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07/06/2019

For the week 7/1-7/5

[Posted 11:00 PM ET, Friday]

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Edition 1,056

It seems like more than just a week ago that we were in Osaka, and then the DMZ, but it was quite a weekend for President Trump, with the declaration of a trade truce between the United States and China, after Trump’s little summit with Chinese President Xi Jinping, and then Trump’s hour with Kim Jong Un at the DMZ following a surprise invite from The Donald.

I have full details of both important events below but here’s the bottom line.

You are nuts if you believe there is going to be a U.S.-China trade agreement anytime soon.  China will not allow itself to be humiliated again by foreign forces, and Huawei is driving the bus.  Fact.  Plus there are no actual dates as yet for renewed talks, not that this will matter.

Second, for all of Trump’s showmanship in his now three meetings with the chubby, chain-smoking, walking heart attack/stroke victim from Pyongyang, zero...ZERO...has been accomplished, though I readily admit it’s better to talk to your enemies than the converse.  That is assuming the guy on ‘our side’ is indeed a stable genius who might get one of the five “U.S. History” questions right on a Jeopardy! board.

But here’s the real issue. While nothing is going to get accomplished when it comes to China or North Korea for months to come, how will President Trump begin to act as we roll into 2020, when Americans, with the attention span of a gnat, if that, begin to truly focus on the election.  That is the 30% to 40% with the intelligence of a newt who are undecided, watching contrived summer game shows (not Jeopardy! of course) that the rest of us don’t want voting anyway, but will do so based on disinformation from some crazy post they read on Facebook, Instagram, or Twitter in the fall of next year.

And then there is Trump’s ongoing fascination with Vlad the Impaler.

Editorial / Wall Street Journal

“A final word about Mr. Trump’s joking admonition to Vladimir Putin, in front of the TV cameras, not to interfere in U.S. elections.  The Russian dictator smirked, and the press pounced.  These media critics have little credibility given how they ignored Barack Obama’s whispers to Dmitry Medvedev in 2012 that he’d have more flexibility after his re-election; how they cheered John Kerry in his concessions to Iran; and how they winked at Mr. Obama’s one-sided deal with Cuba’s Raul Castro.

“But Mr. Trump’s public canoodling with Mr. Putin is still a sorry spectacle. The Mueller report found no collusion between Mr. Trump and Russia, but the report and the House and Senate Intelligence Committees have proved beyond doubt that Russia meddled in the election to foment doubt about the result.

“Mr. Trump should be angrier than anyone since this Russian interference has haunted his entire Presidency.  By pretending it’s a joke he looks like a Putin supplicant.  One of our worries about a second term is that Mr. Trump would seek an arms-control deal with Russia that betrays Ukraine and European defenses.

“Personal diplomacy has its uses, as George H.W. Bush in particular showed as President.  But Mr. Trump doesn’t need to flatter tyrants as if they are great leaders.  These hard men will make decisions based on raw national interest, not because they like Mr. Trump.”

Trump World

--The Trump administration reversed course again on the controversial issue of putting a citizenship question on the 2020 census, as Justice Department lawyers told a federal court Wednesday that they had been “instructed” to try to find a way to add the question, despite statements from the administration on Tuesday that they were giving up the effort.

The Commerce Department, which oversees the Census Bureau, said Tuesday that it would begin printing forms without the citizenship question, retreating from the legal battle.

The government was running out of time to begin printing millions of forms, and court injunctions continue to bar the administration from adding a question to all forms asking whether household members are U.S. citizens.

But President Trump, in a tweet Wednesday, said reports that he had given up the fight were “incorrect or, to state it differently, FAKE!”

Experts say that including the question would be very likely to discourage many people from responding to the census, lowering the official population counts in states with large immigrant communities.  That could cost those states, particularly California, congressional seats and billions of dollars in federal funds that are distributed based on population.

The Supreme Court issued a 5-4 decision last week that stopped Commerce Secretary Wilbur Ross from including the question, ruling that Ross had “contrived” the rationale for adding it.

But the ruling written by Chief Justice John Roberts left a slim opening to include the citizenship question if the administration could draft a more plausible legal rationale.  Doing that, however, will take time, and the administration had told the courts that it needed to begin printing questionnaires by the end of June.

While the Supreme Court has begun its summer recess, it can respond to emergency appeals in pending cases.

--A federal appeals court in San Francisco on Wednesday blocked President Trump’s plan to shift $2.5 billion from the military budget to erect a border wall, finding by a 2-1 vote that the administration violated federal law by diverting funds Congress had appropriated for other purposes.

The administration had sought to move the funds from the Defense Department to the Department of Homeland Security to build the barrier in portions of Arizona, California and New Mexico.

--Meanwhile, the acting head of the Department of Homeland Security, Kevin McAleenan, ordered an investigation into reports that Border Patrol agents have been posting offensive anti-immigrant comments and threats against lawmakers on a private Facebook group.  The move was announced amid mounting criticism of the Trump administration’s handling of a humanitarian crisis along the U.S.-Mexico border.

The Facebook posts, first reported by the non-profit news site ProPublica, included jokes about the deaths of migrants and sexually explicit content referring to U.S. Representative Alexandria Ocasio-Cortez, a Democrat who has been highly critical of the detention facilities after a tour this week.

The DHS’s inspector general on Tuesday said migrant-holding centers in Texas’ Rio Grande Valley were dangerously overcrowded, publishing graphic pictures of cells holding twice as many people as they were built for.

--Monday President Trump told reporters “brand new Sherman tanks” would be a feature of the Fourth of July celebration, which had many, including in the military, wondering just what he was talking about, seeing as the Sherman tank hadn’t been produced since 1957.

So I was listening to the speech the president then gave Thursday and thought at one point, ‘did he just mention airports?’ Yes he did, in talking about the American Revolution.

“In June of 1775, the Continental Congress created a unified Army out of the Revolutionary Forces encamped around Boston and New York, and named after the great George Washington, commander in chief.  The Continental Army suffered a bitter winter of (sic) Valley Forge, found glory across the waters of the Delaware and seized victory from Cornwallis of (sic) Yorktown.

“Our Army manned the air, it rammed the ramparts, it took over the airports, it did everything it had to do, and at Fort McHenry, under the rocket’s red glare it had nothing but victory. And when dawn came, their star-spangled banner waved defiant.”

The battle at Fort McHenry that inspired Francis Scott Key to write “The Star-Spangled Banner” took place during the War of 1812, not the American Revolution.

Oh well.  I just wish the Continental Army had the benefit then of People Express Airlines and their $29 fares from Newark to Norfolk before the airline went under.  Wasn’t a lot of money in the Treasury in those days and this would have been helpful, as Alexander Hamilton knew better than anyone.

[Trump on Friday said of his “airports” reference, “I guess the rain knocked out the teleprompter.”  But I’ll give the ‘celebrity host’ on Fox News’ “The Five” today who said in listening to Trump’s speech that he “felt like he was getting a history lesson” a break by not identifying him.]

Marc Thiessen / Washington Post

“Millions of ordinary Americans who tuned in to watch must have been wondering what the fuss was all about.  Democrats promised they would witness a partisan address.  But instead, they saw the president deliver a deeply unifying speech that celebrated America’s accomplishments, and the courage of our men and women in uniform.  With each passing minute, the president looked larger while his critics looked increasingly petty and small.”

Michael D. Shear / New York Times

“In a made-for-television Independence Day production starring America’s military weaponry, President Trump used the Lincoln Memorial as the backdrop for a tribute to the country’s armed forces and a call for unity that has largely been absent during his divisive presidency....

“(Two weeks) after formally announcing his re-election bid in Orlando, Fla., with a dark message of grievance and pointed attacks on his enemies, the president on Thursday offered a different, more optimistic tone.  He imposed himself on Washington’s usually nonpolitical Fourth of July celebration in what he called a ‘Salute to America’ that avoided any of his usual attacks on the news media, Democrats or his intelligence agencies but placed him at the center.”

--A president can choose any advisers he wants, so if President Trump wants Ivanka by his side at the G20 summit, that’s his choice.

But it’s the message the president, and Ivanka, are sending when she’s put in spots better suited for career diplomats...as in who is the foreign minister of, say, France, supposed to listen to?

Actually, I could go on and on...but I’ll just bite my tongue.

--Trump Tweets:

“If Illegal Immigrants are unhappy with the conditions in the quickly built or refitted detention centers, just tell them not to come.  All problems solved!”

“Our Border Patrol people are not hospital workers, doctors or nurses.  The Democrats bad Immigration Laws, which could be easily fixed, are the problem. Great job by Border Patrol, above and beyond.  Many of these illegal aliens are living far better now than where they...

“...came from, and in far safer conditions.  No matter how good things actually look, even if perfect, the Democrat visitors will act shocked & aghast at how terrible things are.  Just Pols.  If they really want to fix them, change the Immigration Laws and Loopholes. So easy to do!”

“...Now, if you really want to fix the Crisis at the Southern Border, both humanitarian and otherwise, tell migrants not to come into our country unless they are willing to do so legally, and hopefully through a system based on Merit.  This way we have no problems at all!”

“The cost of our great Salute to America tomorrow will be very little compared to what it is worth. We own the planes, we have the pilots, the airport is right next door (Andrews), all we need is the fuel.  We own the tanks and all.  Fireworks are donated by two of the greats.  Nice!”

“As most people are aware, according to the Polls, I won EVERY debate, including the three with Crooked Hillary Clinton, despite the fact that in the first debate, they modulated the sound on me, and got caught.  This crew looks somewhat easier than Crooked, but you never know?”

Wall Street and Trade Wars

Stocks hit new highs early in the week, with the major averages closing at record levels on Wednesday, just in time for President Trump’s celebration the next day, but then the market fell a bit today on a strong employment report that has many now questioning whether the Federal Reserve will cut interest rates, as was assumed, when it next meets end of July.

Today we learned the economy added 224,000 jobs in June, much better than expected, though both April and May’s totals were revised slightly downward, the net result being we have a three-month average gain of 171,000*. 

*The first-quarter three-month average was 174,000.  Q4 was 233,000.

Average hourly earnings were slightly disappointing and are now running at a 3.1% annualized rate. Again, in an expansion this far advanced, wage gains would normally be 3.5%+.

The unemployment rate ticked up to 3.7%, while U6, the underemployment rate, also rose from 7.1% to 7.2%.  It’s still all good, just maybe too good to suit the Fed.  We may learn a lot more as to Fed sentiment when Chairman Jerome Powell gives his semi-annual testimony to Congress next week.

In other economic news, we had June ISM readings on manufacturing, 51.7, and the service sector, 55.1 (50 the dividing line between growth and contraction); both figures down from the prior month. 

Construction spending for May was -0.8%, and factory orders for the month -0.7%, both worse than forecast.

So add it all up and the Atlanta Fed’s GDPNow barometer for second quarter growth is at 1.3%, a far cry from Q1’s 3.1%, but we still have a lot of data to sort through before the government’s official first look end of the month.

And the bottom line is that as second-quarter earnings begin to flow in, up to 80% of companies that have preannounced are taking their guidance down, not up. 

But on the other hand, we have easy money all over the world these days, and that is why the path of least resistance has been to move into stocks, boys and girls.

And how low are some of the interest rates both in Europe and Asia?

Try these 10-year yields as of today’s close....

Germany -0.37%
France -0.09%
Netherlands -0.22%
UK 0.73%
Spain 0.32%
Italy 1.74%
Greece 2.10%
Japan -0.17%

U.S. 2.03%

Yes, those are minus signs in front of some of them.

Meanwhile, this afternoon in his press spray before heading to his club in New Jersey, Trump attacked the Fed yet again.

“We don’t have a Fed that knows what it’s doing,” the president keeping up his demand that Chairman Powell and his band of merry pranksters immediately lower rates...to like the levels of Germany and Japan.  Trump said if the Fed complied the economy would take off “like a rocket ship.”

No doubt Mr. Powell will be asked about the president’s comments next week.

Turning to Trade....

As expected, Presidents Trump and Xi Jinping agreed on a trade truce in Osaka Saturday, the U.S. agreeing not to tack on tariffs above what is already levied on $250 billion in Chinese exports, as in no additional tariffs on another $300 billion worth of Chinese goods as threatened.

Trump told reporters: “We had a very good meeting with President Xi of China, excellent, I would say excellent, as good as it was going to be. We discussed a lot of things and we’re right back on track and we’ll see what happens.”

And: “We’re holding back on tariffs and they’re going to buy farm products,” he said at a news conference after.  “If we make a deal, it will be a very historic event.”

As always, Trump gave no details on his farm product statement (which the Chinese government increasingly looks like it will tie to cooperation on Huawei), though there was a story China purchased 544,000 metric tons of U.S. soybeans prior to Saturday’s summit.

In a statement, China’s foreign ministry said negotiators from both sides would discuss the specific details, but did not elaborate.

China’s official state news agency Xinhua also quoted Xi as saying: “China and the U.S. have highly integrated interests and extensive cooperation areas and they should not fall into so-called traps of conflict and confrontation.”

As in, leave us the hell alone, U.S., when it comes to the South China Sea, among other things.

Xi said on the issues of sovereignty and respect that China must safeguard its core interests.

“China is sincere about continuing negotiations with the United States...but negotiation should be equal and show mutual respect,” the foreign ministry quoted him as saying.

The bottom line is the results of Osaka were similar to what emerged from the Trump-Xi meeting at the G20 summit in Argentina seven months ago; only this time, unlike the 90-day ceasefire Xi and Trump agreed to in December, this time they did not impose a deadline.

But the latest fragile truce could nonetheless have long-range implications, especially if the United States continues to keep in place broad tariffs on the first $250 billion in Chinese goods.  Global companies would be forced to continue to shift at least the final stages of production out of China.  The United States wants fundamental economic policy changes in China, while Beijing wants the tariffs dropped entirely.  They are hardly going to overhaul their economic model based on building up state-owned enterprises through subsidies, which has helped lift millions out of poverty.

And then there is the aforementioned Huawei.  President Trump decided to give in in his meeting with Xi, allowing U.S. companies to continue to sell to the Chinese telecommunications giant, reversing a ban imposed by the U.S. last month on Huawei buying U.S. products without a license, including from Google, which is crucial to many of Huawei’s initiatives.

Republican Senator Marco Rubio (Fla.), a China hawk, warned via Twitter that any concessions on Huawei “will destroy the credibility” of the administration. 

“If President Trump has agreed to reverse recent sanctions against Huawei he has made a catastrophic mistake.  It will destroy the credibility of his administration’s warnings about the threat posed by the company, no one will ever again take them seriously.”

Republican Sen. Lindsay Graham said on “Meet the Press,” “There will be a lot of pushback if  it is a major concession.”

Many in the national-security establishment don’t want to see the heat taken off Huawei, which officials say was built on a foundation of stolen Western technology and is now building wireless networks that could be  tapped by the Chinese government, allegations Huawei has forcefully denied.

Robert Lighthizer, the chief U.S. trade representative, sought to keep Huawei out of talks in the belief that it could complicate an already difficult negotiation.

But for Beijing, relieving U.S. pressure on the company was a precondition for a broader deal, though, again, the U.S. is demanding structural changes in China’s policy in order to protect U.S. intellectual property and ensure fair competition, let alone an agreement on enforcement mechanisms for same.

Hu Xijin, editor in chief of the Global Times, took to Twitter in English to complain: “The U.S. made big concessions?  U.S. companies selling equipment to Huawei is just going back to one and a half months ago; no new tariffs is going back half a month ago. China will actually buy more American goods and pay the cost of reforms. Some Americans still unsatisfied?”

Andrew Ross Sorkin / New York Times

“In an impromptu question-and-answer session late last month at the White House, President Trump was asked about the nation’s efforts to block Huawei, the Chinese telecommunications company, from doing business in the United States and with our allies around the globe.

“ ‘Huawei is something that is very dangerous,’ Mr. Trump said. Then, almost in the same breath, he added: ‘It’s possible that Huawei would be included in a trade deal....

“Over the weekend in Japan, Mr. Trump appeared to choose trade over national security, suspending the ban on United States companies’ supplying equipment to Huawei as he hopes to reach a trade deal with President Xi Jinping of China.  Without providing any details, he declared that American companies could sell to Huawei without creating a ‘great, national emergency problem.’

“He said this even as his own secretary of state, Mike Pompeo, spent the past several months traveling the world warning our allies that Huawei is a profoundly dangerous security threat and instructing them to freeze out the company.

“Senator Marco Rubio, Republican of Florida, used Twitter to call Mr. Trump’s reversal ‘a catastrophic mistake’ that ‘will destroy the credibility of his administration’s warnings about the threat posed by the company, no one will ever again take them seriously.’....

“While Mr. Trump may view Huawei as both ‘dangerous’ and a pawn in the trade war, the truth is it may be something else entirely.

“Huawei is the most significant long-term competitive threat to the United States’ dominance of the future of wireless technology. And the United States is woefully – even disgracefully – behind.

“No matter what the United States does to hobble Huawei – and Mr. Trump’s latest stance will only hasten its rise – it will not alter a fundamental problem that clouds the conversation: The United States needs a meaningful strategy to lead the world in next-generation wireless technology – a kind of Manhattan Project for the future of connectivity....

“In April...(an) alarming government report was issued – and largely overlooked.

“It was written by the Defense Innovation Board, a group of business leaders and academics that advises the Defense Department.  And it was a scathing indictment of the country’s 5G efforts.

“ ‘The leader of 5G stands to gain hundreds of billions of dollars in revenue over the next decade, with widespread job creation across the wireless technology sector,’ wrote the board, a who’s-who of the tech world that includes the former Alphabet chairman Eric Schmidt, the LinkedIn founder Reid Hoffman and Walter Isaacson, the author and a former chief executive of the Aspen Institute.

“ ‘The country that owns 5G will own many of these innovations and set the standards for the rest of the world,’ the board wrote.

“It added in no uncertain terms: ‘That country is currently not likely to be the United States.’

