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Week in Review

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07/27/2019

For the week 7/22-7/26

[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 1,059

One thing I can say with conviction about this column over the last 20+ years.  I’ve been consistent.  I don’t blow with the wind. I give you a market forecast each year and stick with it come hell or high water.  I make claims on geopolitics and stay with them.  Long-term, I’ll put my track record up against anyone’s. 

And so I’ve maintained the Democrats would be very foolish to proceed with impeachment against President Trump, especially when there’s no crime, and some of you should have caught that I didn’t even mention Robert Mueller the previous two weeks.  I didn’t think the House hearings would amount to anything because Mueller himself, in that nine-minute press conference following release of his report, told us he would stick to the script.  And he did.  There was never any reason to believe otherwise.

I watched it all (or listened to some of it in the car), and I’ll summarize it in a bit, but I’ll tell you what left me incredulous (all over again) this week; President Trump’s impromptu press conference with Pakistani leader Imran Khan, where Trump said some of the flat-out stupidest things I’ve ever heard from any leader.

I discuss the issues in detail below but Trump explicitly endorsed Chinese President Xi Jinping and the violence that occurred in Hong Kong on Sunday, when Xi (or his underlings) clearly unleashed the triad gangs to beat up protesters, journalists and total innocents, such as in the subway station.  I mean I have taken the Hong Kong subways a ton of times and never once, not once, felt threatened.  I love the place, but Hong Kong these days is on a knife’s edge...it can flip.  And Xi wouldn’t mind that in the least.

But Trump said, “I think President Xi has reacted very responsibly.  He’s allowed [the protests] to go on for a long time.”

These are democratic protests against authoritarianism, Mr. President!

And then Trump said his administration has had “very positive correspondence with North Korea...When they’re ready, we’ll be ready.”

Trust me, there was no positive correspondence.  Less than three days later, Kim Jong Un was firing off missiles, upset over U.S.-South Korean military exercises.

But as if the Xi comment wasn’t bad enough, what the president said on Afghanistan, Imran Khan sitting next to him, was startling, and beyond irresponsible.

Trump started talking about how he could win a war in ten days in Afghanistan if he wanted to, but that the U.S. would have to “kill 10 million people” and the country “would be wiped off the face of the Earth.”

What?!!!  Trump then bitched about “rebuilding schools.”  “The United States, we shouldn’t be doing that, that’s for them to do.”

George C. Marshall was stirring in his grave.

I have been consistent since day one of the Trump presidency.  To me it’s always been about foreign policy and if you are confident with Trump at the tiller these days, what more can I say, except that I hope it all works out for the good of the country, and if I’ve been way off base down the road, I’ll be the first to admit it.

Trump World / Mueller Testifies:

Yes, Robert Mueller was not on his game.  What virtually all of us found kind of shocking, regardless of what side you were on, is how he didn’t seem to know details of his own report that all of us knew.  The former FBI director, nearly 75, was steadfast at times and mumbling almost incoherently at others. 

Let’s face it...the sound was awful, he kept forgetting to speak into the microphone, and some of his statements were contradictory.  He struggled with basic questions.

But you could tell he was also being extra cautious to stick to his conclusions. And lawmakers peppered him with prewritten questions, rushing to get everything in in their five minutes, and, be honest, how many of them did you hear clearly?  All this made Mueller look lost.  Many of the congressmen were assholes for not slowing down.  This wasn’t supposed to be “Beat the Clock.”

Much of it was a just a mess.

But at the same time, Judiciary Committee Jerrold Nadler asked, “Did you actually totally exonerate the president?”  “No,” Mueller replied.  He also reiterated that Trump “was not exculpated.”

Mueller said his inquiry was conducted in “a fair and independent manner,” and that members of the special counsel’s team “were of the highest integrity.”

“It is not a witch hunt,” Mueller added.  And he said he “generally” agreed that Trump’s written answers to his investigators were not always truthful after the president refused to submit to a face-to-face interview.  Mueller said his team decided not to exercise its subpoena powers against Trump to force an interview last year because of “the necessity of expediting the end of the investigation.”  I believe this explanation.  Of course any subpoena would have been dragged out probably beyond Nov. 2020.

Democrats had entered the hearings hoping his testimony would rally public support behind their own ongoing investigations of the president and his administration.  And it clearly didn’t.  Public opinion polls have consistently shown there is no appetite for impeachment hearings...period. And Democrats really need to move on.  Fight Trump in 2020 on healthcare, not this.

In the end, Trump lawyer Jay Sekulow said, “The American people understand that this issue is over. They also understand that the case is closed.”

Today, the House Judiciary Committee filed a 53-page petition in U.S. district Court seeking permission to review grand jury evidence from the Mueller probe that lawmakers say they need to determine whether to begin impeachment proceedings against the president.  The testimony would involve evidence concerning interactions between Trump campaign officials and Russian agents, as well as Trump’s alleged efforts to direct White House Counsel Don McGahn to remove Special Counsel Robert Mueller.

Judiciary Committee Chairman Nadler told a news conference that the House of Representatives is the only institution of government capable of holding Trump accountable for actions outlined in the Mueller report.

“The House must have access to all the relevant facts and consider whether to exercise its full...powers, including a constitutional power of the utmost gravity: recommendation of articles of impeachments,” Nadler said.

The top Republican on the Judiciary Committee, Rep. Doug Collins, criticized Nadler’s move.  “Judiciary Democrats are suing for grand jury material to which they have no right,” he said in a statement.

Unfortunately, what should be the major takeaway from Mueller’s testimony is that Russia is continuing to interfere in U.S. elections.

“They’re doing it as we sit here,” Mueller told lawmakers.  Earlier he’d said how that aspect of his investigation has been underplayed despite the long-term effect on the U.S. 

“Let me say one more thing,” Mueller said at one point.  “Over the course of my career, I have seen a number of challenges to our democracy. The Russian government’s effort to interfere with our election is among the most serious.”  Mueller said Russians were continuing to interfere in U.S. politics “and they expect to do it during the next campaign.”

And later, “I hope this is not the new normal, but I fear it is.”

So on Thursday, the day after Mueller spoke, the Senate resumed its bipartisan bickering over some Democratic proposals to tighten up the election process, such as in mandating paper ballots, but Senate Majority Leader Mitch McConnell opposed it, saying it was just more of an anti-Trump effort. 

FBI Director Christopher Wray said in his own testimony on Capitol Hill Tuesday, “The Russians are absolutely intent on trying to interfere with our elections through the foreign influence.”  And he added they’re still at it.  “Well, my view is until they stop, they haven’t been deterred enough.”

But Wray also said the FBI doesn’t need any new laws to help.

So here’s the bottom line.  The hearings obviously didn’t move the needle either way, on this we should all be able to agree.  Assuming the Democrats come up with a candidate who is not of the far left, or one who can move somewhat to the center, it’s 44-44 on July 26, 2019, with the other 16 percent up for grabs.  Assume a third party, or two, takes 3 percent, collectively, and we’ll end up 49-48 or 50-47 in the popular vote, but today, Trump is winning the Electoral College. 

We all know it’s about suburban women, just as in 2018.  But there’s a long, long way to go, sports fans, and foreign policy could still end up being the key.

---

--Late Friday the Supreme Court cleared the way for the Trump administration to use $2.5 billion from the Department of Defense to construct parts of a wall along the southwestern border that the government argues is necessary to protect national security.

The ruling is a significant win for President Trump, who wants to use the construction of the wall as a major talking point for 2020.

--A federal judge Wednesday blocked the Trump administration from enforcing a new rule that bars asylum for the vast majority of migrants trying to enter the U.S. at the southern border.

U.S. District Judge Jon S. Tigar, an Obama appointee, issued a nationwide preliminary injunction against the 10-day-old rule that made migrants ineligible for asylum if they passed through another country en route to the U.S. and failed to apply for protection in that country.  Most asylum seekers come from Central America.

“Under our laws, the right to determine whether a particular group of applicants is categorically barred from eligibility for asylum is conferred on Congress,” Tigar wrote, adding the new rule was inconsistent with existing laws.

“While the public has a weighty interest in the efficient administration of the immigration laws at the border,” he wrote, “it also has a substantial interest in ensuring that the statutes enacted by its representatives are not imperiled by executive fiat.”

Earlier in the day, a different federal judge in Washington, Judge Timothy J. Kelly, a Trump appointee, refused to block the rule.

Tigar noted before his ruling that he was not bound by the Washington judge’s decision and that “The appellate courts can sort this out,” he said.

--The Trump administration wants to tighten the rules governing who qualifies for food stamps, which could end up stripping more than 3 million people of their benefits.

The Agriculture Department issued a proposed rule Tuesday that curtails so-called broad-based categorical eligibility, which makes it easier for Americans with somewhat higher incomes and more savings to participate in the Supplemental Nutrition Assistance Program, or SNAP, the formal name for food stamps.

Republicans have argued this expanded eligibility option is a “loophole” that permits those with higher incomes and assets to get public assistance.

But this is an incredibly stupid move, politically, ahead of 2020.  It won’t matter what the facts are, you just handed the Democrats a terrific talking point that I virtually guarantee will be mentioned on the debate stage once or twice next week...albeit the 20 candidates will be spending most of their time going after each other.

--The immigration sweep that was heavily telegraphed by the president targeted thousands nationwide resulting “in only 35 arrests,” ICE said Tuesday.

So I ask you, if you were one of those targeted, wouldn’t you have taken evasive actions after the ‘Dear Leader’ so heavily promoted it?  I told you this was idiotic.  I want these people rounded up too!  They broke the law, and, given a chance to do the right thing, they didn’t. 

But the stable genius....oh, never mind.

--Meanwhile, President Trump, on a related matter, did say today he agreed to drop the threat of economic sanctions against Guatemala after the country said it would implement new measures aimed at reducing U.S. asylum claims from migrants fleeing Honduras and El Salvador.

But there are legal issues in Guatemala.  The Constitutional Court there had ruled that a safe third country deal could not be signed without prior approval from the country’s Congress, which is on a summer recess. So who the hell knows?

--The Senate confirmed Mark Esper to be secretary of defense by a 90-8 vote, after seven months of the Pentagon being without a Senate-confirmed leader; Esper being one of three to serve as ‘acting defense secretary’ in the time since.  Mr. Esper has his hands full with discipline issues in the military...see below.

--At the end of the Mueller hearings, President Trump told reporters: “We had a good day today.  The Republican Party, our country, there was no defense of what Robert Mueller was trying to defend.  I think everybody understands what is going on.  There was no defense to this ridiculous hoax, this witch hunt.”

Singling out Speaker Pelosi, Nadler and Adam Schiff, Trump said: “They should be ashamed of themselves.  Absolutely ashamed.  And you know who knew it was a phony cloud more than anyone was Schiff and Nadler and Schumer and Pelosi, every one of them.  They all knew it was phony stuff,” he said.

The president said Mueller did “a horrible job” testifying.  “He had a lot of problems,” Trump said.

The Democrats, Trump continued, “hurt themselves very badly” heading into 2020.  “Their party is in shambles right now.  This was a devastating day for the Democrats.”

--Trump Tweets:

“TRUTH IS A FORCE OF NATURE!”

“Why didn’t Robert Mueller & his band of 18 Angry Democrats spend any time investigating Crooked Hillary Clinton, Lyin’ & Leakin’ James Comey, Lisa Page and her Psycho lover, Peter S, Andy McCabe, the beautiful Ohr family, Fusion GPS, and many more, including HIMSELF & Andrew W?”

“Farmers are starting to do great again, after 15 years of a downward spiral.  The 16 Billion Dollar China ‘replacement’ money didn’t exactly hurt!”

[The above is such crap, loaded with dishonesty.  And since most of you are non-farmers, aren’t you thrilled your tax dollars are just being handed out when if the TPP had been approved, America’s farmers would have had all kinds of new markets opened up, regardless of what the U.S. and China were disputing?]

“When an old Wall at the Southern Border, that is crumbling and falling over, built in an important section to keep out problems, is replaced with a brand new 30 foot high steel and concrete Wall, the Media says no new Wall has been built.  Fake News! Building lots of Wall!”

“The Mainstream Media is out of control.  They constantly lie and cheat in order to get their Radical Left Democrat views out their (sic) for all to see.  It has never been this bad. They have gone bonkers, & no longer care what is right or wrong.  This large scale false reporting is sick!”

“Fake News Equals the Enemy of the People!”

“The Amazon Washington Post front page story yesterday was total Fake News.  They said ‘Advisors wrote new talking points and handed him reams of opposition research on the four Congresswomen.’  Now really, does that sound like me?  [Editor: ‘Yes.’]  What advisors, there were no talking points....

“....except for those stated by me, & ‘reams of paper’ were never given to me.  It is a made up story meant to demean & belittle.  The Post had no sources.  The facts remain the same, that we have 4 Radical Left Congresswomen who have said very bad things about Israel & our Country!”

[I’m sorry...what is amazing about this is that the president had a press spray Monday during a Cabinet meeting and pointed out that he had reams of paper on what the four had said!]

“Going with First Lady to pay our respects to Justice Stevens.  Leaving now!”

“@FoxNews is at it again.  So different from what they used to be during the 2016 Primaries, & before – Proud Warriors!  Now new Fox Polls, which have always been terrible to me (they had me losing BIG to Crooked Hillary), have me down to Sleepy Joe.  Even considering....

“....the fact that I have gone through a three year vicious Witch Hunt, perpetrated by the Lamestream Media in Collusion with Crooked and the Democrat Party, there can be NO WAY, with the greatest Economy in U.S. history, that I can be losing to the Sleepy One.  KEEP AMERICA GREAT!”

Wall Street and the Trade War

Stocks resumed their winning ways after a one week respite, powered by generally strong earnings, as detailed below.

The week’s economic data was just a prelude to the biggie, the release of the first look at second-quarter GDP.

Tuesday, June existing home sales came in less than expected, a 5.27 million annualized rate, down 1.7% month-over-month, down 2.2% year-over-year, as the housing market just hasn’t taken off like one would think it could, given a 30-year fixed mortgage rate of 3.75%.  But the median home price hit a new high, $285,700, good for sellers.

Wednesday saw new-home sales for last month and here too the number, 655,000, was less than forecast.

But on Thursday, the durable goods figure for June was good, 2.0%, and up a solid 1.2% ex-transportation.

So today we got our first look at Q2 gross domestic product and the Trump administration got the 2-handle it needed...2.1%, less than the first quarter’s 3.1%, but solid, and above most expectations.  Consumption (read the consumer) was up a strong 4.3%, far better than in the prior two quarters, which made up for a decline in business spending owing to the trade uncertainty.

The Fed’s preferred inflation barometer, the personal consumption expenditures index, for the quarter was 1.8% on core (ex-food and energy), still under the Fed’s 2% target.

[The Atlanta Fed’s GDPNow barometer came in at 1.3% the day before, a bad miss for them.  Then again, there will be two revisions to this report and they could go either way.]

So for the last six quarters we have:

Q2 2019... 2.1%
Q1 2019... 3.1%
Q4 2018... 1.1%
Q3 2018... 2.9%
Q2 2018... 3.5%
Q1 2018... 2.5%

The estimates released today also reflect the results of the Annual Update of the National Income and Product Accounts, i.e., the numbers have been revised where necessary from the first quarter of 2014 through the first quarter of 2019.  I haven’t had a chance to compare the figures yet and may comment further next week.

Trump tweeted:  “Q2 GDP Up 2.1% Not bad considering we have the very heavy weight of the Federal Reserve anchor wrapped around our neck. Almost no inflation.  USA is set to Zoom!”

Finally, the House voted 284-149 to approve a deal crafted by Treasury Secretary Steven Mnuchin and Speaker Nancy Pelosi to lift the nation’s debt ceiling and raise caps set on federal spending for the next two years, to take both issues off the table for the election cycle.

Despite opposition from most Republicans and some progressive Democrats, most members agreed that the deal was a necessary compromise considering the divided government, let alone the need to prevent the nation from defaulting on its debt.

But the deal sets up $1.37 trillion in “discretionary” spending next year, up from $1.32 trillion this year, and slightly more in 2021.  Lawmakers will still need to enact legislation as to just how the money is to be spent, but the measure eliminates any partisan fighting until after 2020.

The measure will be voted on in the Senate next week.

“The absence of chaos is to the advantage of both sides,” said Senate Majority Leader Mitch McConnell (R-Ky.).  “But I think particularly to the advantage of our side because we do have a Republican in the White House.”

By raising the spending caps through 2021, the deal marks the formal end to the 2011 effort by former President Obama and then-Speaker John Boehner to try to control federal spending by imposing deep cuts to federal programs; i.e., sequester.

But in every budget since the deal was to take effect, lawmakers voted to reverse the cuts.  Under law they expire in 2021.

Yes, it was my party, the Republicans, who liked to tout themselves as fiscal conservatives.  No longer.

Trump tweeted Thursday: “House Republicans should support the TWO YEAR BUDGET AGREEMENT which greatly helps our Military and our Vets. I am totally with you!”

But over two years spending will rise by $320 billion over the existing caps, while the federal debt, which has ballooned to $22 trillion, will continue to grow.  During the first two years of the Trump administration, the debt increased by more than $2 trillion, in part because of the 10-year, $1.5 trillion tax cut and large spending increases that Trump signed into law.

On the trade issue, the United States and China are slated to hold their first face-to-face talks since May next week in Shanghai, the U.S. team led by Trade Rep Robert Lighthizer.  As economic adviser Larry Kudlow said Friday morning, no one should expect much, but the U.S. hopes to “reset the stage” and hopefully get back to where they were in May before the talks broke off.

Huawei remains a critical issue and there are expectations that President Trump will ease the ban on U.S. companies supplying components to the telecom giant.  Chinese officials have said that an easing of the Huawei ban was a precondition for making large purchases of U.S. farm goods.

But the fact is, in the first six months of the marketing year, between October 2018 and March 2019, China bought just 2.7 million metric tons of U.S. soybeans, around a tenth of the 24.4 million metric tons during the same period the previous year.  Brazil, meanwhile, stepped up its exports of soybeans from 14.2 million metric tons to 25.7 metric tons, effectively replacing U.S. exports.

The two sides remain a long way from any comprehensive trade accord, but Nov. 2020 is fast approaching.  The president needs to do something...at least he’ll see it that way.

Europe and Asia

The International Monetary Fund issued its latest World Economic Outlook and revised global growth for 2019 down to 3.2% from April’s 3.3%.  Growth was 3.8% in 2017 and 3.6% in 2018.  But the IMF looks for a rebound to 3.5% in 2020.

World trade was revised down to just 2.5% growth this year, a downgrade of nearly a point since April’s forecast.  As recently as 2017, global trade in goods and service was growing at a robust 5.5%. 

Growth in the eurozone (EA19) was pegged at just 1.3% in 2019, 1.6% in 2020. 

The IMF has the UK at 1.3% in 2019, 1.4% in 2020.

[The projection for the United States, by the way, is 2.6% this year, but just 1.9% in 2020.]

Elsewhere in the eurozone, we had the flash PMI readings for July (via IHS Markit). For the EA19, the composite was 51.5 vs. 52.2 in June (50 being the dividing line between growth and contraction).  The manufacturing PMI was a sickly 47.0, a 75-month low, while services came in at 53.3.

Germany’s flash readings were 51.4 composite, 43.1 manufacturing (84-month low), services 55.4.

France’s figures were 51.7 comp, 49.6 manufacturing, 52.2 services.

The IMF pegged Germany’s GDP growth at 0.7% in 2019, France 1.3%, and Italy 0.1%.

Separately, Eurostat released the first-quarter debt to GDP figures for the EA19.  Overall, the figure was 85.9%, down from 87.1% a year earlier.

Germany 61.0%; France 99.7%, Spain 98.7%, UK 85.3%, Italy 134.0%, Greece 181.9%.

Regarding these last two, it’s startling the 10-year yield in Italy closed the week at 1.56%, and 2.04% in Greece.

Chris Williamson / IHS Markit

“The eurozone economy relapsed in July, with the PMI giving up the gains seen in May and June to signal one of the weakest expansions seen over the past six years.  The pace of GDP growth looks set to weaken from the 0.2% rate indicated for the second quarter closer to 0.1% in the third quarter.

“The manufacturing sector has become an increasing cause for concern. Geopolitical worries, Brexit, growing trade frictions and the deteriorating performance of the auto sector in particular has pushed manufacturing into a deeper downturn with the survey indicative of the goods-producing sector contracting at a quarterly rate of approximately 1%.

