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Week in Review

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08/10/2019

For the week 8/5-8/9

[Posted 11:00 PM ET, Friday]

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Edition 1,061

Yet another depressing week on Planet Earth.  Thank god for the diversion of sports.

I’ve been writing incessantly how dangerous the world is today on the geopolitical front, and my raison d’etre for this column has been to constantly work through the question,  ‘What can shatter confidence, what can change the tone in, say, financial markets and the economy overnight?’  Certainly 9/11 did, though when it came to the markets we recovered quickly thanks to strong leadership.

But if China suddenly made a move in Hong Kong, or against Taiwan, or against an American warship in the South China Sea, I’m not so sure how quick the recovery would be after an initial shock.

Tonight, as I go to post, China is railing about a U.S. diplomat who reportedly met with student leaders of Hong Kong’s pro-democracy movement, with the U.S. State Department calling out China’s behavior, saying it has gone “from irresponsible to dangerous” and must stop, State Department spokeswoman Morgan Ortagus said today.

“Chinese authorities know full well, our accredited consular personnel are just doing their jobs, just like diplomats from every other country.”

On Thursday, Ortagus called China a “thuggish regime” for disclosing photographs and personal details of the diplomat, identified by a Hong Kong newspaper as Julie Eadeh of the U.S. consulate’s political section.

“I don’t think that leaking an American diplomat’s private information, pictures, names of their children – I don’t think that is a formal protest... That is not how a responsible nation would behave,” she told a briefing.

The thing is the denunciations are unusually sharp, but it’s largely because a Hong Kong newspaper, Ta Kung Pao, published a photograph it said showed Eadeh talking with student leaders in the lobby of a luxury hotel, under the headline “Foreign Forces Intervene.”

Ortagus said, “China has a long record of broken commitments; it’s their duty under the Vienna Conventions, to which China is a party, to treat our diplomats and consular officers with due respect and take all appropriate steps to prevent any attack on their person, freedom or dignity.”

China has accused foreign powers, particularly the United States, of fomenting the demonstrations in Hong Kong. 

This may seem like a small deal, but it isn’t.  China is laying the predicate for action.  This much is clear.

And then we have a separate report tonight of a fifth North Korean missile test of short-range missiles in about two weeks, hours after President Donald Trump said he had received a “very beautiful letter” from Kim Jong-un.  Further discussion below.

But for now, my bottom line has been there will be no trade agreement with China for some time to come, though as we draw nearer to November 2020, Trump will strike a middling one and claim total victory, as he has with all the other bogus trade deals he’s ‘brilliantly negotiated’ thus far.

At the same time, Chinese President Xi Jinping is slowly beginning to roll out the nationalism card, which will be much to the detriment of U.S. multi-nationals, and in fanning anti-American sentiment, anything can happen.

August is historically a very dicey month, both geopolitically and in the markets.  I won’t be surprised by anything.

President Trump is also on vacation this coming week.  Unlike his predecessors that means one thing.  He has to make sure he remains on the front page, so he won’t stay silent.  If only he could.

Trump World...El Paso and Dayton

I really have little to say concerning the depressing weekend we had with the two mass shootings and I’ll let others do the bulk of the talking.  It’s mainly because I know nothing of real substance will get done.  President Trump today told a gaggle of reporters that he was committed to strengthened background checks and that Senate Majority Leader Mitch McConnell was as well, along with Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer.

But so many of the past gunmen had cleared checks, and will new ones, plus the NRA will convince Trump to water down any legislation, and then maybe nothing gets done.

What I really want is action on at least the ‘magazines’ and their capacity, knowing that actual gun control legislation is just not possible; those in opposition falling back on the slippery slope argument – if they get this, they’ll then go after  that – and you just throw up your arms and ask, ‘Are the Mets on tonight?’

I don’t mean to imply I’m insensitive...I cried like many of you did at some of the stories...it’s just that, one, I’m a realist, and, two, there are other concerns, many involving geopolitics. 

It also doesn’t help when we have a president who is caught twice on video while in El Paso, supposedly comforting the victims and praising first responders, displaying how he just can’t help himself and has to talk about crowd size, while slamming his opponents.  I mean can he hold off for even 12 hours?  We know the answer to that one.

Editorial / Wall Street Journal

“The mass shootings in El Paso and Dayton over the weekend are horrifying assaults on peaceful communities by disturbed young men.  American politics will try to simplify these events into a debate about guns or political rhetoric, but the common theme of these killings is the social alienation of young men that will be harder to address.

“One response to reject is the reflex to blame these shootings on political opponents.  Before noon on Sunday we received an email from the Progressive Democrats of America declaring that ‘we blame President Trump for feeding into the anti-immigrant frenzy and white supremacist violence.  Yes, you Mr. President had your finger on that AK-47.’

“This is political cynicism.  Mass shootings also occurred under Presidents Obama, Bush and Clinton.  They occur around the world, if much less frequently, such as in Christchurch, New Zealand (2019), Australia (2019), and Norway (2011).  The twisted motivations are varied and often too convoluted to sort into any clear ideology.

“Take the El Paso shooter, who is suspected of writing a manifesto posted on the 8chan website before the rampage.  He expressed sympathy for the racial motivations of the Christchurch killer and denounced Hispanic immigration, but he also raged against ‘unchecked corporations’ who support immigration and pollute the land.

“This is the rant of someone angry about a society he doesn’t feel a part of and doesn’t comprehend.  It is all-too-typical of most of these young killers who tend to be loners and marinate in notions they absorb in the hours they spend online.  They are usually disconnected to family, neighborhood, church, colleagues at work, or anything apart from their online universe.

“These men may draw inspiration from one another online, and any communication or common connection needs to be investigated.  The FBI says it has made 100 arrests related to domestic terrorism in the last nine months.  But blaming all this on one politician or ideology, left or right, without evidence of such a connection is disingenuous and counterproductive.

“Yet politicians and other leaders do have a responsibility to condemn and marginalize those who indulge the ugly instincts that infect any human society.  That includes the President of the United States.  These columns have long warned Mr. Trump about the divisive tone of his public rhetoric.  He should separate himself forcefully and consistently from alt-right and white-supremacy voices.

“His supporters may be correct that Mr. Trump’s opponents will not reciprocate by pushing back against the irrational elements on the left.  But a President has a special role in the American system even if our politics has elevated the Presidency more than it should.  Either Mr. Trump restrains his rhetoric or he will pay a consequential political price.  Joe Biden’s theme of a return to ‘decency’ and ‘normalcy’ will resonate with even millions of Trump voters if Mr. Trump doesn’t change.”

Editorial / New York Post

“America is terrified.

“President Trump, you are positioned to assuage that fear.  On gun control, you are a pragmatic centrist, someone who knows there is a vast majority of Americans who are not to the extreme left or right on this issue.  They just want the killings to stop.

“Yes, we know the president regularly praises the Second Amendment and received the National Rifle Association’s support in the 2016 race.

“But the Second Amendment leaves ample room for regulating gun rights, just as every other constitutional right has its limits.

“And Trump has sneered at others for being afraid of the NRA when it comes to passing common-sense gun laws.  He’d surely have rather had Congress pass a law banning bump stocks, although his administration got it done eventually through executive action.

“Plus, the NRA is falling apart at the seams these days – with insiders profiteering from hysteria-driven fundraising finally exposed.  Far wiser to appeal now to the (much more numerous) Americans who hunt or keep guns for self-defense but are appalled by the endless string of mass shootings.

“Come up with answers.  Now.  Beginning with the return of an assault-weapons ban....

“The Supreme Court has ruled that the Second Amendment protects the right to own ‘guns in common use.’   That doesn’t cover the semiautomatic weapons regularly used only in mass shootings.

“The ban would only be part of the response: Keep improving background checks, find wiser approaches to mental health, get every state to pass a red-flag law (do a federal one, too, even if issuing these restraining orders is mainly the job of state courts).

“And by all means, do as Sen. Elizabeth Warren suggested in last week’s Democratic debate and ‘double down on the research and find out what really works.’....

“One of the big reasons that crime has fallen so far in New York City is a crackdown on guns. Their ownership is restricted, and the NYPD is focused on getting illegal ones off the street.  Gun control works.

“An assault-weapons ban is aimed at the likes of the El Paso shooter, who coldly plotted how to kill as many as possible, as quickly as possible.  Let’s make that a lot tougher for the next monster.

“ ‘Guns don’t kill people, people do,’ says the cliché.  But the twisted and the evil can kill a lot more people when handed a murder machine.  Our Founding Fathers gave us the right to bear arms in a time of muskets.  They did not foresee a time when one 21-year-old could kill 20 people in the span of minutes thanks to poisonous beliefs and an assault weapon.

“It does not have to be this way.  It should not have to be this way.  Mr. President, do something – help America live without fear.”

---

--The disconcerting revolving door in our intelligence apparatus continues.  Trump named Joseph Maguire, the current acting chief of the National Counterterrorism Center, to become the acting director of national intelligence.  Maguire will take over the post on Aug. 15, when Dan Coats, the current director of the agency overseeing civilian and military intelligence, steps down.

Sue Gordon, who many hoped would be named for the post, Ms. Gordon deputy director of National Intelligence behind Coats, instead resigned.

Last week, Trump dropped his first choice to replace Coats, Rep. John Ratcliffe, after questions arose about his lack of experience and exaggeration of his resume.

As for Gordon’s resignation, it’s not known what prompted it, but the Republican chairman of the Senate Intelligence Committee, Richard Burr, said in a statement, “Sue Gordon’s retirement is a significant loss for our Intelligence Community.”

This is a freakin’ mess...and the last place that needs to be one.            

--U.S. immigration authorities rounded up 680 workers at seven agricultural processing plants across Mississippi on Wednesday in what federal officials said could be the largest worksite enforcement operation in a single state.  ICE said they detained workers that were working illegally at the plants.

The next day hundreds were released, but it was a moving scene to see some of the children, whose mother or father was ripped away, leaving them alone to be sheltered by church groups and in some cases total strangers.

But while I’m highly-sympathetic, the companies are breaking the law, and I wish they were hit hard (they aren’t) as much as the illegal migrants.

--Trump tweets:

“We cannot let those killed in El Paso, Texas, and Dayton, Ohio, die in vain.  Likewise for those so seriously wounded.  We can never forget them, and those many who came before them.  Republicans and Democrats must come together and get strong background checks, perhaps marrying....

“....this legislation with desperately needed immigration reform.  We must have something good, if not GREAT, come out of these two tragic events!”

“The Media has a big responsibility to life and safety in our Country.  Fake News has contributed greatly to the anger and rage that has built up over many years.  News coverage has got to start being fair, balanced and unbiased, or these terrible problems will only get worse!”

“Watching Sleepy Joe Biden making a speech.  Sooo Boring!  The LameStream Media will die in the ratings and clicks with this guy.  It will be over for them, not to mention the fact that our Country will do poorly with him.  It will be one big crash, but at least China will be happy!”

“Just left Dayton, Ohio, where I met with the Victims & families, Law Enforcement, Medical Staff & First Responders.  It was a warm & wonderful visit.  Tremendous enthusiasm & even Love.  Then I saw failed Presidential Candidate (0%) Sherrod Brown & Mayor Whaley totally...

“....misrepresenting what took place inside of the hospital. Their news conference after I left for El Paso was a fraud.  It bore no resemblance to what took place with those incredible people that I was so lucky to meet and spend time with.  They were all amazing!”

“Watching Fake News CNN is better than watching Shepard Smith, the lowest rated show on @Foxnews.  Actually, whenever possible, I turn to @OANN!”  [Ed. “One America News”]

“Beto (phony name to indicate Hispanic heritage) O’Rourke, who is embarrassed by my last visit to the Great State of Texas, where I trounced him, and is now even more embarrassed by polling at 1% in the Democrat Primary, should respect the victims & law enforcement - & be quiet!”

“Leaving El Paso for the White House. What GREAT people I met there and in Dayton, Ohio. The Fake News worked overtime trying to disparage me and the two trips, but it just didn’t work.  The love, respect & enthusiasm were there for all to see. They have been through so much.  Sad!”

[None of the eight patients still being treated at University Medical Center in El Paso agreed to meet with Trump when he visited the hospital, UMC spokesman Ryan Mielke said. Two victims who already had been discharged returned to the hospital with family members to meet with him.  Before Trump’s visit, however, some of the hospitalized victims accepted visits from a number of city and county elected officials, as well as two congressmen.]

And I can’t help but add this guest ‘retweet’ from Trump...of Fox Business News’ Charles Payne.  All spelling and punctuation is correct.

“While the media is fixated on tweets and fear mongering here’s are some employment stats for Black American in July.  284,000 returned to labor force Participation rate soars 62.7% from 61.9% Unemployment gap between Black and White now second lowest on record (record May 2018).”

I’m assuming Mr. Payne corrected this later.

Wall Street and the Trade War

There was very limited economic data this week, with the ISM non-manufacturing (service sector) reading for July at just 53.7 (50 being the dividing line between growth and contraction), a 3-year low.  Following last week’s poor PMI on manufacturing, just a further sign of a slowdown, potentially, albeit still slower ‘growth.’

Today, we had more tame news on the inflation front, with the producer price index for July coming in at 0.2%, -0.1% ex-food and energy; 1.7% year-over-year, 2.1% yoy on core.

A very early reading on third-quarter GDP from the Atlanta Fed’s GDPNow barometer is 1.8% at week’s end, but next week we have the all-important retail sales data for last month, as well on housing starts and industrial production that will feed into the GDPNow data set.

The bond market was a big story this week with the yield on the 10-year Treasury bond dipping below 1.6% for the first time since October 2016, before finishing the week at 1.74%, nonetheless a huge drop from 2.07% just two weeks earlier (and 2.68% at the start of the year).

Certainly a positive with the falling bond yields is having mortgage rates fall to their lowest level in nearly three years, spurring a new rush for homeowners to refinance.  The rate on a 30-year fixed, which was 4.94% in November, fell to 3.60% Thursday.  Mortgage rates are closely tied to the 10-year Treasury.

But will falling rates really lead to a boost in home buying, which has stalled out the past year?  Concerns with the overall economy may continue to hold purchasers back.

And the following, the trade conflict with China, played a key role in the stock market’s gyrations, after the U.S. accused Beijing of manipulating its currency (it really isn’t), which led to more harsh rhetoric and Wall Street’s worst single day of the year, Monday, the Dow dropping 717 points before finishing the week down 0.7%.

So speaking of the trade war....

Tensions mounted anew after President Trump threatened to impose a 10 percent tariff on $300 billion of Chinese products from September 1, with China responding by suspending purchases of American agricultural products and allowing the yuan to weaken beyond the key level of seven to the U.S. dollar on Monday.

In retaliation, the Treasury Department officially labeled China a currency manipulator, a move which many say could pave the way for additional tariffs and sanctions.

But at week’s end, September’s trade talks were still on, although the date, or venue, hasn’t been disclosed.

Earlier in the week, Larry Kudlow, the increasingly irrelevant top economic adviser to Trump, told CNBC, “The president and our team is planning for a Chinese visit in September.  We’re willing to negotiate. Movement towards a good deal would be very positive and might change the tariff situation.  But then again, it might not.”

Secretary of State Mike Pompeo escalated his criticism of China during a visit to Australia on Sunday, drawing a direct link between what he called one-sided trade deals and China’s ability to strengthen its military.

Pompeo, speaking in Sydney, said, “We were asleep at the switch,” as China began to steal data, launch military exercises in the disputed South China Sea and saddle other countries with debt to increase its influence.

“Those are the kind of things that I think everyone needs to have their eyes wide open with respect to,” Pompeo said.  “The United States certainly does.”

For their part, Hu Xijin, the editor-in-chief of a Communist Party mouthpiece, the Global Times, tweeted on Tuesday, China “no longer expects goodwill from the United States.”

Additionally, Chinese state media has been warning that Beijing could use its dominant position as a rare earths exporter to the United States as leverage in the trade dispute.  The materials are used in everything from iPhones to military equipment.

Or, as I noted above, and have further examples below, China can just ratchet up the pressure on American multi-nationals.

Today, in his press spray, President Trump said the U.S. and China were still pursuing a trade agreement but he was not ready to make a deal.  “We’re doing very well with China.  We’re talking with China.  We’re not ready to make a deal – but we’ll see what happens. China wants to do something, but I’m not ready to do anything yet.  Twenty-five years of abuse – I’m not ready so we’ll see how that works out.”

He also said, “We’re not going to do business with (Chinese telecom giant) Huawei.  That doesn’t mean we won’t agree to something if and when we make a trade deal, but we’re not going to be doing business with Huawei.”

Editorial / New York Post

“A quarter-century ago, the West wagered that welcoming China into the world economy would seduce the Communist Party into allowing ever-more freedom.  That bet’s been lost.