“It is no wonder.  No American company makes the devices that transmit high-speed wireless signals. Huawei is the clear leader in the field: the Swedish company Ericsson is a distant second; and the Finnish company Nokia is third.”

So I was watching a CNBC interview with President Trump’s trade adviser Peter Navarro this week and he was confronted on the Huawei 5G issue and he basically said, no problem, ‘we have Ericcson and Nokia.’  To which the questioner appropriately observed, ‘Well, ah, those aren’t American companies.’

This is indeed scandalous.  In many respects we are so overrated.

Thomas J. Duesterberg / Wall Street Journal

“(Success with China) will depend on U.S. resolve and tariffs to weaken the Chinese economy, whose success is a key to Mr. Xi’s political reign. Hard-liners in China appear to have the upper hand in blocking the tentative deal negotiated by Vice Premier Liu He, but can they hold out if the Chinese economy continues to weaken?  There are countervailing forces in China among the business community and reformers, but the Chinese system is so opaque that few can assess the relative strengths of these factions....

“A deal will be politically acceptable in the U.S. only if it includes structural reform as well as strong enforcement. And it appears that such a deal is likely to come about only if U.S. sanctions continue to weaken the Chinese economy.  Perhaps Europe will awaken to the threat China poses to its economy, but that seems unlikely at the moment.

“Though Mr. Trump hasn’t brought decisive results, Democrats are offering no new ideas to achieve an acceptable outcome in the China talks.  And the president signaled at Osaka that he can be patient in the negotiations. A good outcome requires steady pressure and perseverance to win more international support for the U.S. position.  It’s unclear if Mr. Trump can do that, but he’s the only one making the effort.”

There are other trade issues to deal with....the United States and European Union are battling over retaliatory tariffs in a long-running subsidy dispute between Boeing and Airbus.  The Trade Representative’s office in Washington on Monday published a list of $4 billion worth of EU goods to target in retaliation for European aircraft subsidies.

The EU has a similar case pending against Boeing and has readied retaliatory tariffs of its own.  Hardly what is needed given already strained ties between Washington and Brussels, much of which predates President Trump’s term.

Finally, Japan is imposing further restrictions on exports to South Korea, citing a decline in “relations of international trust” between the Asian neighbors.

Starting yesterday, Thursday, Japanese exports related to technology in manufacturing must apply for approval for each contract.

But it’s not exactly clear what is behind the bilateral tensions, though some point to a dispute over the seizure of local assets going back to World War II and compensation for forced laborers.

Yes, they have long memories in this region.  Something for President Trump to remember.

Europe and Asia

Lots of economic data for the eurozone (EA19) this week. 

We had the PMIs for June, with the composite for the EA19 at 52.2 vs. 51.8 in May; manufacturing, though, a still putrid 47.6, services a much better 53.6.

Germany: 45.0 manufacturing (below 50, contraction, a sixth straight month); 55.8 non-manufacturing (services)
France: 51.9 mfg; 52.9 services
Italy: 48.4; 50.5
Spain 47.9 (74-month low); 53.6
Ireland: 49.8 (72-month low); 56.9
Netherlands: 50.7 manufacturing (72-month low)
Greece: 52.4 mfg.

UK: 48.0 manufacturing; 50.2 services

[All the above courtesy of IHS / Markit]

Separately, Eurostat released the May unemployment data for the euro area, the overall figure at 7.5% (7.6% in April), the lowest since July 2008.

Germany 3.1%; France 8.6%; Italy 9.9%; Spain 13.6% (though down from 15.4% a year ago), Netherlands 3.3%; Greece 18.1% (March), Ireland 4.4%.

Lastly, retail trade for the EA19 in May was down 0.3% over April, up just 1.3% from a year ago.

Chris Williamson / IHS Markit

“Eurozone manufacturing remained stuck firmly in a steep downturn in June, continuing to contract at one of the steepest rates seen for over six years.  The disappointing survey rounds off a second quarter in which the average PMI reading was the lowest since the opening months of 2013, consistent with the official measure of output falling at a quarterly rate of approximately 0.7% and acting as a major drag on GDP....

“The downturn is also increasingly feeding through to lower inflationary pressures, as producers and their suppliers compete on price to retain customers and generate sales.  In stark contrast to the steep rise in producers’ costs and charges seen at the start of the year, raw material prices are now falling for the first time in three years and selling prices are barely rising.

“The downturn is also showing no signs of any imminent end.  The survey’s forward-looking indicators remained worryingly subdued in June, adding to concerns about the economy in the second half of the year.”

But after the service-sector data a few days later, Mr. Williamson offered:

“The June PMI surveys indicate that the pace of eurozone economic growth picked up at the end of the second quarter, though it would be wrong to get overly excited by the upturn. The survey is indicative of GDP merely rising by just over 0.2% in the second quarter, and a deterioration of business expectations for the year ahead to one of the lowest seen for over four years suggests the business mood remains somber.  Downside risks to the outlook prevail amid trade war worries, rising geopolitical uncertainty and slowing global economic growth....

“Given the relatively weak current and future growth being signaled by the PMI and the accompanying slide in inflationary pressures, we expect to see renewed stimulus from the ECB in coming months.”

The EU: A new slate of leaders is being decided on, with German Defense Minister Ursula von der Leyen to become the new president of the bloc’s powerful executive arm, the European Commission, taking over from Jean-Claude Juncker, one of two women named to top EU posts for the first time.

European Council President Donald Tusk is to be replaced by Belgian Prime Minister Charles Michel.

Frenchwoman Christine Lagarde, a familiar figure who is currently president of the IMF, has been proposed as president of the European Central Bank, while Spanish Foreign Minister Josep Borrell was nominated to become EU foreign policy chief, meaning he would be charged with supervising the Iran nuclear deal.

Only Michel can take up his post without a vote.  The others must be endorsed by the European Parliament.

Brexit: Boris Johnson and Jeremy Hunt have stepped up their campaigning to replace Theresa May as prime minister and head of the Conservative Party.  The 160,000 party members will choose between the two in a mail ballot, the result of which is due July 23.  The winner automatically becomes PM, and then the ‘fun’ begins.  Three months to Brexit, Halloween.

Speaking of which, Hunt this week said he would decide to take Britain out of the European Union without a deal on October 31 if it becomes clear at the beginning of that month that there is no prospect of getting an agreement through parliament.

But Johnson is still expected to win the race handily.

Italy: The government dodged the threat of EU disciplinary action over its public finances on Wednesday after persuading the European Commission that new measures submitted this week would help bring its growing debt into line with EU fiscal rules.  Italy’s anti-austerity, Eurosceptic government made further concessions in the final hours of the talks with Brussels.  The European Union executive then said opening a disciplinary procedure was no longer warranted as Italy was expected to be broadly compliant with the EU’s stability and growth pact this year.

So Italian bond yields plunged in response, with Economy Minister Giovanni Tria issuing a statement calling it “a great day for Italy.”  He said the government’s efforts had been “rewarded twice over” by the dropping of the disciplinary procedure and by the positive market response which lowers Rome’s borrowing costs.

Turning to Asia...

China’s official government manufacturing PMI for June was 49.4, unchanged from May.  The service sector came in at a much stronger 54.2 vs. 54.3 the prior month.

The private Caixin manufacturing PMI was 49.4, with the new orders index down to 48.8 from 50.7 the prior month, not good. The service sector Caixin reading was 52.0 for June vs. 52.7 in May.

Japan’s manufacturing PMI for June was 49.3; 51.9 non-manufacturing.

[South Korea’s manufacturing PMI was 47.5; Taiwan’s 45.5, the worst since Nov. 2011]

Street Bytes

--As alluded to above, stocks hit all-time highs on Wednesday, the Dow Jones at 26966, S&P 500 2995 and Nasdaq 8170, before falling a little Friday on the employment data and concern the Fed won’t cut rates later this month.

On the week, the Dow gained 1.2%, S&P 1.6% and Nasdaq 1.9%.

--U.S. Treasury Yields

6-mo. 2.12%  2-yr. 1.86%  10-yr. 2.03%  30-yr. 2.54%

Yield on the 2-year up 11 basis points on the week, the 10-year up 8 bps Friday on the jobs report.

--President Trump said he’s planning to nominate Christopher Waller and Judy Shelton to serve on the Federal Reserve Board.  Waller is an executive vice president and the director of research at the St. Louis Federal Reserve Bank, who previously was a professor of economics at Notre Dame.

Shelton, who has been an informal adviser to Trump, is the U.S. executive director for the European Bank for Reconstruction and Development.

Earlier this year, Trump advanced two supporters for the Fed, Stephen Moore and Herman Cain, but both withdrew their names after they came under criticism.

--OPEC sealed a long-term cooperation agreement with Russia on Tuesday, extending a partnership set up two years ago to fight a surge of U.S. oil that has upset the balance of power in the oil market, specifically OPEC’s ability to control prices to a large extent.

The 14 crude-producing nations of the cartel and a Russia-led group of 10 countries also completed a nine-month agreement to curb oil production by a combined 1.2 million barrels a day, rolling over the six-month deal that was set last December.

Despite the production agreement, prices fell over fears on future demand, and OPEC, the International Energy Agency, and the Energy Information Administration have all recently cut their demand growth outlooks for 2019.

But then we had an inventory report on Friday that revealed a decline far less than expected and oil rallied some, cutting the loss for the week to less than $0.50, finishing at $57.73 on West Texas Intermediate.

--Boeing said on Wednesday that it would allocate $100 million to help the families and communities affected by the recent crashes of two of its 737 MAX jets; an acknowledgement of Boeing’s responsibility in the crashes, which were caused by a malfunctioning anti-stall system on the new jets. 

“We at Boeing are sorry for the tragic loss of lives in both of these accidents, and these lives lost will continue to weigh heavily on our hearts and on our minds for years to come,” CEO Dennis Muilenburg said in a statement.  “The families and loved ones of those on board have our deepest sympathies, and we hope this initial outreach can help bring them comfort.”

Boeing still has to deal with a slew of lawsuits from victims’ families, investigations by federal regulators and calls for compensation from airlines.

Speaking of this last point, Southwest Airlines, the largest operator of the grounded Boeing 737 MAX, said the latest safety issue with the beleaguered aircraft was forcing the carrier to reassess its schedule for the rest of the year, as first reported by Bloomberg.

The latest problem, “unfortunately, is going to delay the timeline for returning the MAX to service,” CEO Gary Kelly told employees on Monday.  “That’s very disappointing.”

After Boeing completes the update to the MAX, the FAA must review the fix as well as the results of test flights, which most are now saying won’t be before mid-September, and then you have the issue of whether pilots need to go through simulator training or just through their laptops, and so you’re talking October at the earliest.

--Major auto makers in the U.S. saw new-vehicle sales drop in the first half, a trend that is expected to continue the remainder of the year, though we are coming off the industry’s historic sales run.

A dramatic shift away from sedans and compact cars helped dent sales in the first part of the year as General Motors and other auto makers discontinued these models.

U.S. new-vehicle sales in 2019 are likely to fall below 17 million for the first time since 2014, analysts predict, as the strong sales since the financial crisis have satisfied pent-up demand.  No need to panic, though. Just a slowdown for now.

J.D. Power estimates the annualized selling pace in June to come in at 17.3 million, lower than a year earlier, while the first half posted six straight months of weaker sales compared with the same period in 2018, according to Cox Automotive.

GM’s U.S. sales slid 4% through June, while Fiat Chrysler reported a 2% decline in the first six months.  Ford reported a 2.9% drop, with second-quarter sales down 4.1%.

Among the Japanese car companies, Toyota Motor Corp. was off 3% in the first half, Nissan was down 8.2% and Honda Motor’s Co.’s U.S. sales fell 1.4%.

--Tesla Inc. set a record for quarterly vehicle deliveries in a triumphant response to loads of questions about demand for its electric cars.  Shares rose 4.6% on the news Wednesday.

Tesla didn’t comment on profit, as the earnings release comes later, but the robust deliveries will help jumpstart sentiment, one would think, though the stock at $232.70 at week’s end was well below the $347 it closed at on Jan. 11.

Deliveries of all models for the quarter hit 95,200 vehicles, including 17,650 Model S and X, though this was down from the 27,550 of the more expensive and profitable models delivered in the fourth quarter.  Analysts on average were expecting total deliveries of 89,084.  CEO Elon Musk has repeatedly said Tesla would deliver a record number of cars in the second quarter, beating the 90,700 it sent to customers in the final quarter of last year.

In a statement, the company added that it was “well positioned” to increase production and deliveries in the third quarter.  But Tesla may be hard pressed to reach its goal of selling 360,000 to 400,000 cars this year.  That is because the company has delivered just over 158,000 in the first six months.

Tesla had a miserable first quarter and lost $702 million, which the company blamed in part on logistics issues at the company’s international ports and a drop-off in U.S. orders after the tax credit was halved, spurring worries that Tesla may have tapped a limited market for electric cars at premium prices.  And despite the solid quarter, skeptics remain.  Heck, the muted reaction in the share price spoke volumes.

I must admit, though, that I have suddenly seen a lot of Teslas on the road in my area.

--I had no idea the Betsy Ross flag, with a circle of 13 stars representing the first colonies, was being used by some white nationalists.  Nike claims it didn’t know either when it created a special edition Air Max 1 Quick Strike Fourth of July trainer featuring the flag.

So Nike then withdrew the shoe “based on concerns that it could unintentionally offend and detract from the nation’s patriotic holiday,” the company plunging headlong back into the nation’s culture wars.

The abrupt cancellation came after Colin Kaepernick, the former NFL quarterback and social justice activist, privately criticized the design to Nike, according to various sources.

Kaepernick, who had signed a lucrative deal to serve as a Nike brand ambassador last year, expressed the concern the Betsy Ross flag had been co-opted by groups espousing racist ideologies, a source told the New York Times.

Republican Gov. of Arizona Doug Ducey announced on Twitter that he would pull back state support for a Nike facility that would have employed more than 500 people, which the company had proposed to open in Goodyear, Arizona.  [The support was apparently in the offer of a grant worth up to $1 million.]

“Words cannot express my disappointment at this terrible decision,” Ducey said in a series of tweets, adding that Nike “has bowed to the current onslaught of political correctness and historic revisionism.” 

Ducey, who had previously expressed excitement over the project, also said: “Arizona’s economy is doing just fine without Nike.  We don’t need to suck up to companies that consciously denigrate our nation’s history.”

But Democratic governors in states such as California said, ‘Hey, we’ll take your factory, Nike.’ 

By week’s end, the shoe was going for over $2,500 on some web sites.

Editorial / Wall Street Journal

“Colin Kaepernick may no longer be a quarterback, but he’s calling the plays at Nike.  The athletic shoe company was scheduled to release a sneaker featuring the ‘Betsy Ross flag’ this week, but the former San Francisco 49er thought it wasn’t a good idea.  The Air Max 1 USA, featuring the Founding-era American flag with 13 white stars arranged in a circle to represent the original colonies, would have gone on sale to mark the Fourth of July holiday.  Not anymore.

“We commend Nike executives for their original patriotic instincts, assuming they were sincere, but they didn’t think this one through.  Last year the company launched an ad campaign featuring a black-and-white photo of Mr. Kaepernick bearing the words ‘Believe in something.  Even if it means sacrificing everything.’....

“Remember the National anthem?  Normally we sing it standing and facing the American flag.  Did  no one at Nike foresee a contradiction between its exaltation of Mr. Kaepernick’s anti-flag fervor, on the one hand, and its flag-embossed sneaker on the other?

“Mr. Kaepernick certainly noticed....

“The company had already shipped the shoes to retailers, but it deferred to Mr. Kaepernick’s historical and semiotic expertise and had them all recalled....

“Nike is entitled to cancel its products for any reason. But the rest of us are entitled to point out that no flag of the United States is a symbol of oppression and racism, and that Mr. Kaepernick’s suggestion that it is one – with Nike’s tacit agreement – is political theater based on false history....

“It’s also worth remembering that harebrained controversies like this give many Americans the not unreasonable sense that their country is being maligned by pampered social-justice warriors.  Donald Trump has reaped enormous political benefits from the ill-judged fashion among NFL players to kneel during the National Anthem. If the President wins re-election, perhaps he should write a thank-you note to Colin Kaepernick and Nike.”

--Delta Air Lines Inc. raised its outlook for the June quarter, as it sees stronger demand from travelers leading into the summer travel season.

The nation’s third-largest carrier by traffic on Tuesday said it expects second-quarter adjusted revenue to rise between 8% to 8.5% from the prior-year, up from the 6% to 8% growth it previously expected.

--Warren Buffett said Monday he plans to donate $3.6 billion of Berkshire Hathaway Inc. stock to five charities – one of his largest gifts ever.  This brings the total amount of stock he’s donated to foundations to about $34 billion since making a pledge in 2006 to give away all his fortune.  The recipients include the Gates Foundation, as well as charities named for his late wife and ones run by his children.

--We note the passing of a great American...Lee Iacocca, 94.  Iacocca was an immigrant’s son and salesman extraordinaire whose blunt and swaggering persona dominated the auto industry like nobody since Henry Ford.

Iacocca really had two careers, first, as father of the wildly popular Ford Mustang in 1964, and then at Chrysler, which following his firing at the hands of Henry Ford II, he rescued dramatically in the early 1980s.

A powerful speaker, with a soaring ego, he became a hero to millions of Americans, as well as a household name for starring in his own commercials for Chrysler, where he would point at the camera and deliver a sales pitch that entered the lexicon: “If you can find a better car, buy it.”

Oh, he had his critics, for sure, and many said he clearly deserved to be fired from Ford as he schemed to take over the company, but no one can dispute his success at Chrysler.  It was a company moments from bankruptcy, but Iacocca persuaded Congress to guarantee $1.5 billion in loans to launch its new “K-car” and extracted major givebacks from workers, dealers, bankers and suppliers.  Chrysler regained it health and Iacocca famously paid back his government loans seven years early.