“The more domestically-focused service sector remained the main driver of expansion, though even here the rate of growth has slowed, likely in part due to signs of weaker labor market trends.  Hiring was close to a three-year low in July....

“With growth slowing, job creation fading and price pressures having fallen markedly compared to earlier in the year, the survey will give added impetus to calls for more aggressive stimulus from the ECB.”

Speaking of the European Central Bank, it indeed sent a strong signal Thursday that a package of easing measures is coming in September.  Recent emphasis from President Mario Draghi that the central bank would tolerate higher inflation has some investors betting the effort is going to be aggressive.  But there are no details.

Germany’s 10-year hit a record low yield of minus-0.461% (before closing the week at -0.38%), while the euro fell to its lowest level in more than two years at $1.104, before reversing somewhat when it became clear no one knows exactly what the ECB will do in September, especially in terms of the inflation mandate and any expectations.

But the threat of a big package of measures by the ECB down the road could put further pressure on the Federal Reserve to cut rates by more than the quarter-point expected next week.

Brexit / Boris Johnson: Britain has a new prime minister, Boris Johnson, who picked up 2/3s of the Conservative Party membership vote, easily defeating Jeremy Hunt. 

On entering Downing Street on Wednesday, Johnson set up a showdown with the EU by vowing to negotiate a new deal and threatening that, if the bloc refused, he would take Britain out of the EU on Oct. 31 without one.

In his first speech as PM, he vowed to lead Britain out of the European Union on Oct. 31 “no ifs or buts.”

“We are going to fulfil the repeated promises of parliament to the people and come out of the EU on October 31, no ifs or buts,” Johnson, 55, said after arriving at his new residence.  “We can do a deal without checks at the Irish border.  It is of course vital at the same time that we prepare for the remote possibility that Brussels refuses any further to negotiate and we are forced to come out with no deal.”

Johnson’s strategy sets the UK up for a showdown and thrusts it towards a potential constitutional crisis, or an election, at home.  And he does not have a parliamentary majority, relying on the support of 10 lawmakers from the Brexit-backing Democratic Unionist Party in Northern Ireland in order to govern.

Johnson then formed his cabinet.  His rival for the leadership, Foreign Secretary Jeremy Hunt, was offered the job of defense minister but turned it down.  Among the key Cabinet positions will be Dominic Raab as foreign secretary, and Ben Wallace at defense.

But here is the reality regarding Brexit and the October 31 deadline.  First, little is likely to be accomplished in the month of August, with the European Union / European Commission on recess (just like the U.S. Congress), as well as the British Parliament.  So then you are down to just two months.

It’s also true the main stumbling block between the UK and the EU is the Irish backstop – an insurance policy to provisionally keep Britain in a customs union with the EU and prevent the return of a hard border between the Irish Republic and Northern Ireland.

Irish Prime Minister Leo Varadkar said this week there would be no withdrawal agreement or subsequent trade pact with Britain if it did not accept the backstop.

European Commission President Jean-Claude Juncker also told Johnson this week that the divorce deal agreed to by predecessor Theresa May last November was the best and only deal with the EU.

France said it is ready to work with Boris Johnson, but Paris and other European capitals will not renegotiate the terms of the hard-fought Brexit deal, a French minister said today.  President Emmanuel Macron will hold Brexit-related talks with Johnson in France in the coming weeks.

But Minister for European affairs Amelie de Montchalin reiterated there was no question of renegotiating the divorce deal, but that the two sides still had much to talk about.

“What is still to negotiate is the future relationship,” Montchalin said.  “We have to create a working relationship and not get into games, gestures and provocations.”

Montchalin also added that Britain must have good reason for any further delay should it eventually want one.

Turning to Asia....

The IMF projected China’s GDP for 2019 would be 6.2%, and 6.0% in 2020.

The IMF pegs Japan at just 0.9% GDP this year and only 0.4% next.  Japan had a flash reading on manufacturing for July from IHS Markit of 49.6, services 52.3.

Street Bytes

--The S&P 500 and Nasdaq closed the week at new all-time highs, the S&P up 1.7% to 3025, while Nasdaq gained 2.3% to 8330.  Friday, strong earnings from Alphabet (Google) and Starbucks helped power equities.

But the Dow Jones was hurt by the likes of components 3M, Dow and Chevron and finished the week up only 0.1% to 27192, still 200 points from its record level.

The earnings barrage continues next week, while Wednesday the Federal Reserve will make its move to lower interest rates probably a quarter-point.

--U.S. Treasury Yields

6-mo. 2.09%  2-yr. 1.85%  10-yr. 2.07%  30-yr. 2.59%

All eyes on the Federal Reserve and its decision on rates this coming Wednesday.

--Facebook was formally fined $5 billion for privacy violations, with federal regulators instituting new oversight and restrictions on its business.  But they are only holding CEO Mark Zuckerberg personally responsible in a limited fashion.

The fine is the largest the Federal Trade Commission has levied on a tech company, but it is minimal given Facebook generated nearly $56 billion in revenue last year.

As part of the agency’s settlement, Zuckerberg will have to personally certify his company’s compliance with its privacy programs.  The FTC said that false certifications could expose him to civil or criminal penalties.

Some had thought the FTC might fine Zuckerberg directly or seriously limit his authority over the company.  Instead it’s a slap on the wrist.

The FTC said Facebook’s deceptive disclosures about privacy settings allowed it to share users’ personal information with third-party apps that their friends downloaded but the users’ themselves did not give permission to.

Facebook said the new operational changes required by the settlement would be costly.

But the company said the second straight quarter of above-expectations revenue showed that its namesake app is producing growth even as users gravitate toward newer, more private features whose popularity has outstripped their usage among advertisers.

Second-quarter revenue rose to $16.9 billion from $13.2 billion a year ago, beating analysts’ estimate of $16.5 billion, according to IBES data from Refinitiv.

Facebook reported 2.7 billion monthly users and 2.1 billion daily users across Facebook, Messenger, Instagram and WhatsApp, both figures about the same as last quarter.

--With the FTC move on Facebook, more broadly, the U.S. Justice Department said on Tuesday its Antitrust Division is reviewing whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.

The department didn’t specify any companies, but clearly this is about Facebook, Amazon, Alphabet (Google) and Apple, among others.

--Amazon.com reported second quarter profits were below the Street’s estimates as increasing competition for faster delivery is putting pressure on the online leader’s business.

Net sales rose 20% to $63.4 billion, higher than forecast by analysts, but earnings per share, $5.22 (profit of $2.63bn), was well short of the $5.56 estimated by the same folks.  The company said it was hit in particular by surging shipping costs.

Amazon’s revenue outlook for the current quarter was in line with expectations.  Amazon Web Services, which is a big profit driver for the company, delivered $8.4bn in sales for year-over-year growth of 37%, after topping 40% in previous quarters.

Separately, Amazon rejected Queens for a ‘second’ headquarters earlier this year, but Crain’s Business New York reported the ecommerce giant is searching for a massive space where it can operate a logistics facility that lets it quickly deliver orders to customers, and one location being considered is in Industry City, a sprawling campus of buildings in Brooklyn.  Another possibility is the former Lord & Taylor flagship store on Fifth Avenue.

Finally, a report by the Center for Popular Democracy and the Private Equity Stakeholder Project concludes that over the last decade, 597,000 U.S. employees working for retailers owned by private equity firms and hedge funds have lost their jobs, while the sector as a whole added more than 1 million positions.

“It is unsurprising that 10 out of the 14 largest retail chain bankruptcies since 2012 were at private equity-acquired chains,” the study said.  “Wall Street firms are poised to impact an additional 1 million people working in retail in the coming years.”

A spokesman for a private equity trade group said, “This report is biased and is focused on a sector that experienced tremendous disruption over the past decade,” i.e., Amazon.  [Bloomberg]

--Alphabet Inc. reported quarterly revenue and earnings that beat expectations on Thursday, easing concerns about the short-term growth challenges facing Google, YouTube and the company’s other advertising businesses even as it faces antitrust investigations.

Revenue rose 19% to $38.94 billion, compared to average estimates for less than 17% growth and $38.15bn in revenue.  The shares rose nearly 10% on the news.

Ad clicks on Google’s properties rose 6% compared to the first quarter, when they had fallen 9%.  Advertising sales grew 16% overall.

Net income rose to $9.95 billion, or $14.21 per share, vs. an estimate of $11.32 on the latter.

Cloud computing is Google’s fastest-growing business and second-quarter results put the operation on course to generate more than $8 billion annually, which is about a quarter of the sales produced by Amazon.com Inc.’s AWD cloud unit, but the solid growth gave investors hope that Google can keep pace with Amazon and Microsoft in this booming sector.

Trump tweet Friday morning: “There may or may not be National Security concerns with regard to Google and their relationship with China.  If there is a problem, we will find out about it.  I sincerely hope there is not!!!”

--Twitter Inc. shares rose 9% after the company posted solid user and revenue growth in the latest quarter.  Profit ballooned to $1.12 billion, its largest ever, with the company profitable for a seventh consecutive quarter, after years of sustained losses.

Twitter’s revenue rose 18% to $841 million, exceeding analysts’ projections.

The number of people using Twitter daily increased by 5 million from the first quarter to a record 139 million.

--Apple Inc. took a major step toward supplying its own smartphone chips by purchasing the majority of Intel Corp.’s modem business in a deal valued at $1 billion, the companies said on Thursday.  Under the deal, about 2,200 Intel employees will join Apple, along with intellectual property, equipment and leases.  Apple is looking to have an internal developed 5G modem technology for use in some of its products by 2021, with the company using Qualcomm’s technology for a 5G iPhone in 2020.

Intel shares at first rose nearly 6% on the news, before falling back to finish down, even as the company’s earnings beat analysts’ expectations.  EPS were actually down 17%, driven by weaker demand in China, but the decline wasn’t as bad as many forecast.

Sales fell 3% to $16.5 billion, but this too beat the Street.

President Trump then dropped a tweet Friday morning, unrelated to the earnings or acquisition.

“Apple will not be given Tariff waivers, or relief, for Mac Pro parts that are made in China.  Make them in the USA, no Tariffs!”

--Boeing Co. said it might slow or halt production of its 737 MAX jetliner if regulators don’t approve its return to service by the end of the year.  Boeing reported its biggest quarterly loss to date, after taking an initial $7 billion hit on the grounding and slowed production of the MAX.

CEO Dennis Muilenburg said on a call with analysts that while Boeing plans to continue producing 42 of its 737 jets a month and boost that rate to 57 next year, any slippage in the timeline of the MAX could impact these projections.

At this point, few believe the MAX won’t be flying again until next year, as Boeing said questions remain about the process by which regulators and airlines will work to get the MAX back into passenger service.

Boeing reported a loss of $2.94 billion for the June quarter, compared with a profit of $2.2 billion a year earlier, a slightly smaller loss than analysts expected.  Sales dropped 35% to $15.75 billion as the company delivered only 90 jetliners with MAX shipments on hold. 

Boeing took a $5.6 billion charge in the quarter to compensate MAX customers, with the MAX grounding rippling into the broader U.S. economy at this point, airlines having had to cancel thousands of flights.

--Related to the above, American Airlines Group Inc. raised its full-year estimate for costs related to cancellations from the MAX grounding to $400 million, as the company reported net income rose 19% in the second quarter to $662 million.

--And Southwest Airlines Co. said the prolonged grounding of the MAX hastened its decision to stop flying at  Newark Liberty International Airport this fall.  Southwest is the biggest MAX customer, with 34 in its fleet and orders for hundreds more. The carrier said it won’t plan on flying the MAX again this year, extending planned cancellations through Jan. 5.

Southwest CEO Garry Kelly said on a call with analysts, “It’s really all about the MAX.  That’s the only issue we’re dealing with.”

Back to the Newark decision, Kelly said it’s part of a broader strategy to fly into just one airport in major cities and Southwest will be consolidating its New York operations in LaGuardia.

--Caterpillar reported an 11 percent drop in revenues from the oil and gas industry in the second quarter, citing “lower demand for equipment in the Permian Basin,” i.e., where the shale boom has been taking place.

The company retained its full-year profit guidance, but this is assuming a recovery in oil and gas by the end of the year.

Despite the weaker results in energy, Caterpillar’s construction sector saw sales jump 5 percent, while natural resources sales rose 11 percent.  Overall revenues were up 3 percent, with consolidated operating profit up 2 percent to $2.21bn.

--Tesla Inc. reported second-quarter revenue that missed analysts’ estimates on Wednesday, $6.35 billion vs. a forecast of $6.41bn (though revenue rose 58.7% over a year ago).  The net loss was $408.3 million, compared with $717.5 million a year ago.

The company said it was looking to produce 10,000 vehicles of all models per week by the end of 2019.  And in a shareholder letter, CEO Elon Musk reiterated previous guidance that Tesla would deliver 360,000 to 400,000 vehicles this year.

But the shares were hit hard as total gross margins dipped to 14.5% from 15.5% a year earlier.

And Tesla also warned it would emphasize expanding its production capacity and model lineup over increasing the bottom line, a change from earlier in the year when Musk said he expected to be profitable “for all quarters coming forward.”  Musk told analysts Monday the electric car maker expects to only reach break-even in the current quarter, with a return to profitability in Q4.

But can you believe anything this guy says?  Of course not.

And there was a story that registrations of new high-end Model S sedans in the second quarter plummeted 54% to 1,205 in California, according to the Dominion Cross-Sell report, and the Wall Street Journal.  The Golden State is a strong indicator of demand as Tesla’s largest U.S. market, representing 40% of Model S registrations in the country last year, according to Edmunds.com.

Model 3 registrations, however, nearly doubled in the state to 16,372, but this is for the lower-priced model (with skimpier margins).

--Ford’s net profit tumbled 86% in the second quarter due largely to restructuring costs in Europe and South America.  Net income dropped to $148 million, while revenue was flat at $38.9 billion.

CFO Tim Stone says the company had charges of $1.2 billion as it moved to close factories in Europe and South America, while the white-collar work force is being reduced a previously announced 7,000.

Ford said it expects improvement in the second half of the year as more new big SUVs hit dealerships and more of the restructuring takes hold.

Ford’s U.S. sales fell nearly 5% in the second quarter, according to Edmunds.com, as the company exits the passenger car business.

Separately, Ford’s sales in China fell 27% in the first six months of 2019 from the prior-year period, as the downturn in the Chinese car market continued.

Last year, Ford’s sales in China plunged 37%, far sharper than the overall 3% decline in the broader market.

--Nissan Motor Co. said it would cut 12,500 jobs globally by March 2023 as it struggles to recover from the turmoil following the arrest of former Chairman Carlos Ghosn in November.  The company said it is cutting costs and is overhauling the U.S. business, where profits have fallen sharply over the past two years.

Nissan said its net profit in the second quarter was down 94.5% from a year earlier.  Its sales fell in Europe, North America and Japan.   Revenue fell 12.7% overall, with the automaker expecting revenue to fall 2.4% in the fiscal year ending March 2020.

--Ford, Volkswagen, BMW and Honda have reached a deal with California to increase gas mileage standards and reduce greenhouse gas emissions, setting a national standard, a longtime auto industry goal.

The deal between the four automakers and the California Air Resources Board appears to offer a way around the standoff between the Trump administration and California over the former’s push to roll back the standards laid out during the Obama administration.  But the fight will no doubt continue in the courts as the White House works to rewrite the rules.

The deal “recognizes California’s authority” and would increase the average fuel economy of the automakers’ new vehicle fleets to almost 50 mpg by model year 2026.

--Harley-Davidson Inc. surged the most in a year after it secured approval from the European Union to import bikes from Thailand and mitigate almost all of the $100-million hit it’s feeling from tariffs this year.  The timing of the announcement was critical, after the company cut its forecasts for annual shipments and profit margin following another dismal quarter for sales.

The levies on bikes Harley ships from Thailand to the EU will be just 6%, down from the 31% rate that the trade block put on U.S.-made motorcycles last year.

As for the quarterly report...yuck!  The Milwaukee-based chopper maker said it expects to ship 212,000 to 217,000 bikes worldwide this year, down 5,000 from a previous forecast and well short of last year’s total of 228,000.  If Harley’s outlook holds, it would be the fifth straight year of declines for the company, whose sales peaked in 2014 at 267,999.

It’s not a difficult to understand...we all know that few younger folk are riding motorcycles, while current riders, err, how can I put this...die off.

Harley is trying to lure younger customers through its “More Roads” plan, while producing smaller bikes to woo riders in Asia.

And in September, Harley plans to launch its first electric motorcycle, the LiveWire – but it’s going to have a $30,000 price tag. 

Global sales fell 8.4 percent in the second quarter, compared with a year ago, with the U.S. showing an 8 percent drop.  Sales in Europe plunged 12.5 percent.

--UPS, long an economic bellwether, along with FedEx, reported better than expected profits and revenues in the second quarter driven by growing demand for next-day service, while the company has been increasing investments in its delivery system.

Revenue rose 3.4 percent from a year ago to $18.05bn.  Revenues in the U.S. jumped nearly 8 percent vs. a year ago.

The International segment, though, saw revenues slide 3 percent, which the company put down to “global macroeconomic pressure”.

Net income rose to $1.69bn, up from $1.49bn in the year ago quarter.

UPS also said it would join FedEx in adding Sunday deliveries and introduced its drone delivery unit.  Sunday Ground deliveries will start Jan. 1 for U.S. customers.  It already delivers critical healthcare and other high-value shipments on Sunday.

--AT&T bled nearly a million television customers in the second quarter, a steeper loss than analysts had expected as Americans continue to ditch their cable boxes in favor of online alternatives.

AT&T lost 946,000 total video subscribers in Q2, with analysts expecting a loss of 652,000, but wireless was a bright spot, with the company adding 72,000 postpaid phone subscribers, the most lucrative type of customers.

CEO Randall Stephenson also said, “We continue to pay down debt and are more confident than ever that we’ll meet our year-end deleveraging goal,” following its acquisition of Time Warner last year.

And AT&T has been looking to compete head-on with Netflix through the Time Warner division, which is HBO, the Warner Bros film studio, and a trove of TV channels.

Revenues at WarnerMedia grew 5.5 percent to $8.4bn in the quarter, boosted by the performance of the superhero film Shazam!, which has grossed more than $360m globally.

AT&T’s new streaming service, HBO Max, is set to launch next spring and compete directly with Netflix, given WarnerMedia offers up the exclusive  rights to HBO’s full library, Time Warner’s television classics such as Friends, as well as new films.

--U.S. regulators are approving T-Mobile’s $26.5 billion takeover of rival Sprint, despite fears of higher prices and job cuts.

Friday’s approval by the Justice Department and five state attorneys general comes after Sprint and T-Mobile agreed to conditions that would set up satellite-TV provider Dish as a fourth wireless company, so the number of major U.S. providers remains at four.

Dish is buying prepaid cellphone brands such as Boost and Virgin Mobile and some spectrum, or airwaves for wireless service, from the two companies.  It will also be able to rent T-Mobile’s network for seven years while it builds its own.  The Justice Department’s antitrust chief, Makan Delrahim, said the settlement sets up Dish “as a disruptive force in wireless.”

Sprint and T-Mobile combined would now approach the size of Verizon and AT&T.

Attorneys general from 13 states and the District of Columbian still have a lawsuit to block the deal and may not be satisfied with the settlement.

--Huawei Technologies Co. reported revenue grew roughly 30% in the first half after securing critical supplies to keep production going despite U.S. tech export restrictions, according to Bloomberg.  This is a slowdown from 39% in the first three months of 2019, but is up sharply from 2018.

Huawei’s U.S. research arm, Futurewei Technologies, however, announced it would slash more than 600 jobs, out of 850 employed in the United States.  Futurewei has offices in Silicon Valley, as well as Seattle, Chicago and Dallas.  An employee not impacted by the layoffs told Reuters that work had come to a standstill since Huawei was blacklisted by the U.S. government.

--Equifax Inc. struck a settlement of up to $700 million to resolve investigations and lawsuits stemming from its 2017 data breach that exposed the personal data of nearly 150 million Americans.

If approved by a federal district court in the Northern District of Georgia, the agreement would require Equifax to establish a $425 million consumer fund for monetary relief to consumers and pay the Consumer Financial Protection Bureau, a $100 million civil money penalty, among other relief.

Consumers will soon be able to file claims online or by mail to a settlement administration.