“There’s precious little ideology to China’s ‘communism’ anymore and no hint of seeking economic justice. But the party will allow no challenge to its rule.  Since Xi Jinping took over as president in 2013, he’s rolled back freedom after freedom.

“Christian churches are smashed and worshippers jailed; Xi has even bullied Rome into letting him choose Catholic bishops in China.  Re-education camps house 1 million Uighers in a province teeming with hi-tech surveillance. Twelve million other Muslims suffer stepped-up repression and systematic abuses, notes Human Rights Watch. Buddhists deemed members of the Falun Gong movement pack prisons that provide involuntary ‘organ donors.’

“And Hong Kong’s promised ‘high degree of autonomy’ has become a joke.  The mainland has even begun to databank its residents’ biometrics (DNA, fingerprints, voice samples, etc.), the obvious basis for eventual Big Brother surveillance.

“Secretary of State Mike Pompeo said recently that ‘protest is appropriate’ and ‘we hope the Chinese will do the right thing,’ but Team Trump overall has muted criticism as trade talks continue.

“Hard as it might hit the stock market, maybe human rights should become the issue in those negotiations: In the long run, America doesn’t win by trading freely with a nation run by monsters.”

Robert Samuelson / Washington Post

“Donald Trump sold himself to the American public as an expert dealmaker. At the top of his list was a promised trade bargain with China that would boost U.S. exports and remedy some of the more egregious examples of discrimination against American firms.

“It isn’t working as planned.

“To the contrary: The ensuing trade war between the United States and China is morphing into something bigger and more ominous. It’s increasingly not just a trade war but a broader and more dangerous economic battle, with each nation seemingly determined to hurt the other as much as possible....

“The central – and unanswerable – question now is whether we are stumbling toward a larger and unmanageable global economic crisis. There are several possibilities.

“One is that the gradual slowing of economic growth in Europe, China and the United States makes it harder for borrowers to service their loans, leading to spending cutbacks or defaults.  A related danger is massive capital flight from ‘emerging market’ countries (such as China, India and Brazil) as investors move their funds into safe havens. This, too, would tighten credit.

“For the moment, most economists seem to be discounting a devastating crisis.  Higher tariffs mean higher prices.  They discourage spending and growth, but the amounts affected are modest compared with the size of the U.S. or Chinese economies.  Remember that the U.S. economy is roughly $20 trillion.

“What could change the outlook is the impact of the U.S.-China conflict on consumer and business confidence.  If people suddenly become more uncertain about the future, the impact on spending could be much larger.

“Meanwhile, Trump’s self-declared reputation as a great dealmaker is in shambles.  It will be hard to make that claim again.”

Editorial / Wall Street Journal

“Multiple reports out of the White House last week say President Trump overruled all of his economic advisers other than Peter Navarro when he decided to impose new tariffs on China. Global and American economic conditions have been heading south ever since, so perhaps we should call this the Trump-Navarro trade-policy slowdown.

“Mr. Trump used to talk as if stock prices were his economic lodestar, which was never wise since stocks fluctuate for many reasons.  But on Wednesday he professed not to be too concerned by the stock-market correction. The Dow Jones Industrial Average dropped sharply Wednesday morning before stabilizing, though it still closed lower than it was in January 2018 when his tariff offensive began.  He can ignore stocks if he chooses, but financial markets across the board are signaling worry about more trade and currency tensions and a slowing global economy....

“The U.S. economy has held up better than the rest of the world, thanks in large part to Mr. Trump’s policies.  Deregulation and tax reform revived a recovery that was long in the tooth and barely escaped recession in 2015-2016.  Business confidence and capital investment surged, which has driven further job market gains, rising wages and durable consumer spending.

“But note the economic canaries.  CEO confidence and capital spending have tailed off since the trade war escalated in 2018, and the falloff is beginning to affect economic growth. The near-3% surge in GDP has slid to 2%, and average monthly job growth has declined to 165,000 this year from 223,000 in 2018 [Ed. 140,000 the last three months.]

“Exports have subtracted from GDP as global demand slumps, especially for manufactured goods.  If oil demand stays low, the oil and gas industry will have to begin layoffs.  The 10-year Treasury yield dipped below 1.6% Wednesday morning, another sign of slower growth ahead.

“Oh, and has Mr. Trump noticed that the trade deficit hasn’t improved?  Global supply chains are moving out of China to third countries such as Vietnam.  But the overall trade deficit is steady.  This is because the U.S. invests less than it saves. Thus it imports capital from abroad, which in the national income accounts is offset by a trade deficit.

“The irony, and a dangerous one, is that Mr. Trump doesn’t seem to understand that his trade policy is contributing to exchange-rate instability and a rising dollar. When he slaps tariffs on China he reduces the demand for Chinese yuan.  He also encourages capital flight to safe havens like the dollar, which encourages more capital into dollar instruments and the U.S.  China isn’t manipulating its currency.  It is setting a lower peg to reflect supply and demand and prevent greater capital flight out of China.

“We aren’t predicting a recession, but then few thought we were in a recession in mid-2008 either.  Economic downturns can sneak up on the smartest policy makers. Dan Clifton of Strategas Research Partners has begun noting that Mr. Trump is ‘‘trading away’ his re-election’ as  his trade policy erodes what was a strong economy.  Mr. Clifton is a supply-sider who supports Mr. Trump’s tax and deregulatory agenda.

“This is a warning the President should heed, and probably one Mr. Navarro won’t tell him.  If Mr. Trump can’t strike a broader trade deal with China before the election, he should at least call a trade truce to reduce the damage.  Economic expansions don’t end on their own. They almost always end due to policy mistakes.  Mr. Trump’s willy-nilly trade offensive could be the mistake that turns a slowdown into the Navarro recession.”

Europe and Asia

We had the composite and service sector PMIs for the eurozone (EA19) this week, after last week’s putrid manufacturing data for July. The final composite number (combining manufacturing and services) is 51.5 vs. 52.2 in June for the EA19.  The services reading was 53.2 vs. 53.6 the prior month.

Spain’s comp came in at 51.7, a 68-month low, while Germany’s, at 50.9, was a 73-month low.

Some service sector readings:

Germany 54.5; France 52.6; Italy 51.7; Spain 52.9; Ireland 55.0; and the U.K. 51.2.  All still representing growth, but also deceleration in most of the countries.

Separately, Germany reported that industrial production fell 1.5% in June over May, as many begin talking of recession.  There is a crisis in the key automotive sector with weaker foreign demand, while business sentiment continues to fall.  The German government expects GDP growth of 0.5% for all of 2019, rebounding to 1.5% in 2020.

In the U.K., in a clear reflection of Brexit uncertainties, Britain saw its worst retail sales in July since the survey began in 1995.

Chris Williamson / IHS Markit

“The service sector continued to sustain the expansion of the overall eurozone economy at the start of the third quarter, but there are signs that the scale of the manufacturing downturn is starting to overwhelm.

“Trade war worries, slower economic growth, falling demand for business equipment, slumping auto sales and geopolitical concerns such as Brexit led the list of business woes, dragging manufacturing production lower at its fastest rate for over six years.  While the service sector has helped offset the manufacturing downturn, growth also edged lower among service providers in July, meaning the overall pace of expansion of GDP signaled by the PMI has slipped closer to 0.1% [Ed. quarter-over-quarter]

“The main source of expansion currently appears to be the consumer, in turn buoyed by the relative strength of the labor market.  However, with the July survey indicating the weakest jobs gains in over three years, there are signs that this growth engine is also losing impetus, and adding another headwind to the economy for the coming months.”

Brexit: On Thursday, Boris Johnson was asked if he would resign if his government lost a vote of no-confidence, and he responded that he had pledged to take Britain out of the EU at the end of October, with or without a deal, and that’s what he would do.  But this sets up a clash with lawmakers who have vowed to try and stop a no-deal Brexit, including by trying to collapse the government.

Asked what he would do if he lost a vote, Johnson told reporters: “I think that what Members of Parliament should do and what I think they’ve already voted to do when triggering Article 50...is honor the mandate of the people and leave the EU on October 31.”

Earlier, as reported by the Financial Times, Johnson is telling his people he would hold an election in the days following Brexit if lawmakers sink his government in a no-confidence vote, which is now targeted for early September when Parliament returns from its summer break.

Johnson said his government was working hard to reach a deal with the EU and if Britain can get changes to the so-called backstop, an insurance policy aimed at avoiding a hard border between Northern Ireland and the Republic, then “there is a good deal to be done.”

“There’s every possibility for the EU to show flexibility and there’s bags of time for them to do it, and I’m confident they will,” Johnson added.

But there is zero...zero...evidence the European Union is prepared to renegotiate the deal it painstakingly crafted with former Prime Minister Theresa May that was then turned down by Parliament on three separate occasions.

EU negotiators told European diplomats this week there was currently no basis for “meaningful discussions” and talks were back where they were three years ago.

Downing Street said the EU needed to “change its stance.”

If there is to be a renewal of talks between the two sides, it could come at the G7 summit in France at the end of August.  But this could also be the point at which a no-deal Brexit becomes inevitable.

Friday, the government released data on GDP for the second quarter that was far worse than expected, an actual decline of 0.2% over the previous quarter, in the starkest warning sign since the 2016 Brexit referendum as manufacturing continues to slump badly ahead of the Oct. 31 deadline.  Year-on-year growth slid to 1.2% from 1.8% in the first quarter, according to the Office for National Statistics, with annual growth in June alone the weakest since August 2013 at 1.0%.

The Brexit crisis has left the British economy on a “knife-edge” for the third quarter, as one economist put it.  And the U.S.-China trade dispute isn’t helping the mood either as it impacts U.K. trade as well.

The Chancellor of the Exchequer (treasury secretary), Sajid Javid, said he does not expect the U.K. to slide into recession but recession now seems likely, depending on the size of any inventory buildup (which has been taking place for over a year) ahead of Brexit.

Also today, Boris Johnson wrote all government civil servants to tell them that preparing for a no-deal exit from the European Union is his and their top priority, Sky News first reported.  “I would very much prefer to leave with a deal...but I recognize this may not happen,” the letter said.  “That is why preparing urgently and rapidly for the possibility of an exit without a deal will be my top priority, and it will be the top priority for the Civil Service too.”

The problem is that while large corporations, both in Britain and the EU, have the resources to prepare for a no-deal, such as in hiring consultants, small- and medium-sized companies on both sides just don’t have those resources and are no doubt woefully unprepared.  I can’t emphasize enough it would be chaos, and Ground Zero would be Ireland/Northern Ireland.

More on this next time.

Italy: The bond market here was rocked at week’s end as Matteo Salvini, head of Italy’s far-right, sought to trigger snap elections by declaring an end to the government in which he serves, exploiting his strong lead over his coalition partner, the antiestablishment 5 Star Movement, with whom differences have become irreconcilable.  Salvini wants to make himself the country’s sole leader.

So after 15 months in power, the populist government is coming to an end, Salvini saying, “Let’s go immediately to Parliament to establish that there is no longer a majority...and let’s quickly let the voters have their say.”

The 5 Star Movement’s leader, Luigi Di Maio, said his party stood ready for elections, but he wants to delay a vote until after Parliament passes a change to the constitution that would cut the number of lawmakers in Italy’s bloated two-chamber legislature.  The change is currently slated to be debated in September.

On paper, Salvini is Italy’s deputy prime minister and interior minister and his League party is the junior partner in the governing coalition.  But the League has been polling better than 5 Star, and Salvini has been seeking the removal of ministers who have resisted his agenda of tax cuts and immigration crackdowns.

Turning to Asia...

China reported exports for July that were better than expected, up 3.3% (best since March), with imports shrinking 5.6%, which was slower than analysts expected.

Exports had dropped by 1.3% in June, but July’s number was solid, relatively speaking, it being the second full month under which China’s exports to the U.S. faced a higher tariff of 25%, as reported by the General Administration of Customs in China on Thursday.

Last month, exports from China to the U.S. dipped 6.5% year-on-year, while imports fell 19.1%.

China also reported its inflation data for July, with the consumer price index up 2.8% year-over-year, while producer prices fell for the first time in three years, down 0.3%, which is concerning; i.e., deflation.

Separately, the private Caixin PMI on the service sector came in at 51.6 for July vs. 52.0 in June.

Next week we get key data on industrial production and retail sales.

Japan shocked the markets a bit when it reported second-quarter GDP came in at a 1.8% annualized rate, much faster than expected (0.4% had been forecast), marking the third quarter of expansion as robust private consumption and business investment offset the hit to exports from cooling global demand.  The data offers some relief to the Bank of Japan, which has been under pressure to follow other central banks and ramp up stimulus to head off heightening global risks.

The optimistic GDP print, though, needs to be put in perspective as an expected consumer slowdown is on the horizon with another hike in the sales tax come October.

Japan’s service sector PMI for July was 51.8 vs. 51.9 in June.

Meanwhile, the South Korea-Japan trade dispute only gets worse.  You want an example of how playing the ‘nationalism card’ works?  Sales of Japanese cars in South Korea fell over 30% last month.  Industry data show Toyota sales plunged 32% from a year earlier, while Honda’s sales slid 34%, as South Koreans have been boycotting Japanese goods after Tokyo tightened export curbs on the country in July. 

Pay attention, Apple investors.

Street Bytes

--It was a highly-volatile, rollercoaster of a week in equities, around the world, but in the end losses were minimal, though representing a second consecutive week in the red with the Dow Jones losing 0.7% to 26287, while the S&P 500 and Nasdaq lost 0.5% and 0.6%, respectively.  Wednesday morning was particularly noteworthy as the Dow opened down 589 points, but ended with just a 22-point loss.

--U.S. Treasury Yields

6-mo. 1.94%  2-yr. 1.65%  10-yr. 1.74%  30-yr. 2.26%

As noted above the 10-year traded down to 1.59% early Wednesday, while the 30-year neared an all-time low of 2.10% in touching 2.11% intraday.

But yields were falling anew all over the world with the German 10-year ending the week at -0.58%, nearly a record low.

It’s nuts.  France’s 10-year is at -0.27%, the Netherlands’ -0.46%, the U.K., with all its Brexit uncertainty, is at 0.48%.  Spain, hardly in outstanding fiscal shape, 0.25%.

At least $15 trillion in sovereign debt has a negative yield.

President Trump tweeted:

“As your President, one would think that I would be thrilled with our very strong dollar.  I am not!  The Fed’s high interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers like Caterpillar, Boeing....

“....John Deere, our car companies, & others, to compete on a level playing field.  With substantial Fed Cuts (there is no inflation) and no quantitative tightening, the dollar will make it possible for our companies to win against any competition.  We have the greatest companies....

“....in the world, there is nobody even close*, but unfortunately the same cannot be said about our Federal Reserve.  They have called it wrong at every step of the way, and we are still winning.  Can you imagine what would happen if they actually called it right?”

*Heineken is close.  Ever been to their cool museum in Amsterdam?  More importantly I totally disagree with the president, who then called today for the Fed to cut its benchmark rate a full point, which is beyond absurd. 

--Crude prices plummeted to fresh seven-month lows (though recovered some today) as trade war tensions hit the outlook for oil demand while there was a surprise build in U.S. inventories. Another factor pushing down the price were reports China is purchasing oil from Iran despite U.S. sanctions, making the market appear less tight than first thought.

The International Energy Agency said Friday that concerns over the world’s economy and increased trade tensions will put further pressure on global oil demand.  Earlier this week the U.S. Energy Information Agency cut its own 2019 world-wide oil consumption forecast for a seventh straight month.

--The turmoil in the global bond market and fresh rate cuts by major central banks heaped new pressure on U.S. bank stocks.  Investors have grown increasingly wary that a weaker interest rate environment will hammer earnings in the financial sector.

--Disney shares tumbled 5% after the company reported profit and revenue that was below expectations for its fiscal third quarter.    CEO Bob Iger said Disney’s results were weighed down by its merger with Twenty-First Century Fox, despite the fact that Disney has earned a whopping $8 billion at the box office so far this year.

Disney acquired the entertainment assets of Fox for $71.3 billion earlier this year, a move that gives it a trove of content for Disney+, which launches in November for $6.99 a month.

Iger noted that his firm produced five of the six global top-grossing movies this year.

Earnings fell 28%, while revenue rose 33%, to $20.3 billion, both below expectations.

Disney is spending heavily on streaming services ESPN+ and Disney+, which is expected to launch in November.  A bundle consisting of Disney+, ESPN+ and a version of Hulu will be offered for $12.99 a month.

Iger said it would take “a good solid year, maybe two years, before we can have an impact” on Fox’s film business, which was highly disappointing.

The parks and consumer products segment posted a 4% increase in operating income to $1.72 billion, even as attendance at Disneyland Resort in Anaheim and Walt Disney World in Orlando declined 3%.

--FedEx Corp. said it was ending its contract to deliver Amazon.com packages through its ground network, gambling it is better off filling its trucks with other customers’ goods than with one of the world’s biggest shippers.

