well, you know, that was kind of the subtext of the Civil War, sports fans.  Not exactly the right reply for 2019 and a Democratic Party presidential debate.

Back to healthcare, there were further divisions Thursday as in round one, with Sen. Bernie Sanders arguing that Americans are ready to embrace a universal system, while Pete Buttigieg said, “I would call it Medicare for all who want it.”

Here’s the bottom line, as far too many tried to make too much of the first of at least six debates this year for the Dems.

There is clearly a group of five front-runners: Biden, Sanders, Warren, Harris and Buttigieg.

Is it possible for Klobuchar or Booker to break through?  Sure, though my senator, Booker, needs to stop talking about his Newark experience as if he’s doing something heroic by living there.  Whatever.

We have a long, long way to go, with lots of stumbles along the way. 

--No doubt Mayor Buttigieg has been distracted by the killing of a black man in his city of South Bend, Indiana, the police officer involved responding to reports of a suspicious person going through cars around 3:30 a.m. when the victim was spotted inside a vehicle.

When confronted, 54-year-old Eric Jack Logan approached Sgt. Ryan O’Neill with a 6- to 8-inch blade, O’Neill then firing twice, killing Logan.  The shooting was not recorded on the officer’s body camera.

In Thursday’s debate, Buttigieg handled a question on the issue with honesty.  Most viewers had to respect that.

--It just hit me who Democratic candidate Marianne Williamson, the goddess of love, reminds me of...actress MacKenzie Phillips.  [And Kate McKinnon already has Williamson down pat.  We need Marianne to survive at least into SNL’s fall season for this sole reason.]

--In a major blow to election reformers, the Supreme Court on Thursday rejected efforts to rein in electoral map manipulation by politicians aimed at entrenching one party in power, a practice known as gerrymandering that critics have said warps democracy.

In a landmark 5-4 ruling that will reverberate for years, the justices ruled for the first time that federal judges do not have the authority to curb the partisan practice – a decision that is likely to embolden state lawmakers to intensify use of it.

The court ruled along ideological lines in the decision written by Chief Justice John Roberts, conservatives in the majority, liberals in dissent.

The court sided with Republican lawmakers in North Carolina and Democratic legislators in Maryland who drew electoral district boundaries that had been challenged by voters as so politically biased that they violated Constitutional rights.

In the decision, Roberts said the court was not condoning excessive gerrymandering, which can yield election results that “seem unjust,” but added that it is an inherently political act reserved for legislatures, not courts, whose review would appear political.  The Constitution allows courts to forbid the practice, like it does racial discrimination in political map-drawing, Roberts allowed, though, “You can take race out of politics,” he said from the bench, “but you can’t take politics out of politics.”

Or as the Wall Street Journal opines:

“Partisan gerrymandering can be ugly, in other words, but not every problem is the Supreme Court’s job to fix.”

--From Adam Elmahrek and Paul Pringle / Los Angeles Times:

Contractors with white ancestry were awarded hundreds of millions of dollars in government contracts reserved for minorities by making unsubstantiated claims to being Native American, a Times investigation found.  To qualify for the minority contracting programs, they used membership in unrecognized Cherokee groups that federally recognized tribes and Native American experts consider illegitimate.

“Two years ago, when the mayor’s office in St. Louis announced a $311,000 contract to tear down an old shoe factory, it made a point of identifying the demolition company as minority owned.

“That was welcome news. The Missouri city was still grappling with racial tensions from the 2014 fatal police shooting of Michael Brown, a black 18-year-old, in nearby Ferguson. After angry protests, elected officials had pledged to set aside more government work for minority-owned firms.

“There was only one problem.

“Bil Buell, the owner of Premier Demolition Inc., has no verifiable claim to being a member of a minority group.  His ancestors are identified as white in census and other government records.  And his claim to being a Native American rests on his membership in a self-described Cherokee group that is not recognized as a legitimate tribe.

“The case highlights a major failure in the nation’s efforts to help disadvantaged Americans by steering municipal, state and federal contracts to qualified minority-owned companies.  In many instances, government agencies have not vetted those companies to protect the interests of taxpayers and legitimate minority contractors.

“Since 2000, the federal government and authorities in 18 states, including California, have awarded more than $300 million under minority contracting programs to companies whose owners made unsubstantiated claims of being Native American, a Los Angeles Times investigation found.