Hackers were able to work their way into Equifax’s systems through a software flaw the company had failed to patch.

--Bed Bath & Beyond said it was cutting 7% of corporate staff, including the position of chief operating officer, directors and managers at its headquarters in Union, New Jersey, and at other locations.  This is one sick company.  Long-time CEO Steven Temares departed in May, following pressure from activist investors.

--McDonald’s Corp. said sales grew world-wide in its latest quarter after the fast-food giant raised prices, made improvements at its stores and implemented new digital-ordering capabilities.  The company reported adjust earnings per share of $2.05 for the second quarter, in line with analyst expectations and up 3% from a year earlier.  Revenue of $5.34 billion was flat vs. a year ago.

But same-store sales growth of 6.5% globally was much stronger than expected and the most robust in two years.  U.S. same-store sales increased 5.7%, also beating the Street and simply outstanding.  About a third of the growth came from higher prices.

CEO Steve Easterbrook said he plans to improve the chain’s coffee and snack offerings, while McDonald’s franchisees have asked for a better chicken sandwich to compete with Chick-fil-A.

McDonald’s expects to open around 1,200 restaurants in its current fiscal year.

--Starbucks Corp. said sales rose in its key U.S. and China markets, thanks to new drinks and upgrades to its stores and digital-ordering platforms.  Earnings rose 26% vs. a year ago, above expectations, with sales of $6.8 billion up 8%, also beating the Street.

Global same-store sales growth of 6% was the strongest in three years, with U.S. same-store sales rising 7%.

Starbucks’ shares rose nearly 9% on the news.

--Coca-Cola Co. reported quarterly profit of $2.6 billion as revenue rose 6.1% to $10bn, boosted by higher demand for its namesake soft drinks and the introduction of coffee, energy drinks and other products.  Organic revenue, which excludes currency swings, acquisitions and divestitures, also rose a solid 6%, with gains in each of Coke’s four geographic regions.

Coke’s push to roll out Coke Zero Sugar, as well as new flavors and offerings has worked, with ongoing sagging demand for sugary drinks.

The soda business rose 4% in the quarter, with volumes of Coke Zero Sugar up 10% globally.  Orange Vanilla Coca-Cola, which rolled out earlier this year as the first new flavor in a decade, performed strongly in the U.S., while Coca-Cola Plus Coffee helped sales in Europe.

Earlier this month, rival PepiCo Inc. also posted strong sales helped by new product launches.

--Allergan PLC recalled certain textured breast implants from the market after U.S. health regulators said there was an increase in cases of a rare type of cancer and deaths among women receiving the implants.

The U.S. Food and Drug Administration said Wednesday it asked Allergan to recall the implants because their continued sale “would likely cause serious, adverse health consequences and potentially death,” with the risk associated with Allergan’s implants being about six times the risk of similar types of implants from other manufacturers, including Johnson & Johnson.

--Chipotle Mexican Grill bumped up its outlook, following forecast-beating revenue and adjusted earnings in the second quarter.  Comparable sales, for outlets open at least 13 months, rose a strong 10 percent from a year ago, driving overall revenue up 13.2 percent year-on-year to $1.43bn.  Earnings of $3.99 a share were decidedly above expectations, and the shares rose to a record high on the news.

--“The Lion King” pulled in an estimated $185 million in its North American debut for a 10-day worldwide total of $531 million through Sunday (it opened a week early in China, where it has earned $97.5 million to date).  So much for the impact of tepid reviews.  60 percent of the U.S. audience was female, according to PostTrak.

Meanwhile, “Avengers: Endgame” surpassed “Avatar” over the weekend to be the highest-grossing movie in the world of all time.  After a theatrical rerelease last month, “Endgame” finally managed to dethrone James Cameron’s sci-fi movie, which sat at the top of the global box office for a decade.  “Endgame” has grossed $2.790 billion and “Avatar” grossed $2.789bn.

If you adjust for inflation, however, according to Box Office Mojo, “Gone with the Wind,” originally released in 1939, grossed $402 million worldwide, but would be an astounding $7.4 billion in today’s dollar, including $3.5bn domestically.

Box Office Mojo calculates inflation by adjusting to a given year’s average U.S. ticket price - $9.00 this year – and doesn’t calculate worldwide-box-office inflation.  If you just adjust for inflation, box office domestically for “Gone with the Wind” would be more like $1.8bn.

Foreign Affairs

Iran: The UK government did not take its “eye off the ball” over the seizure of a UK-flagged oil tanker in the Gulf last Friday, now ex-Chancellor of the Exchequer Philip Hammond said the UK has been working closely with U.S. and European partners in response to Iran’s actions.

But ex-Tory party leader Iain Duncan Smith said the Stena Impero’s capture was a “major failure” for the UK.

Iran’s foreign minister said only “prudence and foresight” would reduce tensions between Iran and Britain.

The 23 crew members, who are Indian, Russian, Latvian and Filipino, have now been taken off the ship for “questioning,” Iran’s Press TV has reported.

The seizure of the Steno Impero came two weeks after Royal Marines helped seize the Iranian tanker Grace 1 off Gibraltar, because of evidence it was carrying oil to Syria in violation of EU sanctions.

Wednesday, Iranian President Hassan Rouhani said Iran is ready for “just” negotiations but not if they mean surrender, seeming to refer to negotiations with the United States.

“As long as I have the responsibility for the executive duties of the country, we are completely ready for just, legal and honest negotiations to solve the problems,” Rouhani said, according to his official website.

“But at the same time we are not ready to sit at the table of surrender under the name of negotiations.”

Thursday, President Rouhani told French President Macron that the Islamic republic is ready to return to its commitments under the 2015 nuclear deal if the U.S. dials back sanctions, even without returning to the JCPOA deal, Radio Farda reported.

Macron has proposed a “freeze-for-freeze” plan in which Iran would stop increasing its nuclear activities and the U.S. would hold sanctions at the current level to allow for dialogue to resume.

In Rouhani’s alternative, Iran would not demand that the U.S. return to the nuclear deal it abandoned, but Iran would expect sanctions on Iran’s oil exports and international banking to be removed.  In return, Tehran would stop reducing its commitments to the nuclear deal, including exceeding the 3.67% uranium enrichment limit.

“If European countries stop wrong measures such as detaining an Iranian oil tanker at Gibraltar, they will see an appropriate response from Tehran,” said Rouhani on Wednesday.  In a cabinet meeting that day, Rouhani said that Iran and other Gulf countries are in charge of maritime safety in the Strait of Hormuz and the Persian Gulf.  “The Strait of Hormuz is no place for joking or playing with international regulations,” said Rouhani.

British Foreign Secretary Jeremy Hunt announced on Monday that the UK will form a European-led maritime protection missions to support safe passage of both crew and cargo in the region, but now Hunt is no longer foreign secretary and new Prime Minister Boris Johnson will be focused on Brexit.

Syria: David Ignatius / Washington Post

“In the direct and disciplined voice of Gen. Mazloum Abdi, the commander of the Syrian Kurdish militia, you can hear the determination that has made the Kurds a great partner for the United States and one of the extraordinary survival stories of the Middle East.  Mazloum quietly enumerates the sacrifices made by his group, known as the Syrian Democratic Forces, in the obliteration of the Islamic State: 11,000 of his fighters were killed, 24,000 were wounded, and many thousands of civilians perished or were driven from their homes.  U.S. dead in the Islamic State fight were fewer than 10.

“ ‘That was the price we gave to defeat ISIS,’ Mazloum told me this week in an interview.  ‘The people here desire to have the fruit of the sacrifices they made.’  Mazloum spoke at his headquarters here [Ed. Kobani, Syria], known as the ‘Yellow House’ with its bright color against the flat, sun-parched landscape.

“And yet, instead of receiving thanks, Mazloum and his fighters have been coping with new threats.  President Trump announced last December that he wanted to quickly withdraw U.S. troops from their support of the SDF, as the Kurdish militia is known, and turn security in the area over to Turkey, the Kurds’ historical enemy.

“Fortunately, Trump was talked out of that profoundly unwise move by his military and civilian advisers, and about 1,000 U.S. Special Operations forces remain in the country.  Their encampment is visible here, near the landing zone that has supplied the small U.S. force.

“Mazloum didn’t mention Trump’s near-betrayal: ‘We respect any decision made by the U.S. whether they want to stay or leave.’  But he hopes the United States will remain a player in the Kurdish regions of northeast Syria ‘to achieve an irreversible solution for all the parties in Syria and the defeat of ISIS.’

“A mortal new danger is emerging because of Turkish President Recep Tayyip Erdogan’s threat this month to invade the Kurdish area, to crush what he claims is the Kurdish terrorist threat.  Here, again, Mazloum reacted calmly.  He said he’s ready to support a U.S. proposal for joint U.S.-Turkish patrols in northeast Syria – if it will forestall the Turkish attack.

“ ‘War is not good for anyone,’ he told me, saying he’s open to the plan advanced by U.S. special envoy James Jeffrey.  ‘We would like to discuss details of these joint patrols directly with the Turks, or be part of this process,’ he said.  His one condition is ‘no permanent base for the Turkish military in our territory.’

“The U.S. diplomatic approach, with the Kurds participating through some cut-out, would be an ideal solution because it might begin to ease the poisonous feud between Erdogan and the Kurds.  Mazloum warned that if Turkey does invade, ‘we will not keep the battle just in areas Turkey wants,’ but wage counterstrikes all along the 600-kilometer border between Turkey and Kurdish areas....

“Mazloum is coping with a final potential nightmare, which is detention of the 12,000 Islamic State fighters who were captured when the caliphate was crushed.  He revealed that this group numbers 2,500 foreign fighters, including about 1,000 Europeans in addition to 3,000 Iraqis.  If Turkey invades, he said, his fighters won’t be able to guard the prisons – which means that thousands of potential terrorists could be loosed on the world....

“Listening to Mazloum, you understand that good partners are the essential requirement for successful security operations. Trust has bene built through bloody sacrifice, and President Trump should listen to Mazloum’s words and understand how precious that trust is.”

But Wednesday, Turkey slammed a new U.S. proposal for a so-called “safe zone” in northern Syria, saying it was “not satisfactory” and warning that Ankara may launch a new offensive to secure its border if an agreement isn’t reached soon.

But Turkey’s foreign minister didn’t specify what Turkey finds unacceptable, U.S. envoy Jeffrey and other U.S. officials having held talks in Ankara.

Finally, Russia Thursday opposed a United Nations Security Council resolution calling for an end to attacks on health facilities in Syria’s Idlib region.

The UN’s humanitarian chief, Mark Lowcock said, “The carnage must stop.”

Russia again denied bombing the hospitals.  Moscow’s UN Ambassador Vassily Nebenzia told reporters, “I provided information from my ministry of defense” and an investigation demonstrated that there were “no attacks at nine out of eleven facilities” allegedly attacked.  “The two others were partially damaged but not by Russian” forces, he said.

Just more lies.

Afghanistan: President Ashraf Ghani immediately called for “clarification” about President Trump’s statement that he could win the Afghan war in just 10 days by “wiping out” the country.

Speaking to reporters during a visit by Pakistani Prime Minister Imran Khan, Trump went on to say he “did not want to kill 10 million people.”

“If I wanted to win that war, Afghanistan would be wiped off the face of the earth,” Trump said.  “It would be over in literally, in 10 days.”

He did not elaborate on how that would be done.

The statement from Ghani’s office said that while it “supports the U.S. efforts for ensuring peace in Afghanistan, the government underscores that foreign heads of state cannot determine Afghanistan’s fate.”

Criticism of Trump’s comments on social media in Afghanistan was fierce.

Kevin Baron / Defense One

“President Donald Trump said six times on Monday that U.S. troops should not be in Afghanistan as ‘policemen,’ undercutting his own ‘South Asia Strategy’ and rebuffing the Pentagon’s top generals – including the one he recently nominated to lead the Joint Chiefs of Staff.

“Trump barely mentions Afghanistan, most days... Even he admits he doesn’t talk about it much....

“On Monday, Trump welcomed Pakistan’s Prime Minister Imran Khan to the Oval Office for a photo op that turned into an extended impromptu press conference.  The word ‘Afghanistan’ appeared some 30 times as Trump complained about the war’s long duration, criticized the use of U.S. aid to rebuild schools, and disparaged the value of the U.S. military mission and presence there.

‘I think Pakistan is going to help us out to extricate ourselves.  We’re like policemen.  We’re not fighting the war.  If we wanted to fight a war in Afghanistan and win it, I could win that war in a week.  I just don’t want to kill 10 million people. Does that make sense to you?  I don’t want to kill 10 million people.  [Editor’s note: The population of Afghanistan is about 37 million.]

“ ‘I have plans on Afghanistan that, if I wanted to win that war, Afghanistan would be wiped off the face of the Earth. It would be gone.  It would be over in – literally, 10 days. And I don’t want to do – I don’t want to go that route....

“ ‘ I have a plan that would win that war in a very short period of time.  You understand that better than anybody.

“ ‘ We’ve been in there not fighting to win, just fighting to – they’re building gas stations; they’re rebuilding schools. The United States, we shouldn’t be doing that.  That’s for them to do.

“ ‘ But what we did and what our leadership got us into was ridiculous.  But we will – I think we’ll have some very good answers on Afghanistan, very quickly.’

“Nobody knows what Trump meant by ‘answers’ or ‘a plan that would win that war in a very short period.’....

“Today, a wide swath of politicians on the right and left are calling for an end to ‘endless wars,’ including several Democratic presidential candidates.  ‘Endless wars’ effectively is the new ‘global police.’

“But the desire to pull back runs counter to the advice of those that want the U.S. to remain – remain deployed, remain engaged, and remain ready to help with non-military plans and assistance and leadership when the wars are over.

“The U.S. mission in Afghanistan, as Pentagon leaders describe it, is to keep limited forces on station to press the Taliban to the table, and to keep forces in South Asia to deter and respond to terrorist groups, especially those plotting attacks on the U.S. homeland.

“Trump undermined all of that with his Monday comments....

“If the commander in chief doesn’t believe in his own strategy, and in the missions that U.S. troops are currently executing on his orders, then he should say so, and bring them home now.  If he does believe in it, and all of the politically difficult patience it requires, then he should defend it.  Either would be better than what he said on Monday.

“Trump may not like the Afghanistan war, but Trump owns the Afghanistan war.

“Two weeks ago, Special Forces Sgt. Maj. James G. ‘Ryan’ Sartor, was killed in action in Afghanistan, the twelfth to die in the country this year.”

Libya: About 115 people are missing and feared to have drowned and another 134 were rescued by Libyan coast guards and local fishermen after a wooden boat carrying migrants capsized off Libya on Thursday.  Most of the 250 on board were from Eritrea and other sub-Saharan Africa and Arab countries.

Over 600 migrants have died in accidents crossing the Mediterranean this year, putting 2019 on track to be the sixth year in a row with more than 1,000 deaths.

Saudi Arabia: President Trump on Wednesday vetoed a trio of congressional resolutions aimed at blocking his administration from bypassing Congress and selling billions of dollars in weapons and maintenance support to Saudi Arabia and the United Arab Emirates.

Secretary of State Mike Pompeo last month cited threats from Iran as a reason to approve the $8.1 billion arms sale to the two U.S. allies, both enemies of Tehran.

The White House had argued that stopping the sale would send a signal that the United States doesn’t stand by its partners and allies during a time when threats against them are increasing, which is a joke given the above on Syria’s Kurds.

Anger has been mounting in Congress over the Trump administration’s close ties to the Saudis, fueled by the high civilian casualties in the Saudi-led war in Yemen – a military campaign the U.S. is assisting – and the killing of journalist Jamal Khashoggi by Saudi agents.  Then Trump in May made the decision to sell the Saudis arms.

China: Releasing a new defense “white paper” Wednesday, China accused the U.S. of undermining regional stability by strengthening its alliances, and sharpened a warning that Beijing would use force, if necessary, to prevent Taiwan from declaring independence.           

China warned that it is ready for war should Taiwan make such a declaration, while denouncing U.S. arms sales to the self-ruled island. As part of a briefing on the white paper, a Chinese Defense ministry spokesman Wu Qian outlined the military’s strategic concerns, that China would make its greatest effort for peaceful reunification with Taiwan.

“If there are people who dare to try to split Taiwan from the country, China’s military will be ready to go to war to firmly safeguard national sovereignty, unity and territorial integrity,” he said.

A Chinese foreign ministry spokeswoman told a regular press briefing, “The Taiwan question is the most sensitive and important issue between China and the U.S.  We urge the U.S. to abide by the One China principle and the three joint communiques, to be prudent and act appropriately with regards to Taiwan so that it doesn’t harm China-U.S. relations and the peace and stability in the Taiwan Strait’s region.”

Thursday, China expressed “deep concerns” over a U.S. Navy warship sailing through the Taiwan Strait.

A spokesman for the U.S. Navy’s Seventh Fleet said in a statement Wednesday, “The ship’s transit through the Taiwan Street demonstrates the U.S. commitment to a free and open Indo-Pacific.  The U.S. Navy will continue to fly, sail and operate anywhere international law allows,” he added.

While the United States has no formal ties with Taiwan, it is bound by law to help provide the island with the means to defend itself, and the Defense Department just approved $2.2 billion in sales of weapons requested by Taiwan, including tanks and Stinger missiles. 

President Tsai Ing-wen told reporters Thursday, “Taiwan makes no compromise on its freedom, democracy and sovereignty.  The responsibility for cross-strait and regional stability lies with every party. China has the responsibility, and we will undertake ours, too,” he said.

As for the ongoing protests in Hong Kong and China’s handling of the crisis, the aforementioned Defense ministry spokeswoman Wu Qian referred only to the territory’s garrison law, which he said “already has a clear stipulation.”

That law states that the Hong Kong government can request the People’s Liberation Army (PLA) garrison’s assistance to maintain public order.  But few believe Beijing would allow the PLA to be deployed as it would shatter the “one country, two systems” formula under which the former British colony returned to China in 1997.

What was awful about the protests last weekend is that Sunday night, hordes of men, dressed in white and brandishing poles and bats, unleashed an apparently coordinated attack on protesters, journalists and passers-by, leaving at least 45 injured.

The Hong Kong police did nothing, saying they were stretched thin.  U.S. Senator Marco Rubio said on Monday: “(The attackers) didn’t seem too concerned about getting caught or stopped by authorities.  It isn’t hard to figure out who sent them.”

Hong Kong leader Carrie Lam dismissed as “groundless” the accusations that her administration or the police colluded with the mob.  The more than 100 men who carried out the attacks included members of the city’s triad gangs, as reported by the South China Morning Post.

Editorial / Washington Post

“The high-voltage rhetoric and ugly violence (last weekend) were signs that the regime of Xi Jinping is shedding restraints in its response to the mass movement that has emerged in Hong Kong this summer to defend the city’s autonomy and demand greater freedoms.  It means that, more than ever, Hong Kong’s people need the support of established democracies.

“Unfortunately, President Trump on Monday sided with the dictatorship. Asked to react to Sunday’s events, the president explicitly endorsed the Xi regime’s behavior.  ‘I think President Xi has reacted very responsibly,’ he told reporters. ‘He’s allowed [the protests] to go on for a long time.’

“In essence, Mr. Trump all but offered Mr. Xi an invitation to crack down on a movement that is fighting for liberal values such as free speech and the rule of law.  The protests began in reaction to a proposed extradition law that would have undermined Hong Kong’s independent courts and allowed China to pursue its enemies in the city.  When the measure was shelved, the marches continued as opposition leaders called for an investigation of police violence....

“As the recently departed U.S. consul general in Hong Kong, Kurt W. Tong, argued in an op-ed published Monday, the United States has a strong interest in how the conflict ends.  Close to 1,400 U.S businesses operating in Hong Kong depend on the preservation of its autonomy.  ‘Chinese leaders,’ he wrote, ‘need to realize they could destroy Hong Kong’s economic specialness if they keep trying to align its political culture with mainland norms.’

“Mr. Trump could have made that point.  Instead, he noted that he and Mr. Xi were ‘working on a trade deal’ and repeated that the regime had pledged to buy billions more in U.S. goods.  Mr. Tong, whose farewell speech was reportedly censored by the State Department to remove language in support of the protesters, wrote in his op-ed that Hong Kong should not be ‘a token to be exchanged for concessions in trade talks.’  As he has now made perfectly clear, Mr. Trump thinks otherwise.”

Editorial / Wall Street Journal

“(Mr. Trump) finally broke his silence on Hong Kong – for the worse....