FedEx said it decided not to renew the contract, which expires at the end of August, after saying in June that it was ending its air-shipping contract with Amazon in the U.S., but continue to handle ground deliveries. 

Needless to say the moves are escalating tensions between the two longtime partners as Amazon builds its own delivery network, including leasing cargo planes, buying trucks and funding local delivery drivers.

FedEx, while walking away from Amazon, is positioning itself as the go-to carrier for Target, Walmart and other retailers looking to compete with Amazon.

FedEx said in a statement: “This change is consistent with our strategy to focus on the broader e-commerce market.”

According to the parcel consulting firm SJ Consulting Inc., Amazon used its own drivers to deliver 45% of its July orders, the U.S. Postal Service for 28% and UPS for 21%.  The e-commerce giant has been pulling away from FedEx for a while and, according to SJ Consulting, didn’t register any deliveries in July.

--HSBC Holdings PLC, in an attempt to change directions amid what it sees as a worsening global outlook, ousted CEO John Flint after just 18 months at the helm (three decades at the bank) and announced it would be slashing thousands of jobs and rolling back spending.

Chairman Mark Tucker said Mr. Flint’s departure doesn’t signal any change in strategy, but that the board felt like a change at the top was needed to respond to “an increasingly complex and challenging global environment.”

Gee, if I were Mr. Flint, assuming there weren’t any non-job related issues, this would be kind of depressing, regardless of his exit package.

‘The world is complex...and you’re pretty stupid.’  [The Wall Street Journal said he was ‘indecisive.’]

I mean there’s only one thing for Flint to do at this point.  Ride the rails and join the circus.

As for HSBC’s job cuts, the bank’s finance director said they would amount to 2% of the current 237,000 employee base.

--Huawei Technologies Co.’s smartphone sales are surging in China, as you’d expect, on a patriotic buying spree.  This is helping to blunt the impact of the severe sanctions levied by the United States.

Huawei’s share of the smartphone market in China is now up to 38%, according to market-research firm Canalys.  Apple lost share in the second quarter, but then I’ve been telling you this for years.  China was always going to be playing the nationalism card at some point, and that point is now.  Various Chinese companies are now offering incentives for employees to switch to Huawei phones.

Huawei’s main concern is its ability to maintain access to Google’s Android operating system and suite of popular apps, including Gmail and Google Maps.

Globally, Huawei jumped from the No. 4 vendor of handsets in 2014 to No. 2 in the first half of 2019, ahead of Apple and behind Samsung, according to Canalys.

But if Google doesn’t get Commerce Department clearance to continue working with Huawei, the company’s overseas smartphone business would collapse.

However, Friday, Huawei unveiled its proprietary operating system for use in smartphones and other devices.

“Harmony OS is completely different from Android and iOS,” said Richard Yu, head of Huawei’s consumer business group, referring to operating systems developed by Google and Apple.

Harmony is available for use in smartphones but Huawei prefers to stick to Android for now to support its app developers, Yu said, adding the Honor smart screen product it plans to unveil on Saturday will be the first product using the Harmony OS.

Yu said it would be difficult for Huawei to meet its previous goal of becoming the world’s biggest smartphone maker by shipments this year due to the U.S. curbs.

The company would have been able to ship 300 million smartphones this year without such restrictions, Yu said.

--Growing protests in Hong Kong are weighing heavily on neighboring Chinese territory Macau as some visitors steer clear of the world’s biggest gambling hub, worried over transportation disruptions and safety concerns.

Matt Maddox, chief executive of Wynn Resorts, which runs two Macau casinos, said the protests are clearly impacting the premium end of the business.

I’ve told you over the years how I’ve been to Macau a couple times as part of my many trips to Hong Kong.  It’s just a one-hour ferry ride and a third of Macau’s visitors arrive by sea or a recently-built bridge (Macau a quick drive from Hong Kong’s main airport).

Gaming revenue fell 3.5% in July over a year ago, a larger drop than anticipated, but the figures could get far worse, especially if China’s military cracks down on the protesters, which seems a certainty.  One major ferry operator said the protests had caused their business to drop 30 percent or more.

--Irish travelers face a rising risk of massive holiday disruptions after Ryanair pilots in the UK voted Wednesday to strike – a move likely to be backed by Irish pilots.

The 48-hour strike would start on August 22 and a 72-hour strike starting on September 2 if Ryanair doesn’t meet wide-ranging demands for better pay and conditions.

Ryanair argues that no pilots should be threatening to walk off the job at a time when Ryanair already has warned it could lay off 500 pilots company-wide amid weak fares, Boeing aircraft delays and the threat of a no-deal Brexit.

--CVS Health Corp. posted a second straight quarter of strong results, following its acquisition of Aetna Inc. as the health insurer drove much of the gains.  CVS said profit increased to $1.93 billion in the quarter, with CVS saying results improved in all parts of the business.

Prescription sales rose 19% from a year ago, which CVS said is largely because its clinical programs are helping more people take their medication.

Central to the merger with Aetna is the concept to turn some CVS stores into health hubs offering services and products for people with chronic conditions such as high blood pressure and diabetes.  Improving patients’ adherence to their prescriptions would generate more drug sales for CVS while cutting down on high-cost emergency-room visits.

CVS also bumped up its guidance for the full year.

--CVS rival Walgreens announced it was closing about 200 U.S. stores following “a review of the real estate footprint in the United States,” according to an SEC filing.  This represents less than 3% of Walgreens nearly 9,600 U.S. stores.

Eight months into 2019, there have already been 29% more store closings announced than in all of 2018, according to an Aug. 2 report from global marketing research firm Coresight Research.

--Lyft Inc. saw its shares initially rise 7% as the company boosted its outlook for the year, the company now projecting 2019 revenue of between $3.47 billion to $3.5 billion, higher than a previous range of $3.275bn to $3.3bn.

Lyft, still far from profitable, said it now sees a narrower loss for the year, $850 million to $875 million in 2019, adjusted, vs. a previous forecast of around $1.15bn.

Revenue surged 72% to $867 million, with the number of active riders climbing to 21.8 million from 15.5 million in the year-earlier period.

Lyft shares then finished the week at $59, barely up on the week and still well below its $72 IPO price in March.

--The next day, Uber Technologies reported second-quarter results which showed a smaller than expected loss, but lower revenues than analysts were anticipating.  At first the shares plunged in the aftermarket, Thursday, but recovered some, though at the close today, like Lyft, below the May IPO price of $45 at $40.

Revenue rose 14% to $3.17 billion, the slowest quarterly growth rate Uber has ever disclosed, with a loss of $2.01 a share; analysts expecting a loss of $2.70 on revenue of $3.32 billion.

The loss, though, was still $5.2 billion, its largest ever, but $3.9 billion of it was caused by stock-based compensation that Uber paid its employees after its IPO. 

Excluding that one-time expense, Uber lost $1.3 billion, or nearly twice the $878 million that it lost a year earlier.  On that same basis and excluding other costs, the company said it expected to lose $3 billion to $3.2 billion this year.

Uber said that trips increased 35% year over year to 1.677 million in the quarter.  Monthly active platform consumers were up 30% to 99 million.  Uber Eats monthly active users jumped 140%.

--Warren Buffett’s Berkshire Hathaway Inc. reported second-quarter net earnings last Saturday of $14 billion, up from $12 billion, in the year-earlier period (on the Class A share equivalent), while also reporting Berkshire now held a record $122 billion in cash at the end of Q2.

But the conglomerate, which runs a large insurance operation as well as railroads, utilities, industrial manufacturers and retailers, excluded earnings from Kraft Heinz because that company hadn’t provided them as yet.

And then Thursday, Kraft Heinz reported weak sales, prompting the maker of packaged foods to write down the value of several business units by more than $1 billion and drop its full-year forecast as it struggles to lure back customers.  Shares fell to a record low as the company marked a 12th straight quarter of lackluster sales.  With Buffett as its largest investor, Kraft Heinz has been battered by competition from private-label brands, changing consumer tastes and lower investment in its brands due to heavy cost-cutting under leaders installed by Brazilian private-equity firm 3G Capital, whom Buffett had long extolled.

The earnings report, delayed by an internal investigation into its accounting practices, underscored these issues and pushed the stock down 15%.

Well by golly, I bought some Oscar Mayer bacon Thursday...just because.  Kraft Heinz said net sales fell about 5% in the quarter and the shares have lost a third of their value since February.

--Adidas AG posted higher quarterly earnings on strong sales in China and predicted continued growth in the second half, but warned a protracted trade and currency war could hurt business.  Retailers such as Adidas have been insulated from the trade dispute thus far, but would no longer be so if the global economy is hit with a deepening conflict between Washington and Beijing.

Adidas sales rose 4.7% in the quarter, driven by China, though there was a drop in soccer products because of the yearly comparison with last year’s World Cup.

--New York Times Co. stock fell sharply Wednesday as the publisher warned digital advertising revenue was expected to decline in the current quarter.  The company estimates the category will decrease by a high-single-digit percentage in the third quarter, while digital-only subscription revenue will increase by a percentage in the midteens.

The Times’ reported second-quarter net income of $25.2 million, up 6.7% from a year earlier, with revenue increasing 5.2% to $436.3 million, driven by gains in subscription revenue as well as growth in advertising revenue and revenue from the television series “The Weekly,” as well as growth from commercial printing operations.  The revenue number was slightly below estimates.

Digital-subscription growth slowed 12% from the first quarter, the Times’ adding 197,000 net new digital-only subscriptions, including 131,000 from its core news product and the remaining 66,000 from its cooking and crossword offerings.

Subscription revenue rose 3.8%, while advertising revenue rose 1.3%.  Revenue from digital advertising rose 14% to $58 million, while print advertising revenue fell 8% to $62.7 million.

The shares closed 12% lower at $31.25 Wednesday.

--New Media Investment Group, a holding company that controls GateHouse Media, announced that it had agreed to buy Gannett, the owner of USA TODAY and more than 100 other publications nationwide, in a transaction valued at roughly $1.4 billion.

Once combined, GateHouse and Gannett will publish more than 260 daily newspapers in the U.S., along with more than 300 weekly publications, in 47 states, as well as Guam.  The new company will go by the name Gannett.

While both companies said the merger would “enhance quality journalism,” both have also been cutting costs in recent years by laying off journalists.

Gannett owns The Detroit Free Press, The Arizona Republic, and The Milwaukee Journal Sentinel, as well as other prominent newspapers in smaller cities.  GateHouse Media owns 154 daily newspapers and operates in 39 states, having struck recent deals to acquire The Austin American-Statesman, The Palm Beach Post and The Akron Beacon Journal.

Gannett and GateHouse are talking about $300 million in savings between the two. 

--President Trump’s campaign and other prominent Republican groups said they are temporarily freezing spending on Twitter Inc. after the social-media platform locked the account belonging to Senate Majority Leader Mitch McConnell’s campaign.

The @teammitch account was blocked over a video it posted of a protest outside McConnell’s Louisville home.  A protester can be heard saying “stab the mother f---er in the heart.”  Twitter said this incited violence, even if the holder of the account is the target of the offending content.

The McConnell campaign declined to take down the video and Twitter continued to insist the video be deleted.  The @teammitch feed still appears on Twitter, with the video no longer available, but as of Friday morning, the account was still locked in terms of posting new content.

--As first reported by Bloomberg, the U.S. National Highway Traffic Safety Administration (NHTSA) sent a cease-and-desist letter to Tesla Inc. last year for not complying with the agency’s guidelines in its Model 3 safety assertions and subpoenaed the carmaker for information on several crashes.  The auto safety agency’s letter concerned claims by Tesla that the Model 3 had the lowest probability of injury of any vehicle ever tested by NHTSA.

--Stephen Ross is the billionaire owner of the Miami Dolphins.  He is also chairman of  Related Companies, which is the parent company of both Equinox and SoulCycle, two high-end fitness clubs that can be found in 15 cities across the country.  Equinox also just opened a luxury hotel at the flashy new Hudson Yards complex on Manhattan’s West Side.

So word got out that Ross is hosting a fundraiser in the Hamptons for President Trump this Friday (tickets ranging from $5,600 to $250,000) and there was a major backlash against the two chains, with liberal members choosing to cancel their memberships and boycott the clubs.

[Attendees paying top dollar get a lunch, a photo and private roundtable conversation with Trump.]

Equinox and SoulCycle management said in a statement: “Neither Equinox nor SoulCycle have anything to do with the event later this week and do not support it.  As is consistent with our policies, no company profits are used to fund politicians. ...Mr. Ross is a passive investor and is not involved in the management of either business.”

Critics also got hold of Ross’ Wikipedia page and amended the bio: “Stephen M. Ross is an American real estate developer, right wing person of very low intelligence, pretend philanthropist (because giving money to right wing causes does not count as charity) and sports team owner.”

I am generally against such targeting.

And it turns out, as Crain’s New York Business just broke, Stephen Ross has given $hundreds of thousands to Democratic politicians, including $80,000 over the years to Gov. Andrew Cuomo!

Which is why, boys and girls, we always say, ‘wait 24 hours.’

--Callaway Golf Company announced net sales growth of 13% in the second quarter, with record net sales of $447 million, with the company raising full year earnings guidance.  Interesting.

--June was the biggest month ever for sales of luxury residential real estate in New York City, as a looming July 1 tax increase sent hundreds of buyers scrambling to close deals.

According to a Wall Street Journal analysis of property records, June’s sales activity set  record for the most sales over $2 million, sales above $10 million and even sales above $25 million.

As Josh Barbanel reported: “In all, more than $4.8 billion in property changed hands,” the highest monthly amount since at least 2003.  The new transfer tax isn’t big, $5,000 on a $2 million sale (and then scaling up), yet it was high enough to motivate behavior, with the market having been in a years-long slump, amid rising inventory and price cuts.

The June sales included a $51.6 million penthouse purchased by Amazon.com CEO Jeff Bezos, and the most expensive townhouse sale in Manhattan, a $77.1 million mansion on East 67th Street sold by hedge-fund manager Philip Falcone; the buyer saving more than $2.2 million by closing before July 1.

--Attendance and revenue at SeaWorld parks have continued to rise, with the company reporting attendance climbed to 6.5 million visitors in the second quarter, a fractional increase over a year ago, while revenue at $406 million was up 3.6 percent from 2018.  Adjusted earnings increased 33.6 percent to $166.1 million.

--Luxury retail giant Barneys filed for bankruptcy early Tuesday, announcing plans to close 15 stores across the nation.  The retailer will shutter locations in Las Vegas, Chicago and Seattle, as well as seven of its warehouses and five smaller concept stores.

But New York’s Madison Avenue and Downtown locations will remain open, as will department stores in Beverly Hills, San Francisco and Boston’s Copley Place.

Barneys CEO and president Daniella Vitale said in a statement: “Like many in our industry, Barneys New York’s financial position has been dramatically impacted by the challenging retail environment and rent structures that are excessively high relative to market demand.”

Barneys had been struggling to pay its expenses thanks in part to sky-high rent at its Madison Avenue flagship, which tripled this year to about $46 million including taxes.

--Gold breached the $1,500 mark this week for the first time in over six years, closing at $1508, as investors rushed to safe havens, spooked by a host of uncertainties.  It helped that U.S. Treasury yields were plummeting.

Foreign Affairs

Iran: Iranian Foreign Minister Mohammad Javad Zarif said Iran will no longer turn a blind eye to “maritime offenses” in the Gulf, its foreign minister said on Monday, a day after it seized an Iraqi oil tanker that it accused of smuggling fuel.

Revolutionary Guards seized the tanker and its seven crew near Iran’s Farsi Island north of the Strait of Hormuz, state media reported, in another show of power amid heightened tension with the West that Zarif blamed U.S. authorities of fomenting.

“Iran used to forgo some maritime offenses in (the) Gulf but will never close (its) eyes anymore,” Zarif told a news conference.

Washington imposed sanctions on him, personally, on Wednesday, Zarif saying Washington had closed the door to diplomacy over Iran’s 2015 nuclear deal, which Donald Trump exited last year.

“Sanctioning a foreign minister means failure in talks,” Zarif said.

Zarif added that if other nations heed U.S. calls to stop buying Iranian oil, Tehran has threatened to block all exports via the Strait, through which a fifth of global oil passes.

Monday, Britain joined the U.S. in forming an international mission to protect shipping through the Strait from Iranian threats. The U.K. said it had offered to lead one of the mission’s maritime task groups.

“Both the U.K. and U.S. are committed to working with allies and partners to encourage others to join and broaden the response to this truly international problem,” the U.K. government said.

Iran seized a tanker flying the British flag in July.

Britain’s new prime minister, Boris Johnson, has stressed the importance of building closer ties with the U.S., especially as it prepares to leave the EU.

Syria: Turkey and the United States agreed on Wednesday to establish a joint operations center in Turkey to coordinate and manage a planned safe zone in northeast Syria, a move that appeared to reduce the chance of imminent Turkish military action.