“The minority-owned certifications and contract work were issued in every West Coast state, New Mexico and Idaho, Texas and four Southern states, several states in the Midwest and as far east as Pennsylvania, The Times found.”

Actually, “William Wages, whose brother-in-law is House Minority Leader Kevin McCarthy, says he is one-eighth Cherokee. Wages’ company, Vortex Construction, has won more than $7 million in federal contracts set aside for minorities....

“Census and birth records available to The Times dating to 1850 show no Cherokees among his ancestors.”

This should infuriate everyone.  Offenders should also face life in prison, at best, for such massive, “premeditated,” crime, including insurance fraud. 

--Speaking of corruption and fraud, how about California Republican Rep. Duncan Hunter, darling of the far-right?    Hunter had previously been accused of misusing campaign funds, but now details are emerging and prosecutors said in court papers that he was having multiple extramarital affairs and now his wife may testify against him at trial to save herself.

Hunter was first indicted by a grand jury in August 2018 on various criminal counts, his wife, Margaret, also accused of taking more than $200,000 in campaign funds to pay for such expenses as private school tuition for their children, a holiday in Italy (“Three Coins in the Foun-tain....”) and expensive meals.

But Hunter won re-election in his San Diego County district anyway, only now prosecutors detail a series of five “intimate personal relationships” they said Hunter had between 2009 and 2016, in which he spent campaign funds on social occasions.  A couple of these liaisons involved female lobbyists.

As prosecutors put it: “Simply put, carrying out a sequence of romantic liaisons is so far removed from any legitimate campaign or congressional activity as to rebut any argument that Hunter believed these were proper uses of campaign funds,” they wrote.

Hunter’s attorney filed court papers Monday seeking to have the charges dropped or moved the case to another venue, like Greenland or Kazakhstan...or so I imagine.

I’m sorry, but this cracks me up given how sanctimonious he has appeared over the years.

--Editorial / Wall Street Journal

“The Supreme Court on Monday delivered another victory for free speech by striking down the Lanham Act’s prohibition on ‘immoral’ and ‘scandalous’ trademarks.  All nine justices agreed to some degree that the law’s broad scope offends the First Amendment, which sends the message that governments can’t use expansive statutory language to restrict speech they dislike.

“Fashion designer Erik Brunetti (Iancu v. Brunetti) sued the U.S. Patent and Trademark Office for denying a trademark for his streetwear line ‘FUCT,’ putatively short for Friends U Can’t Trust.  The government claimed the trademark violated the 1946 Lanham Act because it was ‘vulgar,’ ‘highly offensive’ and carried ‘decidedly negative sexual connotations.’....

“The majority showed judicial modesty by rejecting the invitation to rewrite the law in order to rescue it.  But as Justice Samuel Alito notes in his concurrence, the Court’s decision does not prevent Congress from adopting a more tailored law ‘that precludes the registration of marks containing vulgar terms that play no real part in the expression of ideas.’....

“(Justice Alito noted) that the Court’s ruling ‘is not based on moral relativism,’ but on the recognition that ‘a law banning speech deemed by government officials to be ‘immoral’ or ‘scandalous’ can easily be exploited for illegitimate ends.’  Look at college campuses or efforts in Congress to regulate political speech to see how right he is.”

--NASA’s Curiosity rover has detected another methane “spike” on Mars, in what could be a sign of life.

According to the New York Times, which published an email written by senior NASA scientists, the rover detected “startlingly high amounts of methane in the Martian air.”  

No guarantees, boys and girls.  Still no actual Martians or B-movie-like space monsters spotted by Marscam, which should they ever show up would no doubt go viral, but it’s a hopeful sign.

---

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

A special salute to Ret. Army Staff Sgt. David Bellavia, the first living Iraq war veteran to receive the Medal of Honor.  Five others who fought there were awarded the medal posthumously.

God bless America.

---

Gold $1412
Oil $58.20

Returns for the week 6/24-6/28

Dow Jones  -0.5% [26599]
S&P 500  -0.3%  [2941]
S&P MidCap  +0.9%
Russell 2000  +1.1%
Nasdaq  -0.3%  [8006]

Returns for the period 1/1/19-6/28/19

Dow Jones  +14.0%
S&P 500  +17.4%
S&P MidCap  +17.0%
Russell 2000  +16.2%
Nasdaq  +20.7%

Bulls 50.5
Bears 18.4

Have a great week....and a Happy Fourth! 

Brian Trumbore