“We sure hope Mr. Xi doesn’t take (Trump’s words) as a U.S. blessing if he does use force to put down the demonstrations....

“Beijing has rigged Hong Kong’s political system, so ‘protesting is the only way we can make our voices heard in the absence of democracy.’ 29-year-old demonstrator Sandy Chan said.  On Sunday an estimated 430,000 marched, and the vast majority were law-abiding and orderly.

“But at the Chinese government’s liaison office, a minority defaced China’s national emblem.  Police fired tear gas, and some protesters answered with projectiles. Thugs in white shirts materialized and beat protesters and journalists.  Police failed to promptly intervene, and at least 45 were injured.  Pro-democracy activists suspect the ruffians had the government’s support or were gangs encouraged by China....

“Ominously, Beijing is now allowing images of the protests to circulate in the mainland, and the state-owned media are calling for stern punishment.

“Hong Kong’s protesters are standing up to the same Chinese promise-breaking and lawlessness that Mr. Trump is challenging in trade negotiations.  They’ve learned that Mr. Xi’s idea of acting responsibly is to crush dissent.  Mr. Trump harms his own interests when he fails to stand up for Hong Kong.”

Meanwhile, Vietnam said it has extended the work schedule of an oil rig on Vanguard Bank, showing no sign of backing down from a confrontation with Beijing over drilling operations in the South China Sea.  The Vietnamese foreign ministry said it would protect its sovereign rights as the stand-off between Hanoi and Beijing entered its fourth week.

A Chinese foreign ministry spokeswoman said today that Vietnam had been violating China’s sovereign rights to Vanguard Bank since May.

North Korea: Pyongyang called the test of two new missiles on Thursday a “solemn warning” against what it described as “South Korean warmongers.”

The short-range missiles were fired into the Sea of Japan from Wonsan on North Korea’s east coast and were the first tests since Kim met with President Trump last month at the DMZ and agreed to revive denuclearization talks.  Needless to say, the tests raise doubts about the revival of said negotiations, which stalled after the collapse of a second summit between Kim and Trump in Hanoi in February.

Kim Jong-un said his country was forced to develop weapons to “eliminate potential and direct threats.”

He said the test involved a new tactical guided weapons system, as reported in State media. This comes after the North continued to criticize a decision by South Korea and the U.S. to hold military drills next month, Pyongyang long regarding the drills as preparation for an invasion.

South Korea’s Joint Chiefs of Staff said one of the new missiles traveled about 428 miles.  Kim said Seoul should “not make a mistake of ignoring the warning.”

U.S. Secretary of State Mike Pompeo downplayed the tests, calling them a negotiating tactic.

“Everybody tries to get ready for negotiations and create leverage and create risk for the other side,” he told Bloomberg.

“We want diplomacy to work. If it takes another two weeks or four weeks, so be it.”

But Kim is targeting the South – in both weapons and words.  The missile test Thursday puts the whole peninsula within range of a strike.

North Korea conducted a similar short-range missile launch in May.

South Korean President Moon Jae-in has worked hard to develop a relationship with Kim, but even Seoul’s offer to send rice to the impoverished North appears to have been spurned for now.

Last year, Kim said North Korea would stop nuclear testing and would no longer launch intercontinental ballistic missiles.

But nuclear activity has continued, with satellite images of North Korea’s main nuclear site showing movement last month, suggesting the North is reprocessing radioactive material into bomb fuel.

Earlier in the week, Kim inspected a new type of submarine under construction, which state media reported on, with analysts saying it could be developed to carry ballistic missiles.

China’s foreign ministry said the launches were a protest against the military exercises between the U.S. and South Korea and said the U.S. and North Korea should resume negotiations as soon as possible.

What was President Trump’s response?  This afternoon he said he was not upset by the missile tests.

“We’ll see what happens, but they are short-range missiles and many people have those missiles...very standard missiles,” the president told reporters at the White House, reiterating he had a very good relationship with Kim Jong Un.  Asked whether he was troubled by the launches, he replied: “No.  Not at all.”

But there is a troubling story in the Wall Street Journal, with analysts at the U.S. Defense Intelligence Agency examining all the satellite imagery and concluding that North Korea may have produced 12 nuclear weapons since the first Trump-Kim meeting in Singapore last year.  “In total, Pyongyang could currently possess between 20 and 60 nuclear bombs, according to estimates by various security analysts.”

When confronted with evidence of this kind gathered by security analysts, Trump replies, as he did in a recent television interview, that Kim “promised he wouldn’t do it.”

On a different matter, South Korea’s military said that three Russian and two Chinese military aircraft entered the Korean Air Defense Identification Zone on Tuesday morning.  Four of the aircraft were capable of dropping nuclear weapons.  Another of the planes – a Russian surveillance plane – violated the South’s territorial airspace twice, it said, before leaving.  South Korea scrambled 18 jet fighters that fired 360 machine-gun rounds as a warning, according to Seoul’s defense ministry.

In response, China vowed to step up military cooperation with Russia.  South Korea then said Russia apologized for flying into its airspace.  Russia strongly denied ever apologizing.

Finally, the trade dispute between Japan and South Korea worsened, with Seoul airing its complaint at the World Trade Organization on Wednesday, the latest move in this festering dispute that has seen the two nations lobbing accusations at each other.

Japan has enraged South Korea by effectively curbing exports to South Korea and erecting a barrier that could disrupt the global supply of semiconductors, following a ruling by a South Korean court that Japanese companies had to pay compensation to South Koreans forced to work in Japanese factories during Japan’s occupation of the Korean peninsula from 1910 to 1945.

Japan’s top government spokesman said on Wednesday the country’s relationship with South Korea was in a “very severe” state and that Tokyo would continue to urge Seoul to take appropriate action over a string of issues that have frayed bilateral ties.

Japan: Prime Minister Shinzo Abe’s ruling coalition has maintained its majority in the upper house after elections last weekend.  Abe’s Liberal Democratic Party and its junior coalition, however, do not have a required two-thirds majority necessary to change the war-renouncing constitution, as Abe has long desired.  In November he will become Japan’s longest-serving prime minister, having taken office in December 2012.

Russia: On Thursday, Ukraine said its security services had detained a Russian oil tanker in the Kerch Strait, a narrow passage of water connecting the Black and Azov seas.  The tanker was allegedly blocking Ukrainian warships’ passage through the strait, the Ukrainian Security Service said in a statement.  The move was in clear retaliation for a November 2018 incident in which Russia captured a Ukrainian ship and detained 24 sailors, who are still being held in custody in Russia.

Ukraine released the crew of the tanker it seized.  Russia’s Foreign Ministry had warned Ukraine that there would be consequences if any Russians were “taken hostage.”

Separately, the Senate Intelligence Committee concluded Thursday that election systems in all 50 states were targeted by Russia in 2016, an effort more far-reaching than previously acknowledged and one largely undetected by the states and federal officials at the time.

But the bipartisan report’s findings were heavily redacted at the insistence of American intelligence agencies that key recommendations for 2020 were blacked out.

Previously, details of Russian hacking, particularly in Illinois and Arizona, had been well known, but the committee described “an unprecedented level of activity against state election infrastructure” intended largely to search for vulnerabilities in the election systems.

But while the Intelligence Committee’s report was bipartisan, Senate Majority Leader Mitch McConnell continued to block consideration of election security legislation put forward by Democrats, calling it “just a highly partisan bill from the same folks who spent two years hyping up a conspiracy theory about President Trump and Russia and who continue to ignore this administration’s progress at correcting the Obama administration’s failure on this subject,” McConnell said of the Democrat bill.

Random Musings

--Presidential tracking polls....

Gallup: 44% approval of President Trump, 51% disapproval (July 1-12), 90% Republicans, 38% Independents.
Rasmussen: 47% approval, 51% disapproval (July 26).

--In an NPR/PBS NewsHour/Marist poll released Monday, President Trump’s approval rating reached a new high at 44%, though 52% disapprove.  The poll was conducted from July 15-17, which was after the tweet he sent on July 14 that was condemned in a House resolution the following Tuesday.  Trump’s low in this particular poll was 35% in August 2017.

Last week a USA TODAY/Ipsos poll found that 68% of Americans considered Trump’s tweets aimed at the four congresswomen to be offensive and 59% said they were “un-American.”

In the Marist poll, as you would expect, 90% of Democrats say they disapprove of Trump’s performance, 90% of Republicans approve.  With independent voters, critical to Nov. 2020, the president’s approval rating was 42% and his disapproval was at 53%.

As poll director Lee Miringoff said, “Independents are on the fence overall.  They’re not willing to grant President Trump reelection, and yet they’re not persuaded by Democrats at this point.”

Trump’s approval and disapproval among white voters were both at 48%.

52% of registered voters said they approved of Trump’s handling of the economy, 44% disagree.

--In a New Fox News Poll, Trump receives the same 52% approval on his handling of the economy, 41% disapprove.

But his job approval is 46%, 51% disapprove.  Last month it was 45-53.  His best rating in the Fox News poll was 48% approval, right after he took office, February 2017.

Trump, according to this survey, remains net underwater because he has net negative marks on things like border security (44 approve – 52 disapprove), immigration (41-54), Iran (39-46), North Korea (39-49), and health care (38-51).

Trump’s lowest marks are on race relations (32-57).

In the Fox survey, 56% think it is racist to say “go back” to a person of color, while 23% disagree.

--In a CBS News survey of Battleground (early voting) states, Joe Biden continues to be the first choice among Democratic voters, but rivals Elizabeth Warren and Kamala Harris are gaining ground.

If you assume a 15% threshold as the minimum support needed to win convention delegates, then across the early states, four would meet that benchmark: Biden, Warren, Harris and Bernie Sanders.

Among Democrats and Democratic-leaning Independents:

Iowa

Biden 24%, Sanders 19%, Warren 17%, Harris 16%

New Hampshire

Biden 27%, Sanders 20%, Warren 18%, Harris 12%

South Carolina

Biden 39%, Sanders 17%, Harris 12%, Warren 7%

All Early Contests / First Choice

Biden 25%, Warren 20%, Harris 16%, Sanders 15%

On the issue of Trump’s tweets against the four congresswomen, 59% of Americans disagreed with what the president said, but 40% of the country agrees with him.  “ ‘Progressive’ Democratic Congresswomen’ should ‘go back’ to their countries.”  88% of Democrats disagree with what the president said, 82% of Republicans agree.  Independents mirror the country overall – 58% disagree. 

Overall, 48% of Americans describe the tweets as racist, 34% feel they were not racist.

Whites were split: 41% / 41%.

--In the aforementioned Fox News Poll, among Democratic primary voters nationwide:

Biden 33%, Sanders 15%, Warren 12%, Harris 10%.

--Rep. Tulsi Gabbard (D-Hawaii) launched an attack against Sen. Kamala Harris, with whom she will share a debate stage next week. 

Kamala Harris is not qualified to serve as commander in chief and I can say this from a personal perspective as a soldier,” said Gabbard during a radio interview.  “She’s got no background or experience in foreign policy and she lacks the temperament that is necessary for commander in chief.”

--Former Massachusetts Gov. Bill Weld, addressing the national NAACP convention in Detroit, called President Trump a “raging racist” and warned the Republican Party that if it does not denounce Trump in 2020, the GOP will be known as the “party of racism in America.”

“(It’s) not a political choice.  It’s a moral choice,” Weld said.  He is challenging Trump for the Republican nomination, admittedly with odds at about 99,000 to 1.

--The Senate voted Tuesday 97-2 to pass the “Never Forget the Heroes: James Zadroga, Ray Pfeifer and Luis Alvarez Permanent Authorization of the September 11th Victim Compensation Fund Act,” with President Trump signing it on Monday.  Only Republican Senators Rand Paul and Mike Lee voted against it.

The new bill would cost at least $10.2 billion over the first 10 years, but would be open-ended to deal with whatever the need turns out to be until 2092.  The Department of Justice administrator had slashed its payouts by more than half in February, saying most of the money was gone.

--Sixteen U.S. Marines were arrested Thursday for alleged involvement in various illegal activities ranging from human smuggling to drug-related offenses, according to a statement from the Marine Corps.

Apparently the arrests were made in dramatic fashion on Thursday morning at Camp Pendleton, California, during a battalion formation.

Eight other Marines were questioned on their involvement in alleged drug offenses unrelated to yesterday’s arrests, the Marine Corps said.

And then today we learned the above number of “16” had increased to 18, plus, a platoon of SEALs was sent home today from Iraq amid a rape investigation and use of alcohol during the act.

This crap better stop soon.  I have told you how I subscribe to Army Times to keep abreast of developments in the military and I have been distressed by the increasing frequency of stories such as the above.  You have no military without discipline...period.  Something is very wrong.

--Puerto Rico’s besieged Gov. Ricardo Rossello is finally bowing to pressure from massive protests and announced he would resign Aug. 2.

Rossello’s ability to govern the U.S. territory had grown increasingly tenuous following disclosure of leaked messages between him and several top aides that were profane, sexist and homophobic.  Many Puerto Ricans focused on one exchange in particular – a joke about bodies accumulating after Hurricane Maria decimated the island in September 2017.

--From the New York Post: “City kids are struggling with basic math and English – but a new Department of Education curricular initiative focuses instead on racial privilege and activism, The Post has learned.

“Pushed by Schools Chancellor Richard Carranza, the ‘Culturally Responsive-Sustaining Education’ program will require schools to ‘identify and interrupt policies and practices that center on historically advantaged social/cultural groups and lead to predictable outcomes of success or failure for historically marginalized students.’....

“Officials stressed that the goal is to make all kids feel represented in school subject matter and  that the strategy has been proven to boost performance.”

Oh brother.

--In an incident that sparked outrage and criticism around the nation, a Brooklyn man surrendered Wednesday for his role in the weekend dousing of two New York City police with buckets of water in Harlem.  Two others were arrested.  A second incident occurred in Brooklyn, others also emerging.

Officers had been responding to reports of men spraying passersby with water guns on a Harlem sidewalk, and then were themselves targeted upon arrival at W. 115th St. and St. Nicholas Ave.  Needless to say, highly disturbing.

But in a Brooklyn incident, officers walked away without responding following the dousing.  NYPD Chief of Department Terence Monahan was not happy.

“Any cop who thinks that’s all right, that they can walk away from something like that, maybe they should reconsider whether or not this is the profession for them,” he said.

Some lawmakers praised the cops for not responding, while failing to first condemn the behavior.

NYPD Detectives Endowment Association President Michael Pallapino ripped local politicians for a failure to support the NYPD.

“Lawmakers with decriminalization agendas apparently have little regard for the law, so there’s no reason to believe those very same politicians have any regard for us,” said the union head.  “If they did, they would publicly condemn such behavior, but instead, they condone it by remaining silent.”

President Trump tweeted: “We love our Law Enforcement Officers all around this great Country. What took place in NYC with water being tossed on NYPD officers was a total disgrace.  It is time for @NYCMayor @BilldeBlasio to STAND UP for those who protect our lives and serve us all so well...”

In another tweet, Trump added, “...What took place was completely unacceptable, and will not be tolerated.  Bill de Blasio should act immediately!”

De Blasio immediately fired back: “First of all, the moment I heard about that incident I condemned it and I made very clear – and I want to make it clear here – anybody who interferes with the work of a police officer is going to be charged and is going to suffer the consequences.  It’s illegal, it’s inappropriate, it’s unacceptable.

“Now, to the president: The president knows nothing about New York City. This is a guy who wanted to go back to stop-and-frisk, which was a horrible failure.

“This is a guy who literally does not even understand the place he came from,” said de Blasio.  “He didn’t live the life of everyday New Yorkers.  He was the child of a millionaire.”

--Peggy Noonan / Wall Street Journal

“I want to kick away from the daily and get to something larger.

“We are a nation of just under 330 million.  We have a lot of disputes, always have, argument is one of our traditions.  To make it all work, to keep this thing going, we have to give each other a little room, a little space.  We have so many different thoughts and ways.  We have to be easy with each other, not pick on each other all the time.

This requires tact, which sounds sissy and small-time but is not.  Tact takes brains and discipline.  It’s a form of empathy: You see the other guy is embarrassed or unhappy, and you decide not to make it worse.  You hold back from causing unnecessary pain.  It is connected to graciousness: You let your foe up easy.

“In a great roiling democracy tact isn’t only desirable, it is necessary. We won’t hold together as a nation without it.

“And we don’t value it at all.  We let it slide down the hole of old habits.  Who teaches civic tact now?

“What has taken its place in our political culture is a spirit of maximalism – let’s rub their faces in it.

“In New York six months ago it wasn’t enough to pass one of the most radical pro-abortion laws in the land; you had to light up the World Trade Center and the Governor Mario M. Cuomo Bridge in pink lights to celebrate.  So that even the skyline approves of what you did.  You say you do this because you’re happy.  You do it to rub the opposition’s faces in it....

“Nike makes a new sneaker they’re unveiling on July 4, and it’s got  a Betsy Ross flag on it, but Colin Kaepernick, a bright and eccentric young man, declares that flag a racist symbol because we used to have slavery and now have unresolved racial problems.  And Nike says: What Colin says goes, no flag sneaker for you, America!  Who’s worse, Mr. Kaepernick, so full of himself  that his need to provide moral instruction is never ameliorated by any personal modesty, or the mealy-mouthed weasel-cynic corporate executives who in their play-to-the-demographic, postpatriotic way give worldly success a bad name?

“What does it matter?  They’re rubbing your face in it.

“This week there was a poll on race, and it showed Americans disheartened on the issue. I believe it....”

Ms. Noonan believes many of our issues, like in the case of racism, starts, and could end, at the southern border.

“(This) week on ‘CBS This Morning,’ Norah O’Donnell toured the largest detention facility on the border and talked to a young mother from Venezuela with a 2-year-old son. She told her story.  For months at home she’d heard nothing but gunfire. She fled alone with her son, just the two of them on the long trek north. She wept as she talked.

“She was a person of modesty and dignity.

“She said she had warm food here. They provided Pampers for the baby.  Ms. O’Donnell said: But you are sleeping on the floor.  Yes, said the mother, ‘on a mat.’

“She showed no resentment, expressed no demand.  She was just grateful.

“She had tact.

“Get her in here, please.  We need her kind.”

--Europe suffered through its second major heatwave of the summer, with all-time records broken in Belgium and the Netherlands, while threatening the same in Britain, Germany and France.    Belgium saw a temp of 106F, smashing a record of 98 set back in June 1947 (with records going back to 1833). The Netherlands had a record mark of 107F.

Thursday, Paris hit 109!  The highest temp ever recorded there.  In the west of France, it hit 114.

Britain saw temps of 101 (Cambridge), the highest-ever for the month of July and second-highest on record in the U.K.

Speaking of heat, that was one helluva heatwave last weekend across much of the nation, with heat indexes of 110 common in the Midwest and Northeast.  It was the first time since 2012 that both Chicago and Philadelphia hit 100 degrees, according to AccuWeather.

I was in Cincinnati and it was rather uncomfortable, but for New Yorkers, tens of thousands, at one point, were without power thanks to the world’s worst utility (Venezuela’s state power company excluded), Con Edison, which had issues.  At one point it took 30,000 out of power on purpose to protect the rest of the system...which is pathetic.

Governor Andrew Cuomo blasted the utility.  “We’ve been through this situation with ConEd time & again & they should have been better prepared – period,” Cuomo tweeted.

There was a major issue at New Jersey’s Monmouth Park race track and some of the races had to be canceled and others pushed back due to the heat, including the $1 million Haskell Invitational that was forced to go off at 8 p.m., hours later, much to the chagrin of the big crowd.  [I went to the Haskell a few years ago to see American Pharaoh after winning the Triple Crown.  Great spot to watch some racing.] Maximum Security won the race, by the way, the horse that crossed the finish line first in this year’s Kentucky Derby and then was disqualified.

---

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

God bless America.

---

Gold: $1418
Oil: $56.16

Returns for the week 7/22-7/26

Dow Jones  +0.1%  [27192]
S&P 500  +1.7%  [3025]
S&P MidCap  +2.4%
Russell 2000  +2.0%
Nasdaq  +2.3%  [8330]

Returns for the period 1/1/19-7/26/19

Dow Jones  +16.6%
S&P 500  +20.7%
S&P MidCap  +19.3%
Russell 2000  +17.1%
Nasdaq  +25.5%

Bulls: 54.2
Bears: 16.8

Have a great week.