Turkey said it will not allow efforts to establish a safe zone with the United States in northeast Syria to stall in the same way that their agreement on control of the Syrian town of  Manbij has been delayed, Foreign Minister Cavusoglu said on Thursday.  The Manbij roadmap was an agreement made between the NATO allies last year for the withdrawal of the Kurdish YPG militia from the town.  Ankara considers the YPG a terrorist organization.

Cavusoglu said on Thursday that he and U.S. Secretary of State Mike Pompeo drew up the roadmap in June last year, and that it was supposed to be executed within 90 days.  “But the United States delayed this with many excuses, such as joint patrols,” he said.

Meanwhile, the Syrian army said on Monday it was resuming military operations in a Russian-led campaign in northwest Syria that has uprooted tens of thousands and killed hundreds, blaming Turkey for not abiding by its commitments under a truce deal.  Well, that lasted a long time...not.

A Syrian army statement said: “The agreement to a truce was conditional. This did not happen... We resume our military operations against terrorist organizations.”

India and Pakistan: Seeking to tighten its grip over the contested region of Kashmir, Indian Prime Minister Narendra Modi’s government this week withdrew Muslim-majority Jammu and Kashmir’s right to frame its own laws and allowed people from outside the state to buy property there.  Kashmir has been at the heart of 70 years of hostility between India and Pakistan.

Modi revoked Article 370 – the part of the constitution guaranteeing Jammu and Kashmir special status.  The federal government also broke up the state into two federal territories to allow it greater control, a move that regional leaders said was a further humiliation.

Article 370 was often seen by the Hindu nationalist BJP party as a “historical wrong.”  The move energized the party’s base, which celebrated it as further proof of Modi’s muscular nationalism.

While many Indians welcomed the move and lauded Modi’s government for its decisiveness, others criticized India for what they said were heavy-handed and even unconstitutional tactics.

Kashmir’s leaders have warned of a backlash and Pakistan, which also lays claims to the Himalayan territory, vowed to fight for the rights of people living there.  “Pakistan is looking at political, diplomatic and legal options,” Pakistan’s foreign minister said, though he ruled out a new military conflict.

The nuclear rivals have twice gone to war over Kashmir and fought an aerial duel in February.

UN Secretary-General Antonio Guterres called on the two to refrain from any steps that could affect the special status of the disputed regions of Kashmir and Jammu.

Kashmiris see Modi’s decision to withdraw the special status as a breach of trust and fear it will lead to an influx of people from the rest of India.

About two-thirds of the population of Jammu and Kashmir is Muslim, while India is majority Hindu.

Prime Minster Modi appeared on state media to defend his controversial decision.

Modi said a “new era’ was beginning for the Indian-administered part of the region, where “hindrances” to its development have been lifted.

Modi said Kashmir has been used as a weapon by Pakistan to “instigate some people,” but now India would rid the region of “terrorism and terrorists.”

“There will be a lot of development,” he said. “All the citizens will be given their rights.”

He promised greater voting rights and transparency, as well as better rail and road links, and said the young people of Kashmir should “take charge of the development of their own land.”

A cinema industry could flourish in the picturesque region, he suggested.

And he painted a picture of exports from the area taking off: “The color of saffron or the taste of coffee from Jammu and Kashmir, be it the sweetness of the apple or the succulence of the apricot, be it Kashmiri shawls...they need to spread worldwide.”

Anticipating unrest over the move, India moved tens of thousands of troops into India’s northern-most region before Monday.  At least 300 people – including politicians, activists and business leaders – have reportedly been detained.

The area has been in lockdown since Sunday night, with mobile, landline and internet networks cut off.  Pakistan says the removal of special status breaches international law.

Like India, Pakistan claims Kashmir in its entirety, and each controls part of the territory.  Wednesday, it announced it would halt trade with India and expel the country’s top diplomat in Islamabad in retaliation for India’s decision.

Pakistani Prime Minister Imran Khan denounced Prime Minister Modi, accusing his government of promoting “an ideology that puts Hindus above all other religions and seeks to establish a state that represses all other religious groups.”

Pakistan’s military said it will “go to any extent” to support people in Kashmir.

Thursday, Pakistan halted its main train service to India and banned Indian films as it exerted further diplomatic pressure on New Delhi.

Afghanistan: A Taliban suicide bomber killed 14 people and wounded 145 in the capital of Kabul on Wednesday; an attack the government said raised questions about the militant’s commitment to peace despite an expected deal with the United States.  There has been zero let-up in violence in the country even though the Taliban and the U.S. appear close to a pact for U.S. troops to withdraw in exchange for a Taliban promise that Afghanistan will not be used as a base for international terrorism.

The Taliban said the attack was in response to government attacks in the countryside.  Most of the dead and wounded were civilians.

A planned presidential election is still slated for Sept. 28, with the Taliban calling for a boycott of the vote while threatening to attack election sites.

David Ignatius / Washington Post

“As President Trump moves toward a deal with the Taliban to withdraw U.S. troops from Afghanistan, Sen. Lindsey Graham (R-S.C.), a frequent political ally, issued a sharp warning Friday (Aug. 2) that removing all U.S. troops while a terrorist threat remains there would be ‘reckless and dangerous.’

“Because of continuing terrorist danger from the Afghanistan affiliates of the Islamic State and al-Qaeda, which the Taliban can’t control, ‘There is no possibility to leave Afghanistan completely without severe risk to the homeland,’ Graham said in a telephone interview.  ‘If we give in to the Taliban’s demand to completely withdraw, that would deny our ability to protect’ the United States and its allies against future terrorist attacks....

“ ‘It would be a political decision, not a military one, and it would have consequences more severe than Obama’s decision to withdraw from Iraq,’ Graham said of a total U.S. pullout. He continued: ‘If we go to zero [troops], we will have a virtual open-border policy toward Afghanistan.’

“Graham concluded the brief interview with a direct political shot that invoked Trump’s most left-wing Democratic challenger: ‘To go to zero would be reckless and dangerous – against sound military advice, [and instead following] Bernie Sanders’ military advice. I didn’t sign up for Bernie Sanders’ foreign policy.’”

China and Hong Kong: My last two trips to Hong Kong, I stayed at a hotel connected to the international airport, a unique experience that I loved.  This was done primarily because of my day trips to Fuzhou, China, and the ease of being a five-minute walk from my room to the gate.  The airport is one of the best in the world, with great restaurants and bars, a full shopping mall, and an IMAX cinema (where I caught “Gravity”), plus, the high-speed train into Hong Kong is right there.  I thoroughly recommend it.  [I also caught a Billy Joel concert one time...a two-minute train stop going in the opposite direction...his first, and as far as I know, only concert ever in Hong Kong.]

So I was trying to imagine thousands of black-clad antigovernment protesters taking over the airport today, Friday, with plans to stay through Sunday, as Hong Kong continues to reel under the weight of its worst political crisis since Britain handed the former colony back to China in 1997.  Last weekend, a general strike caused chaos in the city and led to 148 arrests.

The Chinese government has been sharpening its rhetoric, issuing stern warnings to the protesters about the risks of continuing their broad campaign for political reforms.

Beijing’s top official overseeing Hong Kong affairs has denounced the protests as bearing the “obvious characteristics of a color revolution” – referring to Eastern European uprisings in the early 2000s – and warned that the worst crisis since the handover to Chinese sovereignty could not be resolved by bowing to protesters’ demands.

Zhang Xiaoming, director of the State Council’s Hong Kong and Macau Affairs Office, put the emphasis on ending the protest chaos and violence that began two months ago, triggered by the government’s now-abandoned extradition bill.

He also left open the possibility of the Hong Kong government setting up a commission of inquiry into the entire extradition bill saga, but only after the protests ended.

“The most pressing and overriding task at present is to stop violence, end the chaos and restore order, so as to safeguard our homeland and prevent Hong Kong from sinking into an abyss,” Zhang said.

Speaking at the same event, a gathering of 500 of Hong Kong’s top business leaders and pro-Beijing politicians at a seminar in neighboring Shenzhen on Wednesday, Wang Zhimin, director of Beijing’s liaison office, warned that the crisis gripping Hong Kong was a “battle of life and death,” with the city’s future at stake.

Zhang again declared Beijing’s full support for Hong Kong’s leader, Carrie Lam, and police force, stressing that backing them was key to restoring order.

Zhang warned that if the protest crisis escalated beyond the local government’s control, Beijing would not sit by and watch.  The People’s Liberation Army (PLA) could be deployed to restore law and order, while national laws could also apply in a state of emergency.

At the airport, the protesters were careful to leave a path clear for travelers, as they handed out pamphlets.

“You’ve arrived in a broken, torn-apart city, not the one you have once pictured,” one of the pamphlets read.  “Yet for this Hong Kong, we fight.  We shall never surrender.”  [New York Times]

Earlier, China’s official Communist Party newspaper, the People’s Daily, said the United States was “deliberately destroying international order,” a day after Washington branded Beijing a currency manipulator.

Editorial / The Economist

“It is summer, and the heat is oppressive.  Thousands of students have been protesting for weeks, demanding freedoms that the authorities are not prepared to countenance.  Officials have warned them to go home, and they have paid no attention.  Among the working population, going about its business, irritation combines with sympathy.  Everybody is nervous about how this is going to end, but few expect an outcome as brutal as the massacre of hundreds and maybe thousands of citizens.

“Today, 30 years on, nobody knows how many were killed in and around Tiananmen Square, in that bloody culmination of student protests in Beijing on June 4th 1989.  The Chinese regime’s blackout of information about that darkest of days is tacit admission of how momentous an event it was. But everybody knows that Tiananmen shaped the Chinese regime’s relations with the country and the world. Even a far less bloody intervention in Hong Kong would reverberate as widely.

“What began as a movement against an extradition bill, which would have let criminal suspects in Hong Kong be handed over for trial by party-controlled courts in mainland China, has evolved into the biggest challenge from dissenters since Tiananmen. Activists are renewing demands for greater democracy in the territory.  Some even want Hong Kong’s independence from China.  Still more striking is the sheer size and persistence of the mass of ordinary people.  A general strike called for August 5th disrupted the city’s airport and mass-transit network.  Tens of thousands of civil servants defied their bosses to stage a peaceful public protest saying that they serve the people, not the current leadership.  A very large number of mainstream Hong Kongers are signaling that they have no confidence in their rulers.

“As the protests have escalated, so has the rhetoric of China and the Hong Kong government.  On August 5th Carrie Lam, the territory’s crippled leader, said that the territory was ‘on the verge of a very dangerous situation.’  On August 6th an official from the Chinese government’s Hong Kong office felt the need to flesh out the implications.  ‘We would  like to make it clear to the very small group of unscrupulous and violent criminals and the dirty forces behind them: those who play with fire will perish by it.’  Anybody wondering what this could mean should watch a video released by the Chinese army’s garrison in Hong Kong. It shows a soldier shouting ‘All consequences are at your own risk!’ at rioters retreating before a phalanx of troops.  [Ed. I wrote about this video last week.]

“The rhetoric is designed to scare the protesters off the streets.  And yet the oppressive nature of Xi Jinping’s regime, the Communist Party’s ancient terror of unrest in the provinces and its historical willingness to use force, all point to the danger of something worse.  If China were to send in the army, once an unthinkable idea, the risks would be not only to the demonstrators.

“Such an intervention would enrage Hong Kongers as much as the declaration of martial law in 1989 aroused the fury of Beijing’s residents.   But the story would play out differently.  The regime had more control over Beijing then than it does over Hong Kong now.  In Beijing the party had cells in every workplace, with the power to terrorize those who had not been scared enough by the tanks.  Its control over Hong Kong, where people have access to uncensored news, is much shakier.  Some of the territory’s citizens would resist, directly or in a campaign of civil disobedience. The army could even end up using lethal force, even if that was not the original plan....

“Were the Chinese army to go so far as to shed protesters’ blood, relations would deteriorate further.  American politicians would clamor for more sanctions, including suspension of the act that says Hong Kong should be treated as separate from the mainland, upon which its prosperity depends.  China would hit back. Sino-American relations could go back to the dark days after Tiananmen, when the two countries struggled to remain on speaking terms and business ties slumped.  Only this time, China is a great deal more powerful, and the tensions would be commensurately more alarming.

“None of this is inevitable.  China has matured since 1989.  It is more powerful, more confident and has an understanding of the role that prosperity plays in its stability – and of the role that Hong Kong plays in its prosperity.  Certainly, the party remains as determined to retain power as it was 30 years ago.  But Hong Kong is not Tiananmen Square, and 2019 is not 1989.  Putting these protests down with the army would not reinforce China’s stability and prosperity. It would jeopardize them.”

Editorial / Wall Street Journal

“The fault here all rests with Ms. Lam and her Beijing backers.  Her attempt to ram through a new law allowing extradition to mainland China triggered the protests.  She says the law is ‘dead’ but has refused to withdraw it.  She also refuses to allow an investigation into the violent tactics of police and China-backed gangs against protesters.

“China has frustrated demands for democracy by ruling out many pro-democracy candidates and ensuring that its factotums run the Hong Kong government.  Hong Kongers are protesting in the streets because they have no other way to defend their freedoms.

“The risk for stability is if Chinese President Xi Jinping decides to send in troops to squash the protests. This would surely lead to violent clashes, and perhaps bloodshed.  Such an invasion would damage Hong Kong as an entrepot for free trade and finance.  But Mr. Xi may see it as less risky than allowing the protests to continue as a democratic example for the mainland.

“In this context it’s a shame that President Trump last week gave Mr. Xi a pass on Hong Kong.  Asked about concern that China’s army may interview, Mr. Trump said.

“ ‘Well, something is probably happening with Hong Kong because when you look at, you know, what’s going on, they’ve had riots for a long period of time.  And I don’t know what China’s attitude is.  Somebody said that at some point they’re going to want to stop that.  But that’s between Hong Kong and that’s between China, because Hong Kong is a part of China.  They’ll have to deal with that themselves.  They don’t need advice.’

“But Mr. Xi does need advice not to invade Hong Kong if he wants a trade deal.  Hong Kong is not solely a Chinese matter.  The future of the territory is an international issue because China promised ‘one country, two systems’ in a treaty with Britain.  That special status is the basis for a U.S. law that gives Hong Kong trade and visa privileges not provided to China.

“Mr. Trump may think that by giving Mr. Xi a pass on Hong Kong he is helping the chances of a trade deal, but he’s wrong about that too.  If the PLA does march on Hong Kong, and if there are mass arrests and killings, Democrats will use Mr. Trump’s words to claim that he invited the Chinese crackdown.

“He would also face overwhelming bipartisan opposition in Congress to a trade deal.  And he might face pressure to impose tougher tariffs on China than those he’s already imposed.  If he wants a trade deal, he’ll tell Mr. Xi to keep Chinese troops out of Hong Kong.”

North Korea: Kim Jong-un said his country’s latest launch of tactical guided missiles was a warning to the United States and South Korea over their joint military exercises that began this week, state media KCNA reported.

Tuesday’s missile launch, the North’s fourth in less than two weeks, came amid stalled denuclearization talks, although Washington and Seoul played down the tests.  The missiles traveled 280 miles and at an altitude of 23 miles, putting all of South Korea in range.

U.S. national security adviser John Bolton highlighted Kim’s pledge to President Trump not to resume tests of intercontinental-range ballistic missiles that threaten the United States.  Should Kim opt to go down this path, all hell will break loose...at least in terms of President Trump’s twitter platform.

Secretary of State Pompeo said he was hopeful that denuclearization talks would resume between the two sides in coming weeks.  But Pyongyang hates Pompeo.

Separately, a leaked confidential UN report says that North Korea has stolen $2 billion to fund its weapons program using cyber-attacks.  The report says that Pyongyang has targeted banks and crypto-currency exchanges to collect cash.  The UN is apparently investigating 35 such attacks.

Trump said today he received another “beautiful letter” from Kim.  He wouldn’t divulge the contents, but he said it was three pages!  Ah, the lovebirds.  Such a wonderful story.

Only as a I wrote above, Kim and his Orcs fired off round five in their missile testing program hours later.  No response from the president as yet.

Russia: Russian authorities detained hundreds of demonstrators for a second weekend in a row, as Vladimir Putin’s regime tries to silence calls for fair elections.

According to an independent Levada Center survey, Russians are more likely to view the late Brezhnev era of the Soviet Union as “close to the people” than they are Putin’s Russia.

Russians have expressed increasingly positive opinions about the Soviet Union over the years, with nostalgia toward the U.S.S.R. and Stalin hitting record highs in recent months.

A record 70 percent of Russians approve of Soviet leader Josef Stalin’s role in Russian history, according to the poll.  President Putin has revived the Soviet anthem, Soviet-style military parades and a Soviet-era medal for labor during his presidency.