“He was easily one of the greatest figures in the history of the automobile industry,” said David Lewis, a professor emeritus of business history and Ford expert at the University of Michigan.  “And he was second only to [the first] Henry Ford in the amount of publicity he generated.”

Iacocca exploited his high visibility to attack U.S. and Japanese policies that he said were killing American jobs, a message that hit home as factories closed by the thousands in the 1980s and the nation’s economy seemed to wither in the face of competition from Japan.

Iacocca’s leadership of a money-raising blitz to refurbish the Statue of Liberty and Ellis Island in the mid-1980s further honed his image as a patriot and champion of the working people.  Some leading Democrats touted him as a presidential candidate.

But his hard-driving and loud style not only wasn’t suited for politics (at least back then), but by the late 1980s, Chrysler began to have some serious problems and Iacocca was forced to lay off thousands while he continued to collect huge paychecks, which began to hurt his image.

Iacocca retired as chairman of Chrysler on Dec. 31, 1992, having underseen a second turnaround that led to the company becoming the most profitable in the industry in the mid-1990s.  He wanted to be remembered for the profitability he engineered, but as he put it, “I have a feeling I’m going to be remembered only for my TV commercials.”

Iacocca was born in Allentown, Pa., and attended Lehigh University in nearby Bethlehem, and then received a master’s degree in engineering at Princeton, joining Ford as an engineering trainee in 1946.  Ten years later he drew the attention of Robert McNamara, who was running the Ford Division, McNamara bringing Iacocca to the headquarters in Dearborn, Mich.  One of McNamara’s last acts at Ford was to recommend that Iacocca become, at 36, the youngest vice president in Ford’s history.

Using this platform Iacocca orchestrated the new Mustang, which sold 419,000 its first year and became a huge success story.

--According to researchers at the University of California at Riverside, puffing on electronic cigarettes can damage neural stem cells important to brain function, per a new study.

E-cigarettes are sold as safer and cleaner than tobacco cigarettes, but as a co-author of the research, Atena Zahedi, said: “Even short-term exposure can stress cells in a manner that may lead, with chronic use, to cell death or disease.  Our observations are likely to pertain to any product containing nicotine,” Zahedi said in a statement.

E-cigarettes set off a complex series of cellular-level events that damage stem cells’ DNA, the researchers said.

--Meghan McCain, the 34-year-old daughter of the late Sen. John McCain, is reportedly considering leaving the ABC daytime talk show “The View,” according to various sources.

McCain feels “so exhausted and defeated,” an anonymous source told the Daily Beast, pointing to rising tensions between the co-hosts.  In a CNN report, McCain was described as “miserable” on the show.

But ABC is dismissing the reports.

--MAD magazine is coming off newsstands after a 67-year run.  The famed satirical magazine featuring the freckled face of Alfred E. Neuman will stop publishing new material outside of its end-of-year specials, owner DC said in an email.

Soon the bimonthly publication will only feature vintage MAD content and be sold at comic book stores.  The magazines will still be mailed to subscribers, and DC  will continue to publish MAD books and special collections.

“I am profoundly sad to hear that after 67 years, MAD Magazine is ceasing publication.  I can’t begin to describe the impact it had on me as a young kid – it’s pretty much the reason I turned out weird,” tweeted comedian “Weird Al” Yankovic, who served as MAD’s first guest editor in 2015.  “Goodbye to one of the all-time greatest American institutions.”

Foreign Affairs

Iran: President Hassan Rouhani on Wednesday warned that Iran would increase its enrichment of uranium this weekend to whatever level was needed beyond the cap set by the nuclear agreement.

Iran has repeatedly threatened to increase enrichment above the 3.67 percent level allowed under the nuclear deal by July 7 unless it receives some relief from U.S. sanctions.  European countries are struggling to meet Tehran’s demands to keep the 2015 nuclear deal alive.

“Our enrichment rate is not going to be 3.67 percent anymore,” Rouhani said.  “It’s going to be as much as we want it to be.”

The uranium needs to be enriched to much higher levels, around 90 percent, before it can be turned into a weapon.

Iran argues that it should no longer be bound by the limits of the deal if it does not also benefit from the sanctions relief that the 2015 agreement promises.  Since withdrawing from the deal last year the United States has reimposed sanctions, which has also made it difficult for European companies to trade with Iran.

European signatories to the nuclear pact with Iran said on Tuesday they were “extremely concerned” by Tehran’s apparent breach of the accord, as Israel said it was preparing for possible involvement in any confrontation between Iran and the United States.

Iran’s main demand at this point is that it be allowed to sell its oil at the levels before Washington pulled out of the deal and restored sanctions.  Iranian crude exports were around 300,000 barrels per day or less in late June, industry sources said, a fraction of the more than 2.5 million bpd Iran shipped in April 2018, the month before Trump withdrew from the nuke deal.  Iran has said it will breach the accord’s nuclear curbs one by one until it is able to sell that amount of oil, saying this is the least it should be able to expect from an agreement that offered economic gains in exchange for nuclear restrictions.

President Trump tweeted:

“Iran has just issued a New Warning.  Rouhani says that they will Enrich Uranium to ‘any amount we want’ if there is no new Nuclear Deal.  Be careful with the threats, Iran.  They can come back to bite you like nobody has been bitten before!”

And:

“Iran was violating the 150 Billion Dollar (plus 1.8 Billion Dollar in CASH) Nuclear Deal with the United States, and others who paid NOTHING, long before I became President – and they have now breached their stockpile limit.  Not good!”

Meanwhile, a tanker suspected of violating EU sanctions against Syria, the Grace 1, was seized by British Royal Marines in Gibraltar on Thursday, apparently having sailed from Iran.  If so, the tanker also defied a U.S. ban on Iranian oil exports.  [The Brits landed a helicopter on the moving vessel in pitch darkness...not bad, Gents, not bad at all.]

The tanker had sailed around Africa from the Middle East and shipping data reviewed by various news sources suggests it had been loaded with Iranian oil off the coast of Iran, although the ship seems to have documents saying the oil is from Iraq. [Iran later admitted it was from their country.]

A spokesman for British Prime Minister Theresa May welcomed Gibraltar’s move, though the incident could also signal some tensions within Europe.  Spain, which challenges British ownership of Gibraltar, said the action was prompted by a U.S. request to Britain and appeared to have taken place in Spanish waters.

While Europe has banned oil shipments to Syria since 2011, it had never seized a tanker at sea.

Needless to say Tehran is fuming, the foreign ministry summoning the British ambassador to voice “its very strong objection to the illegal and unacceptable seizure” of the ship.  But such a gesture lifted any doubt over Iran’s ownership of the vessel, which flies a Panamanian flag and is listed as managed by a company in Singapore.

At the same time, an Iranian Revolutionary Guards Corps commander, Mohsen Rezai, threatened today to seize a British ship in retaliation.

Editorial / Wall Street Journal

“Many Europeans will blame Washington more than Tehran for (the breakout in uranium enrichment).  But it’s been clear all along that the regime has viewed the deal as a pause, not an end, to its nuclear ambitions.  In 2016 the country overproduced heavy water, which the Obama Administration then purchased.  Earlier this year the country’s top nuclear official acknowledged the regime had long been preparing to break out from the deal and pursue nuclear weapons.

“Iran also ignores United Nations Security Council bans on missile tests and weapons sales.  The regime maintains a destabilizing presence in Syria, plots terrorist attacks in Europe, and calls for the destruction of Israel.  Its recent attacks on oil pipelines throughout the Middle East are part of a pattern that long preceded the U.S. maximum-pressure policy.

“That policy is putting an enormous economic and political strain on Iran, which explains why it is acting out even as it refuses the U.S. invitation to renegotiate. The loud announcement of a nuclear breakout is intended to scare the world into coaxing President Trump to back off the sanctions pressure.

“Iran’s actions should instead prompt Europe to join the U.S. in sanctions.  Some in Europe are hoping Mr. Trump will lose his re-election bid and a Democrat will rejoin the nuclear accord.  But we’ve learned enough about Iran’s behavior to know that the regime always intended to use the deal to finance its adventures abroad, while biding its time and getting stronger as it waits for the date it could escape the deal’s strictures and become a nuclear power.”

Syria: 200 corpses, including those of people believed to have been executed by ISIS, were found near the city of Raqqa, according to the Syrian Observatory for Human Rights.  More bodies are expected to be uncovered as the search of the area continues.

Libya: The United Nations said on Thursday it had information that Libyan guards shot at refugees and migrants trying to flee from air strikes that killed at least 53 people, including six children, in a migrant detention center.  The UN said there were two air strikes late on Tuesday, one hitting a hangar containing around 120 refugees and migrants.  There are still about 500 people at the detention center east of Tripoli.

Libya is one of the departure points for African migrants fleeing poverty and war to reach Italy by boat, but many are intercepted at sea and brought back by the Libyan coast guard, with the approval of the European Union.

Speaking from Italy, where he’s been touring and meeting officials, Russian President Vladimir Putin said he was worried militants were flowing into Libya from Syria’s Idlib province and warned that the Libyan situation was deteriorating.  Putin said he wants the warring sides to agree to a ceasefire and to enter into proper political talks.

Libya’s UN-backed government blamed the United Arab Emirates for the airstrike, suggesting a new level of foreign intervention in the battle for the capital.

UN Libya envoy Ghassan Salame condemned the air strike, saying it “clearly amounts to the level of a war crime.”

“The absurdity of this ongoing war has today reached its most heinous form and tragic outcome with this bloody, unjust slaughter,” he said.

Eastern forces under Khalifa Haftar launched a ground and aerial offensive three months ago to take Tripoli, the base of Libya’s internationally recognized government.  But Haftar’s Libyan National Army (LNA) force, allied to a parallel government based in eastern Libya, has seen its advance on Tripoli held up by robust defenses on the outskirts of the capital, so now it says it will start heavy air strikes after “traditional means” of war had been exhausted.

Afghanistan: The Taliban killed at least 26 members of a pro-government militia in north Afghanistan on Saturday, officials said, as the Islamists and U.S. negotiators were set to begin a seventh round of peace talks in Qatar.  One U.S. official said the meeting was a “make-or-break moment” in efforts to end the 18-year-old war.

The Taliban obviously believes it needs to negotiate from a position of strength, thus the constant attacks while professing it wants peace.

North Korea: President Trump met with Kim Jong Un on Sunday at the DMZ, after Trump’s surprise tweet that he was already going to be in the area and would like to see him, and the two agreed in talks of about an hour to push forward dialogue for making a new breakthrough in the denuclearization of the Korean peninsula, North Korean state media said on Monday.

Trump thus became the first sitting U.S. president to set foot in North Korea.

“The top leaders of the two countries agreed to keep in close touch in the future, too, and resume and push forward productive dialogues for making a new breakthrough in the denuclearization of the Korean peninsula and in the bilateral relations,” KCNA news agency said.

KCNA added: The two leaders’ “bold, brave decision” that led to the historic meeting “created unprecedented trust between the two countries” that had been tangled in deeply rooted animosity.

But it is clear that in any new round of talks with the United States, North Korea wants actions not words, as in sanctions relief.  After President Trump met with Kim at the DMZ, Secretary of State Mike Pompeo told reporters a fresh round of negotiations with North Korean foreign ministry diplomats will likely happen “sometime in July.”  Pompeo later made clear the United States believed sanctions put in place under UN Security Council resolutions needed to remain in place as talks moved forward.

The U.S. has previously rejected Pyongyang’s offer to dismantle its reactor complex at Yongbyon in exchange for sweeping sanctions relief.  But since then, the North has only doubled down on its calls for sanctions to be withdrawn, signaling that while lesser steps might be welcome, they would not be enough to persuade Pyongyang to give up its nuclear assets.

North Korea’s mission to the United Nations on Wednesday criticized the United States as “obsessed with sanctions and pressure campaign” and accused it of being “more and more hell-bent on hostile acts” against Pyongyang.

Clearly, the Trump administration is looking for a freeze of some kind on fissile material, nuclear weapons, and missile production at Yongbyon, but North Korea doesn’t acknowledge enrichment facilities outside Yongbyon, so how can it expect any kind of sanctions relief?

Uri Friedman / Defense One

“While Trump’s diplomatic engagement with Kim has produced many first moments, it has yet to yield any real progress on the core issue of North Korea’s nuclear-weapons program, including long-range missiles that are potentially capable of delivering nuclear warheads to the United States.

“The president has conducted nuclear talks with Kim as though they were a reality-TV show, while often ignoring or distorting the grave underlying realities of the negotiations.  Standing at Observation Point Ouellette along the DMZ on Sunday, he declared that ‘all of the danger went away’ after his initial summit with Kim in Singapore, when nothing’s changed in terms of North Korea’s military capabilities.  (The military tensions that threatened to devolve into another war on the Korean peninsula in 2017 have undoubtedly subsided, for now at least.)

“Trump similarly stated at a press conference before his trip to the DMZ that Barack Obama was ‘begging for a meeting’ with Kim but that the North Korean leader had refused his predecessor’s requests.  When I asked Ben Rhodes, one of Obama’s top foreign-policy advisers, whether this was in fact the case, he responded, ‘No.  Not at all.  Never.’....

“(After) meeting with Kim, Trump said: ‘We are going to have teams, they are going to meet over the next weeks, they are going to start a process.’  Joseph Yun, who served as the North Korea envoy for Obama and Trump from 2016 to 2018, recently told me that he thinks this ‘process’ might ultimately prove to be the ‘only thing Trump accomplished [on North Korea] in his first term.’

“The question is whether that process is sustainable, given that Kim has made clear that his preference is to deal only with the president rather than his more hard-line advisers, let alone any future Democratic president bent on repudiating Trump’s record on foreign policy....

“If Trump fails to denuclearize North Korea during his time in office, the leader-to-leader channel could provide an avenue for avoiding conflict with a nuclear-armed North Korea.

“Even Trump, however, seems to recognize that the most concrete result of all his summitry, displayed to such dazzling effect on Sunday, may not be as durable as it seems.  ‘We have a very good relationship,’ Trump said of Kim just ahead of their meeting.  ‘I don’t know about beyond the two of us, but I can say the two of us.’”

Editorial / Washington Post

“There was, to be sure, more showmanship than substance in President Trump’s meeting with the Chinese and North Korean leaders over the weekend and a disturbing lack of detail in the president’s accounts of what came out of them.  The odds of a breakthrough in negotiations over China’s trade practices or North Korea’s nuclear arsenal still look long. But at a time of growing danger and disorder in U.S. foreign relations, there’s reason to be grateful for even a temporary easing of tensions – and that is what Mr. Trump’s summits with Xi Jinping and Kim Jong Un seem to have accomplished.”

Editorial / USA TODAY

“There’s more here than self-promotion, though.  In constantly providing a stage for Kim, Trump is giving him legitimacy and global standing that he most assuredly does not deserve.

“Making matters worse, Trump is, according to the New York Times, considering recognizing North Korea as a nuclear power and merely asking for it to freeze its arsenal, rather than giving it up.  That’s a step back from where Kim was last year, when he promised to denuclearize.  [Ed. National Security Adviser John Bolton vehemently denies talk of a ‘freeze.’]

“Not that it is likely Kim would follow through with either.  North Korea has a long history of reneging on pledges to eliminate or freeze its nuclear weapons program. These pledges go back to 1985, when it joined a nuclear nonproliferation treaty, and 1992, when North Korea and South Korea signed a pact to denuclearize the peninsula.  In 1994, it negotiated a deal with former President Jimmy Carter to freeze its program.

“To give Kim so much upfront now, in hopes that he will reform his ways, is unwise.  Other rogue nations will be encouraged to follow suit, developing their own nuclear arsenals and forcing their way onto the U.S. president’s agenda.

“Indeed, Iranian leaders, who signed a deal to freeze their nuclear program in 2015, have to see the way their nation is being treated even as Trump coddles North Korea.  Making a nuclear deal without weapons in hand has left Iran vulnerable to renewed sanctions from an administration hellbent on blowing up this agreement.”

China: Hundreds of protesters besieged and broke into the Hong Kong legislature on Monday after a demonstration marking the anniversary of the return to Chinese rule in 1997 under a “one country,  two systems” formula that includes freedoms not enjoyed in mainland China, including the right to protest.

The violence followed weeks of protests against a now-suspended extradition bill that opponents say would undermine Hong Kong’s much-cherished rule of law and give Beijing powers to prosecute activists in mainland courts, which are controlled by the Communist Party.

Hong Kong police arrested more than two dozen people in connection with the protests, and one thing is clear.  While Hong Kong’s business community and ordinary citizens supported those protesting the controversial extradition bill, Monday night’s ugly demonstrations risk losing that very support – and giving a boost to pro-Beijing leader Carrie Lam.  [I watched it live and was disgusted by the protesters’ behavior...for the first time, ever, when it comes to Hong Kong.]

Speaking in the early hours outside the police headquarters, Ms. Lam said it was a scene that “really saddens...and shocks a lot of people.”

“I hope the community at large will agree with us that with these violent acts that we have seen, it is right for us to condemn it, and hope society will return to normal as soon as possible,” she told reporters.

Monday night’s chaos may also prove helpful to Chinese President Xi Jinping, whose government argues that only tight control can ensure the stability necessary to support economic growth.

Chinese state media blamed meddling by Western governments on Thursday for unrest in Hong Kong amid an escalating spat between China and the UK over the former British colony.

“Ideologues in Western governments never cease in their efforts to engineer unrest against governments that are not to their liking, even though their actions have caused misery and chaos in country after country in Latin America, Africa, the Middle East and Asia,” the official China Daily said in an editorial.  “Now they are trying the same trick in China.”

British Foreign Secretary Jeremy Hunt has refused to back down in his war of words with China, repeating his threat that there would be “serious consequences” if the agreement guaranteeing the rights and freedoms of the people of Hong Kong is breached.  “It’s very important that the one country, two systems approach is honored,” he told BBC News.