Brian Trumbore

 



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Week in Review

07/27/2019

For the week 7/22-7/26

[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 1,059

One thing I can say with conviction about this column over the last 20+ years.  I’ve been consistent.  I don’t blow with the wind. I give you a market forecast each year and stick with it come hell or high water.  I make claims on geopolitics and stay with them.  Long-term, I’ll put my track record up against anyone’s. 

And so I’ve maintained the Democrats would be very foolish to proceed with impeachment against President Trump, especially when there’s no crime, and some of you should have caught that I didn’t even mention Robert Mueller the previous two weeks.  I didn’t think the House hearings would amount to anything because Mueller himself, in that nine-minute press conference following release of his report, told us he would stick to the script.  And he did.  There was never any reason to believe otherwise.

I watched it all (or listened to some of it in the car), and I’ll summarize it in a bit, but I’ll tell you what left me incredulous (all over again) this week; President Trump’s impromptu press conference with Pakistani leader Imran Khan, where Trump said some of the flat-out stupidest things I’ve ever heard from any leader.

I discuss the issues in detail below but Trump explicitly endorsed Chinese President Xi Jinping and the violence that occurred in Hong Kong on Sunday, when Xi (or his underlings) clearly unleashed the triad gangs to beat up protesters, journalists and total innocents, such as in the subway station.  I mean I have taken the Hong Kong subways a ton of times and never once, not once, felt threatened.  I love the place, but Hong Kong these days is on a knife’s edge...it can flip.  And Xi wouldn’t mind that in the least.

But Trump said, “I think President Xi has reacted very responsibly.  He’s allowed [the protests] to go on for a long time.”

These are democratic protests against authoritarianism, Mr. President!

And then Trump said his administration has had “very positive correspondence with North Korea...When they’re ready, we’ll be ready.”

Trust me, there was no positive correspondence.  Less than three days later, Kim Jong Un was firing off missiles, upset over U.S.-South Korean military exercises.

But as if the Xi comment wasn’t bad enough, what the president said on Afghanistan, Imran Khan sitting next to him, was startling, and beyond irresponsible.

Trump started talking about how he could win a war in ten days in Afghanistan if he wanted to, but that the U.S. would have to “kill 10 million people” and the country “would be wiped off the face of the Earth.”

What?!!!  Trump then bitched about “rebuilding schools.”  “The United States, we shouldn’t be doing that, that’s for them to do.”

George C. Marshall was stirring in his grave.

I have been consistent since day one of the Trump presidency.  To me it’s always been about foreign policy and if you are confident with Trump at the tiller these days, what more can I say, except that I hope it all works out for the good of the country, and if I’ve been way off base down the road, I’ll be the first to admit it.

Trump World / Mueller Testifies:

Yes, Robert Mueller was not on his game.  What virtually all of us found kind of shocking, regardless of what side you were on, is how he didn’t seem to know details of his own report that all of us knew.  The former FBI director, nearly 75, was steadfast at times and mumbling almost incoherently at others. 

Let’s face it...the sound was awful, he kept forgetting to speak into the microphone, and some of his statements were contradictory.  He struggled with basic questions.

But you could tell he was also being extra cautious to stick to his conclusions. And lawmakers peppered him with prewritten questions, rushing to get everything in in their five minutes, and, be honest, how many of them did you hear clearly?  All this made Mueller look lost.  Many of the congressmen were assholes for not slowing down.  This wasn’t supposed to be “Beat the Clock.”

Much of it was a just a mess.

But at the same time, Judiciary Committee Jerrold Nadler asked, “Did you actually totally exonerate the president?”  “No,” Mueller replied.  He also reiterated that Trump “was not exculpated.”

Mueller said his inquiry was conducted in “a fair and independent manner,” and that members of the special counsel’s team “were of the highest integrity.”

“It is not a witch hunt,” Mueller added.  And he said he “generally” agreed that Trump’s written answers to his investigators were not always truthful after the president refused to submit to a face-to-face interview.  Mueller said his team decided not to exercise its subpoena powers against Trump to force an interview last year because of “the necessity of expediting the end of the investigation.”  I believe this explanation.  Of course any subpoena would have been dragged out probably beyond Nov. 2020.

Democrats had entered the hearings hoping his testimony would rally public support behind their own ongoing investigations of the president and his administration.  And it clearly didn’t.  Public opinion polls have consistently shown there is no appetite for impeachment hearings...period. And Democrats really need to move on.  Fight Trump in 2020 on healthcare, not this.

In the end, Trump lawyer Jay Sekulow said, “The American people understand that this issue is over. They also understand that the case is closed.”

Today, the House Judiciary Committee filed a 53-page petition in U.S. district Court seeking permission to review grand jury evidence from the Mueller probe that lawmakers say they need to determine whether to begin impeachment proceedings against the president.  The testimony would involve evidence concerning interactions between Trump campaign officials and Russian agents, as well as Trump’s alleged efforts to direct White House Counsel Don McGahn to remove Special Counsel Robert Mueller.

Judiciary Committee Chairman Nadler told a news conference that the House of Representatives is the only institution of government capable of holding Trump accountable for actions outlined in the Mueller report.

“The House must have access to all the relevant facts and consider whether to exercise its full...powers, including a constitutional power of the utmost gravity: recommendation of articles of impeachments,” Nadler said.

The top Republican on the Judiciary Committee, Rep. Doug Collins, criticized Nadler’s move.  “Judiciary Democrats are suing for grand jury material to which they have no right,” he said in a statement.

Unfortunately, what should be the major takeaway from Mueller’s testimony is that Russia is continuing to interfere in U.S. elections.

“They’re doing it as we sit here,” Mueller told lawmakers.  Earlier he’d said how that aspect of his investigation has been underplayed despite the long-term effect on the U.S. 

“Let me say one more thing,” Mueller said at one point.  “Over the course of my career, I have seen a number of challenges to our democracy. The Russian government’s effort to interfere with our election is among the most serious.”  Mueller said Russians were continuing to interfere in U.S. politics “and they expect to do it during the next campaign.”

And later, “I hope this is not the new normal, but I fear it is.”

So on Thursday, the day after Mueller spoke, the Senate resumed its bipartisan bickering over some Democratic proposals to tighten up the election process, such as in mandating paper ballots, but Senate Majority Leader Mitch McConnell opposed it, saying it was just more of an anti-Trump effort. 

FBI Director Christopher Wray said in his own testimony on Capitol Hill Tuesday, “The Russians are absolutely intent on trying to interfere with our elections through the foreign influence.”  And he added they’re still at it.  “Well, my view is until they stop, they haven’t been deterred enough.”

But Wray also said the FBI doesn’t need any new laws to help.

So here’s the bottom line.  The hearings obviously didn’t move the needle either way, on this we should all be able to agree.  Assuming the Democrats come up with a candidate who is not of the far left, or one who can move somewhat to the center, it’s 44-44 on July 26, 2019, with the other 16 percent up for grabs.  Assume a third party, or two, takes 3 percent, collectively, and we’ll end up 49-48 or 50-47 in the popular vote, but today, Trump is winning the Electoral College. 

We all know it’s about suburban women, just as in 2018.  But there’s a long, long way to go, sports fans, and foreign policy could still end up being the key.

---

--Late Friday the Supreme Court cleared the way for the Trump administration to use $2.5 billion from the Department of Defense to construct parts of a wall along the southwestern border that the government argues is necessary to protect national security.

The ruling is a significant win for President Trump, who wants to use the construction of the wall as a major talking point for 2020.

--A federal judge Wednesday blocked the Trump administration from enforcing a new rule that bars asylum for the vast majority of migrants trying to enter the U.S. at the southern border.

U.S. District Judge Jon S. Tigar, an Obama appointee, issued a nationwide preliminary injunction against the 10-day-old rule that made migrants ineligible for asylum if they passed through another country en route to the U.S. and failed to apply for protection in that country.  Most asylum seekers come from Central America.

“Under our laws, the right to determine whether a particular group of applicants is categorically barred from eligibility for asylum is conferred on Congress,” Tigar wrote, adding the new rule was inconsistent with existing laws.

“While the public has a weighty interest in the efficient administration of the immigration laws at the border,” he wrote, “it also has a substantial interest in ensuring that the statutes enacted by its representatives are not imperiled by executive fiat.”

Earlier in the day, a different federal judge in Washington, Judge Timothy J. Kelly, a Trump appointee, refused to block the rule.

Tigar noted before his ruling that he was not bound by the Washington judge’s decision and that “The appellate courts can sort this out,” he said.

--The Trump administration wants to tighten the rules governing who qualifies for food stamps, which could end up stripping more than 3 million people of their benefits.

The Agriculture Department issued a proposed rule Tuesday that curtails so-called broad-based categorical eligibility, which makes it easier for Americans with somewhat higher incomes and more savings to participate in the Supplemental Nutrition Assistance Program, or SNAP, the formal name for food stamps.

Republicans have argued this expanded eligibility option is a “loophole” that permits those with higher incomes and assets to get public assistance.

But this is an incredibly stupid move, politically, ahead of 2020.  It won’t matter what the facts are, you just handed the Democrats a terrific talking point that I virtually guarantee will be mentioned on the debate stage once or twice next week...albeit the 20 candidates will be spending most of their time going after each other.

--The immigration sweep that was heavily telegraphed by the president targeted thousands nationwide resulting “in only 35 arrests,” ICE said Tuesday.

So I ask you, if you were one of those targeted, wouldn’t you have taken evasive actions after the ‘Dear Leader’ so heavily promoted it?  I told you this was idiotic.  I want these people rounded up too!  They broke the law, and, given a chance to do the right thing, they didn’t. 

But the stable genius....oh, never mind.

--Meanwhile, President Trump, on a related matter, did say today he agreed to drop the threat of economic sanctions against Guatemala after the country said it would implement new measures aimed at reducing U.S. asylum claims from migrants fleeing Honduras and El Salvador.

But there are legal issues in Guatemala.  The Constitutional Court there had ruled that a safe third country deal could not be signed without prior approval from the country’s Congress, which is on a summer recess. So who the hell knows?

--The Senate confirmed Mark Esper to be secretary of defense by a 90-8 vote, after seven months of the Pentagon being without a Senate-confirmed leader; Esper being one of three to serve as ‘acting defense secretary’ in the time since.  Mr. Esper has his hands full with discipline issues in the military...see below.

--At the end of the Mueller hearings, President Trump told reporters: “We had a good day today.  The Republican Party, our country, there was no defense of what Robert Mueller was trying to defend.  I think everybody understands what is going on.  There was no defense to this ridiculous hoax, this witch hunt.”

Singling out Speaker Pelosi, Nadler and Adam Schiff, Trump said: “They should be ashamed of themselves.  Absolutely ashamed.  And you know who knew it was a phony cloud more than anyone was Schiff and Nadler and Schumer and Pelosi, every one of them.  They all knew it was phony stuff,” he said.

The president said Mueller did “a horrible job” testifying.  “He had a lot of problems,” Trump said.

The Democrats, Trump continued, “hurt themselves very badly” heading into 2020.  “Their party is in shambles right now.  This was a devastating day for the Democrats.”

--Trump Tweets:

“TRUTH IS A FORCE OF NATURE!”

“Why didn’t Robert Mueller & his band of 18 Angry Democrats spend any time investigating Crooked Hillary Clinton, Lyin’ & Leakin’ James Comey, Lisa Page and her Psycho lover, Peter S, Andy McCabe, the beautiful Ohr family, Fusion GPS, and many more, including HIMSELF & Andrew W?”

“Farmers are starting to do great again, after 15 years of a downward spiral.  The 16 Billion Dollar China ‘replacement’ money didn’t exactly hurt!”

[The above is such crap, loaded with dishonesty.  And since most of you are non-farmers, aren’t you thrilled your tax dollars are just being handed out when if the TPP had been approved, America’s farmers would have had all kinds of new markets opened up, regardless of what the U.S. and China were disputing?]

“When an old Wall at the Southern Border, that is crumbling and falling over, built in an important section to keep out problems, is replaced with a brand new 30 foot high steel and concrete Wall, the Media says no new Wall has been built.  Fake News! Building lots of Wall!”

“The Mainstream Media is out of control.  They constantly lie and cheat in order to get their Radical Left Democrat views out their (sic) for all to see.  It has never been this bad. They have gone bonkers, & no longer care what is right or wrong.  This large scale false reporting is sick!”

“Fake News Equals the Enemy of the People!”

“The Amazon Washington Post front page story yesterday was total Fake News.  They said ‘Advisors wrote new talking points and handed him reams of opposition research on the four Congresswomen.’  Now really, does that sound like me?  [Editor: ‘Yes.’]  What advisors, there were no talking points....

“....except for those stated by me, & ‘reams of paper’ were never given to me.  It is a made up story meant to demean & belittle.  The Post had no sources.  The facts remain the same, that we have 4 Radical Left Congresswomen who have said very bad things about Israel & our Country!”

[I’m sorry...what is amazing about this is that the president had a press spray Monday during a Cabinet meeting and pointed out that he had reams of paper on what the four had said!]

“Going with First Lady to pay our respects to Justice Stevens.  Leaving now!”

“@FoxNews is at it again.  So different from what they used to be during the 2016 Primaries, & before – Proud Warriors!  Now new Fox Polls, which have always been terrible to me (they had me losing BIG to Crooked Hillary), have me down to Sleepy Joe.  Even considering....

“....the fact that I have gone through a three year vicious Witch Hunt, perpetrated by the Lamestream Media in Collusion with Crooked and the Democrat Party, there can be NO WAY, with the greatest Economy in U.S. history, that I can be losing to the Sleepy One.  KEEP AMERICA GREAT!”

Wall Street and the Trade War

Stocks resumed their winning ways after a one week respite, powered by generally strong earnings, as detailed below.

The week’s economic data was just a prelude to the biggie, the release of the first look at second-quarter GDP.

Tuesday, June existing home sales came in less than expected, a 5.27 million annualized rate, down 1.7% month-over-month, down 2.2% year-over-year, as the housing market just hasn’t taken off like one would think it could, given a 30-year fixed mortgage rate of 3.75%.  But the median home price hit a new high, $285,700, good for sellers.

Wednesday saw new-home sales for last month and here too the number, 655,000, was less than forecast.

But on Thursday, the durable goods figure for June was good, 2.0%, and up a solid 1.2% ex-transportation.

So today we got our first look at Q2 gross domestic product and the Trump administration got the 2-handle it needed...2.1%, less than the first quarter’s 3.1%, but solid, and above most expectations.  Consumption (read the consumer) was up a strong 4.3%, far better than in the prior two quarters, which made up for a decline in business spending owing to the trade uncertainty.

The Fed’s preferred inflation barometer, the personal consumption expenditures index, for the quarter was 1.8% on core (ex-food and energy), still under the Fed’s 2% target.

[The Atlanta Fed’s GDPNow barometer came in at 1.3% the day before, a bad miss for them.  Then again, there will be two revisions to this report and they could go either way.]

So for the last six quarters we have:

Q2 2019... 2.1%
Q1 2019... 3.1%
Q4 2018... 1.1%
Q3 2018... 2.9%
Q2 2018... 3.5%
Q1 2018... 2.5%

The estimates released today also reflect the results of the Annual Update of the National Income and Product Accounts, i.e., the numbers have been revised where necessary from the first quarter of 2014 through the first quarter of 2019.  I haven’t had a chance to compare the figures yet and may comment further next week.

Trump tweeted:  “Q2 GDP Up 2.1% Not bad considering we have the very heavy weight of the Federal Reserve anchor wrapped around our neck. Almost no inflation.  USA is set to Zoom!”

Finally, the House voted 284-149 to approve a deal crafted by Treasury Secretary Steven Mnuchin and Speaker Nancy Pelosi to lift the nation’s debt ceiling and raise caps set on federal spending for the next two years, to take both issues off the table for the election cycle.

Despite opposition from most Republicans and some progressive Democrats, most members agreed that the deal was a necessary compromise considering the divided government, let alone the need to prevent the nation from defaulting on its debt.

But the deal sets up $1.37 trillion in “discretionary” spending next year, up from $1.32 trillion this year, and slightly more in 2021.  Lawmakers will still need to enact legislation as to just how the money is to be spent, but the measure eliminates any partisan fighting until after 2020.

The measure will be voted on in the Senate next week.

“The absence of chaos is to the advantage of both sides,” said Senate Majority Leader Mitch McConnell (R-Ky.).  “But I think particularly to the advantage of our side because we do have a Republican in the White House.”

By raising the spending caps through 2021, the deal marks the formal end to the 2011 effort by former President Obama and then-Speaker John Boehner to try to control federal spending by imposing deep cuts to federal programs; i.e., sequester.

But in every budget since the deal was to take effect, lawmakers voted to reverse the cuts.  Under law they expire in 2021.

Yes, it was my party, the Republicans, who liked to tout themselves as fiscal conservatives.  No longer.

Trump tweeted Thursday: “House Republicans should support the TWO YEAR BUDGET AGREEMENT which greatly helps our Military and our Vets. I am totally with you!”

But over two years spending will rise by $320 billion over the existing caps, while the federal debt, which has ballooned to $22 trillion, will continue to grow.  During the first two years of the Trump administration, the debt increased by more than $2 trillion, in part because of the 10-year, $1.5 trillion tax cut and large spending increases that Trump signed into law.

On the trade issue, the United States and China are slated to hold their first face-to-face talks since May next week in Shanghai, the U.S. team led by Trade Rep Robert Lighthizer.  As economic adviser Larry Kudlow said Friday morning, no one should expect much, but the U.S. hopes to “reset the stage” and hopefully get back to where they were in May before the talks broke off.

Huawei remains a critical issue and there are expectations that President Trump will ease the ban on U.S. companies supplying components to the telecom giant.  Chinese officials have said that an easing of the Huawei ban was a precondition for making large purchases of U.S. farm goods.

But the fact is, in the first six months of the marketing year, between October 2018 and March 2019, China bought just 2.7 million metric tons of U.S. soybeans, around a tenth of the 24.4 million metric tons during the same period the previous year.  Brazil, meanwhile, stepped up its exports of soybeans from 14.2 million metric tons to 25.7 metric tons, effectively replacing U.S. exports.

The two sides remain a long way from any comprehensive trade accord, but Nov. 2020 is fast approaching.  The president needs to do something...at least he’ll see it that way.

Europe and Asia

The International Monetary Fund issued its latest World Economic Outlook and revised global growth for 2019 down to 3.2% from April’s 3.3%.  Growth was 3.8% in 2017 and 3.6% in 2018.  But the IMF looks for a rebound to 3.5% in 2020.

World trade was revised down to just 2.5% growth this year, a downgrade of nearly a point since April’s forecast.  As recently as 2017, global trade in goods and service was growing at a robust 5.5%. 

Growth in the eurozone (EA19) was pegged at just 1.3% in 2019, 1.6% in 2020. 

The IMF has the UK at 1.3% in 2019, 1.4% in 2020.

[The projection for the United States, by the way, is 2.6% this year, but just 1.9% in 2020.]

Elsewhere in the eurozone, we had the flash PMI readings for July (via IHS Markit). For the EA19, the composite was 51.5 vs. 52.2 in June (50 being the dividing line between growth and contraction).  The manufacturing PMI was a sickly 47.0, a 75-month low, while services came in at 53.3.

Germany’s flash readings were 51.4 composite, 43.1 manufacturing (84-month low), services 55.4.

France’s figures were 51.7 comp, 49.6 manufacturing, 52.2 services.

The IMF pegged Germany’s GDP growth at 0.7% in 2019, France 1.3%, and Italy 0.1%.

Separately, Eurostat released the first-quarter debt to GDP figures for the EA19.  Overall, the figure was 85.9%, down from 87.1% a year earlier.

Germany 61.0%; France 99.7%, Spain 98.7%, UK 85.3%, Italy 134.0%, Greece 181.9%.

Regarding these last two, it’s startling the 10-year yield in Italy closed the week at 1.56%, and 2.04% in Greece.

Chris Williamson / IHS Markit

“The eurozone economy relapsed in July, with the PMI giving up the gains seen in May and June to signal one of the weakest expansions seen over the past six years.  The pace of GDP growth looks set to weaken from the 0.2% rate indicated for the second quarter closer to 0.1% in the third quarter.

“The manufacturing sector has become an increasing cause for concern. Geopolitical worries, Brexit, growing trade frictions and the deteriorating performance of the auto sector in particular has pushed manufacturing into a deeper downturn with the survey indicative of the goods-producing sector contracting at a quarterly rate of approximately 1%.