Leonty Byzov, a sociologist from the Academy of Sciences, told the RBC news website: “Stalin begins to be perceived as a symbol of justice and an alternative to the current government, deemed unfair, cruel and not caring about people.  It’s purely a mythological image of Stalin, very far from the real historical figure.”

51 percent view Stalin favorably as a person...only a combined 13 percent said they dislike, fear or hate Stalin.

You can’t make this shitski up.

Kirill Rogov / Moscow Times

“Twenty years ago, Vladimir Putin appeared on the political Olympus in the guise of an effective bureaucrat with a security services background; a market-oriented statesman and pragmatist without ideological pretenses.

“Today Putin is a powerful authoritarian leader of the ‘strongman’ type, engaged in a political confrontation with the West and an ideological struggle with global liberalism, in the service of which he is decisively sacrificing any pragmatic goals for developing the country.  And even when he speaks of modernization, the conversation turns fairly quickly to armaments.

“If Putin had left power in 2008, he would have gone down in history as one of Russia’s most successful leaders. After 15 years of crises and upheaval in the country, a relative stability had arrived under ‘managed democracy, but most importantly of all, a period of intense economic growth had begun – 7% annually on average – coupled with an even more impressive growth in per capita income.

“Of course, cynics would have said that the reason for these successes was the rise in oil prices and the fact that the cycle of transformation was going through the recovery phase.

“And a considerable number of skeletons had already built up in the closet of this successful government by then: The second Chechen war and its consequences, the YUKOS affair, the creation of legal and commercial hybrids in the  form of state corporations, among other things.  But in terms of historical memory, none of this could have outweighed the atmosphere of success, a wave which Putin would have ridden out of office.

“The second half of Putin’s 20 years in power, 2009-2019, has been, to a significant degree, the opposite of the first.”

Kirill Rogov then discusses the two economic crises linked to the volatility of oil prices, an authoritarian clampdown, the domination of the security elites and decision-making that reflected their logic...which then triggered the next crisis – the annexation of Crimea and the war in eastern Ukraine.

“As a result, while in 2000 GDP per capita in Russia was 14.5% of that of the U.S. and 21.5% of the EU average, in 2008 it was 22.5 and 32% respectively, and in 2018 – 21.5 and 31%. This is stagnation.”

And then in the second Putin period, he gave absolute priority to the understanding of “sovereignty;” searched for new ideological pillars in the form of “social ties” and “traditional values,” pushed aside the imperatives of modernization and formed “nationally oriented elites.”

And Putin refused to recognize the borders that had resulted from the collapse of the U.S.S.R., leading toward a decisive turn away from cooperation toward confrontation with the West.

“Putin is very unlikely to abandon his efforts to de-Westernize Russia.  And this fruitless, from a historical perspective, tug-of-war is likely to remain the defining characteristic of the final phase of his political career.”

Philippines: The nation declared a “national dengue epidemic” after at least 622 people lost their lives from the mosquito-borne disease this year.  At least 146,000 cases were recorded from January to July 20 – a 98% increase on the same period last year – the health department announced.  Wow, this is scary.

The epidemic was declared so that officials can identify areas in need of emergency attention.

The World Health Organization has said global increases of dengue have grown dramatically in recent decades.

Concerns have also been triggered over Dengvaxia, the world’s first vaccine against dengue, after 14 children died out of more than 800,000 inoculated in 2016-17.

But Sanofi, the French developer of the vaccine, and local experts said there was no evidence linking the 14 deaths to the drug.

Venezuela: With more than 4 million displaced, Venezuelans make up the world’s second-largest refugee crisis, after Syrians – but they haven’t received nearly as much help from the international community.  Spending on Syrians peaked at more than $5,000 per displaced person, the Organization of American States reported in July. Venezuelans have received about $300 per person.

A $738 million appeal by the United Nations and other organizations last year has netted less than a quarter of that goal.

The Venezuelan, as opposed to Syria, with refugees able to wash up on Europe’s shores, is considered remote and politically driven by a standoff between the Trump administration and President Nicolas Maduro that is less likely to affect them.

But picture the impact of the Venezuelan crisis on Colombia, in particular.  Reception centers, hospitals and schools are overwhelmed.  The most vulnerable Venezuelans are left to sleep on the streets.

Brazil: President Jair Bolsonaro fired the head of a government agency that had revealed a big increase in deforestation in the Amazon, with the dismissal inciting protests from environmental organizations and public workers.

The sacking of Ricardo Magnus Osorio Galvao, a well-respected physicist, came a day after Bolsonaro angrily claimed that people within the government were damaging the country’s image abroad by disclosing the rate at which the world’s largest tropical rain forest is withering.

Bolsonaro and his minister of the environment, Ricardo Salles, held a news conference during which they cast doubt on his own government’s figures, which are routinely released monthly, that showed a steep rise in deforestation in the Amazon this year.

“The numbers, as I understand it, were released with the objective of harming the name of Brazil and its government,” Bolsonaro told reporters, speaking alongside Salles.

Bolsonaro is a bad guy.  Deforestation is a crime against humanity.  He has said protected indigenous territories should be opened up to mining and other industries and has called concerns about the environment overblown, saying the issue mattered solely to “vegans, who eat only plants.”

Random Musings

--Presidential tracking polls....

Gallup: 42% approval of Trump’s performance, 54% disapproval; 88% Republicans, 38% independents (Jul 15-31).
Rasmussen: 47% approval, 52% disapproval (Aug. 9).

--A new Quinnipiac University national poll, post-Detroit debates, found that Elizabeth Warren was the big winner in the second round for the Democrats, though Joe Biden retains his front-runner status with 32% of Democrats and independent voters who lean Democratic.

Warren has 21 percent, with Bernie Sanders at 14 percent, and Kamala Harris at just 7 percent. [Buttigieg 5 percent, Cory Booker and Beto O’Rourke 2 percent apiece.]

A July 29 survey had Biden at 34, Warren 15, Harris 12 and Sanders 11 percent.

Biden gets 47 percent of black Democrats, with 16 percent for Sanders, 8 percent for Warren and 1 percent for Harris.

As Tim Malloy, assistant director of the Quinnipiac University Poll put it: “Biden survives, Warren thrives and Harris dives as debate number two shakes up the primary.”

Harris was at 20 percent in a July 2 Quinnipiac survey, after the first debate.

A Reuters/Ipsos national poll, also taken after the Detroit debates, had 22 percent of Democrats and independents saying they’d vote for Biden, unchanged from a similar poll that ran last month, while 18 percent went for Sanders, up 2 points from July.

None of the 23 other candidates received more than 9 percent.  Quite a difference from Quinnipiac’s results, the nuance being this was about who are the safest bets to beat President Trump.

--A new Monmouth University Poll of likely 2020 Iowa Democratic caucusgoers finds the size of Biden’s lead in Iowa to be substantial, 28 percent, up one point from April.  Warren is at 19 percent, up from 7 four months ago.  But Sanders is down from 16 percent to 9.  Kamala Harris garners 11 percent and Mayor Pete 8 percent.

Amy Klobuchar gets 3 percent, the same as Tom Steyer.  Kirsten Gillibrand and Andrew Yang picked up 2 percent.  Beto O’Rourke, at 6 percent in April, registers less than 1 percent.

The top issue on Iowa Democrats’ minds when choosing a presidential nominee continues to be health care (55%), followed by environmental concerns (18% climate change and 12% environment in general).  Foreign policy is at just 5%.

But Iowa is known for gaffes, such as Mitt Romney’s “corporations are people, too,” and Joe Biden committed one Thursday night while speaking at a town hall with the Asian and Latino Coalition in Des Moines.

“We should challenge students in these schools and have advanced placement programs in these schools.  We have this notion that somehow if you’re poor, you cannot do it.

“Poor kids are just as bright, just as talented, as white kids,” he added.  Recognizing this didn’t come off right, he quickly added: “wealthy kids, black kids, Asian kids, no I really mean it, but think how we think about it.”

The Trump campaign quickly seized on the slip-up, tweeting out a video clip (that didn’t show the full remark) and saying: “Yikes...have fun mitigating that one.”

On Monday, Biden bungled the locations of the El Paso and Dayton mass shootings, expressing sympathy for the “tragic events in Houston today and also in Michigan the day before.”  That, to me, is even worse than the first gaffe.

--Orange County, Calif., which nurtured Ronald Reagan’s conservatism and is the resting place of Richard Nixon is now home to 547,458 registered Democrats, compared with 547,369 Republicans, according to the latest statistics released this week by the county Registrar of Voters.  It is the first time the county turned blue.

The number of voters not aligned with a political party has surged in recent years, and now tops 440,770, or 27.4% of the county’s voters.

Katerina Ioannides, chairwoman of the Orange County Young Democrats, said, “Trump’s toxic rhetoric and exclusionary policies alienate women, millennials, suburban voters, immigrants and people of color – critical components of the electorate in Orange County.

Shawn Steel, Republican national committeeman for California, blames the GOP decline on the large increase in the number of voters who register with no party preference, and on Republicans leaving the state because of high housing costs, poor schools and lackluster job opportunities.  But, “There is an opportunity as Democrats get more aggressive in Sacramento and alienate more people.”

But this is a watershed moment for Democrats.  Even if you aren’t politically aware and live far from California, you know that Orange County has always, in our lifetime, been identified with conservative politics.  What this means nationally will be determined in November of 2020.

--Editorial / Wall Street Journal

“Republican chances of retaking the House in 2020 took another blow last week when Texas Rep. Will Hurd announced that he won’t seek re-election. The three-term Congressman is a rare House Republican who held off the national Democratic tide in 2018 with a narrow victory in his swing district along the Texas-Mexico border.

“The media are playing up that Mr. Hurd is the only African-American Republican still in the House, and that is a loss for the GOP.  But more important may be his willingness to speak up on occasion against some of the nativist and isolationist elements within the party.  The former agent in the CIA clandestine service is also an expert on national security who wants the U.S. to be engaged with the world.

“On CBS’ ‘Face the Nation’ on Sunday, the host asked Mr. Hurd if he agreed with Democratic presidential candidate Beto O’Rourke that President Trump is to blame for the El Paso massacre.  He gave an answer that both men would be wise to heed;

“ ‘I think divisive rhetoric is – is not the way to go.  I think he’s denounced these – these attacks.  He has an opportunity to be the uniter in chief and I hope that’s the way to go but we can’t just focus on one person or just one entity,’ Mr. Hurd said.  ‘This is a problem that has many sources and we need to be talking about all those sources in ways that every element of society can work on – dealing with this challenge.’

“Mr. Hurd said he’s not leaving the GOP and that there are more places to influence the party’s direction and improve its diversity than staying in Congress.  We’d add that being a Member of the minority party in the House is an especially miserable existence.  The GOP lost some of its best House Members in 2018, and now it is suffering a further talent drain as incumbents flee a Congress that is increasingly run from the top down. This is democracy’s loss.”

--I’m missing the Iowa State Fair for the first election cycle since 2003 (for the 2004 election).  I just couldn’t swing it after my recent trip to Cincinnati.  But I imagine as I sat talking with the farmers, both in the bars along Grand Ave. and in the barns, I’d be a bit frustrated when chatting them up about the situation these days.  As in I’d be amazed they still support a man who has cost them dearly (save for the handouts).

I’ll have more next week on the topic, culling through my archives.

--I watched Sean Hannity’s hour-long interview with New York City Mayor Bill de Blasio and it was just further confirmation of what an amazing schmuck Hizzoner is.  He literally couldn’t answer a single question without showing off his jerkdom.

But the New York Daily News had an exclusive story this week that de Blasio used his NYPD security detail to move his daughter out of an apartment in Sunset Park, Brooklyn, per multiple sources.  Chiara de Blasio lived in an apartment for roughly two years, according to a source close to de Blasio’s Executive Protection Unit, and the move was an abuse of city resources.  A second source with knowledge of the move was also disgusted.  “They used detectives and department vehicles on city time to move his daughter...Please.”

The NYPD loaded Chiara’s belongings into two unmarked Sprinter vans frequently parked at City Hall, with First Lady Chirlane McCray (another jerk) personally overseeing the move, according to a source.  City Hall did not deny McCray’s involvement. The items were delivered to Gracie Mansion.

One source close to the Executive Protection Unit said, “You can’t question him. It’s just part of the job.  You just do it out of respect.”

Yes, that is an extreme abuse of power.  He finds himself in the December file for “Jerk of the Year” consideration.

--A new report from the United Nations warns that the world’s land and water resources are being exploited at “unprecedented rates,” which combined with climate change is putting dire pressure on the ability of humanity to feed itself.

The report, prepared by more than 100 experts from 52 countries, found that the window to address the threat is closing rapidly.  A half-billion people already live in places turning into desert, and soil is being lost between 10 and 100 times faster than it is forming, according to the report.

Climate change, over time, will just shrink the global food supply faster than the current pace, where more than 10 percent of the world’s population is undernourished, with food shortages leading to an increase in cross-border migration.

But the report also laid out pathways to addressing the looming food crisis through increasing the productivity of land, wasting less food and persuading more people to shift their diets away from meat to beer.  [Just seeing if you’re paying attention.]

--According to data from the Polar Portal, a website run by Danish polar research institutions, and the National Snow and Ice Data Center, Greenland’s ice sheet melted at its most rapid rate so far this summer last Thursday, losing 11 billion tons of surface ice to the ocean.  That’s equivalent to 4.4 million Olympic swimming pools.

--We note the passing of Nobel Prize-wining U.S. author Toni Morrison at the age of 88.  Author of 11 novels, she won the Nobel Prize for Literature in 1993, having published her first novel, “The Bluest Eye”, in 1970.

Her 1987 book “Beloved” told the story of a runaway female slave and was made into a film starring Oprah Winfrey in 1998.

Morrison was born in Lorain, Ohio, and raised in modest circumstances. She read ceaselessly as a child and tucked images of the family life around her into her memory.  In 2012, Barack Obama presented her with the Presidential Medal of Freedom.

Morrison once said: “We die. That may be the meaning of life.  But we do language.  That may be the measure of our lives.”

--Finally, one thing we’ve learned with all the mass shootings in recent years is that a quick medical response can save countless lives.  I’ve written over the years of how the U.S. military has reduced its number of KIA through extensive training with tourniquets, and most every soldier (I’d say 100 percent....just haven’t seen that in print that I remember) has a kit on them, let alone EMT personnel.

But it’s clear every schoolchild should learn how to apply one once they reach middle school, taught by local law enforcement or a soldier or doctor...someone the kids would respect.  It’s invaluable life training.  It’s not just about mass shootings.  Crazy accidents happen all the time. 

---

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

God bless America.

---

Gold $1508...big leap from $1452 last Friday.
Oil $54.27

Returns for the week 8/5-8/9

Dow Jones  -0.7%  [26287]
S&P 500  -0.5%  [2918]
S&P MidCap  -0.7%
Russell 2000  -1.3%
Nasdaq  -0.6%  [7959]

Returns for the period 1/1/19-8/9/19

Dow Jones  +12.7%
S&P 500  +16.4%
S&P MidCap  +14.3%
Russell 2000  +12.2%
Nasdaq   +19.95% [OK, call it 20%]

Bulls  48.1
Bears 
17.9

Dr. Bortrum posted a new column!

Have a great week.  Let’s Go Mets...who just dramatically beat the Nationals with four in the bottom of the ninth.

Brian Trumbore

 



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Week in Review

08/10/2019

For the week 8/5-8/9

[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 1,061

Yet another depressing week on Planet Earth.  Thank god for the diversion of sports.

I’ve been writing incessantly how dangerous the world is today on the geopolitical front, and my raison d’etre for this column has been to constantly work through the question,  ‘What can shatter confidence, what can change the tone in, say, financial markets and the economy overnight?’  Certainly 9/11 did, though when it came to the markets we recovered quickly thanks to strong leadership.

But if China suddenly made a move in Hong Kong, or against Taiwan, or against an American warship in the South China Sea, I’m not so sure how quick the recovery would be after an initial shock.

Tonight, as I go to post, China is railing about a U.S. diplomat who reportedly met with student leaders of Hong Kong’s pro-democracy movement, with the U.S. State Department calling out China’s behavior, saying it has gone “from irresponsible to dangerous” and must stop, State Department spokeswoman Morgan Ortagus said today.

“Chinese authorities know full well, our accredited consular personnel are just doing their jobs, just like diplomats from every other country.”

On Thursday, Ortagus called China a “thuggish regime” for disclosing photographs and personal details of the diplomat, identified by a Hong Kong newspaper as Julie Eadeh of the U.S. consulate’s political section.

“I don’t think that leaking an American diplomat’s private information, pictures, names of their children – I don’t think that is a formal protest... That is not how a responsible nation would behave,” she told a briefing.

The thing is the denunciations are unusually sharp, but it’s largely because a Hong Kong newspaper, Ta Kung Pao, published a photograph it said showed Eadeh talking with student leaders in the lobby of a luxury hotel, under the headline “Foreign Forces Intervene.”