“China is a country that has benefited massively from the application of a rules-based international system...to not honor this very important agreement between the UK and China of course would have consequences for China as well as for the UK.”

Beijing accused the British government of “gross interference.”  China’s ambassador to the UK, in a press conference at the Chinese embassy in London, attacked British ministers for openly defending the rights of Hong Kong demonstrators.  “The UK government chose to stand on the wrong side,” Liu Xiaoming said.  “It has made inappropriate remarks not only to interfere in internal affairs of Hong Kong but also to back up the violent lawbreakers.”

The 1984 Sino-British Joint Declaration promised Hong Kong a high degree of autonomy and the protection of various freedoms including an independent judiciary.

Editorial / Global Times...a Communist Party mouthpiece...

“Although Hong Kong is a capitalist city, it will never condone such violent behavior.  It is a disgrace that such a developed society could carry out this kind of reckless and savage violence that has signaled an ominous alert for the city’s future.

‘In the West, police enforce a zero-tolerance policy toward vandalism and the destruction of government property. This recent round of rioting will forever be a stain upon Hong Kong’s image as a reliable hub for international finance and commerce....

“In light of the autonomy already in place, law and order are the internal matters of Hong Kong and meant to be handled by the local government.  However, with a general and common sense understanding of how justice functions, Chinese society is all too aware that a zero-tolerance policy is the only remedy for such destructive behavior witnessed.  Otherwise, and without this policy, it would be similar to opening a Pandora’s Box, upending social disorder....

“We believe that neither Hong Kong nor the Chinese mainland will allow this type of mob culture to flourish.  Problems and disputes are to be resolved through constitutional devices currently in place and readily available to all members of society.  Using violence to hijack a society like Hong Kong’s is the greatest evil of the modern era.

“It is time for Hong Kong society to take action and say ‘no’ to the violence.  Under the principle of ‘one country, two systems,’ the residents are responsible for maintaining stability.

“This is also the underlying obligation implied within the ‘Hong Kong people governing Hong Kong’ policy.  The city’s image and the lifestyle enjoyed by those who live there shall not be undermined by vicious protesters.  Chinese mainland society and Hong Kong belong to the same big family, and the mainland looks forward to witnessing the reemergence of a stable and prosperous city.

“An improved and fully recovered Hong Kong is the wish of all Chinese.”

Separately, there was a report Friday that China is deliberately separating Muslim children from their families, faith and language in its far western region of Xinjiang.

At the same time as hundreds of thousands of adults are being detained in giant camps, there is a rapid campaign to build boarding schools.

And on a different matter, the U.S. has accused China of conducting missile launches in the South China Sea.  Beijing had announced military drills but did not confirm the allegations that it launched missiles in the disputed waters, but it had warned ships not to enter a designated area between the Spratly and Paracel Islands for five days.

A Pentagon spokesman said on Tuesday that China’s behavior was “contrary to its claim to want to bring peace to the region and obviously actions like this are coercive acts meant to intimidate other claimants” to the South China Sea.  [Taiwan, the Philippines, Brunei, Malaysia and Vietnam all have claims on parts of the sea that China has been aggressively taking for its own.]

Lastly, Taiwan President Tsai Ing-wen will be spending a few nights in the United States as part of a diplomatic trip to the Caribbean this month, where Taiwan still has a few allies.  Her mere presence in the U.S. will piss off Beijing.  Good!!!

Russia: Fourteen crew members on board a Russian Defense Ministry submarine were killed after a fire broke out, the government reported.  The deep-sea research vessel was carrying out a military survey in Russian territorial waters, the ministry said.  The 14 were killed by poisonous fumes.

But due to the top-secret nature of the mission, no further details were released, including on how many survivors there may have been.

It was in August 2000 that the Russian nuclear-powered submarine Kursk sank to the floor of the Barents Sea after two explosions in its bow, killing all 118 on board.  The explosion was seen as a public relations disaster for President Vladimir Putin in the early days of his presidency.

Random Musings

--Presidential tracking polls....

Gallup: 41% approval of Trump’s job performance, 54% disapproval; 90% Republicans, 34% independents (June 19-30...July 2).
Rasmussen: 49% approval, 50% disapproval (July 4)

In a national CNN/SSRS survey among Democrats, post-debates, Joe Biden led with 22% (down a whopping 10 points since May), with Kamala Harris at 17% (up from 8% in May), Elizabeth Warren 15% (vs. 7%), and Bernie Sanders 14% (down from 18% in May).

What I found surprising is Pete Buttigieg was fifth at just 4%, down a point from May.

Back to Biden, he is still receiving 36% of the black vote, with Harris at 24%.

In a new Quinnipiac University national poll of Democrats and Democratic leaners, also post-debates, Biden garnered 22% in this one as well, with Harris at 20%, followed by Warren 14%, Sanders 13%, and Buttigieg 4%.

A June 11, 2019 Quinnipiac poll had Biden at 30%, Sanders 19%, Warren 15%, Buttigieg 8%, and Harris 7%. 

But when asked who would have the best chance of beating President Trump in 2020, regardless of who they support in the primary, Biden topped the field  with 42%, which is a drop from the 56% he received on April 30.  Harris was a distant second at 14%, up from 2% in April. Sanders received 13%.

--And this week Sen. Harris labeled President Trump a “predator” that she could take on due to her background as a prosecutor – a new line of attack against the president.

While speaking in Iowa Wednesday, Harris invoked her record as a prosecutor, saying that she had gone after a number of groups that have “preyed” on Americans, including big banks and pharmaceutical companies.

“I know predators,” she said, after rattling off the list.  “And we have a predator living in the White House.”

--Surprisingly, Pete Buttigieg raised $24.8 million over the past three months, adding to his $7 million total from the first quarter.  Joe Biden took in $21.5 million.  [Sanders $18 million, Harris $12 million.]

But with Buttigieg at 4%, what will he do with the cash to improve his standing?  The candidate said it would be spent on staffing up in Iowa, for starters.

--In a CNN/SSRS survey, 74% of Americans say the situation at the Southern border with Mexico is a crisis, up from less than half who felt that way in January (45%).

The steep increase comes most sharply among Democrats. Back in January, just 23% of Democrats called it a crisis as President Trump took that line in an effort to build support for border wall funding during the longest-ever government shutdown.  Now, 70% of Democrats see the situation at the border as a crisis.

Among independents, the share who see a crisis at the border climbed from 47% to 72%, and among Republicans, it’s up 11 points to 82%. 

But there is disagreement on the cause of the crisis at the border.  A majority of Democrats consider it a crisis because of the treatment migrants are receiving as they attempt to cross the border (54%), while most Republicans say they think it’s a crisis because of the number of migrants attempting to enter the country (63%).

93% of Democrats disapprove of the treatment migrants are receiving, while 62% of Republicans say they approve of the way they are being treated by the government after crossing the border.

--Kyle Smith / New York Post

President Trump must have looked at the Democratic debates the way Bruce Willis looked at the famous wall of weapons in Quentin Tarantino’s ‘Pulp Fiction.’  Should he choose the crossbow or the mace or the samurai sword or the baseball bat or...?

“It was as if the Democratic Party’s goal was to give Trump objects with which to bash it.

“Julian Castro says he wants to turn illegal border crossings into a parking ticket.  Park yourself in America, get a fine!  President Castro probably isn’t going to make you pay that fine, by the way.  Kamala Harris wants to abolish private health insurance. Elizabeth Warren wants to forgive student debt.  Oh, and everybody in the Thursday debate wants Uncle Sam to buy health insurance for however many Guatemalans, Hondurans and El Salvadorans manage to sneak across the border.

“One minute Democrats are waxing poetic about the humanitarian crisis down at the border; the next minute they’re proposing to make it 100,000 times worse by issuing engraved invitations to the couple hundred million people south of the border who would love to be ushered into the American health care system.  Bring all your ailments to El Norte, illegal immigrants.  American workers will pay your bill.

“In the age of Trump, politics has gotten a bit exhausting.  A gravestone in the latest ‘Simpsons’ Treehouse of Horror episode read: ‘Slow News Days.’  Wouldn’t it be nice if things could calm down a bit?

“Any presidential candidate who stood before the American people and said, ‘I vow to make politics so boring you won’t have to check the news again till 2024’ would have a pretty compelling argument.  There must be millions of Americans in the Upper Midwest thinking, ‘I dislike Trump but things are otherwise pretty much OK.’  Not a single Democrat is trying to reach these voters.”

Bret Stephens / New York Times

Amigos democratas,

“Si ustedes siguen asi, van a perder last elecciones. Y lo mereceran.

“Translation for the linguistically benighted: ‘Democratic friends, if you go on like this, you’re going to lose the elections.  And you’ll deserve it.’

“In this week’s Democratic debates, it wasn’t just individual candidates who presented themselves to the public.  It was also the party itself.  What conclusions should ordinary people draw about what Democrats stand for, other than a thunderous repudiation of Donald Trump, and how they see America, other than as a land of unscrupulous profiteers and hapless victims?

“Here’s what: a party that makes too many Americans feel like strangers in their own country. A party that puts more of its faith, and invests most of its efforts, in them instead of us. 

“They speak Spanish.  We don’t.  They are not U.S. citizens or legal residents.  We are.  They broke the rules to get into this country. We didn’t.  They pay few or no taxes. We already pay most of those taxes.  They willingly got themselves into debt. We’re asked to write it off.  They don’t pay the premiums for private health insurance.  We’re suppled to give up ours in exchange for some V.A.-type nightmare.  They didn’t start enterprises that create employment and drive innovation.  We’re expected to join the candidates in demonizing the job-creators, breaking up their businesses and taxing them to the hilt.

“That was the broad gist of the Democratic message, in which the only honorable exceptions, like Maryland’s John Delaney and Colorado’s John Hickenlooper, came across as square dancers at a rave.

“On closer inspection, the message got even worse.

“Promising access to health insurance for north of 11 million undocumented immigrants at a time when there’s a migration crisis at the southern border?  Every candidate at Thursday’s debate raised a hand for that one, in what was surely the evening’s best moment for the Trump campaign....

“Harris, meanwhile, came across as Barack Obama in reverse, especially with her scurrilous attack on Biden for the sin of having had a functional political relationship with two former segregationist senators in the 1970s. This was portrayed as a clever debate move but it will come to haunt her.

“Obama’s political genius was to emphasize what Greg Lukianoff and Jonathan Haidt, authors of ‘The Coddling of the American Mind,’ have called ‘common-humanity identity politics’ – he made you feel comfortable no matter the color of your skin.  Harris’ approach, by contrast, is ‘common-enemy identity politics.’  Making white Americans feel racially on trial for views they may have held in the past on crime, busing and similar subjects is not going to help the Democrats.

“None of this means that Democrats can’t win in 2020.  The economy could take a bad turn.  Or Trump could outdo himself in loathsomeness.  But the Democratic Party we saw this week did even less to appeal beyond its base than the president.  And at least his message is that he’s on their – make that our – side.”

--Justin Amash / Washington Post...the five-term Michigan representative having been the first sitting Republican lawmaker to join Democratic calls for an impeachment inquiry into President Trump.

“When my dad was 16, America welcomed him as a Palestinian refugee.  It wasn’t easy moving to a new country, but it was the greatest blessing of his life.

“Throughout my childhood, my dad would remind my brothers and me of the challenges he faced before coming here and how fortunate we were to be Americans. In this country, he told us, everyone has an opportunity to succeed regardless of background....

“My parents, both immigrants, were Republicans, I supported Republican candidates throughout my early adult life and then successfully ran for office as a Republican.  The Republican Party, I believed, stood for limited government, economic freedom and individual liberty – principles that had made the American Dream possible for my family.

“In recent years, though, I’ve become disenchanted with party politics and frightened by what I see from it. The two-party system has evolved into an existential threat to American principles and institutions.

“George Washington was so concerned as he watched political parties take shape in America that he dedicated much of his farewell address to warning that partisanship, although ‘inseparable from our nature,’ was the people’s ‘worst enemy.’  He observed that it was ‘the interest and duty of a wise people to discourage and restrain it.’  Washington said of partisanship, in one of America’s most prescient addresses: ‘The disorders and miseries which result gradually incline the minds of men to seek security and repose in the absolute power of an individual; and sooner or later the chief of some prevailing faction, more able or more fortunate than his competitors, turns this disposition to the purposes of his own elevation, on the ruins of public liberty....

“ ‘It serves always to distract the public councils and enfeeble the public administration.  It agitates the community with ill-founded jealousies and false alarms, kindles the animosity of one part against another, foments occasionally riot and insurrection.  It opens the door to foreign influence and corruption, which finds a facilitated access to the government itself through the channels of party passions.  Thus the policy and the will of one country are subjected to the policy and will of another.’

“True to Washington’s fears, Americans have allowed government officials, under assertions of expediency and party unity, to ignore the most basic tenets of our constitutional order: separation of powers, federalism and the rule of law.  The result has been the consolidation of political power and the near disintegration of representative democracy.

“These are consequences of a mind-set among the political class that loyalty to party is more important than serving the American people or protecting our governing institutions.  The parties value winning for its own sake, and at whatever cost.  Instead of acting as an independent branch of government and serving as a check on the executive branch, congressional leaders of both parties expect the House and Senate to act in obedience or opposition to the president and their colleagues on a partisan basis.

“In this hyperpartisan environment, congressional leaders use every tool to compel party members to stick with the team, dangling chairmanships, committee assignments, bill sponsorships, endorsements and campaign resources.  As donors recognize the growing power of party leaders, they supply these officials with ever-increasing funds, which, in turn, further tightens their grip on power.

“The founders envisioned Congress as a deliberative body in which outcomes are discovered. We are fast approaching the point, however, where Congress exists as little more than a formality to legitimize outcomes dictated by the president, the speaker of the House and the Senate majority leader....

“Most Americans are not rigidly partisan and do not feel well represented by either of the two major parties.  In fact, the parties have become more partisan in part because they are catering to fewer people, as Americans are rejecting party affiliation in record numbers....

“But we owe it to future generations to stand up for our constitutional republic so that Americans may continue to live free for centuries to come....

“Today, I am declaring my independence and leaving the Republican Party.  No matter your circumstance, I’m asking you to join me in rejecting the partisan loyalties and rhetoric that divide and dehumanize us.  I’m asking you to believe that we can do better than their two-party system – and to work toward it.  If we continue to take America for granted, we will lose it.”

Amash’s declaration and break with the Republicans is fueling speculation he is seeking the Libertarian Party nomination in order to launch a long-shot bid for president in 2020.

President Trump tweeted:

“Great news for the Republican Party as one of the dumbest & most disloyal men in Congress is ‘quitting’ the Party.  No Collusion.  No Obstruction!  Knew he couldn’t get the nomination to run again in the Great State of Michigan.  Already being challenged for his seat.  A total loser!”

--Navy Special Operations Chief Edward Gallagher was found not guilty on Tuesday of first-degree murder of a captive fighter and attempted murder of civilians in Iraq, but was convicted of a single charge for posing with the dead body of an ISI captive.

Gallagher, 40, a decorated eight-tour veteran serving in SEAL Team 7, became a rallying cause of some Republicans in Congress and members of the conservative media, and the focus of a potential pardon by President Trump.

The chief was turned in by his own platoon last spring. Several fellow SEALs reported that their leader had shot civilians and had killed a captive ISIS fighter with a custom hunting knife during a deployment in Iraq in 2017.  He was also charged with obstruction of justice by threatening to kill SEALs who reported him.

--With Europe’s big heatwave this week, some were blaming climate change.  Southern France experienced a national record 45.9C (114.6F), 4C hotter than it would otherwise have been, scientists say.

“Climate change is no longer an abstract increase in global mean temperature, but a difference you can feel when you step outside in a heatwave,” said Geert Jan van Oldenborgh of the Royal Netherlands Meteorological Institute and one of the paper’s authors.

“The observations show similarly frequent heatwaves would have likely been about 4C cooler a century ago,” said the report by the World Weather Attribution group.

--As beach season is in full swing, two scary incidents this week involving flash-eating bacteria.  A young boy was left covered in open wounds after he was infected during a trip to a Maryland beach, his mother said, after he went swimming off the coast of Ocean City.

When the wounds grew, she took him to the Peninsula Regional Medical Center in Salisbury, Maryland, where doctors diagnosed him with Vibrio, a type of bacteria that can cause skin to rot away in a condition called necrotizing fasciitis. 

Thankfully the boy was healing well at last report.

But that wasn’t the case for a 77-year-old woman who died after she scraped her leg at a Florida beach and contracted the flesh-eating condition.  Lynn F. died after suffering two strokes and sepsis during surgeries to try and save her leg, WTVT reported.

The CDC said the majority of cases of vibrio bacteria actually come from ingesting contaminated food, such as oysters.

One in three people who contract flesh-eating bacteria die from the infection, according to the CDC.

--Meanwhile, a western New Jersey resident has been diagnosed with West Nile virus, the state’s first case of the mosquito-spread disease this year and the earliest it has ever been reported in New Jersey, health officials announced Tuesday.

The Hunterdon County man is recovering at home after being hospitalized for “several days.”

In 2018, 61 people were infected by West Nile in my state, the highest number ever reported, and after record rains this spring, it’s clearly going to be an ugly season for the disease.

---

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

God bless America.

---

Gold $1401
Oil $57.73

Returns for the week 7/1-7/5

Dow Jones  +1.2%  [26922]
S&P 500  +1.6%  [2990]
S&P MidCap  +1.1%
Russell 2000  +0.6%
Nasdaq  +1.9%  [8161]

Returns for the period 1/1/19-7/5/19

Dow Jones  +15.4%
S&P 500  +19.3%
S&P MidCap  +18.2%
Russell 2000  +16.8%
Nasdaq  +23.0%

Bulls 53.3
Bears
18.1 [from a week ago...the folks who put this together were off this week.]

Have a great week.

Dr. Bortrum posted a new column!

And Go Coco Gauff!!!