“The more domestically-focused service sector remained the main driver of expansion, though even here the rate of growth has slowed, likely in part due to signs of weaker labor market trends.  Hiring was close to a three-year low in July....

“With growth slowing, job creation fading and price pressures having fallen markedly compared to earlier in the year, the survey will give added impetus to calls for more aggressive stimulus from the ECB.”

Speaking of the European Central Bank, it indeed sent a strong signal Thursday that a package of easing measures is coming in September.  Recent emphasis from President Mario Draghi that the central bank would tolerate higher inflation has some investors betting the effort is going to be aggressive.  But there are no details.

Germany’s 10-year hit a record low yield of minus-0.461% (before closing the week at -0.38%), while the euro fell to its lowest level in more than two years at $1.104, before reversing somewhat when it became clear no one knows exactly what the ECB will do in September, especially in terms of the inflation mandate and any expectations.

But the threat of a big package of measures by the ECB down the road could put further pressure on the Federal Reserve to cut rates by more than the quarter-point expected next week.

Brexit / Boris Johnson: Britain has a new prime minister, Boris Johnson, who picked up 2/3s of the Conservative Party membership vote, easily defeating Jeremy Hunt. 

On entering Downing Street on Wednesday, Johnson set up a showdown with the EU by vowing to negotiate a new deal and threatening that, if the bloc refused, he would take Britain out of the EU on Oct. 31 without one.

In his first speech as PM, he vowed to lead Britain out of the European Union on Oct. 31 “no ifs or buts.”

“We are going to fulfil the repeated promises of parliament to the people and come out of the EU on October 31, no ifs or buts,” Johnson, 55, said after arriving at his new residence.  “We can do a deal without checks at the Irish border.  It is of course vital at the same time that we prepare for the remote possibility that Brussels refuses any further to negotiate and we are forced to come out with no deal.”

Johnson’s strategy sets the UK up for a showdown and thrusts it towards a potential constitutional crisis, or an election, at home.  And he does not have a parliamentary majority, relying on the support of 10 lawmakers from the Brexit-backing Democratic Unionist Party in Northern Ireland in order to govern.

Johnson then formed his cabinet.  His rival for the leadership, Foreign Secretary Jeremy Hunt, was offered the job of defense minister but turned it down.  Among the key Cabinet positions will be Dominic Raab as foreign secretary, and Ben Wallace at defense.

But here is the reality regarding Brexit and the October 31 deadline.  First, little is likely to be accomplished in the month of August, with the European Union / European Commission on recess (just like the U.S. Congress), as well as the British Parliament.  So then you are down to just two months.

It’s also true the main stumbling block between the UK and the EU is the Irish backstop – an insurance policy to provisionally keep Britain in a customs union with the EU and prevent the return of a hard border between the Irish Republic and Northern Ireland.

Irish Prime Minister Leo Varadkar said this week there would be no withdrawal agreement or subsequent trade pact with Britain if it did not accept the backstop.

European Commission President Jean-Claude Juncker also told Johnson this week that the divorce deal agreed to by predecessor Theresa May last November was the best and only deal with the EU.

France said it is ready to work with Boris Johnson, but Paris and other European capitals will not renegotiate the terms of the hard-fought Brexit deal, a French minister said today.  President Emmanuel Macron will hold Brexit-related talks with Johnson in France in the coming weeks.

But Minister for European affairs Amelie de Montchalin reiterated there was no question of renegotiating the divorce deal, but that the two sides still had much to talk about.

“What is still to negotiate is the future relationship,” Montchalin said.  “We have to create a working relationship and not get into games, gestures and provocations.”

Montchalin also added that Britain must have good reason for any further delay should it eventually want one.

Turning to Asia....

The IMF projected China’s GDP for 2019 would be 6.2%, and 6.0% in 2020.

The IMF pegs Japan at just 0.9% GDP this year and only 0.4% next.  Japan had a flash reading on manufacturing for July from IHS Markit of 49.6, services 52.3.

Street Bytes

--The S&P 500 and Nasdaq closed the week at new all-time highs, the S&P up 1.7% to 3025, while Nasdaq gained 2.3% to 8330.  Friday, strong earnings from Alphabet (Google) and Starbucks helped power equities.

But the Dow Jones was hurt by the likes of components 3M, Dow and Chevron and finished the week up only 0.1% to 27192, still 200 points from its record level.

The earnings barrage continues next week, while Wednesday the Federal Reserve will make its move to lower interest rates probably a quarter-point.

--U.S. Treasury Yields

6-mo. 2.09%  2-yr. 1.85%  10-yr. 2.07%  30-yr. 2.59%

All eyes on the Federal Reserve and its decision on rates this coming Wednesday.

--Facebook was formally fined $5 billion for privacy violations, with federal regulators instituting new oversight and restrictions on its business.  But they are only holding CEO Mark Zuckerberg personally responsible in a limited fashion.

The fine is the largest the Federal Trade Commission has levied on a tech company, but it is minimal given Facebook generated nearly $56 billion in revenue last year.

As part of the agency’s settlement, Zuckerberg will have to personally certify his company’s compliance with its privacy programs.  The FTC said that false certifications could expose him to civil or criminal penalties.

Some had thought the FTC might fine Zuckerberg directly or seriously limit his authority over the company.  Instead it’s a slap on the wrist.

The FTC said Facebook’s deceptive disclosures about privacy settings allowed it to share users’ personal information with third-party apps that their friends downloaded but the users’ themselves did not give permission to.

Facebook said the new operational changes required by the settlement would be costly.

But the company said the second straight quarter of above-expectations revenue showed that its namesake app is producing growth even as users gravitate toward newer, more private features whose popularity has outstripped their usage among advertisers.

Second-quarter revenue rose to $16.9 billion from $13.2 billion a year ago, beating analysts’ estimate of $16.5 billion, according to IBES data from Refinitiv.

Facebook reported 2.7 billion monthly users and 2.1 billion daily users across Facebook, Messenger, Instagram and WhatsApp, both figures about the same as last quarter.

--With the FTC move on Facebook, more broadly, the U.S. Justice Department said on Tuesday its Antitrust Division is reviewing whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.

The department didn’t specify any companies, but clearly this is about Facebook, Amazon, Alphabet (Google) and Apple, among others.

--Amazon.com reported second quarter profits were below the Street’s estimates as increasing competition for faster delivery is putting pressure on the online leader’s business.

Net sales rose 20% to $63.4 billion, higher than forecast by analysts, but earnings per share, $5.22 (profit of $2.63bn), was well short of the $5.56 estimated by the same folks.  The company said it was hit in particular by surging shipping costs.

Amazon’s revenue outlook for the current quarter was in line with expectations.  Amazon Web Services, which is a big profit driver for the company, delivered $8.4bn in sales for year-over-year growth of 37%, after topping 40% in previous quarters.

Separately, Amazon rejected Queens for a ‘second’ headquarters earlier this year, but Crain’s Business New York reported the ecommerce giant is searching for a massive space where it can operate a logistics facility that lets it quickly deliver orders to customers, and one location being considered is in Industry City, a sprawling campus of buildings in Brooklyn.  Another possibility is the former Lord & Taylor flagship store on Fifth Avenue.

Finally, a report by the Center for Popular Democracy and the Private Equity Stakeholder Project concludes that over the last decade, 597,000 U.S. employees working for retailers owned by private equity firms and hedge funds have lost their jobs, while the sector as a whole added more than 1 million positions.

“It is unsurprising that 10 out of the 14 largest retail chain bankruptcies since 2012 were at private equity-acquired chains,” the study said.  “Wall Street firms are poised to impact an additional 1 million people working in retail in the coming years.”

A spokesman for a private equity trade group said, “This report is biased and is focused on a sector that experienced tremendous disruption over the past decade,” i.e., Amazon.  [Bloomberg]

--Alphabet Inc. reported quarterly revenue and earnings that beat expectations on Thursday, easing concerns about the short-term growth challenges facing Google, YouTube and the company’s other advertising businesses even as it faces antitrust investigations.

Revenue rose 19% to $38.94 billion, compared to average estimates for less than 17% growth and $38.15bn in revenue.  The shares rose nearly 10% on the news.

Ad clicks on Google’s properties rose 6% compared to the first quarter, when they had fallen 9%.  Advertising sales grew 16% overall.

Net income rose to $9.95 billion, or $14.21 per share, vs. an estimate of $11.32 on the latter.

Cloud computing is Google’s fastest-growing business and second-quarter results put the operation on course to generate more than $8 billion annually, which is about a quarter of the sales produced by Amazon.com Inc.’s AWD cloud unit, but the solid growth gave investors hope that Google can keep pace with Amazon and Microsoft in this booming sector.

Trump tweet Friday morning: “There may or may not be National Security concerns with regard to Google and their relationship with China.  If there is a problem, we will find out about it.  I sincerely hope there is not!!!”

--Twitter Inc. shares rose 9% after the company posted solid user and revenue growth in the latest quarter.  Profit ballooned to $1.12 billion, its largest ever, with the company profitable for a seventh consecutive quarter, after years of sustained losses.

Twitter’s revenue rose 18% to $841 million, exceeding analysts’ projections.

The number of people using Twitter daily increased by 5 million from the first quarter to a record 139 million.

--Apple Inc. took a major step toward supplying its own smartphone chips by purchasing the majority of Intel Corp.’s modem business in a deal valued at $1 billion, the companies said on Thursday.  Under the deal, about 2,200 Intel employees will join Apple, along with intellectual property, equipment and leases.  Apple is looking to have an internal developed 5G modem technology for use in some of its products by 2021, with the company using Qualcomm’s technology for a 5G iPhone in 2020.

Intel shares at first rose nearly 6% on the news, before falling back to finish down, even as the company’s earnings beat analysts’ expectations.  EPS were actually down 17%, driven by weaker demand in China, but the decline wasn’t as bad as many forecast.

Sales fell 3% to $16.5 billion, but this too beat the Street.

President Trump then dropped a tweet Friday morning, unrelated to the earnings or acquisition.

“Apple will not be given Tariff waivers, or relief, for Mac Pro parts that are made in China.  Make them in the USA, no Tariffs!”

--Boeing Co. said it might slow or halt production of its 737 MAX jetliner if regulators don’t approve its return to service by the end of the year.  Boeing reported its biggest quarterly loss to date, after taking an initial $7 billion hit on the grounding and slowed production of the MAX.

CEO Dennis Muilenburg said on a call with analysts that while Boeing plans to continue producing 42 of its 737 jets a month and boost that rate to 57 next year, any slippage in the timeline of the MAX could impact these projections.

At this point, few believe the MAX won’t be flying again until next year, as Boeing said questions remain about the process by which regulators and airlines will work to get the MAX back into passenger service.

Boeing reported a loss of $2.94 billion for the June quarter, compared with a profit of $2.2 billion a year earlier, a slightly smaller loss than analysts expected.  Sales dropped 35% to $15.75 billion as the company delivered only 90 jetliners with MAX shipments on hold. 

Boeing took a $5.6 billion charge in the quarter to compensate MAX customers, with the MAX grounding rippling into the broader U.S. economy at this point, airlines having had to cancel thousands of flights.

--Related to the above, American Airlines Group Inc. raised its full-year estimate for costs related to cancellations from the MAX grounding to $400 million, as the company reported net income rose 19% in the second quarter to $662 million.

--And Southwest Airlines Co. said the prolonged grounding of the MAX hastened its decision to stop flying at  Newark Liberty International Airport this fall.  Southwest is the biggest MAX customer, with 34 in its fleet and orders for hundreds more. The carrier said it won’t plan on flying the MAX again this year, extending planned cancellations through Jan. 5.

Southwest CEO Garry Kelly said on a call with analysts, “It’s really all about the MAX.  That’s the only issue we’re dealing with.”

Back to the Newark decision, Kelly said it’s part of a broader strategy to fly into just one airport in major cities and Southwest will be consolidating its New York operations in LaGuardia.

--Caterpillar reported an 11 percent drop in revenues from the oil and gas industry in the second quarter, citing “lower demand for equipment in the Permian Basin,” i.e., where the shale boom has been taking place.

The company retained its full-year profit guidance, but this is assuming a recovery in oil and gas by the end of the year.

Despite the weaker results in energy, Caterpillar’s construction sector saw sales jump 5 percent, while natural resources sales rose 11 percent.  Overall revenues were up 3 percent, with consolidated operating profit up 2 percent to $2.21bn.

--Tesla Inc. reported second-quarter revenue that missed analysts’ estimates on Wednesday, $6.35 billion vs. a forecast of $6.41bn (though revenue rose 58.7% over a year ago).  The net loss was $408.3 million, compared with $717.5 million a year ago.

The company said it was looking to produce 10,000 vehicles of all models per week by the end of 2019.  And in a shareholder letter, CEO Elon Musk reiterated previous guidance that Tesla would deliver 360,000 to 400,000 vehicles this year.

But the shares were hit hard as total gross margins dipped to 14.5% from 15.5% a year earlier.

And Tesla also warned it would emphasize expanding its production capacity and model lineup over increasing the bottom line, a change from earlier in the year when Musk said he expected to be profitable “for all quarters coming forward.”  Musk told analysts Monday the electric car maker expects to only reach break-even in the current quarter, with a return to profitability in Q4.

But can you believe anything this guy says?  Of course not.

And there was a story that registrations of new high-end Model S sedans in the second quarter plummeted 54% to 1,205 in California, according to the Dominion Cross-Sell report, and the Wall Street Journal.  The Golden State is a strong indicator of demand as Tesla’s largest U.S. market, representing 40% of Model S registrations in the country last year, according to Edmunds.com.

Model 3 registrations, however, nearly doubled in the state to 16,372, but this is for the lower-priced model (with skimpier margins).

--Ford’s net profit tumbled 86% in the second quarter due largely to restructuring costs in Europe and South America.  Net income dropped to $148 million, while revenue was flat at $38.9 billion.

CFO Tim Stone says the company had charges of $1.2 billion as it moved to close factories in Europe and South America, while the white-collar work force is being reduced a previously announced 7,000.

Ford said it expects improvement in the second half of the year as more new big SUVs hit dealerships and more of the restructuring takes hold.

Ford’s U.S. sales fell nearly 5% in the second quarter, according to Edmunds.com, as the company exits the passenger car business.

Separately, Ford’s sales in China fell 27% in the first six months of 2019 from the prior-year period, as the downturn in the Chinese car market continued.

Last year, Ford’s sales in China plunged 37%, far sharper than the overall 3% decline in the broader market.

--Nissan Motor Co. said it would cut 12,500 jobs globally by March 2023 as it struggles to recover from the turmoil following the arrest of former Chairman Carlos Ghosn in November.  The company said it is cutting costs and is overhauling the U.S. business, where profits have fallen sharply over the past two years.

Nissan said its net profit in the second quarter was down 94.5% from a year earlier.  Its sales fell in Europe, North America and Japan.   Revenue fell 12.7% overall, with the automaker expecting revenue to fall 2.4% in the fiscal year ending March 2020.

--Ford, Volkswagen, BMW and Honda have reached a deal with California to increase gas mileage standards and reduce greenhouse gas emissions, setting a national standard, a longtime auto industry goal.

The deal between the four automakers and the California Air Resources Board appears to offer a way around the standoff between the Trump administration and California over the former’s push to roll back the standards laid out during the Obama administration.  But the fight will no doubt continue in the courts as the White House works to rewrite the rules.

The deal “recognizes California’s authority” and would increase the average fuel economy of the automakers’ new vehicle fleets to almost 50 mpg by model year 2026.

--Harley-Davidson Inc. surged the most in a year after it secured approval from the European Union to import bikes from Thailand and mitigate almost all of the $100-million hit it’s feeling from tariffs this year.  The timing of the announcement was critical, after the company cut its forecasts for annual shipments and profit margin following another dismal quarter for sales.

The levies on bikes Harley ships from Thailand to the EU will be just 6%, down from the 31% rate that the trade block put on U.S.-made motorcycles last year.

As for the quarterly report...yuck!  The Milwaukee-based chopper maker said it expects to ship 212,000 to 217,000 bikes worldwide this year, down 5,000 from a previous forecast and well short of last year’s total of 228,000.  If Harley’s outlook holds, it would be the fifth straight year of declines for the company, whose sales peaked in 2014 at 267,999.

It’s not a difficult to understand...we all know that few younger folk are riding motorcycles, while current riders, err, how can I put this...die off.

Harley is trying to lure younger customers through its “More Roads” plan, while producing smaller bikes to woo riders in Asia.

And in September, Harley plans to launch its first electric motorcycle, the LiveWire – but it’s going to have a $30,000 price tag. 

Global sales fell 8.4 percent in the second quarter, compared with a year ago, with the U.S. showing an 8 percent drop.  Sales in Europe plunged 12.5 percent.

--UPS, long an economic bellwether, along with FedEx, reported better than expected profits and revenues in the second quarter driven by growing demand for next-day service, while the company has been increasing investments in its delivery system.

Revenue rose 3.4 percent from a year ago to $18.05bn.  Revenues in the U.S. jumped nearly 8 percent vs. a year ago.

The International segment, though, saw revenues slide 3 percent, which the company put down to “global macroeconomic pressure”.

Net income rose to $1.69bn, up from $1.49bn in the year ago quarter.

UPS also said it would join FedEx in adding Sunday deliveries and introduced its drone delivery unit.  Sunday Ground deliveries will start Jan. 1 for U.S. customers.  It already delivers critical healthcare and other high-value shipments on Sunday.

--AT&T bled nearly a million television customers in the second quarter, a steeper loss than analysts had expected as Americans continue to ditch their cable boxes in favor of online alternatives.

AT&T lost 946,000 total video subscribers in Q2, with analysts expecting a loss of 652,000, but wireless was a bright spot, with the company adding 72,000 postpaid phone subscribers, the most lucrative type of customers.

CEO Randall Stephenson also said, “We continue to pay down debt and are more confident than ever that we’ll meet our year-end deleveraging goal,” following its acquisition of Time Warner last year.

And AT&T has been looking to compete head-on with Netflix through the Time Warner division, which is HBO, the Warner Bros film studio, and a trove of TV channels.

Revenues at WarnerMedia grew 5.5 percent to $8.4bn in the quarter, boosted by the performance of the superhero film Shazam!, which has grossed more than $360m globally.

AT&T’s new streaming service, HBO Max, is set to launch next spring and compete directly with Netflix, given WarnerMedia offers up the exclusive  rights to HBO’s full library, Time Warner’s television classics such as Friends, as well as new films.

--U.S. regulators are approving T-Mobile’s $26.5 billion takeover of rival Sprint, despite fears of higher prices and job cuts.

Friday’s approval by the Justice Department and five state attorneys general comes after Sprint and T-Mobile agreed to conditions that would set up satellite-TV provider Dish as a fourth wireless company, so the number of major U.S. providers remains at four.

Dish is buying prepaid cellphone brands such as Boost and Virgin Mobile and some spectrum, or airwaves for wireless service, from the two companies.  It will also be able to rent T-Mobile’s network for seven years while it builds its own.  The Justice Department’s antitrust chief, Makan Delrahim, said the settlement sets up Dish “as a disruptive force in wireless.”

Sprint and T-Mobile combined would now approach the size of Verizon and AT&T.

Attorneys general from 13 states and the District of Columbian still have a lawsuit to block the deal and may not be satisfied with the settlement.

--Huawei Technologies Co. reported revenue grew roughly 30% in the first half after securing critical supplies to keep production going despite U.S. tech export restrictions, according to Bloomberg.  This is a slowdown from 39% in the first three months of 2019, but is up sharply from 2018.

Huawei’s U.S. research arm, Futurewei Technologies, however, announced it would slash more than 600 jobs, out of 850 employed in the United States.  Futurewei has offices in Silicon Valley, as well as Seattle, Chicago and Dallas.  An employee not impacted by the layoffs told Reuters that work had come to a standstill since Huawei was blacklisted by the U.S. government.

--Equifax Inc. struck a settlement of up to $700 million to resolve investigations and lawsuits stemming from its 2017 data breach that exposed the personal data of nearly 150 million Americans.

If approved by a federal district court in the Northern District of Georgia, the agreement would require Equifax to establish a $425 million consumer fund for monetary relief to consumers and pay the Consumer Financial Protection Bureau, a $100 million civil money penalty, among other relief.

Consumers will soon be able to file claims online or by mail to a settlement administration.