Ortagus said, “China has a long record of broken commitments; it’s their duty under the Vienna Conventions, to which China is a party, to treat our diplomats and consular officers with due respect and take all appropriate steps to prevent any attack on their person, freedom or dignity.”

China has accused foreign powers, particularly the United States, of fomenting the demonstrations in Hong Kong. 

This may seem like a small deal, but it isn’t.  China is laying the predicate for action.  This much is clear.

And then we have a separate report tonight of a fifth North Korean missile test of short-range missiles in about two weeks, hours after President Donald Trump said he had received a “very beautiful letter” from Kim Jong-un.  Further discussion below.

But for now, my bottom line has been there will be no trade agreement with China for some time to come, though as we draw nearer to November 2020, Trump will strike a middling one and claim total victory, as he has with all the other bogus trade deals he’s ‘brilliantly negotiated’ thus far.

At the same time, Chinese President Xi Jinping is slowly beginning to roll out the nationalism card, which will be much to the detriment of U.S. multi-nationals, and in fanning anti-American sentiment, anything can happen.

August is historically a very dicey month, both geopolitically and in the markets.  I won’t be surprised by anything.

President Trump is also on vacation this coming week.  Unlike his predecessors that means one thing.  He has to make sure he remains on the front page, so he won’t stay silent.  If only he could.

Trump World...El Paso and Dayton

I really have little to say concerning the depressing weekend we had with the two mass shootings and I’ll let others do the bulk of the talking.  It’s mainly because I know nothing of real substance will get done.  President Trump today told a gaggle of reporters that he was committed to strengthened background checks and that Senate Majority Leader Mitch McConnell was as well, along with Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer.

But so many of the past gunmen had cleared checks, and will new ones, plus the NRA will convince Trump to water down any legislation, and then maybe nothing gets done.

What I really want is action on at least the ‘magazines’ and their capacity, knowing that actual gun control legislation is just not possible; those in opposition falling back on the slippery slope argument – if they get this, they’ll then go after  that – and you just throw up your arms and ask, ‘Are the Mets on tonight?’

I don’t mean to imply I’m insensitive...I cried like many of you did at some of the stories...it’s just that, one, I’m a realist, and, two, there are other concerns, many involving geopolitics. 

It also doesn’t help when we have a president who is caught twice on video while in El Paso, supposedly comforting the victims and praising first responders, displaying how he just can’t help himself and has to talk about crowd size, while slamming his opponents.  I mean can he hold off for even 12 hours?  We know the answer to that one.

Editorial / Wall Street Journal

“The mass shootings in El Paso and Dayton over the weekend are horrifying assaults on peaceful communities by disturbed young men.  American politics will try to simplify these events into a debate about guns or political rhetoric, but the common theme of these killings is the social alienation of young men that will be harder to address.

“One response to reject is the reflex to blame these shootings on political opponents.  Before noon on Sunday we received an email from the Progressive Democrats of America declaring that ‘we blame President Trump for feeding into the anti-immigrant frenzy and white supremacist violence.  Yes, you Mr. President had your finger on that AK-47.’

“This is political cynicism.  Mass shootings also occurred under Presidents Obama, Bush and Clinton.  They occur around the world, if much less frequently, such as in Christchurch, New Zealand (2019), Australia (2019), and Norway (2011).  The twisted motivations are varied and often too convoluted to sort into any clear ideology.

“Take the El Paso shooter, who is suspected of writing a manifesto posted on the 8chan website before the rampage.  He expressed sympathy for the racial motivations of the Christchurch killer and denounced Hispanic immigration, but he also raged against ‘unchecked corporations’ who support immigration and pollute the land.

“This is the rant of someone angry about a society he doesn’t feel a part of and doesn’t comprehend.  It is all-too-typical of most of these young killers who tend to be loners and marinate in notions they absorb in the hours they spend online.  They are usually disconnected to family, neighborhood, church, colleagues at work, or anything apart from their online universe.

“These men may draw inspiration from one another online, and any communication or common connection needs to be investigated.  The FBI says it has made 100 arrests related to domestic terrorism in the last nine months.  But blaming all this on one politician or ideology, left or right, without evidence of such a connection is disingenuous and counterproductive.

“Yet politicians and other leaders do have a responsibility to condemn and marginalize those who indulge the ugly instincts that infect any human society.  That includes the President of the United States.  These columns have long warned Mr. Trump about the divisive tone of his public rhetoric.  He should separate himself forcefully and consistently from alt-right and white-supremacy voices.

“His supporters may be correct that Mr. Trump’s opponents will not reciprocate by pushing back against the irrational elements on the left.  But a President has a special role in the American system even if our politics has elevated the Presidency more than it should.  Either Mr. Trump restrains his rhetoric or he will pay a consequential political price.  Joe Biden’s theme of a return to ‘decency’ and ‘normalcy’ will resonate with even millions of Trump voters if Mr. Trump doesn’t change.”

Editorial / New York Post

“America is terrified.

“President Trump, you are positioned to assuage that fear.  On gun control, you are a pragmatic centrist, someone who knows there is a vast majority of Americans who are not to the extreme left or right on this issue.  They just want the killings to stop.

“Yes, we know the president regularly praises the Second Amendment and received the National Rifle Association’s support in the 2016 race.

“But the Second Amendment leaves ample room for regulating gun rights, just as every other constitutional right has its limits.

“And Trump has sneered at others for being afraid of the NRA when it comes to passing common-sense gun laws.  He’d surely have rather had Congress pass a law banning bump stocks, although his administration got it done eventually through executive action.

“Plus, the NRA is falling apart at the seams these days – with insiders profiteering from hysteria-driven fundraising finally exposed.  Far wiser to appeal now to the (much more numerous) Americans who hunt or keep guns for self-defense but are appalled by the endless string of mass shootings.

“Come up with answers.  Now.  Beginning with the return of an assault-weapons ban....

“The Supreme Court has ruled that the Second Amendment protects the right to own ‘guns in common use.’   That doesn’t cover the semiautomatic weapons regularly used only in mass shootings.

“The ban would only be part of the response: Keep improving background checks, find wiser approaches to mental health, get every state to pass a red-flag law (do a federal one, too, even if issuing these restraining orders is mainly the job of state courts).

“And by all means, do as Sen. Elizabeth Warren suggested in last week’s Democratic debate and ‘double down on the research and find out what really works.’....

“One of the big reasons that crime has fallen so far in New York City is a crackdown on guns. Their ownership is restricted, and the NYPD is focused on getting illegal ones off the street.  Gun control works.

“An assault-weapons ban is aimed at the likes of the El Paso shooter, who coldly plotted how to kill as many as possible, as quickly as possible.  Let’s make that a lot tougher for the next monster.

“ ‘Guns don’t kill people, people do,’ says the cliché.  But the twisted and the evil can kill a lot more people when handed a murder machine.  Our Founding Fathers gave us the right to bear arms in a time of muskets.  They did not foresee a time when one 21-year-old could kill 20 people in the span of minutes thanks to poisonous beliefs and an assault weapon.

“It does not have to be this way.  It should not have to be this way.  Mr. President, do something – help America live without fear.”

---

--The disconcerting revolving door in our intelligence apparatus continues.  Trump named Joseph Maguire, the current acting chief of the National Counterterrorism Center, to become the acting director of national intelligence.  Maguire will take over the post on Aug. 15, when Dan Coats, the current director of the agency overseeing civilian and military intelligence, steps down.

Sue Gordon, who many hoped would be named for the post, Ms. Gordon deputy director of National Intelligence behind Coats, instead resigned.

Last week, Trump dropped his first choice to replace Coats, Rep. John Ratcliffe, after questions arose about his lack of experience and exaggeration of his resume.

As for Gordon’s resignation, it’s not known what prompted it, but the Republican chairman of the Senate Intelligence Committee, Richard Burr, said in a statement, “Sue Gordon’s retirement is a significant loss for our Intelligence Community.”

This is a freakin’ mess...and the last place that needs to be one.            

--U.S. immigration authorities rounded up 680 workers at seven agricultural processing plants across Mississippi on Wednesday in what federal officials said could be the largest worksite enforcement operation in a single state.  ICE said they detained workers that were working illegally at the plants.

The next day hundreds were released, but it was a moving scene to see some of the children, whose mother or father was ripped away, leaving them alone to be sheltered by church groups and in some cases total strangers.

But while I’m highly-sympathetic, the companies are breaking the law, and I wish they were hit hard (they aren’t) as much as the illegal migrants.

--Trump tweets:

“We cannot let those killed in El Paso, Texas, and Dayton, Ohio, die in vain.  Likewise for those so seriously wounded.  We can never forget them, and those many who came before them.  Republicans and Democrats must come together and get strong background checks, perhaps marrying....

“....this legislation with desperately needed immigration reform.  We must have something good, if not GREAT, come out of these two tragic events!”

“The Media has a big responsibility to life and safety in our Country.  Fake News has contributed greatly to the anger and rage that has built up over many years.  News coverage has got to start being fair, balanced and unbiased, or these terrible problems will only get worse!”

“Watching Sleepy Joe Biden making a speech.  Sooo Boring!  The LameStream Media will die in the ratings and clicks with this guy.  It will be over for them, not to mention the fact that our Country will do poorly with him.  It will be one big crash, but at least China will be happy!”

“Just left Dayton, Ohio, where I met with the Victims & families, Law Enforcement, Medical Staff & First Responders.  It was a warm & wonderful visit.  Tremendous enthusiasm & even Love.  Then I saw failed Presidential Candidate (0%) Sherrod Brown & Mayor Whaley totally...

“....misrepresenting what took place inside of the hospital. Their news conference after I left for El Paso was a fraud.  It bore no resemblance to what took place with those incredible people that I was so lucky to meet and spend time with.  They were all amazing!”

“Watching Fake News CNN is better than watching Shepard Smith, the lowest rated show on @Foxnews.  Actually, whenever possible, I turn to @OANN!”  [Ed. “One America News”]

“Beto (phony name to indicate Hispanic heritage) O’Rourke, who is embarrassed by my last visit to the Great State of Texas, where I trounced him, and is now even more embarrassed by polling at 1% in the Democrat Primary, should respect the victims & law enforcement - & be quiet!”

“Leaving El Paso for the White House. What GREAT people I met there and in Dayton, Ohio. The Fake News worked overtime trying to disparage me and the two trips, but it just didn’t work.  The love, respect & enthusiasm were there for all to see. They have been through so much.  Sad!”

[None of the eight patients still being treated at University Medical Center in El Paso agreed to meet with Trump when he visited the hospital, UMC spokesman Ryan Mielke said. Two victims who already had been discharged returned to the hospital with family members to meet with him.  Before Trump’s visit, however, some of the hospitalized victims accepted visits from a number of city and county elected officials, as well as two congressmen.]

And I can’t help but add this guest ‘retweet’ from Trump...of Fox Business News’ Charles Payne.  All spelling and punctuation is correct.

“While the media is fixated on tweets and fear mongering here’s are some employment stats for Black American in July.  284,000 returned to labor force Participation rate soars 62.7% from 61.9% Unemployment gap between Black and White now second lowest on record (record May 2018).”

I’m assuming Mr. Payne corrected this later.

Wall Street and the Trade War

There was very limited economic data this week, with the ISM non-manufacturing (service sector) reading for July at just 53.7 (50 being the dividing line between growth and contraction), a 3-year low.  Following last week’s poor PMI on manufacturing, just a further sign of a slowdown, potentially, albeit still slower ‘growth.’

Today, we had more tame news on the inflation front, with the producer price index for July coming in at 0.2%, -0.1% ex-food and energy; 1.7% year-over-year, 2.1% yoy on core.

A very early reading on third-quarter GDP from the Atlanta Fed’s GDPNow barometer is 1.8% at week’s end, but next week we have the all-important retail sales data for last month, as well on housing starts and industrial production that will feed into the GDPNow data set.

The bond market was a big story this week with the yield on the 10-year Treasury bond dipping below 1.6% for the first time since October 2016, before finishing the week at 1.74%, nonetheless a huge drop from 2.07% just two weeks earlier (and 2.68% at the start of the year).

Certainly a positive with the falling bond yields is having mortgage rates fall to their lowest level in nearly three years, spurring a new rush for homeowners to refinance.  The rate on a 30-year fixed, which was 4.94% in November, fell to 3.60% Thursday.  Mortgage rates are closely tied to the 10-year Treasury.

But will falling rates really lead to a boost in home buying, which has stalled out the past year?  Concerns with the overall economy may continue to hold purchasers back.

And the following, the trade conflict with China, played a key role in the stock market’s gyrations, after the U.S. accused Beijing of manipulating its currency (it really isn’t), which led to more harsh rhetoric and Wall Street’s worst single day of the year, Monday, the Dow dropping 717 points before finishing the week down 0.7%.

So speaking of the trade war....

Tensions mounted anew after President Trump threatened to impose a 10 percent tariff on $300 billion of Chinese products from September 1, with China responding by suspending purchases of American agricultural products and allowing the yuan to weaken beyond the key level of seven to the U.S. dollar on Monday.

In retaliation, the Treasury Department officially labeled China a currency manipulator, a move which many say could pave the way for additional tariffs and sanctions.

But at week’s end, September’s trade talks were still on, although the date, or venue, hasn’t been disclosed.

Earlier in the week, Larry Kudlow, the increasingly irrelevant top economic adviser to Trump, told CNBC, “The president and our team is planning for a Chinese visit in September.  We’re willing to negotiate. Movement towards a good deal would be very positive and might change the tariff situation.  But then again, it might not.”

Secretary of State Mike Pompeo escalated his criticism of China during a visit to Australia on Sunday, drawing a direct link between what he called one-sided trade deals and China’s ability to strengthen its military.

Pompeo, speaking in Sydney, said, “We were asleep at the switch,” as China began to steal data, launch military exercises in the disputed South China Sea and saddle other countries with debt to increase its influence.

“Those are the kind of things that I think everyone needs to have their eyes wide open with respect to,” Pompeo said.  “The United States certainly does.”

For their part, Hu Xijin, the editor-in-chief of a Communist Party mouthpiece, the Global Times, tweeted on Tuesday, China “no longer expects goodwill from the United States.”

Additionally, Chinese state media has been warning that Beijing could use its dominant position as a rare earths exporter to the United States as leverage in the trade dispute.  The materials are used in everything from iPhones to military equipment.

Or, as I noted above, and have further examples below, China can just ratchet up the pressure on American multi-nationals.

Today, in his press spray, President Trump said the U.S. and China were still pursuing a trade agreement but he was not ready to make a deal.  “We’re doing very well with China.  We’re talking with China.  We’re not ready to make a deal – but we’ll see what happens. China wants to do something, but I’m not ready to do anything yet.  Twenty-five years of abuse – I’m not ready so we’ll see how that works out.”

He also said, “We’re not going to do business with (Chinese telecom giant) Huawei.  That doesn’t mean we won’t agree to something if and when we make a trade deal, but we’re not going to be doing business with Huawei.”

Editorial / New York Post

“A quarter-century ago, the West wagered that welcoming China into the world economy would seduce the Communist Party into allowing ever-more freedom.  That bet’s been lost.

“There’s precious little ideology to China’s ‘communism’ anymore and no hint of seeking economic justice. But the party will allow no challenge to its rule.  Since Xi Jinping took over as president in 2013, he’s rolled back freedom after freedom.

“Christian churches are smashed and worshippers jailed; Xi has even bullied Rome into letting him choose Catholic bishops in China.  Re-education camps house 1 million Uighers in a province teeming with hi-tech surveillance. Twelve million other Muslims suffer stepped-up repression and systematic abuses, notes Human Rights Watch. Buddhists deemed members of the Falun Gong movement pack prisons that provide involuntary ‘organ donors.’

“And Hong Kong’s promised ‘high degree of autonomy’ has become a joke.  The mainland has even begun to databank its residents’ biometrics (DNA, fingerprints, voice samples, etc.), the obvious basis for eventual Big Brother surveillance.

“Secretary of State Mike Pompeo said recently that ‘protest is appropriate’ and ‘we hope the Chinese will do the right thing,’ but Team Trump overall has muted criticism as trade talks continue.

“Hard as it might hit the stock market, maybe human rights should become the issue in those negotiations: In the long run, America doesn’t win by trading freely with a nation run by monsters.”

Robert Samuelson / Washington Post

“Donald Trump sold himself to the American public as an expert dealmaker. At the top of his list was a promised trade bargain with China that would boost U.S. exports and remedy some of the more egregious examples of discrimination against American firms.

“It isn’t working as planned.

“To the contrary: The ensuing trade war between the United States and China is morphing into something bigger and more ominous. It’s increasingly not just a trade war but a broader and more dangerous economic battle, with each nation seemingly determined to hurt the other as much as possible....

“The central – and unanswerable – question now is whether we are stumbling toward a larger and unmanageable global economic crisis. There are several possibilities.