Brian Trumbore



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Week in Review

07/06/2019

For the week 7/1-7/5

[Posted 11:00 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 1,056

It seems like more than just a week ago that we were in Osaka, and then the DMZ, but it was quite a weekend for President Trump, with the declaration of a trade truce between the United States and China, after Trump’s little summit with Chinese President Xi Jinping, and then Trump’s hour with Kim Jong Un at the DMZ following a surprise invite from The Donald.

I have full details of both important events below but here’s the bottom line.

You are nuts if you believe there is going to be a U.S.-China trade agreement anytime soon.  China will not allow itself to be humiliated again by foreign forces, and Huawei is driving the bus.  Fact.  Plus there are no actual dates as yet for renewed talks, not that this will matter.

Second, for all of Trump’s showmanship in his now three meetings with the chubby, chain-smoking, walking heart attack/stroke victim from Pyongyang, zero...ZERO...has been accomplished, though I readily admit it’s better to talk to your enemies than the converse.  That is assuming the guy on ‘our side’ is indeed a stable genius who might get one of the five “U.S. History” questions right on a Jeopardy! board.

But here’s the real issue. While nothing is going to get accomplished when it comes to China or North Korea for months to come, how will President Trump begin to act as we roll into 2020, when Americans, with the attention span of a gnat, if that, begin to truly focus on the election.  That is the 30% to 40% with the intelligence of a newt who are undecided, watching contrived summer game shows (not Jeopardy! of course) that the rest of us don’t want voting anyway, but will do so based on disinformation from some crazy post they read on Facebook, Instagram, or Twitter in the fall of next year.

And then there is Trump’s ongoing fascination with Vlad the Impaler.

Editorial / Wall Street Journal

“A final word about Mr. Trump’s joking admonition to Vladimir Putin, in front of the TV cameras, not to interfere in U.S. elections.  The Russian dictator smirked, and the press pounced.  These media critics have little credibility given how they ignored Barack Obama’s whispers to Dmitry Medvedev in 2012 that he’d have more flexibility after his re-election; how they cheered John Kerry in his concessions to Iran; and how they winked at Mr. Obama’s one-sided deal with Cuba’s Raul Castro.

“But Mr. Trump’s public canoodling with Mr. Putin is still a sorry spectacle. The Mueller report found no collusion between Mr. Trump and Russia, but the report and the House and Senate Intelligence Committees have proved beyond doubt that Russia meddled in the election to foment doubt about the result.

“Mr. Trump should be angrier than anyone since this Russian interference has haunted his entire Presidency.  By pretending it’s a joke he looks like a Putin supplicant.  One of our worries about a second term is that Mr. Trump would seek an arms-control deal with Russia that betrays Ukraine and European defenses.

“Personal diplomacy has its uses, as George H.W. Bush in particular showed as President.  But Mr. Trump doesn’t need to flatter tyrants as if they are great leaders.  These hard men will make decisions based on raw national interest, not because they like Mr. Trump.”

Trump World

--The Trump administration reversed course again on the controversial issue of putting a citizenship question on the 2020 census, as Justice Department lawyers told a federal court Wednesday that they had been “instructed” to try to find a way to add the question, despite statements from the administration on Tuesday that they were giving up the effort.

The Commerce Department, which oversees the Census Bureau, said Tuesday that it would begin printing forms without the citizenship question, retreating from the legal battle.

The government was running out of time to begin printing millions of forms, and court injunctions continue to bar the administration from adding a question to all forms asking whether household members are U.S. citizens.

But President Trump, in a tweet Wednesday, said reports that he had given up the fight were “incorrect or, to state it differently, FAKE!”

Experts say that including the question would be very likely to discourage many people from responding to the census, lowering the official population counts in states with large immigrant communities.  That could cost those states, particularly California, congressional seats and billions of dollars in federal funds that are distributed based on population.

The Supreme Court issued a 5-4 decision last week that stopped Commerce Secretary Wilbur Ross from including the question, ruling that Ross had “contrived” the rationale for adding it.

But the ruling written by Chief Justice John Roberts left a slim opening to include the citizenship question if the administration could draft a more plausible legal rationale.  Doing that, however, will take time, and the administration had told the courts that it needed to begin printing questionnaires by the end of June.

While the Supreme Court has begun its summer recess, it can respond to emergency appeals in pending cases.

--A federal appeals court in San Francisco on Wednesday blocked President Trump’s plan to shift $2.5 billion from the military budget to erect a border wall, finding by a 2-1 vote that the administration violated federal law by diverting funds Congress had appropriated for other purposes.

The administration had sought to move the funds from the Defense Department to the Department of Homeland Security to build the barrier in portions of Arizona, California and New Mexico.

--Meanwhile, the acting head of the Department of Homeland Security, Kevin McAleenan, ordered an investigation into reports that Border Patrol agents have been posting offensive anti-immigrant comments and threats against lawmakers on a private Facebook group.  The move was announced amid mounting criticism of the Trump administration’s handling of a humanitarian crisis along the U.S.-Mexico border.

The Facebook posts, first reported by the non-profit news site ProPublica, included jokes about the deaths of migrants and sexually explicit content referring to U.S. Representative Alexandria Ocasio-Cortez, a Democrat who has been highly critical of the detention facilities after a tour this week.

The DHS’s inspector general on Tuesday said migrant-holding centers in Texas’ Rio Grande Valley were dangerously overcrowded, publishing graphic pictures of cells holding twice as many people as they were built for.

--Monday President Trump told reporters “brand new Sherman tanks” would be a feature of the Fourth of July celebration, which had many, including in the military, wondering just what he was talking about, seeing as the Sherman tank hadn’t been produced since 1957.

So I was listening to the speech the president then gave Thursday and thought at one point, ‘did he just mention airports?’ Yes he did, in talking about the American Revolution.

“In June of 1775, the Continental Congress created a unified Army out of the Revolutionary Forces encamped around Boston and New York, and named after the great George Washington, commander in chief.  The Continental Army suffered a bitter winter of (sic) Valley Forge, found glory across the waters of the Delaware and seized victory from Cornwallis of (sic) Yorktown.

“Our Army manned the air, it rammed the ramparts, it took over the airports, it did everything it had to do, and at Fort McHenry, under the rocket’s red glare it had nothing but victory. And when dawn came, their star-spangled banner waved defiant.”

The battle at Fort McHenry that inspired Francis Scott Key to write “The Star-Spangled Banner” took place during the War of 1812, not the American Revolution.

Oh well.  I just wish the Continental Army had the benefit then of People Express Airlines and their $29 fares from Newark to Norfolk before the airline went under.  Wasn’t a lot of money in the Treasury in those days and this would have been helpful, as Alexander Hamilton knew better than anyone.

[Trump on Friday said of his “airports” reference, “I guess the rain knocked out the teleprompter.”  But I’ll give the ‘celebrity host’ on Fox News’ “The Five” today who said in listening to Trump’s speech that he “felt like he was getting a history lesson” a break by not identifying him.]

Marc Thiessen / Washington Post

“Millions of ordinary Americans who tuned in to watch must have been wondering what the fuss was all about.  Democrats promised they would witness a partisan address.  But instead, they saw the president deliver a deeply unifying speech that celebrated America’s accomplishments, and the courage of our men and women in uniform.  With each passing minute, the president looked larger while his critics looked increasingly petty and small.”

Michael D. Shear / New York Times

“In a made-for-television Independence Day production starring America’s military weaponry, President Trump used the Lincoln Memorial as the backdrop for a tribute to the country’s armed forces and a call for unity that has largely been absent during his divisive presidency....

“(Two weeks) after formally announcing his re-election bid in Orlando, Fla., with a dark message of grievance and pointed attacks on his enemies, the president on Thursday offered a different, more optimistic tone.  He imposed himself on Washington’s usually nonpolitical Fourth of July celebration in what he called a ‘Salute to America’ that avoided any of his usual attacks on the news media, Democrats or his intelligence agencies but placed him at the center.”

--A president can choose any advisers he wants, so if President Trump wants Ivanka by his side at the G20 summit, that’s his choice.

But it’s the message the president, and Ivanka, are sending when she’s put in spots better suited for career diplomats...as in who is the foreign minister of, say, France, supposed to listen to?

Actually, I could go on and on...but I’ll just bite my tongue.

--Trump Tweets:

“If Illegal Immigrants are unhappy with the conditions in the quickly built or refitted detention centers, just tell them not to come.  All problems solved!”

“Our Border Patrol people are not hospital workers, doctors or nurses.  The Democrats bad Immigration Laws, which could be easily fixed, are the problem. Great job by Border Patrol, above and beyond.  Many of these illegal aliens are living far better now than where they...

“...came from, and in far safer conditions.  No matter how good things actually look, even if perfect, the Democrat visitors will act shocked & aghast at how terrible things are.  Just Pols.  If they really want to fix them, change the Immigration Laws and Loopholes. So easy to do!”

“...Now, if you really want to fix the Crisis at the Southern Border, both humanitarian and otherwise, tell migrants not to come into our country unless they are willing to do so legally, and hopefully through a system based on Merit.  This way we have no problems at all!”

“The cost of our great Salute to America tomorrow will be very little compared to what it is worth. We own the planes, we have the pilots, the airport is right next door (Andrews), all we need is the fuel.  We own the tanks and all.  Fireworks are donated by two of the greats.  Nice!”

“As most people are aware, according to the Polls, I won EVERY debate, including the three with Crooked Hillary Clinton, despite the fact that in the first debate, they modulated the sound on me, and got caught.  This crew looks somewhat easier than Crooked, but you never know?”

Wall Street and Trade Wars

Stocks hit new highs early in the week, with the major averages closing at record levels on Wednesday, just in time for President Trump’s celebration the next day, but then the market fell a bit today on a strong employment report that has many now questioning whether the Federal Reserve will cut interest rates, as was assumed, when it next meets end of July.

Today we learned the economy added 224,000 jobs in June, much better than expected, though both April and May’s totals were revised slightly downward, the net result being we have a three-month average gain of 171,000*. 

*The first-quarter three-month average was 174,000.  Q4 was 233,000.

Average hourly earnings were slightly disappointing and are now running at a 3.1% annualized rate. Again, in an expansion this far advanced, wage gains would normally be 3.5%+.

The unemployment rate ticked up to 3.7%, while U6, the underemployment rate, also rose from 7.1% to 7.2%.  It’s still all good, just maybe too good to suit the Fed.  We may learn a lot more as to Fed sentiment when Chairman Jerome Powell gives his semi-annual testimony to Congress next week.

In other economic news, we had June ISM readings on manufacturing, 51.7, and the service sector, 55.1 (50 the dividing line between growth and contraction); both figures down from the prior month. 

Construction spending for May was -0.8%, and factory orders for the month -0.7%, both worse than forecast.

So add it all up and the Atlanta Fed’s GDPNow barometer for second quarter growth is at 1.3%, a far cry from Q1’s 3.1%, but we still have a lot of data to sort through before the government’s official first look end of the month.

And the bottom line is that as second-quarter earnings begin to flow in, up to 80% of companies that have preannounced are taking their guidance down, not up. 

But on the other hand, we have easy money all over the world these days, and that is why the path of least resistance has been to move into stocks, boys and girls.

And how low are some of the interest rates both in Europe and Asia?

Try these 10-year yields as of today’s close....

Germany -0.37%
France -0.09%
Netherlands -0.22%
UK 0.73%
Spain 0.32%
Italy 1.74%
Greece 2.10%
Japan -0.17%

U.S. 2.03%

Yes, those are minus signs in front of some of them.

Meanwhile, this afternoon in his press spray before heading to his club in New Jersey, Trump attacked the Fed yet again.

“We don’t have a Fed that knows what it’s doing,” the president keeping up his demand that Chairman Powell and his band of merry pranksters immediately lower rates...to like the levels of Germany and Japan.  Trump said if the Fed complied the economy would take off “like a rocket ship.”

No doubt Mr. Powell will be asked about the president’s comments next week.

Turning to Trade....

As expected, Presidents Trump and Xi Jinping agreed on a trade truce in Osaka Saturday, the U.S. agreeing not to tack on tariffs above what is already levied on $250 billion in Chinese exports, as in no additional tariffs on another $300 billion worth of Chinese goods as threatened.

Trump told reporters: “We had a very good meeting with President Xi of China, excellent, I would say excellent, as good as it was going to be. We discussed a lot of things and we’re right back on track and we’ll see what happens.”

And: “We’re holding back on tariffs and they’re going to buy farm products,” he said at a news conference after.  “If we make a deal, it will be a very historic event.”

As always, Trump gave no details on his farm product statement (which the Chinese government increasingly looks like it will tie to cooperation on Huawei), though there was a story China purchased 544,000 metric tons of U.S. soybeans prior to Saturday’s summit.

In a statement, China’s foreign ministry said negotiators from both sides would discuss the specific details, but did not elaborate.

China’s official state news agency Xinhua also quoted Xi as saying: “China and the U.S. have highly integrated interests and extensive cooperation areas and they should not fall into so-called traps of conflict and confrontation.”

As in, leave us the hell alone, U.S., when it comes to the South China Sea, among other things.

Xi said on the issues of sovereignty and respect that China must safeguard its core interests.

“China is sincere about continuing negotiations with the United States...but negotiation should be equal and show mutual respect,” the foreign ministry quoted him as saying.

The bottom line is the results of Osaka were similar to what emerged from the Trump-Xi meeting at the G20 summit in Argentina seven months ago; only this time, unlike the 90-day ceasefire Xi and Trump agreed to in December, this time they did not impose a deadline.

But the latest fragile truce could nonetheless have long-range implications, especially if the United States continues to keep in place broad tariffs on the first $250 billion in Chinese goods.  Global companies would be forced to continue to shift at least the final stages of production out of China.  The United States wants fundamental economic policy changes in China, while Beijing wants the tariffs dropped entirely.  They are hardly going to overhaul their economic model based on building up state-owned enterprises through subsidies, which has helped lift millions out of poverty.

And then there is the aforementioned Huawei.  President Trump decided to give in in his meeting with Xi, allowing U.S. companies to continue to sell to the Chinese telecommunications giant, reversing a ban imposed by the U.S. last month on Huawei buying U.S. products without a license, including from Google, which is crucial to many of Huawei’s initiatives.

Republican Senator Marco Rubio (Fla.), a China hawk, warned via Twitter that any concessions on Huawei “will destroy the credibility” of the administration. 

“If President Trump has agreed to reverse recent sanctions against Huawei he has made a catastrophic mistake.  It will destroy the credibility of his administration’s warnings about the threat posed by the company, no one will ever again take them seriously.”

Republican Sen. Lindsay Graham said on “Meet the Press,” “There will be a lot of pushback if  it is a major concession.”

Many in the national-security establishment don’t want to see the heat taken off Huawei, which officials say was built on a foundation of stolen Western technology and is now building wireless networks that could be  tapped by the Chinese government, allegations Huawei has forcefully denied.

Robert Lighthizer, the chief U.S. trade representative, sought to keep Huawei out of talks in the belief that it could complicate an already difficult negotiation.

But for Beijing, relieving U.S. pressure on the company was a precondition for a broader deal, though, again, the U.S. is demanding structural changes in China’s policy in order to protect U.S. intellectual property and ensure fair competition, let alone an agreement on enforcement mechanisms for same.

Hu Xijin, editor in chief of the Global Times, took to Twitter in English to complain: “The U.S. made big concessions?  U.S. companies selling equipment to Huawei is just going back to one and a half months ago; no new tariffs is going back half a month ago. China will actually buy more American goods and pay the cost of reforms. Some Americans still unsatisfied?”

Andrew Ross Sorkin / New York Times

“In an impromptu question-and-answer session late last month at the White House, President Trump was asked about the nation’s efforts to block Huawei, the Chinese telecommunications company, from doing business in the United States and with our allies around the globe.

“ ‘Huawei is something that is very dangerous,’ Mr. Trump said. Then, almost in the same breath, he added: ‘It’s possible that Huawei would be included in a trade deal....

“Over the weekend in Japan, Mr. Trump appeared to choose trade over national security, suspending the ban on United States companies’ supplying equipment to Huawei as he hopes to reach a trade deal with President Xi Jinping of China.  Without providing any details, he declared that American companies could sell to Huawei without creating a ‘great, national emergency problem.’

“He said this even as his own secretary of state, Mike Pompeo, spent the past several months traveling the world warning our allies that Huawei is a profoundly dangerous security threat and instructing them to freeze out the company.

“Senator Marco Rubio, Republican of Florida, used Twitter to call Mr. Trump’s reversal ‘a catastrophic mistake’ that ‘will destroy the credibility of his administration’s warnings about the threat posed by the company, no one will ever again take them seriously.’....

“While Mr. Trump may view Huawei as both ‘dangerous’ and a pawn in the trade war, the truth is it may be something else entirely.

“Huawei is the most significant long-term competitive threat to the United States’ dominance of the future of wireless technology. And the United States is woefully – even disgracefully – behind.

“No matter what the United States does to hobble Huawei – and Mr. Trump’s latest stance will only hasten its rise – it will not alter a fundamental problem that clouds the conversation: The United States needs a meaningful strategy to lead the world in next-generation wireless technology – a kind of Manhattan Project for the future of connectivity....

“In April...(an) alarming government report was issued – and largely overlooked.

“It was written by the Defense Innovation Board, a group of business leaders and academics that advises the Defense Department.  And it was a scathing indictment of the country’s 5G efforts.

“ ‘The leader of 5G stands to gain hundreds of billions of dollars in revenue over the next decade, with widespread job creation across the wireless technology sector,’ wrote the board, a who’s-who of the tech world that includes the former Alphabet chairman Eric Schmidt, the LinkedIn founder Reid Hoffman and Walter Isaacson, the author and a former chief executive of the Aspen Institute.

“ ‘The country that owns 5G will own many of these innovations and set the standards for the rest of the world,’ the board wrote.

“It added in no uncertain terms: ‘That country is currently not likely to be the United States.’