Hackers were able to work their way into Equifax’s systems through a software flaw the company had failed to patch.

--Bed Bath & Beyond said it was cutting 7% of corporate staff, including the position of chief operating officer, directors and managers at its headquarters in Union, New Jersey, and at other locations.  This is one sick company.  Long-time CEO Steven Temares departed in May, following pressure from activist investors.

--McDonald’s Corp. said sales grew world-wide in its latest quarter after the fast-food giant raised prices, made improvements at its stores and implemented new digital-ordering capabilities.  The company reported adjust earnings per share of $2.05 for the second quarter, in line with analyst expectations and up 3% from a year earlier.  Revenue of $5.34 billion was flat vs. a year ago.

But same-store sales growth of 6.5% globally was much stronger than expected and the most robust in two years.  U.S. same-store sales increased 5.7%, also beating the Street and simply outstanding.  About a third of the growth came from higher prices.

CEO Steve Easterbrook said he plans to improve the chain’s coffee and snack offerings, while McDonald’s franchisees have asked for a better chicken sandwich to compete with Chick-fil-A.

McDonald’s expects to open around 1,200 restaurants in its current fiscal year.

--Starbucks Corp. said sales rose in its key U.S. and China markets, thanks to new drinks and upgrades to its stores and digital-ordering platforms.  Earnings rose 26% vs. a year ago, above expectations, with sales of $6.8 billion up 8%, also beating the Street.

Global same-store sales growth of 6% was the strongest in three years, with U.S. same-store sales rising 7%.

Starbucks’ shares rose nearly 9% on the news.

--Coca-Cola Co. reported quarterly profit of $2.6 billion as revenue rose 6.1% to $10bn, boosted by higher demand for its namesake soft drinks and the introduction of coffee, energy drinks and other products.  Organic revenue, which excludes currency swings, acquisitions and divestitures, also rose a solid 6%, with gains in each of Coke’s four geographic regions.

Coke’s push to roll out Coke Zero Sugar, as well as new flavors and offerings has worked, with ongoing sagging demand for sugary drinks.

The soda business rose 4% in the quarter, with volumes of Coke Zero Sugar up 10% globally.  Orange Vanilla Coca-Cola, which rolled out earlier this year as the first new flavor in a decade, performed strongly in the U.S., while Coca-Cola Plus Coffee helped sales in Europe.

Earlier this month, rival PepiCo Inc. also posted strong sales helped by new product launches.

--Allergan PLC recalled certain textured breast implants from the market after U.S. health regulators said there was an increase in cases of a rare type of cancer and deaths among women receiving the implants.

The U.S. Food and Drug Administration said Wednesday it asked Allergan to recall the implants because their continued sale “would likely cause serious, adverse health consequences and potentially death,” with the risk associated with Allergan’s implants being about six times the risk of similar types of implants from other manufacturers, including Johnson & Johnson.

--Chipotle Mexican Grill bumped up its outlook, following forecast-beating revenue and adjusted earnings in the second quarter.  Comparable sales, for outlets open at least 13 months, rose a strong 10 percent from a year ago, driving overall revenue up 13.2 percent year-on-year to $1.43bn.  Earnings of $3.99 a share were decidedly above expectations, and the shares rose to a record high on the news.

--“The Lion King” pulled in an estimated $185 million in its North American debut for a 10-day worldwide total of $531 million through Sunday (it opened a week early in China, where it has earned $97.5 million to date).  So much for the impact of tepid reviews.  60 percent of the U.S. audience was female, according to PostTrak.

Meanwhile, “Avengers: Endgame” surpassed “Avatar” over the weekend to be the highest-grossing movie in the world of all time.  After a theatrical rerelease last month, “Endgame” finally managed to dethrone James Cameron’s sci-fi movie, which sat at the top of the global box office for a decade.  “Endgame” has grossed $2.790 billion and “Avatar” grossed $2.789bn.

If you adjust for inflation, however, according to Box Office Mojo, “Gone with the Wind,” originally released in 1939, grossed $402 million worldwide, but would be an astounding $7.4 billion in today’s dollar, including $3.5bn domestically.

Box Office Mojo calculates inflation by adjusting to a given year’s average U.S. ticket price - $9.00 this year – and doesn’t calculate worldwide-box-office inflation.  If you just adjust for inflation, box office domestically for “Gone with the Wind” would be more like $1.8bn.

Foreign Affairs

Iran: The UK government did not take its “eye off the ball” over the seizure of a UK-flagged oil tanker in the Gulf last Friday, now ex-Chancellor of the Exchequer Philip Hammond said the UK has been working closely with U.S. and European partners in response to Iran’s actions.

But ex-Tory party leader Iain Duncan Smith said the Stena Impero’s capture was a “major failure” for the UK.

Iran’s foreign minister said only “prudence and foresight” would reduce tensions between Iran and Britain.

The 23 crew members, who are Indian, Russian, Latvian and Filipino, have now been taken off the ship for “questioning,” Iran’s Press TV has reported.

The seizure of the Steno Impero came two weeks after Royal Marines helped seize the Iranian tanker Grace 1 off Gibraltar, because of evidence it was carrying oil to Syria in violation of EU sanctions.

Wednesday, Iranian President Hassan Rouhani said Iran is ready for “just” negotiations but not if they mean surrender, seeming to refer to negotiations with the United States.

“As long as I have the responsibility for the executive duties of the country, we are completely ready for just, legal and honest negotiations to solve the problems,” Rouhani said, according to his official website.

“But at the same time we are not ready to sit at the table of surrender under the name of negotiations.”

Thursday, President Rouhani told French President Macron that the Islamic republic is ready to return to its commitments under the 2015 nuclear deal if the U.S. dials back sanctions, even without returning to the JCPOA deal, Radio Farda reported.

Macron has proposed a “freeze-for-freeze” plan in which Iran would stop increasing its nuclear activities and the U.S. would hold sanctions at the current level to allow for dialogue to resume.

In Rouhani’s alternative, Iran would not demand that the U.S. return to the nuclear deal it abandoned, but Iran would expect sanctions on Iran’s oil exports and international banking to be removed.  In return, Tehran would stop reducing its commitments to the nuclear deal, including exceeding the 3.67% uranium enrichment limit.

“If European countries stop wrong measures such as detaining an Iranian oil tanker at Gibraltar, they will see an appropriate response from Tehran,” said Rouhani on Wednesday.  In a cabinet meeting that day, Rouhani said that Iran and other Gulf countries are in charge of maritime safety in the Strait of Hormuz and the Persian Gulf.  “The Strait of Hormuz is no place for joking or playing with international regulations,” said Rouhani.

British Foreign Secretary Jeremy Hunt announced on Monday that the UK will form a European-led maritime protection missions to support safe passage of both crew and cargo in the region, but now Hunt is no longer foreign secretary and new Prime Minister Boris Johnson will be focused on Brexit.

Syria: David Ignatius / Washington Post

“In the direct and disciplined voice of Gen. Mazloum Abdi, the commander of the Syrian Kurdish militia, you can hear the determination that has made the Kurds a great partner for the United States and one of the extraordinary survival stories of the Middle East.  Mazloum quietly enumerates the sacrifices made by his group, known as the Syrian Democratic Forces, in the obliteration of the Islamic State: 11,000 of his fighters were killed, 24,000 were wounded, and many thousands of civilians perished or were driven from their homes.  U.S. dead in the Islamic State fight were fewer than 10.

“ ‘That was the price we gave to defeat ISIS,’ Mazloum told me this week in an interview.  ‘The people here desire to have the fruit of the sacrifices they made.’  Mazloum spoke at his headquarters here [Ed. Kobani, Syria], known as the ‘Yellow House’ with its bright color against the flat, sun-parched landscape.

“And yet, instead of receiving thanks, Mazloum and his fighters have been coping with new threats.  President Trump announced last December that he wanted to quickly withdraw U.S. troops from their support of the SDF, as the Kurdish militia is known, and turn security in the area over to Turkey, the Kurds’ historical enemy.

“Fortunately, Trump was talked out of that profoundly unwise move by his military and civilian advisers, and about 1,000 U.S. Special Operations forces remain in the country.  Their encampment is visible here, near the landing zone that has supplied the small U.S. force.

“Mazloum didn’t mention Trump’s near-betrayal: ‘We respect any decision made by the U.S. whether they want to stay or leave.’  But he hopes the United States will remain a player in the Kurdish regions of northeast Syria ‘to achieve an irreversible solution for all the parties in Syria and the defeat of ISIS.’

“A mortal new danger is emerging because of Turkish President Recep Tayyip Erdogan’s threat this month to invade the Kurdish area, to crush what he claims is the Kurdish terrorist threat.  Here, again, Mazloum reacted calmly.  He said he’s ready to support a U.S. proposal for joint U.S.-Turkish patrols in northeast Syria – if it will forestall the Turkish attack.

“ ‘War is not good for anyone,’ he told me, saying he’s open to the plan advanced by U.S. special envoy James Jeffrey.  ‘We would like to discuss details of these joint patrols directly with the Turks, or be part of this process,’ he said.  His one condition is ‘no permanent base for the Turkish military in our territory.’

“The U.S. diplomatic approach, with the Kurds participating through some cut-out, would be an ideal solution because it might begin to ease the poisonous feud between Erdogan and the Kurds.  Mazloum warned that if Turkey does invade, ‘we will not keep the battle just in areas Turkey wants,’ but wage counterstrikes all along the 600-kilometer border between Turkey and Kurdish areas....

“Mazloum is coping with a final potential nightmare, which is detention of the 12,000 Islamic State fighters who were captured when the caliphate was crushed.  He revealed that this group numbers 2,500 foreign fighters, including about 1,000 Europeans in addition to 3,000 Iraqis.  If Turkey invades, he said, his fighters won’t be able to guard the prisons – which means that thousands of potential terrorists could be loosed on the world....

“Listening to Mazloum, you understand that good partners are the essential requirement for successful security operations. Trust has bene built through bloody sacrifice, and President Trump should listen to Mazloum’s words and understand how precious that trust is.”

But Wednesday, Turkey slammed a new U.S. proposal for a so-called “safe zone” in northern Syria, saying it was “not satisfactory” and warning that Ankara may launch a new offensive to secure its border if an agreement isn’t reached soon.

But Turkey’s foreign minister didn’t specify what Turkey finds unacceptable, U.S. envoy Jeffrey and other U.S. officials having held talks in Ankara.

Finally, Russia Thursday opposed a United Nations Security Council resolution calling for an end to attacks on health facilities in Syria’s Idlib region.

The UN’s humanitarian chief, Mark Lowcock said, “The carnage must stop.”

Russia again denied bombing the hospitals.  Moscow’s UN Ambassador Vassily Nebenzia told reporters, “I provided information from my ministry of defense” and an investigation demonstrated that there were “no attacks at nine out of eleven facilities” allegedly attacked.  “The two others were partially damaged but not by Russian” forces, he said.

Just more lies.

Afghanistan: President Ashraf Ghani immediately called for “clarification” about President Trump’s statement that he could win the Afghan war in just 10 days by “wiping out” the country.

Speaking to reporters during a visit by Pakistani Prime Minister Imran Khan, Trump went on to say he “did not want to kill 10 million people.”

“If I wanted to win that war, Afghanistan would be wiped off the face of the earth,” Trump said.  “It would be over in literally, in 10 days.”

He did not elaborate on how that would be done.

The statement from Ghani’s office said that while it “supports the U.S. efforts for ensuring peace in Afghanistan, the government underscores that foreign heads of state cannot determine Afghanistan’s fate.”

Criticism of Trump’s comments on social media in Afghanistan was fierce.

Kevin Baron / Defense One

“President Donald Trump said six times on Monday that U.S. troops should not be in Afghanistan as ‘policemen,’ undercutting his own ‘South Asia Strategy’ and rebuffing the Pentagon’s top generals – including the one he recently nominated to lead the Joint Chiefs of Staff.

“Trump barely mentions Afghanistan, most days... Even he admits he doesn’t talk about it much....

“On Monday, Trump welcomed Pakistan’s Prime Minister Imran Khan to the Oval Office for a photo op that turned into an extended impromptu press conference.  The word ‘Afghanistan’ appeared some 30 times as Trump complained about the war’s long duration, criticized the use of U.S. aid to rebuild schools, and disparaged the value of the U.S. military mission and presence there.

‘I think Pakistan is going to help us out to extricate ourselves.  We’re like policemen.  We’re not fighting the war.  If we wanted to fight a war in Afghanistan and win it, I could win that war in a week.  I just don’t want to kill 10 million people. Does that make sense to you?  I don’t want to kill 10 million people.  [Editor’s note: The population of Afghanistan is about 37 million.]

“ ‘I have plans on Afghanistan that, if I wanted to win that war, Afghanistan would be wiped off the face of the Earth. It would be gone.  It would be over in – literally, 10 days. And I don’t want to do – I don’t want to go that route....

“ ‘ I have a plan that would win that war in a very short period of time.  You understand that better than anybody.

“ ‘ We’ve been in there not fighting to win, just fighting to – they’re building gas stations; they’re rebuilding schools. The United States, we shouldn’t be doing that.  That’s for them to do.

“ ‘ But what we did and what our leadership got us into was ridiculous.  But we will – I think we’ll have some very good answers on Afghanistan, very quickly.’

“Nobody knows what Trump meant by ‘answers’ or ‘a plan that would win that war in a very short period.’....

“Today, a wide swath of politicians on the right and left are calling for an end to ‘endless wars,’ including several Democratic presidential candidates.  ‘Endless wars’ effectively is the new ‘global police.’

“But the desire to pull back runs counter to the advice of those that want the U.S. to remain – remain deployed, remain engaged, and remain ready to help with non-military plans and assistance and leadership when the wars are over.

“The U.S. mission in Afghanistan, as Pentagon leaders describe it, is to keep limited forces on station to press the Taliban to the table, and to keep forces in South Asia to deter and respond to terrorist groups, especially those plotting attacks on the U.S. homeland.

“Trump undermined all of that with his Monday comments....

“If the commander in chief doesn’t believe in his own strategy, and in the missions that U.S. troops are currently executing on his orders, then he should say so, and bring them home now.  If he does believe in it, and all of the politically difficult patience it requires, then he should defend it.  Either would be better than what he said on Monday.

“Trump may not like the Afghanistan war, but Trump owns the Afghanistan war.

“Two weeks ago, Special Forces Sgt. Maj. James G. ‘Ryan’ Sartor, was killed in action in Afghanistan, the twelfth to die in the country this year.”

Libya: About 115 people are missing and feared to have drowned and another 134 were rescued by Libyan coast guards and local fishermen after a wooden boat carrying migrants capsized off Libya on Thursday.  Most of the 250 on board were from Eritrea and other sub-Saharan Africa and Arab countries.

Over 600 migrants have died in accidents crossing the Mediterranean this year, putting 2019 on track to be the sixth year in a row with more than 1,000 deaths.

Saudi Arabia: President Trump on Wednesday vetoed a trio of congressional resolutions aimed at blocking his administration from bypassing Congress and selling billions of dollars in weapons and maintenance support to Saudi Arabia and the United Arab Emirates.

Secretary of State Mike Pompeo last month cited threats from Iran as a reason to approve the $8.1 billion arms sale to the two U.S. allies, both enemies of Tehran.

The White House had argued that stopping the sale would send a signal that the United States doesn’t stand by its partners and allies during a time when threats against them are increasing, which is a joke given the above on Syria’s Kurds.

Anger has been mounting in Congress over the Trump administration’s close ties to the Saudis, fueled by the high civilian casualties in the Saudi-led war in Yemen – a military campaign the U.S. is assisting – and the killing of journalist Jamal Khashoggi by Saudi agents.  Then Trump in May made the decision to sell the Saudis arms.

China: Releasing a new defense “white paper” Wednesday, China accused the U.S. of undermining regional stability by strengthening its alliances, and sharpened a warning that Beijing would use force, if necessary, to prevent Taiwan from declaring independence.           

China warned that it is ready for war should Taiwan make such a declaration, while denouncing U.S. arms sales to the self-ruled island. As part of a briefing on the white paper, a Chinese Defense ministry spokesman Wu Qian outlined the military’s strategic concerns, that China would make its greatest effort for peaceful reunification with Taiwan.

“If there are people who dare to try to split Taiwan from the country, China’s military will be ready to go to war to firmly safeguard national sovereignty, unity and territorial integrity,” he said.

A Chinese foreign ministry spokeswoman told a regular press briefing, “The Taiwan question is the most sensitive and important issue between China and the U.S.  We urge the U.S. to abide by the One China principle and the three joint communiques, to be prudent and act appropriately with regards to Taiwan so that it doesn’t harm China-U.S. relations and the peace and stability in the Taiwan Strait’s region.”

Thursday, China expressed “deep concerns” over a U.S. Navy warship sailing through the Taiwan Strait.

A spokesman for the U.S. Navy’s Seventh Fleet said in a statement Wednesday, “The ship’s transit through the Taiwan Street demonstrates the U.S. commitment to a free and open Indo-Pacific.  The U.S. Navy will continue to fly, sail and operate anywhere international law allows,” he added.

While the United States has no formal ties with Taiwan, it is bound by law to help provide the island with the means to defend itself, and the Defense Department just approved $2.2 billion in sales of weapons requested by Taiwan, including tanks and Stinger missiles. 

President Tsai Ing-wen told reporters Thursday, “Taiwan makes no compromise on its freedom, democracy and sovereignty.  The responsibility for cross-strait and regional stability lies with every party. China has the responsibility, and we will undertake ours, too,” he said.

As for the ongoing protests in Hong Kong and China’s handling of the crisis, the aforementioned Defense ministry spokeswoman Wu Qian referred only to the territory’s garrison law, which he said “already has a clear stipulation.”

That law states that the Hong Kong government can request the People’s Liberation Army (PLA) garrison’s assistance to maintain public order.  But few believe Beijing would allow the PLA to be deployed as it would shatter the “one country, two systems” formula under which the former British colony returned to China in 1997.

What was awful about the protests last weekend is that Sunday night, hordes of men, dressed in white and brandishing poles and bats, unleashed an apparently coordinated attack on protesters, journalists and passers-by, leaving at least 45 injured.

The Hong Kong police did nothing, saying they were stretched thin.  U.S. Senator Marco Rubio said on Monday: “(The attackers) didn’t seem too concerned about getting caught or stopped by authorities.  It isn’t hard to figure out who sent them.”

Hong Kong leader Carrie Lam dismissed as “groundless” the accusations that her administration or the police colluded with the mob.  The more than 100 men who carried out the attacks included members of the city’s triad gangs, as reported by the South China Morning Post.

Editorial / Washington Post

“The high-voltage rhetoric and ugly violence (last weekend) were signs that the regime of Xi Jinping is shedding restraints in its response to the mass movement that has emerged in Hong Kong this summer to defend the city’s autonomy and demand greater freedoms.  It means that, more than ever, Hong Kong’s people need the support of established democracies.

“Unfortunately, President Trump on Monday sided with the dictatorship. Asked to react to Sunday’s events, the president explicitly endorsed the Xi regime’s behavior.  ‘I think President Xi has reacted very responsibly,’ he told reporters. ‘He’s allowed [the protests] to go on for a long time.’

“In essence, Mr. Trump all but offered Mr. Xi an invitation to crack down on a movement that is fighting for liberal values such as free speech and the rule of law.  The protests began in reaction to a proposed extradition law that would have undermined Hong Kong’s independent courts and allowed China to pursue its enemies in the city.  When the measure was shelved, the marches continued as opposition leaders called for an investigation of police violence....

“As the recently departed U.S. consul general in Hong Kong, Kurt W. Tong, argued in an op-ed published Monday, the United States has a strong interest in how the conflict ends.  Close to 1,400 U.S businesses operating in Hong Kong depend on the preservation of its autonomy.  ‘Chinese leaders,’ he wrote, ‘need to realize they could destroy Hong Kong’s economic specialness if they keep trying to align its political culture with mainland norms.’

“Mr. Trump could have made that point.  Instead, he noted that he and Mr. Xi were ‘working on a trade deal’ and repeated that the regime had pledged to buy billions more in U.S. goods.  Mr. Tong, whose farewell speech was reportedly censored by the State Department to remove language in support of the protesters, wrote in his op-ed that Hong Kong should not be ‘a token to be exchanged for concessions in trade talks.’  As he has now made perfectly clear, Mr. Trump thinks otherwise.”

Editorial / Wall Street Journal

“(Mr. Trump) finally broke his silence on Hong Kong – for the worse....