“One is that the gradual slowing of economic growth in Europe, China and the United States makes it harder for borrowers to service their loans, leading to spending cutbacks or defaults.  A related danger is massive capital flight from ‘emerging market’ countries (such as China, India and Brazil) as investors move their funds into safe havens. This, too, would tighten credit.

“For the moment, most economists seem to be discounting a devastating crisis.  Higher tariffs mean higher prices.  They discourage spending and growth, but the amounts affected are modest compared with the size of the U.S. or Chinese economies.  Remember that the U.S. economy is roughly $20 trillion.

“What could change the outlook is the impact of the U.S.-China conflict on consumer and business confidence.  If people suddenly become more uncertain about the future, the impact on spending could be much larger.

“Meanwhile, Trump’s self-declared reputation as a great dealmaker is in shambles.  It will be hard to make that claim again.”

Editorial / Wall Street Journal

“Multiple reports out of the White House last week say President Trump overruled all of his economic advisers other than Peter Navarro when he decided to impose new tariffs on China. Global and American economic conditions have been heading south ever since, so perhaps we should call this the Trump-Navarro trade-policy slowdown.

“Mr. Trump used to talk as if stock prices were his economic lodestar, which was never wise since stocks fluctuate for many reasons.  But on Wednesday he professed not to be too concerned by the stock-market correction. The Dow Jones Industrial Average dropped sharply Wednesday morning before stabilizing, though it still closed lower than it was in January 2018 when his tariff offensive began.  He can ignore stocks if he chooses, but financial markets across the board are signaling worry about more trade and currency tensions and a slowing global economy....

“The U.S. economy has held up better than the rest of the world, thanks in large part to Mr. Trump’s policies.  Deregulation and tax reform revived a recovery that was long in the tooth and barely escaped recession in 2015-2016.  Business confidence and capital investment surged, which has driven further job market gains, rising wages and durable consumer spending.

“But note the economic canaries.  CEO confidence and capital spending have tailed off since the trade war escalated in 2018, and the falloff is beginning to affect economic growth. The near-3% surge in GDP has slid to 2%, and average monthly job growth has declined to 165,000 this year from 223,000 in 2018 [Ed. 140,000 the last three months.]

“Exports have subtracted from GDP as global demand slumps, especially for manufactured goods.  If oil demand stays low, the oil and gas industry will have to begin layoffs.  The 10-year Treasury yield dipped below 1.6% Wednesday morning, another sign of slower growth ahead.

“Oh, and has Mr. Trump noticed that the trade deficit hasn’t improved?  Global supply chains are moving out of China to third countries such as Vietnam.  But the overall trade deficit is steady.  This is because the U.S. invests less than it saves. Thus it imports capital from abroad, which in the national income accounts is offset by a trade deficit.

“The irony, and a dangerous one, is that Mr. Trump doesn’t seem to understand that his trade policy is contributing to exchange-rate instability and a rising dollar. When he slaps tariffs on China he reduces the demand for Chinese yuan.  He also encourages capital flight to safe havens like the dollar, which encourages more capital into dollar instruments and the U.S.  China isn’t manipulating its currency.  It is setting a lower peg to reflect supply and demand and prevent greater capital flight out of China.

“We aren’t predicting a recession, but then few thought we were in a recession in mid-2008 either.  Economic downturns can sneak up on the smartest policy makers. Dan Clifton of Strategas Research Partners has begun noting that Mr. Trump is ‘‘trading away’ his re-election’ as  his trade policy erodes what was a strong economy.  Mr. Clifton is a supply-sider who supports Mr. Trump’s tax and deregulatory agenda.

“This is a warning the President should heed, and probably one Mr. Navarro won’t tell him.  If Mr. Trump can’t strike a broader trade deal with China before the election, he should at least call a trade truce to reduce the damage.  Economic expansions don’t end on their own. They almost always end due to policy mistakes.  Mr. Trump’s willy-nilly trade offensive could be the mistake that turns a slowdown into the Navarro recession.”

Europe and Asia

We had the composite and service sector PMIs for the eurozone (EA19) this week, after last week’s putrid manufacturing data for July. The final composite number (combining manufacturing and services) is 51.5 vs. 52.2 in June for the EA19.  The services reading was 53.2 vs. 53.6 the prior month.

Spain’s comp came in at 51.7, a 68-month low, while Germany’s, at 50.9, was a 73-month low.

Some service sector readings:

Germany 54.5; France 52.6; Italy 51.7; Spain 52.9; Ireland 55.0; and the U.K. 51.2.  All still representing growth, but also deceleration in most of the countries.

Separately, Germany reported that industrial production fell 1.5% in June over May, as many begin talking of recession.  There is a crisis in the key automotive sector with weaker foreign demand, while business sentiment continues to fall.  The German government expects GDP growth of 0.5% for all of 2019, rebounding to 1.5% in 2020.

In the U.K., in a clear reflection of Brexit uncertainties, Britain saw its worst retail sales in July since the survey began in 1995.

Chris Williamson / IHS Markit

“The service sector continued to sustain the expansion of the overall eurozone economy at the start of the third quarter, but there are signs that the scale of the manufacturing downturn is starting to overwhelm.

“Trade war worries, slower economic growth, falling demand for business equipment, slumping auto sales and geopolitical concerns such as Brexit led the list of business woes, dragging manufacturing production lower at its fastest rate for over six years.  While the service sector has helped offset the manufacturing downturn, growth also edged lower among service providers in July, meaning the overall pace of expansion of GDP signaled by the PMI has slipped closer to 0.1% [Ed. quarter-over-quarter]

“The main source of expansion currently appears to be the consumer, in turn buoyed by the relative strength of the labor market.  However, with the July survey indicating the weakest jobs gains in over three years, there are signs that this growth engine is also losing impetus, and adding another headwind to the economy for the coming months.”

Brexit: On Thursday, Boris Johnson was asked if he would resign if his government lost a vote of no-confidence, and he responded that he had pledged to take Britain out of the EU at the end of October, with or without a deal, and that’s what he would do.  But this sets up a clash with lawmakers who have vowed to try and stop a no-deal Brexit, including by trying to collapse the government.

Asked what he would do if he lost a vote, Johnson told reporters: “I think that what Members of Parliament should do and what I think they’ve already voted to do when triggering Article 50...is honor the mandate of the people and leave the EU on October 31.”

Earlier, as reported by the Financial Times, Johnson is telling his people he would hold an election in the days following Brexit if lawmakers sink his government in a no-confidence vote, which is now targeted for early September when Parliament returns from its summer break.

Johnson said his government was working hard to reach a deal with the EU and if Britain can get changes to the so-called backstop, an insurance policy aimed at avoiding a hard border between Northern Ireland and the Republic, then “there is a good deal to be done.”

“There’s every possibility for the EU to show flexibility and there’s bags of time for them to do it, and I’m confident they will,” Johnson added.

But there is zero...zero...evidence the European Union is prepared to renegotiate the deal it painstakingly crafted with former Prime Minister Theresa May that was then turned down by Parliament on three separate occasions.

EU negotiators told European diplomats this week there was currently no basis for “meaningful discussions” and talks were back where they were three years ago.

Downing Street said the EU needed to “change its stance.”

If there is to be a renewal of talks between the two sides, it could come at the G7 summit in France at the end of August.  But this could also be the point at which a no-deal Brexit becomes inevitable.

Friday, the government released data on GDP for the second quarter that was far worse than expected, an actual decline of 0.2% over the previous quarter, in the starkest warning sign since the 2016 Brexit referendum as manufacturing continues to slump badly ahead of the Oct. 31 deadline.  Year-on-year growth slid to 1.2% from 1.8% in the first quarter, according to the Office for National Statistics, with annual growth in June alone the weakest since August 2013 at 1.0%.

The Brexit crisis has left the British economy on a “knife-edge” for the third quarter, as one economist put it.  And the U.S.-China trade dispute isn’t helping the mood either as it impacts U.K. trade as well.

The Chancellor of the Exchequer (treasury secretary), Sajid Javid, said he does not expect the U.K. to slide into recession but recession now seems likely, depending on the size of any inventory buildup (which has been taking place for over a year) ahead of Brexit.

Also today, Boris Johnson wrote all government civil servants to tell them that preparing for a no-deal exit from the European Union is his and their top priority, Sky News first reported.  “I would very much prefer to leave with a deal...but I recognize this may not happen,” the letter said.  “That is why preparing urgently and rapidly for the possibility of an exit without a deal will be my top priority, and it will be the top priority for the Civil Service too.”

The problem is that while large corporations, both in Britain and the EU, have the resources to prepare for a no-deal, such as in hiring consultants, small- and medium-sized companies on both sides just don’t have those resources and are no doubt woefully unprepared.  I can’t emphasize enough it would be chaos, and Ground Zero would be Ireland/Northern Ireland.

More on this next time.

Italy: The bond market here was rocked at week’s end as Matteo Salvini, head of Italy’s far-right, sought to trigger snap elections by declaring an end to the government in which he serves, exploiting his strong lead over his coalition partner, the antiestablishment 5 Star Movement, with whom differences have become irreconcilable.  Salvini wants to make himself the country’s sole leader.

So after 15 months in power, the populist government is coming to an end, Salvini saying, “Let’s go immediately to Parliament to establish that there is no longer a majority...and let’s quickly let the voters have their say.”

The 5 Star Movement’s leader, Luigi Di Maio, said his party stood ready for elections, but he wants to delay a vote until after Parliament passes a change to the constitution that would cut the number of lawmakers in Italy’s bloated two-chamber legislature.  The change is currently slated to be debated in September.

On paper, Salvini is Italy’s deputy prime minister and interior minister and his League party is the junior partner in the governing coalition.  But the League has been polling better than 5 Star, and Salvini has been seeking the removal of ministers who have resisted his agenda of tax cuts and immigration crackdowns.

Turning to Asia...

China reported exports for July that were better than expected, up 3.3% (best since March), with imports shrinking 5.6%, which was slower than analysts expected.

Exports had dropped by 1.3% in June, but July’s number was solid, relatively speaking, it being the second full month under which China’s exports to the U.S. faced a higher tariff of 25%, as reported by the General Administration of Customs in China on Thursday.

Last month, exports from China to the U.S. dipped 6.5% year-on-year, while imports fell 19.1%.

China also reported its inflation data for July, with the consumer price index up 2.8% year-over-year, while producer prices fell for the first time in three years, down 0.3%, which is concerning; i.e., deflation.

Separately, the private Caixin PMI on the service sector came in at 51.6 for July vs. 52.0 in June.

Next week we get key data on industrial production and retail sales.

Japan shocked the markets a bit when it reported second-quarter GDP came in at a 1.8% annualized rate, much faster than expected (0.4% had been forecast), marking the third quarter of expansion as robust private consumption and business investment offset the hit to exports from cooling global demand.  The data offers some relief to the Bank of Japan, which has been under pressure to follow other central banks and ramp up stimulus to head off heightening global risks.

The optimistic GDP print, though, needs to be put in perspective as an expected consumer slowdown is on the horizon with another hike in the sales tax come October.

Japan’s service sector PMI for July was 51.8 vs. 51.9 in June.

Meanwhile, the South Korea-Japan trade dispute only gets worse.  You want an example of how playing the ‘nationalism card’ works?  Sales of Japanese cars in South Korea fell over 30% last month.  Industry data show Toyota sales plunged 32% from a year earlier, while Honda’s sales slid 34%, as South Koreans have been boycotting Japanese goods after Tokyo tightened export curbs on the country in July. 

Pay attention, Apple investors.

Street Bytes

--It was a highly-volatile, rollercoaster of a week in equities, around the world, but in the end losses were minimal, though representing a second consecutive week in the red with the Dow Jones losing 0.7% to 26287, while the S&P 500 and Nasdaq lost 0.5% and 0.6%, respectively.  Wednesday morning was particularly noteworthy as the Dow opened down 589 points, but ended with just a 22-point loss.

--U.S. Treasury Yields

6-mo. 1.94%  2-yr. 1.65%  10-yr. 1.74%  30-yr. 2.26%

As noted above the 10-year traded down to 1.59% early Wednesday, while the 30-year neared an all-time low of 2.10% in touching 2.11% intraday.

But yields were falling anew all over the world with the German 10-year ending the week at -0.58%, nearly a record low.

It’s nuts.  France’s 10-year is at -0.27%, the Netherlands’ -0.46%, the U.K., with all its Brexit uncertainty, is at 0.48%.  Spain, hardly in outstanding fiscal shape, 0.25%.

At least $15 trillion in sovereign debt has a negative yield.

President Trump tweeted:

“As your President, one would think that I would be thrilled with our very strong dollar.  I am not!  The Fed’s high interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers like Caterpillar, Boeing....

“....John Deere, our car companies, & others, to compete on a level playing field.  With substantial Fed Cuts (there is no inflation) and no quantitative tightening, the dollar will make it possible for our companies to win against any competition.  We have the greatest companies....

“....in the world, there is nobody even close*, but unfortunately the same cannot be said about our Federal Reserve.  They have called it wrong at every step of the way, and we are still winning.  Can you imagine what would happen if they actually called it right?”

*Heineken is close.  Ever been to their cool museum in Amsterdam?  More importantly I totally disagree with the president, who then called today for the Fed to cut its benchmark rate a full point, which is beyond absurd. 

--Crude prices plummeted to fresh seven-month lows (though recovered some today) as trade war tensions hit the outlook for oil demand while there was a surprise build in U.S. inventories. Another factor pushing down the price were reports China is purchasing oil from Iran despite U.S. sanctions, making the market appear less tight than first thought.

The International Energy Agency said Friday that concerns over the world’s economy and increased trade tensions will put further pressure on global oil demand.  Earlier this week the U.S. Energy Information Agency cut its own 2019 world-wide oil consumption forecast for a seventh straight month.

--The turmoil in the global bond market and fresh rate cuts by major central banks heaped new pressure on U.S. bank stocks.  Investors have grown increasingly wary that a weaker interest rate environment will hammer earnings in the financial sector.

--Disney shares tumbled 5% after the company reported profit and revenue that was below expectations for its fiscal third quarter.    CEO Bob Iger said Disney’s results were weighed down by its merger with Twenty-First Century Fox, despite the fact that Disney has earned a whopping $8 billion at the box office so far this year.

Disney acquired the entertainment assets of Fox for $71.3 billion earlier this year, a move that gives it a trove of content for Disney+, which launches in November for $6.99 a month.

Iger noted that his firm produced five of the six global top-grossing movies this year.

Earnings fell 28%, while revenue rose 33%, to $20.3 billion, both below expectations.

Disney is spending heavily on streaming services ESPN+ and Disney+, which is expected to launch in November.  A bundle consisting of Disney+, ESPN+ and a version of Hulu will be offered for $12.99 a month.

Iger said it would take “a good solid year, maybe two years, before we can have an impact” on Fox’s film business, which was highly disappointing.

The parks and consumer products segment posted a 4% increase in operating income to $1.72 billion, even as attendance at Disneyland Resort in Anaheim and Walt Disney World in Orlando declined 3%.

--FedEx Corp. said it was ending its contract to deliver Amazon.com packages through its ground network, gambling it is better off filling its trucks with other customers’ goods than with one of the world’s biggest shippers.

FedEx said it decided not to renew the contract, which expires at the end of August, after saying in June that it was ending its air-shipping contract with Amazon in the U.S., but continue to handle ground deliveries. 

Needless to say the moves are escalating tensions between the two longtime partners as Amazon builds its own delivery network, including leasing cargo planes, buying trucks and funding local delivery drivers.

FedEx, while walking away from Amazon, is positioning itself as the go-to carrier for Target, Walmart and other retailers looking to compete with Amazon.

FedEx said in a statement: “This change is consistent with our strategy to focus on the broader e-commerce market.”

According to the parcel consulting firm SJ Consulting Inc., Amazon used its own drivers to deliver 45% of its July orders, the U.S. Postal Service for 28% and UPS for 21%.  The e-commerce giant has been pulling away from FedEx for a while and, according to SJ Consulting, didn’t register any deliveries in July.

--HSBC Holdings PLC, in an attempt to change directions amid what it sees as a worsening global outlook, ousted CEO John Flint after just 18 months at the helm (three decades at the bank) and announced it would be slashing thousands of jobs and rolling back spending.

Chairman Mark Tucker said Mr. Flint’s departure doesn’t signal any change in strategy, but that the board felt like a change at the top was needed to respond to “an increasingly complex and challenging global environment.”

Gee, if I were Mr. Flint, assuming there weren’t any non-job related issues, this would be kind of depressing, regardless of his exit package.

‘The world is complex...and you’re pretty stupid.’  [The Wall Street Journal said he was ‘indecisive.’]

I mean there’s only one thing for Flint to do at this point.  Ride the rails and join the circus.

As for HSBC’s job cuts, the bank’s finance director said they would amount to 2% of the current 237,000 employee base.