“It is no wonder.  No American company makes the devices that transmit high-speed wireless signals. Huawei is the clear leader in the field: the Swedish company Ericsson is a distant second; and the Finnish company Nokia is third.”

So I was watching a CNBC interview with President Trump’s trade adviser Peter Navarro this week and he was confronted on the Huawei 5G issue and he basically said, no problem, ‘we have Ericcson and Nokia.’  To which the questioner appropriately observed, ‘Well, ah, those aren’t American companies.’

This is indeed scandalous.  In many respects we are so overrated.

Thomas J. Duesterberg / Wall Street Journal

“(Success with China) will depend on U.S. resolve and tariffs to weaken the Chinese economy, whose success is a key to Mr. Xi’s political reign. Hard-liners in China appear to have the upper hand in blocking the tentative deal negotiated by Vice Premier Liu He, but can they hold out if the Chinese economy continues to weaken?  There are countervailing forces in China among the business community and reformers, but the Chinese system is so opaque that few can assess the relative strengths of these factions....

“A deal will be politically acceptable in the U.S. only if it includes structural reform as well as strong enforcement. And it appears that such a deal is likely to come about only if U.S. sanctions continue to weaken the Chinese economy.  Perhaps Europe will awaken to the threat China poses to its economy, but that seems unlikely at the moment.

“Though Mr. Trump hasn’t brought decisive results, Democrats are offering no new ideas to achieve an acceptable outcome in the China talks.  And the president signaled at Osaka that he can be patient in the negotiations. A good outcome requires steady pressure and perseverance to win more international support for the U.S. position.  It’s unclear if Mr. Trump can do that, but he’s the only one making the effort.”

There are other trade issues to deal with....the United States and European Union are battling over retaliatory tariffs in a long-running subsidy dispute between Boeing and Airbus.  The Trade Representative’s office in Washington on Monday published a list of $4 billion worth of EU goods to target in retaliation for European aircraft subsidies.

The EU has a similar case pending against Boeing and has readied retaliatory tariffs of its own.  Hardly what is needed given already strained ties between Washington and Brussels, much of which predates President Trump’s term.

Finally, Japan is imposing further restrictions on exports to South Korea, citing a decline in “relations of international trust” between the Asian neighbors.

Starting yesterday, Thursday, Japanese exports related to technology in manufacturing must apply for approval for each contract.

But it’s not exactly clear what is behind the bilateral tensions, though some point to a dispute over the seizure of local assets going back to World War II and compensation for forced laborers.

Yes, they have long memories in this region.  Something for President Trump to remember.

Europe and Asia

Lots of economic data for the eurozone (EA19) this week. 

We had the PMIs for June, with the composite for the EA19 at 52.2 vs. 51.8 in May; manufacturing, though, a still putrid 47.6, services a much better 53.6.

Germany: 45.0 manufacturing (below 50, contraction, a sixth straight month); 55.8 non-manufacturing (services)
France: 51.9 mfg; 52.9 services
Italy: 48.4; 50.5
Spain 47.9 (74-month low); 53.6
Ireland: 49.8 (72-month low); 56.9
Netherlands: 50.7 manufacturing (72-month low)
Greece: 52.4 mfg.

UK: 48.0 manufacturing; 50.2 services

[All the above courtesy of IHS / Markit]

Separately, Eurostat released the May unemployment data for the euro area, the overall figure at 7.5% (7.6% in April), the lowest since July 2008.

Germany 3.1%; France 8.6%; Italy 9.9%; Spain 13.6% (though down from 15.4% a year ago), Netherlands 3.3%; Greece 18.1% (March), Ireland 4.4%.

Lastly, retail trade for the EA19 in May was down 0.3% over April, up just 1.3% from a year ago.

Chris Williamson / IHS Markit

“Eurozone manufacturing remained stuck firmly in a steep downturn in June, continuing to contract at one of the steepest rates seen for over six years.  The disappointing survey rounds off a second quarter in which the average PMI reading was the lowest since the opening months of 2013, consistent with the official measure of output falling at a quarterly rate of approximately 0.7% and acting as a major drag on GDP....

“The downturn is also increasingly feeding through to lower inflationary pressures, as producers and their suppliers compete on price to retain customers and generate sales.  In stark contrast to the steep rise in producers’ costs and charges seen at the start of the year, raw material prices are now falling for the first time in three years and selling prices are barely rising.

“The downturn is also showing no signs of any imminent end.  The survey’s forward-looking indicators remained worryingly subdued in June, adding to concerns about the economy in the second half of the year.”

But after the service-sector data a few days later, Mr. Williamson offered:

“The June PMI surveys indicate that the pace of eurozone economic growth picked up at the end of the second quarter, though it would be wrong to get overly excited by the upturn. The survey is indicative of GDP merely rising by just over 0.2% in the second quarter, and a deterioration of business expectations for the year ahead to one of the lowest seen for over four years suggests the business mood remains somber.  Downside risks to the outlook prevail amid trade war worries, rising geopolitical uncertainty and slowing global economic growth....

“Given the relatively weak current and future growth being signaled by the PMI and the accompanying slide in inflationary pressures, we expect to see renewed stimulus from the ECB in coming months.”

The EU: A new slate of leaders is being decided on, with German Defense Minister Ursula von der Leyen to become the new president of the bloc’s powerful executive arm, the European Commission, taking over from Jean-Claude Juncker, one of two women named to top EU posts for the first time.

European Council President Donald Tusk is to be replaced by Belgian Prime Minister Charles Michel.

Frenchwoman Christine Lagarde, a familiar figure who is currently president of the IMF, has been proposed as president of the European Central Bank, while Spanish Foreign Minister Josep Borrell was nominated to become EU foreign policy chief, meaning he would be charged with supervising the Iran nuclear deal.

Only Michel can take up his post without a vote.  The others must be endorsed by the European Parliament.

Brexit: Boris Johnson and Jeremy Hunt have stepped up their campaigning to replace Theresa May as prime minister and head of the Conservative Party.  The 160,000 party members will choose between the two in a mail ballot, the result of which is due July 23.  The winner automatically becomes PM, and then the ‘fun’ begins.  Three months to Brexit, Halloween.

Speaking of which, Hunt this week said he would decide to take Britain out of the European Union without a deal on October 31 if it becomes clear at the beginning of that month that there is no prospect of getting an agreement through parliament.

But Johnson is still expected to win the race handily.

Italy: The government dodged the threat of EU disciplinary action over its public finances on Wednesday after persuading the European Commission that new measures submitted this week would help bring its growing debt into line with EU fiscal rules.  Italy’s anti-austerity, Eurosceptic government made further concessions in the final hours of the talks with Brussels.  The European Union executive then said opening a disciplinary procedure was no longer warranted as Italy was expected to be broadly compliant with the EU’s stability and growth pact this year.

So Italian bond yields plunged in response, with Economy Minister Giovanni Tria issuing a statement calling it “a great day for Italy.”  He said the government’s efforts had been “rewarded twice over” by the dropping of the disciplinary procedure and by the positive market response which lowers Rome’s borrowing costs.

Turning to Asia...

China’s official government manufacturing PMI for June was 49.4, unchanged from May.  The service sector came in at a much stronger 54.2 vs. 54.3 the prior month.

The private Caixin manufacturing PMI was 49.4, with the new orders index down to 48.8 from 50.7 the prior month, not good. The service sector Caixin reading was 52.0 for June vs. 52.7 in May.

Japan’s manufacturing PMI for June was 49.3; 51.9 non-manufacturing.

[South Korea’s manufacturing PMI was 47.5; Taiwan’s 45.5, the worst since Nov. 2011]

Street Bytes

--As alluded to above, stocks hit all-time highs on Wednesday, the Dow Jones at 26966, S&P 500 2995 and Nasdaq 8170, before falling a little Friday on the employment data and concern the Fed won’t cut rates later this month.

On the week, the Dow gained 1.2%, S&P 1.6% and Nasdaq 1.9%.

--U.S. Treasury Yields

6-mo. 2.12%  2-yr. 1.86%  10-yr. 2.03%  30-yr. 2.54%

Yield on the 2-year up 11 basis points on the week, the 10-year up 8 bps Friday on the jobs report.

--President Trump said he’s planning to nominate Christopher Waller and Judy Shelton to serve on the Federal Reserve Board.  Waller is an executive vice president and the director of research at the St. Louis Federal Reserve Bank, who previously was a professor of economics at Notre Dame.

Shelton, who has been an informal adviser to Trump, is the U.S. executive director for the European Bank for Reconstruction and Development.

Earlier this year, Trump advanced two supporters for the Fed, Stephen Moore and Herman Cain, but both withdrew their names after they came under criticism.

--OPEC sealed a long-term cooperation agreement with Russia on Tuesday, extending a partnership set up two years ago to fight a surge of U.S. oil that has upset the balance of power in the oil market, specifically OPEC’s ability to control prices to a large extent.

The 14 crude-producing nations of the cartel and a Russia-led group of 10 countries also completed a nine-month agreement to curb oil production by a combined 1.2 million barrels a day, rolling over the six-month deal that was set last December.

Despite the production agreement, prices fell over fears on future demand, and OPEC, the International Energy Agency, and the Energy Information Administration have all recently cut their demand growth outlooks for 2019.

But then we had an inventory report on Friday that revealed a decline far less than expected and oil rallied some, cutting the loss for the week to less than $0.50, finishing at $57.73 on West Texas Intermediate.

--Boeing said on Wednesday that it would allocate $100 million to help the families and communities affected by the recent crashes of two of its 737 MAX jets; an acknowledgement of Boeing’s responsibility in the crashes, which were caused by a malfunctioning anti-stall system on the new jets. 

“We at Boeing are sorry for the tragic loss of lives in both of these accidents, and these lives lost will continue to weigh heavily on our hearts and on our minds for years to come,” CEO Dennis Muilenburg said in a statement.  “The families and loved ones of those on board have our deepest sympathies, and we hope this initial outreach can help bring them comfort.”

Boeing still has to deal with a slew of lawsuits from victims’ families, investigations by federal regulators and calls for compensation from airlines.

Speaking of this last point, Southwest Airlines, the largest operator of the grounded Boeing 737 MAX, said the latest safety issue with the beleaguered aircraft was forcing the carrier to reassess its schedule for the rest of the year, as first reported by Bloomberg.

The latest problem, “unfortunately, is going to delay the timeline for returning the MAX to service,” CEO Gary Kelly told employees on Monday.  “That’s very disappointing.”

After Boeing completes the update to the MAX, the FAA must review the fix as well as the results of test flights, which most are now saying won’t be before mid-September, and then you have the issue of whether pilots need to go through simulator training or just through their laptops, and so you’re talking October at the earliest.

--Major auto makers in the U.S. saw new-vehicle sales drop in the first half, a trend that is expected to continue the remainder of the year, though we are coming off the industry’s historic sales run.

A dramatic shift away from sedans and compact cars helped dent sales in the first part of the year as General Motors and other auto makers discontinued these models.

U.S. new-vehicle sales in 2019 are likely to fall below 17 million for the first time since 2014, analysts predict, as the strong sales since the financial crisis have satisfied pent-up demand.  No need to panic, though. Just a slowdown for now.

J.D. Power estimates the annualized selling pace in June to come in at 17.3 million, lower than a year earlier, while the first half posted six straight months of weaker sales compared with the same period in 2018, according to Cox Automotive.

GM’s U.S. sales slid 4% through June, while Fiat Chrysler reported a 2% decline in the first six months.  Ford reported a 2.9% drop, with second-quarter sales down 4.1%.

Among the Japanese car companies, Toyota Motor Corp. was off 3% in the first half, Nissan was down 8.2% and Honda Motor’s Co.’s U.S. sales fell 1.4%.

--Tesla Inc. set a record for quarterly vehicle deliveries in a triumphant response to loads of questions about demand for its electric cars.  Shares rose 4.6% on the news Wednesday.

Tesla didn’t comment on profit, as the earnings release comes later, but the robust deliveries will help jumpstart sentiment, one would think, though the stock at $232.70 at week’s end was well below the $347 it closed at on Jan. 11.

Deliveries of all models for the quarter hit 95,200 vehicles, including 17,650 Model S and X, though this was down from the 27,550 of the more expensive and profitable models delivered in the fourth quarter.  Analysts on average were expecting total deliveries of 89,084.  CEO Elon Musk has repeatedly said Tesla would deliver a record number of cars in the second quarter, beating the 90,700 it sent to customers in the final quarter of last year.

In a statement, the company added that it was “well positioned” to increase production and deliveries in the third quarter.  But Tesla may be hard pressed to reach its goal of selling 360,000 to 400,000 cars this year.  That is because the company has delivered just over 158,000 in the first six months.

Tesla had a miserable first quarter and lost $702 million, which the company blamed in part on logistics issues at the company’s international ports and a drop-off in U.S. orders after the tax credit was halved, spurring worries that Tesla may have tapped a limited market for electric cars at premium prices.  And despite the solid quarter, skeptics remain.  Heck, the muted reaction in the share price spoke volumes.

I must admit, though, that I have suddenly seen a lot of Teslas on the road in my area.

--I had no idea the Betsy Ross flag, with a circle of 13 stars representing the first colonies, was being used by some white nationalists.  Nike claims it didn’t know either when it created a special edition Air Max 1 Quick Strike Fourth of July trainer featuring the flag.

So Nike then withdrew the shoe “based on concerns that it could unintentionally offend and detract from the nation’s patriotic holiday,” the company plunging headlong back into the nation’s culture wars.

The abrupt cancellation came after Colin Kaepernick, the former NFL quarterback and social justice activist, privately criticized the design to Nike, according to various sources.

Kaepernick, who had signed a lucrative deal to serve as a Nike brand ambassador last year, expressed the concern the Betsy Ross flag had been co-opted by groups espousing racist ideologies, a source told the New York Times.

Republican Gov. of Arizona Doug Ducey announced on Twitter that he would pull back state support for a Nike facility that would have employed more than 500 people, which the company had proposed to open in Goodyear, Arizona.  [The support was apparently in the offer of a grant worth up to $1 million.]

“Words cannot express my disappointment at this terrible decision,” Ducey said in a series of tweets, adding that Nike “has bowed to the current onslaught of political correctness and historic revisionism.” 

Ducey, who had previously expressed excitement over the project, also said: “Arizona’s economy is doing just fine without Nike.  We don’t need to suck up to companies that consciously denigrate our nation’s history.”

But Democratic governors in states such as California said, ‘Hey, we’ll take your factory, Nike.’ 

By week’s end, the shoe was going for over $2,500 on some web sites.

Editorial / Wall Street Journal

“Colin Kaepernick may no longer be a quarterback, but he’s calling the plays at Nike.  The athletic shoe company was scheduled to release a sneaker featuring the ‘Betsy Ross flag’ this week, but the former San Francisco 49er thought it wasn’t a good idea.  The Air Max 1 USA, featuring the Founding-era American flag with 13 white stars arranged in a circle to represent the original colonies, would have gone on sale to mark the Fourth of July holiday.  Not anymore.

“We commend Nike executives for their original patriotic instincts, assuming they were sincere, but they didn’t think this one through.  Last year the company launched an ad campaign featuring a black-and-white photo of Mr. Kaepernick bearing the words ‘Believe in something.  Even if it means sacrificing everything.’....

“Remember the National anthem?  Normally we sing it standing and facing the American flag.  Did  no one at Nike foresee a contradiction between its exaltation of Mr. Kaepernick’s anti-flag fervor, on the one hand, and its flag-embossed sneaker on the other?

“Mr. Kaepernick certainly noticed....

“The company had already shipped the shoes to retailers, but it deferred to Mr. Kaepernick’s historical and semiotic expertise and had them all recalled....

“Nike is entitled to cancel its products for any reason. But the rest of us are entitled to point out that no flag of the United States is a symbol of oppression and racism, and that Mr. Kaepernick’s suggestion that it is one – with Nike’s tacit agreement – is political theater based on false history....

“It’s also worth remembering that harebrained controversies like this give many Americans the not unreasonable sense that their country is being maligned by pampered social-justice warriors.  Donald Trump has reaped enormous political benefits from the ill-judged fashion among NFL players to kneel during the National Anthem. If the President wins re-election, perhaps he should write a thank-you note to Colin Kaepernick and Nike.”

--Delta Air Lines Inc. raised its outlook for the June quarter, as it sees stronger demand from travelers leading into the summer travel season.

The nation’s third-largest carrier by traffic on Tuesday said it expects second-quarter adjusted revenue to rise between 8% to 8.5% from the prior-year, up from the 6% to 8% growth it previously expected.

--Warren Buffett said Monday he plans to donate $3.6 billion of Berkshire Hathaway Inc. stock to five charities – one of his largest gifts ever.  This brings the total amount of stock he’s donated to foundations to about $34 billion since making a pledge in 2006 to give away all his fortune.  The recipients include the Gates Foundation, as well as charities named for his late wife and ones run by his children.

--We note the passing of a great American...Lee Iacocca, 94.  Iacocca was an immigrant’s son and salesman extraordinaire whose blunt and swaggering persona dominated the auto industry like nobody since Henry Ford.

Iacocca really had two careers, first, as father of the wildly popular Ford Mustang in 1964, and then at Chrysler, which following his firing at the hands of Henry Ford II, he rescued dramatically in the early 1980s.

A powerful speaker, with a soaring ego, he became a hero to millions of Americans, as well as a household name for starring in his own commercials for Chrysler, where he would point at the camera and deliver a sales pitch that entered the lexicon: “If you can find a better car, buy it.”

Oh, he had his critics, for sure, and many said he clearly deserved to be fired from Ford as he schemed to take over the company, but no one can dispute his success at Chrysler.  It was a company moments from bankruptcy, but Iacocca persuaded Congress to guarantee $1.5 billion in loans to launch its new “K-car” and extracted major givebacks from workers, dealers, bankers and suppliers.  Chrysler regained it health and Iacocca famously paid back his government loans seven years early.