“We sure hope Mr. Xi doesn’t take (Trump’s words) as a U.S. blessing if he does use force to put down the demonstrations....

“Beijing has rigged Hong Kong’s political system, so ‘protesting is the only way we can make our voices heard in the absence of democracy.’ 29-year-old demonstrator Sandy Chan said.  On Sunday an estimated 430,000 marched, and the vast majority were law-abiding and orderly.

“But at the Chinese government’s liaison office, a minority defaced China’s national emblem.  Police fired tear gas, and some protesters answered with projectiles. Thugs in white shirts materialized and beat protesters and journalists.  Police failed to promptly intervene, and at least 45 were injured.  Pro-democracy activists suspect the ruffians had the government’s support or were gangs encouraged by China....

“Ominously, Beijing is now allowing images of the protests to circulate in the mainland, and the state-owned media are calling for stern punishment.

“Hong Kong’s protesters are standing up to the same Chinese promise-breaking and lawlessness that Mr. Trump is challenging in trade negotiations.  They’ve learned that Mr. Xi’s idea of acting responsibly is to crush dissent.  Mr. Trump harms his own interests when he fails to stand up for Hong Kong.”

Meanwhile, Vietnam said it has extended the work schedule of an oil rig on Vanguard Bank, showing no sign of backing down from a confrontation with Beijing over drilling operations in the South China Sea.  The Vietnamese foreign ministry said it would protect its sovereign rights as the stand-off between Hanoi and Beijing entered its fourth week.

A Chinese foreign ministry spokeswoman said today that Vietnam had been violating China’s sovereign rights to Vanguard Bank since May.

North Korea: Pyongyang called the test of two new missiles on Thursday a “solemn warning” against what it described as “South Korean warmongers.”

The short-range missiles were fired into the Sea of Japan from Wonsan on North Korea’s east coast and were the first tests since Kim met with President Trump last month at the DMZ and agreed to revive denuclearization talks.  Needless to say, the tests raise doubts about the revival of said negotiations, which stalled after the collapse of a second summit between Kim and Trump in Hanoi in February.

Kim Jong-un said his country was forced to develop weapons to “eliminate potential and direct threats.”

He said the test involved a new tactical guided weapons system, as reported in State media. This comes after the North continued to criticize a decision by South Korea and the U.S. to hold military drills next month, Pyongyang long regarding the drills as preparation for an invasion.

South Korea’s Joint Chiefs of Staff said one of the new missiles traveled about 428 miles.  Kim said Seoul should “not make a mistake of ignoring the warning.”

U.S. Secretary of State Mike Pompeo downplayed the tests, calling them a negotiating tactic.

“Everybody tries to get ready for negotiations and create leverage and create risk for the other side,” he told Bloomberg.

“We want diplomacy to work. If it takes another two weeks or four weeks, so be it.”

But Kim is targeting the South – in both weapons and words.  The missile test Thursday puts the whole peninsula within range of a strike.

North Korea conducted a similar short-range missile launch in May.

South Korean President Moon Jae-in has worked hard to develop a relationship with Kim, but even Seoul’s offer to send rice to the impoverished North appears to have been spurned for now.

Last year, Kim said North Korea would stop nuclear testing and would no longer launch intercontinental ballistic missiles.

But nuclear activity has continued, with satellite images of North Korea’s main nuclear site showing movement last month, suggesting the North is reprocessing radioactive material into bomb fuel.

Earlier in the week, Kim inspected a new type of submarine under construction, which state media reported on, with analysts saying it could be developed to carry ballistic missiles.

China’s foreign ministry said the launches were a protest against the military exercises between the U.S. and South Korea and said the U.S. and North Korea should resume negotiations as soon as possible.

What was President Trump’s response?  This afternoon he said he was not upset by the missile tests.

“We’ll see what happens, but they are short-range missiles and many people have those missiles...very standard missiles,” the president told reporters at the White House, reiterating he had a very good relationship with Kim Jong Un.  Asked whether he was troubled by the launches, he replied: “No.  Not at all.”

But there is a troubling story in the Wall Street Journal, with analysts at the U.S. Defense Intelligence Agency examining all the satellite imagery and concluding that North Korea may have produced 12 nuclear weapons since the first Trump-Kim meeting in Singapore last year.  “In total, Pyongyang could currently possess between 20 and 60 nuclear bombs, according to estimates by various security analysts.”

When confronted with evidence of this kind gathered by security analysts, Trump replies, as he did in a recent television interview, that Kim “promised he wouldn’t do it.”

On a different matter, South Korea’s military said that three Russian and two Chinese military aircraft entered the Korean Air Defense Identification Zone on Tuesday morning.  Four of the aircraft were capable of dropping nuclear weapons.  Another of the planes – a Russian surveillance plane – violated the South’s territorial airspace twice, it said, before leaving.  South Korea scrambled 18 jet fighters that fired 360 machine-gun rounds as a warning, according to Seoul’s defense ministry.

In response, China vowed to step up military cooperation with Russia.  South Korea then said Russia apologized for flying into its airspace.  Russia strongly denied ever apologizing.

Finally, the trade dispute between Japan and South Korea worsened, with Seoul airing its complaint at the World Trade Organization on Wednesday, the latest move in this festering dispute that has seen the two nations lobbing accusations at each other.

Japan has enraged South Korea by effectively curbing exports to South Korea and erecting a barrier that could disrupt the global supply of semiconductors, following a ruling by a South Korean court that Japanese companies had to pay compensation to South Koreans forced to work in Japanese factories during Japan’s occupation of the Korean peninsula from 1910 to 1945.

Japan’s top government spokesman said on Wednesday the country’s relationship with South Korea was in a “very severe” state and that Tokyo would continue to urge Seoul to take appropriate action over a string of issues that have frayed bilateral ties.

Japan: Prime Minister Shinzo Abe’s ruling coalition has maintained its majority in the upper house after elections last weekend.  Abe’s Liberal Democratic Party and its junior coalition, however, do not have a required two-thirds majority necessary to change the war-renouncing constitution, as Abe has long desired.  In November he will become Japan’s longest-serving prime minister, having taken office in December 2012.

Russia: On Thursday, Ukraine said its security services had detained a Russian oil tanker in the Kerch Strait, a narrow passage of water connecting the Black and Azov seas.  The tanker was allegedly blocking Ukrainian warships’ passage through the strait, the Ukrainian Security Service said in a statement.  The move was in clear retaliation for a November 2018 incident in which Russia captured a Ukrainian ship and detained 24 sailors, who are still being held in custody in Russia.

Ukraine released the crew of the tanker it seized.  Russia’s Foreign Ministry had warned Ukraine that there would be consequences if any Russians were “taken hostage.”

Separately, the Senate Intelligence Committee concluded Thursday that election systems in all 50 states were targeted by Russia in 2016, an effort more far-reaching than previously acknowledged and one largely undetected by the states and federal officials at the time.

But the bipartisan report’s findings were heavily redacted at the insistence of American intelligence agencies that key recommendations for 2020 were blacked out.

Previously, details of Russian hacking, particularly in Illinois and Arizona, had been well known, but the committee described “an unprecedented level of activity against state election infrastructure” intended largely to search for vulnerabilities in the election systems.

But while the Intelligence Committee’s report was bipartisan, Senate Majority Leader Mitch McConnell continued to block consideration of election security legislation put forward by Democrats, calling it “just a highly partisan bill from the same folks who spent two years hyping up a conspiracy theory about President Trump and Russia and who continue to ignore this administration’s progress at correcting the Obama administration’s failure on this subject,” McConnell said of the Democrat bill.

Random Musings

--Presidential tracking polls....

Gallup: 44% approval of President Trump, 51% disapproval (July 1-12), 90% Republicans, 38% Independents.
Rasmussen: 47% approval, 51% disapproval (July 26).

--In an NPR/PBS NewsHour/Marist poll released Monday, President Trump’s approval rating reached a new high at 44%, though 52% disapprove.  The poll was conducted from July 15-17, which was after the tweet he sent on July 14 that was condemned in a House resolution the following Tuesday.  Trump’s low in this particular poll was 35% in August 2017.

Last week a USA TODAY/Ipsos poll found that 68% of Americans considered Trump’s tweets aimed at the four congresswomen to be offensive and 59% said they were “un-American.”

In the Marist poll, as you would expect, 90% of Democrats say they disapprove of Trump’s performance, 90% of Republicans approve.  With independent voters, critical to Nov. 2020, the president’s approval rating was 42% and his disapproval was at 53%.

As poll director Lee Miringoff said, “Independents are on the fence overall.  They’re not willing to grant President Trump reelection, and yet they’re not persuaded by Democrats at this point.”

Trump’s approval and disapproval among white voters were both at 48%.

52% of registered voters said they approved of Trump’s handling of the economy, 44% disagree.

--In a New Fox News Poll, Trump receives the same 52% approval on his handling of the economy, 41% disapprove.

But his job approval is 46%, 51% disapprove.  Last month it was 45-53.  His best rating in the Fox News poll was 48% approval, right after he took office, February 2017.

Trump, according to this survey, remains net underwater because he has net negative marks on things like border security (44 approve – 52 disapprove), immigration (41-54), Iran (39-46), North Korea (39-49), and health care (38-51).

Trump’s lowest marks are on race relations (32-57).

In the Fox survey, 56% think it is racist to say “go back” to a person of color, while 23% disagree.

--In a CBS News survey of Battleground (early voting) states, Joe Biden continues to be the first choice among Democratic voters, but rivals Elizabeth Warren and Kamala Harris are gaining ground.

If you assume a 15% threshold as the minimum support needed to win convention delegates, then across the early states, four would meet that benchmark: Biden, Warren, Harris and Bernie Sanders.

Among Democrats and Democratic-leaning Independents:

Iowa

Biden 24%, Sanders 19%, Warren 17%, Harris 16%

New Hampshire

Biden 27%, Sanders 20%, Warren 18%, Harris 12%

South Carolina

Biden 39%, Sanders 17%, Harris 12%, Warren 7%

All Early Contests / First Choice

Biden 25%, Warren 20%, Harris 16%, Sanders 15%

On the issue of Trump’s tweets against the four congresswomen, 59% of Americans disagreed with what the president said, but 40% of the country agrees with him.  “ ‘Progressive’ Democratic Congresswomen’ should ‘go back’ to their countries.”  88% of Democrats disagree with what the president said, 82% of Republicans agree.  Independents mirror the country overall – 58% disagree. 

Overall, 48% of Americans describe the tweets as racist, 34% feel they were not racist.

Whites were split: 41% / 41%.

--In the aforementioned Fox News Poll, among Democratic primary voters nationwide:

Biden 33%, Sanders 15%, Warren 12%, Harris 10%.

--Rep. Tulsi Gabbard (D-Hawaii) launched an attack against Sen. Kamala Harris, with whom she will share a debate stage next week. 

Kamala Harris is not qualified to serve as commander in chief and I can say this from a personal perspective as a soldier,” said Gabbard during a radio interview.  “She’s got no background or experience in foreign policy and she lacks the temperament that is necessary for commander in chief.”

--Former Massachusetts Gov. Bill Weld, addressing the national NAACP convention in Detroit, called President Trump a “raging racist” and warned the Republican Party that if it does not denounce Trump in 2020, the GOP will be known as the “party of racism in America.”

“(It’s) not a political choice.  It’s a moral choice,” Weld said.  He is challenging Trump for the Republican nomination, admittedly with odds at about 99,000 to 1.

--The Senate voted Tuesday 97-2 to pass the “Never Forget the Heroes: James Zadroga, Ray Pfeifer and Luis Alvarez Permanent Authorization of the September 11th Victim Compensation Fund Act,” with President Trump signing it on Monday.  Only Republican Senators Rand Paul and Mike Lee voted against it.

The new bill would cost at least $10.2 billion over the first 10 years, but would be open-ended to deal with whatever the need turns out to be until 2092.  The Department of Justice administrator had slashed its payouts by more than half in February, saying most of the money was gone.

--Sixteen U.S. Marines were arrested Thursday for alleged involvement in various illegal activities ranging from human smuggling to drug-related offenses, according to a statement from the Marine Corps.

Apparently the arrests were made in dramatic fashion on Thursday morning at Camp Pendleton, California, during a battalion formation.

Eight other Marines were questioned on their involvement in alleged drug offenses unrelated to yesterday’s arrests, the Marine Corps said.

And then today we learned the above number of “16” had increased to 18, plus, a platoon of SEALs was sent home today from Iraq amid a rape investigation and use of alcohol during the act.

This crap better stop soon.  I have told you how I subscribe to Army Times to keep abreast of developments in the military and I have been distressed by the increasing frequency of stories such as the above.  You have no military without discipline...period.  Something is very wrong.

--Puerto Rico’s besieged Gov. Ricardo Rossello is finally bowing to pressure from massive protests and announced he would resign Aug. 2.

Rossello’s ability to govern the U.S. territory had grown increasingly tenuous following disclosure of leaked messages between him and several top aides that were profane, sexist and homophobic.  Many Puerto Ricans focused on one exchange in particular – a joke about bodies accumulating after Hurricane Maria decimated the island in September 2017.

--From the New York Post: “City kids are struggling with basic math and English – but a new Department of Education curricular initiative focuses instead on racial privilege and activism, The Post has learned.

“Pushed by Schools Chancellor Richard Carranza, the ‘Culturally Responsive-Sustaining Education’ program will require schools to ‘identify and interrupt policies and practices that center on historically advantaged social/cultural groups and lead to predictable outcomes of success or failure for historically marginalized students.’....

“Officials stressed that the goal is to make all kids feel represented in school subject matter and  that the strategy has been proven to boost performance.”

Oh brother.

--In an incident that sparked outrage and criticism around the nation, a Brooklyn man surrendered Wednesday for his role in the weekend dousing of two New York City police with buckets of water in Harlem.  Two others were arrested.  A second incident occurred in Brooklyn, others also emerging.

Officers had been responding to reports of men spraying passersby with water guns on a Harlem sidewalk, and then were themselves targeted upon arrival at W. 115th St. and St. Nicholas Ave.  Needless to say, highly disturbing.

But in a Brooklyn incident, officers walked away without responding following the dousing.  NYPD Chief of Department Terence Monahan was not happy.

“Any cop who thinks that’s all right, that they can walk away from something like that, maybe they should reconsider whether or not this is the profession for them,” he said.

Some lawmakers praised the cops for not responding, while failing to first condemn the behavior.

NYPD Detectives Endowment Association President Michael Pallapino ripped local politicians for a failure to support the NYPD.

“Lawmakers with decriminalization agendas apparently have little regard for the law, so there’s no reason to believe those very same politicians have any regard for us,” said the union head.  “If they did, they would publicly condemn such behavior, but instead, they condone it by remaining silent.”

President Trump tweeted: “We love our Law Enforcement Officers all around this great Country. What took place in NYC with water being tossed on NYPD officers was a total disgrace.  It is time for @NYCMayor @BilldeBlasio to STAND UP for those who protect our lives and serve us all so well...”

In another tweet, Trump added, “...What took place was completely unacceptable, and will not be tolerated.  Bill de Blasio should act immediately!”

De Blasio immediately fired back: “First of all, the moment I heard about that incident I condemned it and I made very clear – and I want to make it clear here – anybody who interferes with the work of a police officer is going to be charged and is going to suffer the consequences.  It’s illegal, it’s inappropriate, it’s unacceptable.

“Now, to the president: The president knows nothing about New York City. This is a guy who wanted to go back to stop-and-frisk, which was a horrible failure.

“This is a guy who literally does not even understand the place he came from,” said de Blasio.  “He didn’t live the life of everyday New Yorkers.  He was the child of a millionaire.”

--Peggy Noonan / Wall Street Journal

“I want to kick away from the daily and get to something larger.

“We are a nation of just under 330 million.  We have a lot of disputes, always have, argument is one of our traditions.  To make it all work, to keep this thing going, we have to give each other a little room, a little space.  We have so many different thoughts and ways.  We have to be easy with each other, not pick on each other all the time.

This requires tact, which sounds sissy and small-time but is not.  Tact takes brains and discipline.  It’s a form of empathy: You see the other guy is embarrassed or unhappy, and you decide not to make it worse.  You hold back from causing unnecessary pain.  It is connected to graciousness: You let your foe up easy.

“In a great roiling democracy tact isn’t only desirable, it is necessary. We won’t hold together as a nation without it.

“And we don’t value it at all.  We let it slide down the hole of old habits.  Who teaches civic tact now?

“What has taken its place in our political culture is a spirit of maximalism – let’s rub their faces in it.

“In New York six months ago it wasn’t enough to pass one of the most radical pro-abortion laws in the land; you had to light up the World Trade Center and the Governor Mario M. Cuomo Bridge in pink lights to celebrate.  So that even the skyline approves of what you did.  You say you do this because you’re happy.  You do it to rub the opposition’s faces in it....

“Nike makes a new sneaker they’re unveiling on July 4, and it’s got  a Betsy Ross flag on it, but Colin Kaepernick, a bright and eccentric young man, declares that flag a racist symbol because we used to have slavery and now have unresolved racial problems.  And Nike says: What Colin says goes, no flag sneaker for you, America!  Who’s worse, Mr. Kaepernick, so full of himself  that his need to provide moral instruction is never ameliorated by any personal modesty, or the mealy-mouthed weasel-cynic corporate executives who in their play-to-the-demographic, postpatriotic way give worldly success a bad name?

“What does it matter?  They’re rubbing your face in it.

“This week there was a poll on race, and it showed Americans disheartened on the issue. I believe it....”

Ms. Noonan believes many of our issues, like in the case of racism, starts, and could end, at the southern border.

“(This) week on ‘CBS This Morning,’ Norah O’Donnell toured the largest detention facility on the border and talked to a young mother from Venezuela with a 2-year-old son. She told her story.  For months at home she’d heard nothing but gunfire. She fled alone with her son, just the two of them on the long trek north. She wept as she talked.

“She was a person of modesty and dignity.

“She said she had warm food here. They provided Pampers for the baby.  Ms. O’Donnell said: But you are sleeping on the floor.  Yes, said the mother, ‘on a mat.’

“She showed no resentment, expressed no demand.  She was just grateful.

“She had tact.

“Get her in here, please.  We need her kind.”

--Europe suffered through its second major heatwave of the summer, with all-time records broken in Belgium and the Netherlands, while threatening the same in Britain, Germany and France.    Belgium saw a temp of 106F, smashing a record of 98 set back in June 1947 (with records going back to 1833). The Netherlands had a record mark of 107F.

Thursday, Paris hit 109!  The highest temp ever recorded there.  In the west of France, it hit 114.

Britain saw temps of 101 (Cambridge), the highest-ever for the month of July and second-highest on record in the U.K.

Speaking of heat, that was one helluva heatwave last weekend across much of the nation, with heat indexes of 110 common in the Midwest and Northeast.  It was the first time since 2012 that both Chicago and Philadelphia hit 100 degrees, according to AccuWeather.

I was in Cincinnati and it was rather uncomfortable, but for New Yorkers, tens of thousands, at one point, were without power thanks to the world’s worst utility (Venezuela’s state power company excluded), Con Edison, which had issues.  At one point it took 30,000 out of power on purpose to protect the rest of the system...which is pathetic.

Governor Andrew Cuomo blasted the utility.  “We’ve been through this situation with ConEd time & again & they should have been better prepared – period,” Cuomo tweeted.

There was a major issue at New Jersey’s Monmouth Park race track and some of the races had to be canceled and others pushed back due to the heat, including the $1 million Haskell Invitational that was forced to go off at 8 p.m., hours later, much to the chagrin of the big crowd.  [I went to the Haskell a few years ago to see American Pharaoh after winning the Triple Crown.  Great spot to watch some racing.] Maximum Security won the race, by the way, the horse that crossed the finish line first in this year’s Kentucky Derby and then was disqualified.

---

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

God bless America.

---

Gold: $1418
Oil: $56.16

Returns for the week 7/22-7/26

Dow Jones  +0.1%  [27192]
S&P 500  +1.7%  [3025]
S&P MidCap  +2.4%
Russell 2000  +2.0%
Nasdaq  +2.3%  [8330]

Returns for the period 1/1/19-7/26/19

Dow Jones  +16.6%
S&P 500  +20.7%
S&P MidCap  +19.3%
Russell 2000  +17.1%
Nasdaq  +25.5%

Bulls: 54.2
Bears: 16.8

Have a great week.

Brian Trumbore