“He was easily one of the greatest figures in the history of the automobile industry,” said David Lewis, a professor emeritus of business history and Ford expert at the University of Michigan.  “And he was second only to [the first] Henry Ford in the amount of publicity he generated.”

Iacocca exploited his high visibility to attack U.S. and Japanese policies that he said were killing American jobs, a message that hit home as factories closed by the thousands in the 1980s and the nation’s economy seemed to wither in the face of competition from Japan.

Iacocca’s leadership of a money-raising blitz to refurbish the Statue of Liberty and Ellis Island in the mid-1980s further honed his image as a patriot and champion of the working people.  Some leading Democrats touted him as a presidential candidate.

But his hard-driving and loud style not only wasn’t suited for politics (at least back then), but by the late 1980s, Chrysler began to have some serious problems and Iacocca was forced to lay off thousands while he continued to collect huge paychecks, which began to hurt his image.

Iacocca retired as chairman of Chrysler on Dec. 31, 1992, having underseen a second turnaround that led to the company becoming the most profitable in the industry in the mid-1990s.  He wanted to be remembered for the profitability he engineered, but as he put it, “I have a feeling I’m going to be remembered only for my TV commercials.”

Iacocca was born in Allentown, Pa., and attended Lehigh University in nearby Bethlehem, and then received a master’s degree in engineering at Princeton, joining Ford as an engineering trainee in 1946.  Ten years later he drew the attention of Robert McNamara, who was running the Ford Division, McNamara bringing Iacocca to the headquarters in Dearborn, Mich.  One of McNamara’s last acts at Ford was to recommend that Iacocca become, at 36, the youngest vice president in Ford’s history.

Using this platform Iacocca orchestrated the new Mustang, which sold 419,000 its first year and became a huge success story.

--According to researchers at the University of California at Riverside, puffing on electronic cigarettes can damage neural stem cells important to brain function, per a new study.

E-cigarettes are sold as safer and cleaner than tobacco cigarettes, but as a co-author of the research, Atena Zahedi, said: “Even short-term exposure can stress cells in a manner that may lead, with chronic use, to cell death or disease.  Our observations are likely to pertain to any product containing nicotine,” Zahedi said in a statement.

E-cigarettes set off a complex series of cellular-level events that damage stem cells’ DNA, the researchers said.

--Meghan McCain, the 34-year-old daughter of the late Sen. John McCain, is reportedly considering leaving the ABC daytime talk show “The View,” according to various sources.

McCain feels “so exhausted and defeated,” an anonymous source told the Daily Beast, pointing to rising tensions between the co-hosts.  In a CNN report, McCain was described as “miserable” on the show.

But ABC is dismissing the reports.

--MAD magazine is coming off newsstands after a 67-year run.  The famed satirical magazine featuring the freckled face of Alfred E. Neuman will stop publishing new material outside of its end-of-year specials, owner DC said in an email.

Soon the bimonthly publication will only feature vintage MAD content and be sold at comic book stores.  The magazines will still be mailed to subscribers, and DC  will continue to publish MAD books and special collections.

“I am profoundly sad to hear that after 67 years, MAD Magazine is ceasing publication.  I can’t begin to describe the impact it had on me as a young kid – it’s pretty much the reason I turned out weird,” tweeted comedian “Weird Al” Yankovic, who served as MAD’s first guest editor in 2015.  “Goodbye to one of the all-time greatest American institutions.”

Foreign Affairs

Iran: President Hassan Rouhani on Wednesday warned that Iran would increase its enrichment of uranium this weekend to whatever level was needed beyond the cap set by the nuclear agreement.

Iran has repeatedly threatened to increase enrichment above the 3.67 percent level allowed under the nuclear deal by July 7 unless it receives some relief from U.S. sanctions.  European countries are struggling to meet Tehran’s demands to keep the 2015 nuclear deal alive.

“Our enrichment rate is not going to be 3.67 percent anymore,” Rouhani said.  “It’s going to be as much as we want it to be.”

The uranium needs to be enriched to much higher levels, around 90 percent, before it can be turned into a weapon.

Iran argues that it should no longer be bound by the limits of the deal if it does not also benefit from the sanctions relief that the 2015 agreement promises.  Since withdrawing from the deal last year the United States has reimposed sanctions, which has also made it difficult for European companies to trade with Iran.

European signatories to the nuclear pact with Iran said on Tuesday they were “extremely concerned” by Tehran’s apparent breach of the accord, as Israel said it was preparing for possible involvement in any confrontation between Iran and the United States.

Iran’s main demand at this point is that it be allowed to sell its oil at the levels before Washington pulled out of the deal and restored sanctions.  Iranian crude exports were around 300,000 barrels per day or less in late June, industry sources said, a fraction of the more than 2.5 million bpd Iran shipped in April 2018, the month before Trump withdrew from the nuke deal.  Iran has said it will breach the accord’s nuclear curbs one by one until it is able to sell that amount of oil, saying this is the least it should be able to expect from an agreement that offered economic gains in exchange for nuclear restrictions.

President Trump tweeted:

“Iran has just issued a New Warning.  Rouhani says that they will Enrich Uranium to ‘any amount we want’ if there is no new Nuclear Deal.  Be careful with the threats, Iran.  They can come back to bite you like nobody has been bitten before!”

And:

“Iran was violating the 150 Billion Dollar (plus 1.8 Billion Dollar in CASH) Nuclear Deal with the United States, and others who paid NOTHING, long before I became President – and they have now breached their stockpile limit.  Not good!”

Meanwhile, a tanker suspected of violating EU sanctions against Syria, the Grace 1, was seized by British Royal Marines in Gibraltar on Thursday, apparently having sailed from Iran.  If so, the tanker also defied a U.S. ban on Iranian oil exports.  [The Brits landed a helicopter on the moving vessel in pitch darkness...not bad, Gents, not bad at all.]

The tanker had sailed around Africa from the Middle East and shipping data reviewed by various news sources suggests it had been loaded with Iranian oil off the coast of Iran, although the ship seems to have documents saying the oil is from Iraq. [Iran later admitted it was from their country.]

A spokesman for British Prime Minister Theresa May welcomed Gibraltar’s move, though the incident could also signal some tensions within Europe.  Spain, which challenges British ownership of Gibraltar, said the action was prompted by a U.S. request to Britain and appeared to have taken place in Spanish waters.

While Europe has banned oil shipments to Syria since 2011, it had never seized a tanker at sea.

Needless to say Tehran is fuming, the foreign ministry summoning the British ambassador to voice “its very strong objection to the illegal and unacceptable seizure” of the ship.  But such a gesture lifted any doubt over Iran’s ownership of the vessel, which flies a Panamanian flag and is listed as managed by a company in Singapore.

At the same time, an Iranian Revolutionary Guards Corps commander, Mohsen Rezai, threatened today to seize a British ship in retaliation.

Editorial / Wall Street Journal

“Many Europeans will blame Washington more than Tehran for (the breakout in uranium enrichment).  But it’s been clear all along that the regime has viewed the deal as a pause, not an end, to its nuclear ambitions.  In 2016 the country overproduced heavy water, which the Obama Administration then purchased.  Earlier this year the country’s top nuclear official acknowledged the regime had long been preparing to break out from the deal and pursue nuclear weapons.

“Iran also ignores United Nations Security Council bans on missile tests and weapons sales.  The regime maintains a destabilizing presence in Syria, plots terrorist attacks in Europe, and calls for the destruction of Israel.  Its recent attacks on oil pipelines throughout the Middle East are part of a pattern that long preceded the U.S. maximum-pressure policy.

“That policy is putting an enormous economic and political strain on Iran, which explains why it is acting out even as it refuses the U.S. invitation to renegotiate. The loud announcement of a nuclear breakout is intended to scare the world into coaxing President Trump to back off the sanctions pressure.

“Iran’s actions should instead prompt Europe to join the U.S. in sanctions.  Some in Europe are hoping Mr. Trump will lose his re-election bid and a Democrat will rejoin the nuclear accord.  But we’ve learned enough about Iran’s behavior to know that the regime always intended to use the deal to finance its adventures abroad, while biding its time and getting stronger as it waits for the date it could escape the deal’s strictures and become a nuclear power.”

Syria: 200 corpses, including those of people believed to have been executed by ISIS, were found near the city of Raqqa, according to the Syrian Observatory for Human Rights.  More bodies are expected to be uncovered as the search of the area continues.

Libya: The United Nations said on Thursday it had information that Libyan guards shot at refugees and migrants trying to flee from air strikes that killed at least 53 people, including six children, in a migrant detention center.  The UN said there were two air strikes late on Tuesday, one hitting a hangar containing around 120 refugees and migrants.  There are still about 500 people at the detention center east of Tripoli.

Libya is one of the departure points for African migrants fleeing poverty and war to reach Italy by boat, but many are intercepted at sea and brought back by the Libyan coast guard, with the approval of the European Union.

Speaking from Italy, where he’s been touring and meeting officials, Russian President Vladimir Putin said he was worried militants were flowing into Libya from Syria’s Idlib province and warned that the Libyan situation was deteriorating.  Putin said he wants the warring sides to agree to a ceasefire and to enter into proper political talks.

Libya’s UN-backed government blamed the United Arab Emirates for the airstrike, suggesting a new level of foreign intervention in the battle for the capital.

UN Libya envoy Ghassan Salame condemned the air strike, saying it “clearly amounts to the level of a war crime.”

“The absurdity of this ongoing war has today reached its most heinous form and tragic outcome with this bloody, unjust slaughter,” he said.

Eastern forces under Khalifa Haftar launched a ground and aerial offensive three months ago to take Tripoli, the base of Libya’s internationally recognized government.  But Haftar’s Libyan National Army (LNA) force, allied to a parallel government based in eastern Libya, has seen its advance on Tripoli held up by robust defenses on the outskirts of the capital, so now it says it will start heavy air strikes after “traditional means” of war had been exhausted.

Afghanistan: The Taliban killed at least 26 members of a pro-government militia in north Afghanistan on Saturday, officials said, as the Islamists and U.S. negotiators were set to begin a seventh round of peace talks in Qatar.  One U.S. official said the meeting was a “make-or-break moment” in efforts to end the 18-year-old war.

The Taliban obviously believes it needs to negotiate from a position of strength, thus the constant attacks while professing it wants peace.

North Korea: President Trump met with Kim Jong Un on Sunday at the DMZ, after Trump’s surprise tweet that he was already going to be in the area and would like to see him, and the two agreed in talks of about an hour to push forward dialogue for making a new breakthrough in the denuclearization of the Korean peninsula, North Korean state media said on Monday.

Trump thus became the first sitting U.S. president to set foot in North Korea.

“The top leaders of the two countries agreed to keep in close touch in the future, too, and resume and push forward productive dialogues for making a new breakthrough in the denuclearization of the Korean peninsula and in the bilateral relations,” KCNA news agency said.

KCNA added: The two leaders’ “bold, brave decision” that led to the historic meeting “created unprecedented trust between the two countries” that had been tangled in deeply rooted animosity.

But it is clear that in any new round of talks with the United States, North Korea wants actions not words, as in sanctions relief.  After President Trump met with Kim at the DMZ, Secretary of State Mike Pompeo told reporters a fresh round of negotiations with North Korean foreign ministry diplomats will likely happen “sometime in July.”  Pompeo later made clear the United States believed sanctions put in place under UN Security Council resolutions needed to remain in place as talks moved forward.

The U.S. has previously rejected Pyongyang’s offer to dismantle its reactor complex at Yongbyon in exchange for sweeping sanctions relief.  But since then, the North has only doubled down on its calls for sanctions to be withdrawn, signaling that while lesser steps might be welcome, they would not be enough to persuade Pyongyang to give up its nuclear assets.

North Korea’s mission to the United Nations on Wednesday criticized the United States as “obsessed with sanctions and pressure campaign” and accused it of being “more and more hell-bent on hostile acts” against Pyongyang.

Clearly, the Trump administration is looking for a freeze of some kind on fissile material, nuclear weapons, and missile production at Yongbyon, but North Korea doesn’t acknowledge enrichment facilities outside Yongbyon, so how can it expect any kind of sanctions relief?

Uri Friedman / Defense One

“While Trump’s diplomatic engagement with Kim has produced many first moments, it has yet to yield any real progress on the core issue of North Korea’s nuclear-weapons program, including long-range missiles that are potentially capable of delivering nuclear warheads to the United States.

“The president has conducted nuclear talks with Kim as though they were a reality-TV show, while often ignoring or distorting the grave underlying realities of the negotiations.  Standing at Observation Point Ouellette along the DMZ on Sunday, he declared that ‘all of the danger went away’ after his initial summit with Kim in Singapore, when nothing’s changed in terms of North Korea’s military capabilities.  (The military tensions that threatened to devolve into another war on the Korean peninsula in 2017 have undoubtedly subsided, for now at least.)

“Trump similarly stated at a press conference before his trip to the DMZ that Barack Obama was ‘begging for a meeting’ with Kim but that the North Korean leader had refused his predecessor’s requests.  When I asked Ben Rhodes, one of Obama’s top foreign-policy advisers, whether this was in fact the case, he responded, ‘No.  Not at all.  Never.’....

“(After) meeting with Kim, Trump said: ‘We are going to have teams, they are going to meet over the next weeks, they are going to start a process.’  Joseph Yun, who served as the North Korea envoy for Obama and Trump from 2016 to 2018, recently told me that he thinks this ‘process’ might ultimately prove to be the ‘only thing Trump accomplished [on North Korea] in his first term.’

“The question is whether that process is sustainable, given that Kim has made clear that his preference is to deal only with the president rather than his more hard-line advisers, let alone any future Democratic president bent on repudiating Trump’s record on foreign policy....

“If Trump fails to denuclearize North Korea during his time in office, the leader-to-leader channel could provide an avenue for avoiding conflict with a nuclear-armed North Korea.

“Even Trump, however, seems to recognize that the most concrete result of all his summitry, displayed to such dazzling effect on Sunday, may not be as durable as it seems.  ‘We have a very good relationship,’ Trump said of Kim just ahead of their meeting.  ‘I don’t know about beyond the two of us, but I can say the two of us.’”

Editorial / Washington Post

“There was, to be sure, more showmanship than substance in President Trump’s meeting with the Chinese and North Korean leaders over the weekend and a disturbing lack of detail in the president’s accounts of what came out of them.  The odds of a breakthrough in negotiations over China’s trade practices or North Korea’s nuclear arsenal still look long. But at a time of growing danger and disorder in U.S. foreign relations, there’s reason to be grateful for even a temporary easing of tensions – and that is what Mr. Trump’s summits with Xi Jinping and Kim Jong Un seem to have accomplished.”

Editorial / USA TODAY

“There’s more here than self-promotion, though.  In constantly providing a stage for Kim, Trump is giving him legitimacy and global standing that he most assuredly does not deserve.

“Making matters worse, Trump is, according to the New York Times, considering recognizing North Korea as a nuclear power and merely asking for it to freeze its arsenal, rather than giving it up.  That’s a step back from where Kim was last year, when he promised to denuclearize.  [Ed. National Security Adviser John Bolton vehemently denies talk of a ‘freeze.’]

“Not that it is likely Kim would follow through with either.  North Korea has a long history of reneging on pledges to eliminate or freeze its nuclear weapons program. These pledges go back to 1985, when it joined a nuclear nonproliferation treaty, and 1992, when North Korea and South Korea signed a pact to denuclearize the peninsula.  In 1994, it negotiated a deal with former President Jimmy Carter to freeze its program.

“To give Kim so much upfront now, in hopes that he will reform his ways, is unwise.  Other rogue nations will be encouraged to follow suit, developing their own nuclear arsenals and forcing their way onto the U.S. president’s agenda.

“Indeed, Iranian leaders, who signed a deal to freeze their nuclear program in 2015, have to see the way their nation is being treated even as Trump coddles North Korea.  Making a nuclear deal without weapons in hand has left Iran vulnerable to renewed sanctions from an administration hellbent on blowing up this agreement.”

China: Hundreds of protesters besieged and broke into the Hong Kong legislature on Monday after a demonstration marking the anniversary of the return to Chinese rule in 1997 under a “one country,  two systems” formula that includes freedoms not enjoyed in mainland China, including the right to protest.

The violence followed weeks of protests against a now-suspended extradition bill that opponents say would undermine Hong Kong’s much-cherished rule of law and give Beijing powers to prosecute activists in mainland courts, which are controlled by the Communist Party.

Hong Kong police arrested more than two dozen people in connection with the protests, and one thing is clear.  While Hong Kong’s business community and ordinary citizens supported those protesting the controversial extradition bill, Monday night’s ugly demonstrations risk losing that very support – and giving a boost to pro-Beijing leader Carrie Lam.  [I watched it live and was disgusted by the protesters’ behavior...for the first time, ever, when it comes to Hong Kong.]

Speaking in the early hours outside the police headquarters, Ms. Lam said it was a scene that “really saddens...and shocks a lot of people.”

“I hope the community at large will agree with us that with these violent acts that we have seen, it is right for us to condemn it, and hope society will return to normal as soon as possible,” she told reporters.

Monday night’s chaos may also prove helpful to Chinese President Xi Jinping, whose government argues that only tight control can ensure the stability necessary to support economic growth.

Chinese state media blamed meddling by Western governments on Thursday for unrest in Hong Kong amid an escalating spat between China and the UK over the former British colony.

“Ideologues in Western governments never cease in their efforts to engineer unrest against governments that are not to their liking, even though their actions have caused misery and chaos in country after country in Latin America, Africa, the Middle East and Asia,” the official China Daily said in an editorial.  “Now they are trying the same trick in China.”

British Foreign Secretary Jeremy Hunt has refused to back down in his war of words with China, repeating his threat that there would be “serious consequences” if the agreement guaranteeing the rights and freedoms of the people of Hong Kong is breached.  “It’s very important that the one country, two systems approach is honored,” he told BBC News.

“China is a country that has benefited massively from the application of a rules-based international system...to not honor this very important agreement between the UK and China of course would have consequences for China as well as for the UK.”

Beijing accused the British government of “gross interference.”  China’s ambassador to the UK, in a press conference at the Chinese embassy in London, attacked British ministers for openly defending the rights of Hong Kong demonstrators.  “The UK government chose to stand on the wrong side,” Liu Xiaoming said.  “It has made inappropriate remarks not only to interfere in internal affairs of Hong Kong but also to back up the violent lawbreakers.”

The 1984 Sino-British Joint Declaration promised Hong Kong a high degree of autonomy and the protection of various freedoms including an independent judiciary.

Editorial / Global Times...a Communist Party mouthpiece...

“Although Hong Kong is a capitalist city, it will never condone such violent behavior.  It is a disgrace that such a developed society could carry out this kind of reckless and savage violence that has signaled an ominous alert for the city’s future.

‘In the West, police enforce a zero-tolerance policy toward vandalism and the destruction of government property. This recent round of rioting will forever be a stain upon Hong Kong’s image as a reliable hub for international finance and commerce....

“In light of the autonomy already in place, law and order are the internal matters of Hong Kong and meant to be handled by the local government.  However, with a general and common sense understanding of how justice functions, Chinese society is all too aware that a zero-tolerance policy is the only remedy for such destructive behavior witnessed.  Otherwise, and without this policy, it would be similar to opening a Pandora’s Box, upending social disorder....

“We believe that neither Hong Kong nor the Chinese mainland will allow this type of mob culture to flourish.  Problems and disputes are to be resolved through constitutional devices currently in place and readily available to all members of society.  Using violence to hijack a society like Hong Kong’s is the greatest evil of the modern era.

“It is time for Hong Kong society to take action and say ‘no’ to the violence.  Under the principle of ‘one country, two systems,’ the residents are responsible for maintaining stability.

“This is also the underlying obligation implied within the ‘Hong Kong people governing Hong Kong’ policy.  The city’s image and the lifestyle enjoyed by those who live there shall not be undermined by vicious protesters.  Chinese mainland society and Hong Kong belong to the same big family, and the mainland looks forward to witnessing the reemergence of a stable and prosperous city.

“An improved and fully recovered Hong Kong is the wish of all Chinese.”

Separately, there was a report Friday that China is deliberately separating Muslim children from their families, faith and language in its far western region of Xinjiang.

At the same time as hundreds of thousands of adults are being detained in giant camps, there is a rapid campaign to build boarding schools.

And on a different matter, the U.S. has accused China of conducting missile launches in the South China Sea.  Beijing had announced military drills but did not confirm the allegations that it launched missiles in the disputed waters, but it had warned ships not to enter a designated area between the Spratly and Paracel Islands for five days.

A Pentagon spokesman said on Tuesday that China’s behavior was “contrary to its claim to want to bring peace to the region and obviously actions like this are coercive acts meant to intimidate other claimants” to the South China Sea.  [Taiwan, the Philippines, Brunei, Malaysia and Vietnam all have claims on parts of the sea that China has been aggressively taking for its own.]

Lastly, Taiwan President Tsai Ing-wen will be spending a few nights in the United States as part of a diplomatic trip to the Caribbean this month, where Taiwan still has a few allies.  Her mere presence in the U.S. will piss off Beijing.  Good!!!

Russia: Fourteen crew members on board a Russian Defense Ministry submarine were killed after a fire broke out, the government reported.  The deep-sea research vessel was carrying out a military survey in Russian territorial waters, the ministry said.  The 14 were killed by poisonous fumes.

But due to the top-secret nature of the mission, no further details were released, including on how many survivors there may have been.

It was in August 2000 that the Russian nuclear-powered submarine Kursk sank to the floor of the Barents Sea after two explosions in its bow, killing all 118 on board.  The explosion was seen as a public relations disaster for President Vladimir Putin in the early days of his presidency.

Random Musings

--Presidential tracking polls....

Gallup: 41% approval of Trump’s job performance, 54% disapproval; 90% Republicans, 34% independents (June 19-30...July 2).
Rasmussen: 49% approval, 50% disapproval (July 4)

In a national CNN/SSRS survey among Democrats, post-debates, Joe Biden led with 22% (down a whopping 10 points since May), with Kamala Harris at 17% (up from 8% in May), Elizabeth Warren 15% (vs. 7%), and Bernie Sanders 14% (down from 18% in May).

What I found surprising is Pete Buttigieg was fifth at just 4%, down a point from May.

Back to Biden, he is still receiving 36% of the black vote, with Harris at 24%.

In a new Quinnipiac University national poll of Democrats and Democratic leaners, also post-debates, Biden garnered 22% in this one as well, with Harris at 20%, followed by Warren 14%, Sanders 13%, and Buttigieg 4%.

A June 11, 2019 Quinnipiac poll had Biden at 30%, Sanders 19%, Warren 15%, Buttigieg 8%, and Harris 7%. 

But when asked who would have the best chance of beating President Trump in 2020, regardless of who they support in the primary, Biden topped the field  with 42%, which is a drop from the 56% he received on April 30.  Harris was a distant second at 14%, up from 2% in April. Sanders received 13%.

--And this week Sen. Harris labeled President Trump a “predator” that she could take on due to her background as a prosecutor – a new line of attack against the president.

While speaking in Iowa Wednesday, Harris invoked her record as a prosecutor, saying that she had gone after a number of groups that have “preyed” on Americans, including big banks and pharmaceutical companies.

“I know predators,” she said, after rattling off the list.  “And we have a predator living in the White House.”

--Surprisingly, Pete Buttigieg raised $24.8 million over the past three months, adding to his $7 million total from the first quarter.  Joe Biden took in $21.5 million.  [Sanders $18 million, Harris $12 million.]

But with Buttigieg at 4%, what will he do with the cash to improve his standing?  The candidate said it would be spent on staffing up in Iowa, for starters.

--In a CNN/SSRS survey, 74% of Americans say the situation at the Southern border with Mexico is a crisis, up from less than half who felt that way in January (45%).

The steep increase comes most sharply among Democrats. Back in January, just 23% of Democrats called it a crisis as President Trump took that line in an effort to build support for border wall funding during the longest-ever government shutdown.  Now, 70% of Democrats see the situation at the border as a crisis.

Among independents, the share who see a crisis at the border climbed from 47% to 72%, and among Republicans, it’s up 11 points to 82%. 

But there is disagreement on the cause of the crisis at the border.  A majority of Democrats consider it a crisis because of the treatment migrants are receiving as they attempt to cross the border (54%), while most Republicans say they think it’s a crisis because of the number of migrants attempting to enter the country (63%).

93% of Democrats disapprove of the treatment migrants are receiving, while 62% of Republicans say they approve of the way they are being treated by the government after crossing the border.

--Kyle Smith / New York Post

President Trump must have looked at the Democratic debates the way Bruce Willis looked at the famous wall of weapons in Quentin Tarantino’s ‘Pulp Fiction.’  Should he choose the crossbow or the mace or the samurai sword or the baseball bat or...?

“It was as if the Democratic Party’s goal was to give Trump objects with which to bash it.

“Julian Castro says he wants to turn illegal border crossings into a parking ticket.  Park yourself in America, get a fine!  President Castro probably isn’t going to make you pay that fine, by the way.  Kamala Harris wants to abolish private health insurance. Elizabeth Warren wants to forgive student debt.  Oh, and everybody in the Thursday debate wants Uncle Sam to buy health insurance for however many Guatemalans, Hondurans and El Salvadorans manage to sneak across the border.

“One minute Democrats are waxing poetic about the humanitarian crisis down at the border; the next minute they’re proposing to make it 100,000 times worse by issuing engraved invitations to the couple hundred million people south of the border who would love to be ushered into the American health care system.  Bring all your ailments to El Norte, illegal immigrants.  American workers will pay your bill.

“In the age of Trump, politics has gotten a bit exhausting.  A gravestone in the latest ‘Simpsons’ Treehouse of Horror episode read: ‘Slow News Days.’  Wouldn’t it be nice if things could calm down a bit?

“Any presidential candidate who stood before the American people and said, ‘I vow to make politics so boring you won’t have to check the news again till 2024’ would have a pretty compelling argument.  There must be millions of Americans in the Upper Midwest thinking, ‘I dislike Trump but things are otherwise pretty much OK.’  Not a single Democrat is trying to reach these voters.”

Bret Stephens / New York Times

Amigos democratas,

“Si ustedes siguen asi, van a perder last elecciones. Y lo mereceran.

“Translation for the linguistically benighted: ‘Democratic friends, if you go on like this, you’re going to lose the elections.  And you’ll deserve it.’

“In this week’s Democratic debates, it wasn’t just individual candidates who presented themselves to the public.  It was also the party itself.  What conclusions should ordinary people draw about what Democrats stand for, other than a thunderous repudiation of Donald Trump, and how they see America, other than as a land of unscrupulous profiteers and hapless victims?

“Here’s what: a party that makes too many Americans feel like strangers in their own country. A party that puts more of its faith, and invests most of its efforts, in them instead of us. 

“They speak Spanish.  We don’t.  They are not U.S. citizens or legal residents.  We are.  They broke the rules to get into this country. We didn’t.  They pay few or no taxes. We already pay most of those taxes.  They willingly got themselves into debt. We’re asked to write it off.  They don’t pay the premiums for private health insurance.  We’re suppled to give up ours in exchange for some V.A.-type nightmare.  They didn’t start enterprises that create employment and drive innovation.  We’re expected to join the candidates in demonizing the job-creators, breaking up their businesses and taxing them to the hilt.

“That was the broad gist of the Democratic message, in which the only honorable exceptions, like Maryland’s John Delaney and Colorado’s John Hickenlooper, came across as square dancers at a rave.

“On closer inspection, the message got even worse.

“Promising access to health insurance for north of 11 million undocumented immigrants at a time when there’s a migration crisis at the southern border?  Every candidate at Thursday’s debate raised a hand for that one, in what was surely the evening’s best moment for the Trump campaign....

“Harris, meanwhile, came across as Barack Obama in reverse, especially with her scurrilous attack on Biden for the sin of having had a functional political relationship with two former segregationist senators in the 1970s. This was portrayed as a clever debate move but it will come to haunt her.

“Obama’s political genius was to emphasize what Greg Lukianoff and Jonathan Haidt, authors of ‘The Coddling of the American Mind,’ have called ‘common-humanity identity politics’ – he made you feel comfortable no matter the color of your skin.  Harris’ approach, by contrast, is ‘common-enemy identity politics.’  Making white Americans feel racially on trial for views they may have held in the past on crime, busing and similar subjects is not going to help the Democrats.

“None of this means that Democrats can’t win in 2020.  The economy could take a bad turn.  Or Trump could outdo himself in loathsomeness.  But the Democratic Party we saw this week did even less to appeal beyond its base than the president.  And at least his message is that he’s on their – make that our – side.”

--Justin Amash / Washington Post...the five-term Michigan representative having been the first sitting Republican lawmaker to join Democratic calls for an impeachment inquiry into President Trump.

“When my dad was 16, America welcomed him as a Palestinian refugee.  It wasn’t easy moving to a new country, but it was the greatest blessing of his life.

“Throughout my childhood, my dad would remind my brothers and me of the challenges he faced before coming here and how fortunate we were to be Americans. In this country, he told us, everyone has an opportunity to succeed regardless of background....

“My parents, both immigrants, were Republicans, I supported Republican candidates throughout my early adult life and then successfully ran for office as a Republican.  The Republican Party, I believed, stood for limited government, economic freedom and individual liberty – principles that had made the American Dream possible for my family.

“In recent years, though, I’ve become disenchanted with party politics and frightened by what I see from it. The two-party system has evolved into an existential threat to American principles and institutions.

“George Washington was so concerned as he watched political parties take shape in America that he dedicated much of his farewell address to warning that partisanship, although ‘inseparable from our nature,’ was the people’s ‘worst enemy.’  He observed that it was ‘the interest and duty of a wise people to discourage and restrain it.’  Washington said of partisanship, in one of America’s most prescient addresses: ‘The disorders and miseries which result gradually incline the minds of men to seek security and repose in the absolute power of an individual; and sooner or later the chief of some prevailing faction, more able or more fortunate than his competitors, turns this disposition to the purposes of his own elevation, on the ruins of public liberty....

“ ‘It serves always to distract the public councils and enfeeble the public administration.  It agitates the community with ill-founded jealousies and false alarms, kindles the animosity of one part against another, foments occasionally riot and insurrection.  It opens the door to foreign influence and corruption, which finds a facilitated access to the government itself through the channels of party passions.  Thus the policy and the will of one country are subjected to the policy and will of another.’

“True to Washington’s fears, Americans have allowed government officials, under assertions of expediency and party unity, to ignore the most basic tenets of our constitutional order: separation of powers, federalism and the rule of law.  The result has been the consolidation of political power and the near disintegration of representative democracy.

“These are consequences of a mind-set among the political class that loyalty to party is more important than serving the American people or protecting our governing institutions.  The parties value winning for its own sake, and at whatever cost.  Instead of acting as an independent branch of government and serving as a check on the executive branch, congressional leaders of both parties expect the House and Senate to act in obedience or opposition to the president and their colleagues on a partisan basis.

“In this hyperpartisan environment, congressional leaders use every tool to compel party members to stick with the team, dangling chairmanships, committee assignments, bill sponsorships, endorsements and campaign resources.  As donors recognize the growing power of party leaders, they supply these officials with ever-increasing funds, which, in turn, further tightens their grip on power.

“The founders envisioned Congress as a deliberative body in which outcomes are discovered. We are fast approaching the point, however, where Congress exists as little more than a formality to legitimize outcomes dictated by the president, the speaker of the House and the Senate majority leader....

“Most Americans are not rigidly partisan and do not feel well represented by either of the two major parties.  In fact, the parties have become more partisan in part because they are catering to fewer people, as Americans are rejecting party affiliation in record numbers....

“But we owe it to future generations to stand up for our constitutional republic so that Americans may continue to live free for centuries to come....

“Today, I am declaring my independence and leaving the Republican Party.  No matter your circumstance, I’m asking you to join me in rejecting the partisan loyalties and rhetoric that divide and dehumanize us.  I’m asking you to believe that we can do better than their two-party system – and to work toward it.  If we continue to take America for granted, we will lose it.”

Amash’s declaration and break with the Republicans is fueling speculation he is seeking the Libertarian Party nomination in order to launch a long-shot bid for president in 2020.

President Trump tweeted:

“Great news for the Republican Party as one of the dumbest & most disloyal men in Congress is ‘quitting’ the Party.  No Collusion.  No Obstruction!  Knew he couldn’t get the nomination to run again in the Great State of Michigan.  Already being challenged for his seat.  A total loser!”

--Navy Special Operations Chief Edward Gallagher was found not guilty on Tuesday of first-degree murder of a captive fighter and attempted murder of civilians in Iraq, but was convicted of a single charge for posing with the dead body of an ISI captive.

Gallagher, 40, a decorated eight-tour veteran serving in SEAL Team 7, became a rallying cause of some Republicans in Congress and members of the conservative media, and the focus of a potential pardon by President Trump.

The chief was turned in by his own platoon last spring. Several fellow SEALs reported that their leader had shot civilians and had killed a captive ISIS fighter with a custom hunting knife during a deployment in Iraq in 2017.  He was also charged with obstruction of justice by threatening to kill SEALs who reported him.

--With Europe’s big heatwave this week, some were blaming climate change.  Southern France experienced a national record 45.9C (114.6F), 4C hotter than it would otherwise have been, scientists say.

“Climate change is no longer an abstract increase in global mean temperature, but a difference you can feel when you step outside in a heatwave,” said Geert Jan van Oldenborgh of the Royal Netherlands Meteorological Institute and one of the paper’s authors.

“The observations show similarly frequent heatwaves would have likely been about 4C cooler a century ago,” said the report by the World Weather Attribution group.

--As beach season is in full swing, two scary incidents this week involving flash-eating bacteria.  A young boy was left covered in open wounds after he was infected during a trip to a Maryland beach, his mother said, after he went swimming off the coast of Ocean City.

When the wounds grew, she took him to the Peninsula Regional Medical Center in Salisbury, Maryland, where doctors diagnosed him with Vibrio, a type of bacteria that can cause skin to rot away in a condition called necrotizing fasciitis. 

Thankfully the boy was healing well at last report.

But that wasn’t the case for a 77-year-old woman who died after she scraped her leg at a Florida beach and contracted the flesh-eating condition.  Lynn F. died after suffering two strokes and sepsis during surgeries to try and save her leg, WTVT reported.

The CDC said the majority of cases of vibrio bacteria actually come from ingesting contaminated food, such as oysters.

One in three people who contract flesh-eating bacteria die from the infection, according to the CDC.

--Meanwhile, a western New Jersey resident has been diagnosed with West Nile virus, the state’s first case of the mosquito-spread disease this year and the earliest it has ever been reported in New Jersey, health officials announced Tuesday.

The Hunterdon County man is recovering at home after being hospitalized for “several days.”

In 2018, 61 people were infected by West Nile in my state, the highest number ever reported, and after record rains this spring, it’s clearly going to be an ugly season for the disease.

---

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

God bless America.

---

Gold $1401
Oil $57.73

Returns for the week 7/1-7/5

Dow Jones  +1.2%  [26922]
S&P 500  +1.6%  [2990]
S&P MidCap  +1.1%
Russell 2000  +0.6%
Nasdaq  +1.9%  [8161]

Returns for the period 1/1/19-7/5/19

Dow Jones  +15.4%
S&P 500  +19.3%
S&P MidCap  +18.2%
Russell 2000  +16.8%
Nasdaq  +23.0%

Bulls 53.3
Bears
18.1 [from a week ago...the folks who put this together were off this week.]

Have a great week.

Dr. Bortrum posted a new column!

And Go Coco Gauff!!!

Brian Trumbore