--Huawei Technologies Co.’s smartphone sales are surging in China, as you’d expect, on a patriotic buying spree.  This is helping to blunt the impact of the severe sanctions levied by the United States.

Huawei’s share of the smartphone market in China is now up to 38%, according to market-research firm Canalys.  Apple lost share in the second quarter, but then I’ve been telling you this for years.  China was always going to be playing the nationalism card at some point, and that point is now.  Various Chinese companies are now offering incentives for employees to switch to Huawei phones.

Huawei’s main concern is its ability to maintain access to Google’s Android operating system and suite of popular apps, including Gmail and Google Maps.

Globally, Huawei jumped from the No. 4 vendor of handsets in 2014 to No. 2 in the first half of 2019, ahead of Apple and behind Samsung, according to Canalys.

But if Google doesn’t get Commerce Department clearance to continue working with Huawei, the company’s overseas smartphone business would collapse.

However, Friday, Huawei unveiled its proprietary operating system for use in smartphones and other devices.

“Harmony OS is completely different from Android and iOS,” said Richard Yu, head of Huawei’s consumer business group, referring to operating systems developed by Google and Apple.

Harmony is available for use in smartphones but Huawei prefers to stick to Android for now to support its app developers, Yu said, adding the Honor smart screen product it plans to unveil on Saturday will be the first product using the Harmony OS.

Yu said it would be difficult for Huawei to meet its previous goal of becoming the world’s biggest smartphone maker by shipments this year due to the U.S. curbs.

The company would have been able to ship 300 million smartphones this year without such restrictions, Yu said.

--Growing protests in Hong Kong are weighing heavily on neighboring Chinese territory Macau as some visitors steer clear of the world’s biggest gambling hub, worried over transportation disruptions and safety concerns.

Matt Maddox, chief executive of Wynn Resorts, which runs two Macau casinos, said the protests are clearly impacting the premium end of the business.

I’ve told you over the years how I’ve been to Macau a couple times as part of my many trips to Hong Kong.  It’s just a one-hour ferry ride and a third of Macau’s visitors arrive by sea or a recently-built bridge (Macau a quick drive from Hong Kong’s main airport).

Gaming revenue fell 3.5% in July over a year ago, a larger drop than anticipated, but the figures could get far worse, especially if China’s military cracks down on the protesters, which seems a certainty.  One major ferry operator said the protests had caused their business to drop 30 percent or more.

--Irish travelers face a rising risk of massive holiday disruptions after Ryanair pilots in the UK voted Wednesday to strike – a move likely to be backed by Irish pilots.

The 48-hour strike would start on August 22 and a 72-hour strike starting on September 2 if Ryanair doesn’t meet wide-ranging demands for better pay and conditions.

Ryanair argues that no pilots should be threatening to walk off the job at a time when Ryanair already has warned it could lay off 500 pilots company-wide amid weak fares, Boeing aircraft delays and the threat of a no-deal Brexit.

--CVS Health Corp. posted a second straight quarter of strong results, following its acquisition of Aetna Inc. as the health insurer drove much of the gains.  CVS said profit increased to $1.93 billion in the quarter, with CVS saying results improved in all parts of the business.

Prescription sales rose 19% from a year ago, which CVS said is largely because its clinical programs are helping more people take their medication.

Central to the merger with Aetna is the concept to turn some CVS stores into health hubs offering services and products for people with chronic conditions such as high blood pressure and diabetes.  Improving patients’ adherence to their prescriptions would generate more drug sales for CVS while cutting down on high-cost emergency-room visits.

CVS also bumped up its guidance for the full year.

--CVS rival Walgreens announced it was closing about 200 U.S. stores following “a review of the real estate footprint in the United States,” according to an SEC filing.  This represents less than 3% of Walgreens nearly 9,600 U.S. stores.

Eight months into 2019, there have already been 29% more store closings announced than in all of 2018, according to an Aug. 2 report from global marketing research firm Coresight Research.

--Lyft Inc. saw its shares initially rise 7% as the company boosted its outlook for the year, the company now projecting 2019 revenue of between $3.47 billion to $3.5 billion, higher than a previous range of $3.275bn to $3.3bn.

Lyft, still far from profitable, said it now sees a narrower loss for the year, $850 million to $875 million in 2019, adjusted, vs. a previous forecast of around $1.15bn.

Revenue surged 72% to $867 million, with the number of active riders climbing to 21.8 million from 15.5 million in the year-earlier period.

Lyft shares then finished the week at $59, barely up on the week and still well below its $72 IPO price in March.

--The next day, Uber Technologies reported second-quarter results which showed a smaller than expected loss, but lower revenues than analysts were anticipating.  At first the shares plunged in the aftermarket, Thursday, but recovered some, though at the close today, like Lyft, below the May IPO price of $45 at $40.

Revenue rose 14% to $3.17 billion, the slowest quarterly growth rate Uber has ever disclosed, with a loss of $2.01 a share; analysts expecting a loss of $2.70 on revenue of $3.32 billion.

The loss, though, was still $5.2 billion, its largest ever, but $3.9 billion of it was caused by stock-based compensation that Uber paid its employees after its IPO. 

Excluding that one-time expense, Uber lost $1.3 billion, or nearly twice the $878 million that it lost a year earlier.  On that same basis and excluding other costs, the company said it expected to lose $3 billion to $3.2 billion this year.

Uber said that trips increased 35% year over year to 1.677 million in the quarter.  Monthly active platform consumers were up 30% to 99 million.  Uber Eats monthly active users jumped 140%.

--Warren Buffett’s Berkshire Hathaway Inc. reported second-quarter net earnings last Saturday of $14 billion, up from $12 billion, in the year-earlier period (on the Class A share equivalent), while also reporting Berkshire now held a record $122 billion in cash at the end of Q2.

But the conglomerate, which runs a large insurance operation as well as railroads, utilities, industrial manufacturers and retailers, excluded earnings from Kraft Heinz because that company hadn’t provided them as yet.

And then Thursday, Kraft Heinz reported weak sales, prompting the maker of packaged foods to write down the value of several business units by more than $1 billion and drop its full-year forecast as it struggles to lure back customers.  Shares fell to a record low as the company marked a 12th straight quarter of lackluster sales.  With Buffett as its largest investor, Kraft Heinz has been battered by competition from private-label brands, changing consumer tastes and lower investment in its brands due to heavy cost-cutting under leaders installed by Brazilian private-equity firm 3G Capital, whom Buffett had long extolled.

The earnings report, delayed by an internal investigation into its accounting practices, underscored these issues and pushed the stock down 15%.

Well by golly, I bought some Oscar Mayer bacon Thursday...just because.  Kraft Heinz said net sales fell about 5% in the quarter and the shares have lost a third of their value since February.

--Adidas AG posted higher quarterly earnings on strong sales in China and predicted continued growth in the second half, but warned a protracted trade and currency war could hurt business.  Retailers such as Adidas have been insulated from the trade dispute thus far, but would no longer be so if the global economy is hit with a deepening conflict between Washington and Beijing.

Adidas sales rose 4.7% in the quarter, driven by China, though there was a drop in soccer products because of the yearly comparison with last year’s World Cup.

--New York Times Co. stock fell sharply Wednesday as the publisher warned digital advertising revenue was expected to decline in the current quarter.  The company estimates the category will decrease by a high-single-digit percentage in the third quarter, while digital-only subscription revenue will increase by a percentage in the midteens.

The Times’ reported second-quarter net income of $25.2 million, up 6.7% from a year earlier, with revenue increasing 5.2% to $436.3 million, driven by gains in subscription revenue as well as growth in advertising revenue and revenue from the television series “The Weekly,” as well as growth from commercial printing operations.  The revenue number was slightly below estimates.

Digital-subscription growth slowed 12% from the first quarter, the Times’ adding 197,000 net new digital-only subscriptions, including 131,000 from its core news product and the remaining 66,000 from its cooking and crossword offerings.

Subscription revenue rose 3.8%, while advertising revenue rose 1.3%.  Revenue from digital advertising rose 14% to $58 million, while print advertising revenue fell 8% to $62.7 million.

The shares closed 12% lower at $31.25 Wednesday.

--New Media Investment Group, a holding company that controls GateHouse Media, announced that it had agreed to buy Gannett, the owner of USA TODAY and more than 100 other publications nationwide, in a transaction valued at roughly $1.4 billion.

Once combined, GateHouse and Gannett will publish more than 260 daily newspapers in the U.S., along with more than 300 weekly publications, in 47 states, as well as Guam.  The new company will go by the name Gannett.

While both companies said the merger would “enhance quality journalism,” both have also been cutting costs in recent years by laying off journalists.

Gannett owns The Detroit Free Press, The Arizona Republic, and The Milwaukee Journal Sentinel, as well as other prominent newspapers in smaller cities.  GateHouse Media owns 154 daily newspapers and operates in 39 states, having struck recent deals to acquire The Austin American-Statesman, The Palm Beach Post and The Akron Beacon Journal.

Gannett and GateHouse are talking about $300 million in savings between the two. 

--President Trump’s campaign and other prominent Republican groups said they are temporarily freezing spending on Twitter Inc. after the social-media platform locked the account belonging to Senate Majority Leader Mitch McConnell’s campaign.

The @teammitch account was blocked over a video it posted of a protest outside McConnell’s Louisville home.  A protester can be heard saying “stab the mother f---er in the heart.”  Twitter said this incited violence, even if the holder of the account is the target of the offending content.

The McConnell campaign declined to take down the video and Twitter continued to insist the video be deleted.  The @teammitch feed still appears on Twitter, with the video no longer available, but as of Friday morning, the account was still locked in terms of posting new content.

--As first reported by Bloomberg, the U.S. National Highway Traffic Safety Administration (NHTSA) sent a cease-and-desist letter to Tesla Inc. last year for not complying with the agency’s guidelines in its Model 3 safety assertions and subpoenaed the carmaker for information on several crashes.  The auto safety agency’s letter concerned claims by Tesla that the Model 3 had the lowest probability of injury of any vehicle ever tested by NHTSA.

--Stephen Ross is the billionaire owner of the Miami Dolphins.  He is also chairman of  Related Companies, which is the parent company of both Equinox and SoulCycle, two high-end fitness clubs that can be found in 15 cities across the country.  Equinox also just opened a luxury hotel at the flashy new Hudson Yards complex on Manhattan’s West Side.

So word got out that Ross is hosting a fundraiser in the Hamptons for President Trump this Friday (tickets ranging from $5,600 to $250,000) and there was a major backlash against the two chains, with liberal members choosing to cancel their memberships and boycott the clubs.

[Attendees paying top dollar get a lunch, a photo and private roundtable conversation with Trump.]

Equinox and SoulCycle management said in a statement: “Neither Equinox nor SoulCycle have anything to do with the event later this week and do not support it.  As is consistent with our policies, no company profits are used to fund politicians. ...Mr. Ross is a passive investor and is not involved in the management of either business.”

Critics also got hold of Ross’ Wikipedia page and amended the bio: “Stephen M. Ross is an American real estate developer, right wing person of very low intelligence, pretend philanthropist (because giving money to right wing causes does not count as charity) and sports team owner.”

I am generally against such targeting.

And it turns out, as Crain’s New York Business just broke, Stephen Ross has given $hundreds of thousands to Democratic politicians, including $80,000 over the years to Gov. Andrew Cuomo!

Which is why, boys and girls, we always say, ‘wait 24 hours.’

--Callaway Golf Company announced net sales growth of 13% in the second quarter, with record net sales of $447 million, with the company raising full year earnings guidance.  Interesting.

--June was the biggest month ever for sales of luxury residential real estate in New York City, as a looming July 1 tax increase sent hundreds of buyers scrambling to close deals.

According to a Wall Street Journal analysis of property records, June’s sales activity set  record for the most sales over $2 million, sales above $10 million and even sales above $25 million.

As Josh Barbanel reported: “In all, more than $4.8 billion in property changed hands,” the highest monthly amount since at least 2003.  The new transfer tax isn’t big, $5,000 on a $2 million sale (and then scaling up), yet it was high enough to motivate behavior, with the market having been in a years-long slump, amid rising inventory and price cuts.

The June sales included a $51.6 million penthouse purchased by Amazon.com CEO Jeff Bezos, and the most expensive townhouse sale in Manhattan, a $77.1 million mansion on East 67th Street sold by hedge-fund manager Philip Falcone; the buyer saving more than $2.2 million by closing before July 1.

--Attendance and revenue at SeaWorld parks have continued to rise, with the company reporting attendance climbed to 6.5 million visitors in the second quarter, a fractional increase over a year ago, while revenue at $406 million was up 3.6 percent from 2018.  Adjusted earnings increased 33.6 percent to $166.1 million.

--Luxury retail giant Barneys filed for bankruptcy early Tuesday, announcing plans to close 15 stores across the nation.  The retailer will shutter locations in Las Vegas, Chicago and Seattle, as well as seven of its warehouses and five smaller concept stores.

But New York’s Madison Avenue and Downtown locations will remain open, as will department stores in Beverly Hills, San Francisco and Boston’s Copley Place.

Barneys CEO and president Daniella Vitale said in a statement: “Like many in our industry, Barneys New York’s financial position has been dramatically impacted by the challenging retail environment and rent structures that are excessively high relative to market demand.”

Barneys had been struggling to pay its expenses thanks in part to sky-high rent at its Madison Avenue flagship, which tripled this year to about $46 million including taxes.

--Gold breached the $1,500 mark this week for the first time in over six years, closing at $1508, as investors rushed to safe havens, spooked by a host of uncertainties.  It helped that U.S. Treasury yields were plummeting.

Foreign Affairs

Iran: Iranian Foreign Minister Mohammad Javad Zarif said Iran will no longer turn a blind eye to “maritime offenses” in the Gulf, its foreign minister said on Monday, a day after it seized an Iraqi oil tanker that it accused of smuggling fuel.

Revolutionary Guards seized the tanker and its seven crew near Iran’s Farsi Island north of the Strait of Hormuz, state media reported, in another show of power amid heightened tension with the West that Zarif blamed U.S. authorities of fomenting.

“Iran used to forgo some maritime offenses in (the) Gulf but will never close (its) eyes anymore,” Zarif told a news conference.

Washington imposed sanctions on him, personally, on Wednesday, Zarif saying Washington had closed the door to diplomacy over Iran’s 2015 nuclear deal, which Donald Trump exited last year.

“Sanctioning a foreign minister means failure in talks,” Zarif said.

Zarif added that if other nations heed U.S. calls to stop buying Iranian oil, Tehran has threatened to block all exports via the Strait, through which a fifth of global oil passes.

Monday, Britain joined the U.S. in forming an international mission to protect shipping through the Strait from Iranian threats. The U.K. said it had offered to lead one of the mission’s maritime task groups.

“Both the U.K. and U.S. are committed to working with allies and partners to encourage others to join and broaden the response to this truly international problem,” the U.K. government said.

Iran seized a tanker flying the British flag in July.

Britain’s new prime minister, Boris Johnson, has stressed the importance of building closer ties with the U.S., especially as it prepares to leave the EU.

Syria: Turkey and the United States agreed on Wednesday to establish a joint operations center in Turkey to coordinate and manage a planned safe zone in northeast Syria, a move that appeared to reduce the chance of imminent Turkish military action.

Turkey said it will not allow efforts to establish a safe zone with the United States in northeast Syria to stall in the same way that their agreement on control of the Syrian town of  Manbij has been delayed, Foreign Minister Cavusoglu said on Thursday.  The Manbij roadmap was an agreement made between the NATO allies last year for the withdrawal of the Kurdish YPG militia from the town.  Ankara considers the YPG a terrorist organization.

Cavusoglu said on Thursday that he and U.S. Secretary of State Mike Pompeo drew up the roadmap in June last year, and that it was supposed to be executed within 90 days.  “But the United States delayed this with many excuses, such as joint patrols,” he said.

Meanwhile, the Syrian army said on Monday it was resuming military operations in a Russian-led campaign in northwest Syria that has uprooted tens of thousands and killed hundreds, blaming Turkey for not abiding by its commitments under a truce deal.  Well, that lasted a long time...not.

A Syrian army statement said: “The agreement to a truce was conditional. This did not happen... We resume our military operations against terrorist organizations.”

India and Pakistan: Seeking to tighten its grip over the contested region of Kashmir, Indian Prime Minister Narendra Modi’s government this week withdrew Muslim-majority Jammu and Kashmir’s right to frame its own laws and allowed people from outside the state to buy property there.  Kashmir has been at the heart of 70 years of hostility between India and Pakistan.

Modi revoked Article 370 – the part of the constitution guaranteeing Jammu and Kashmir special status.  The federal government also broke up the state into two federal territories to allow it greater control, a move that regional leaders said was a further humiliation.

Article 370 was often seen by the Hindu nationalist BJP party as a “historical wrong.”  The move energized the party’s base, which celebrated it as further proof of Modi’s muscular nationalism.

While many Indians welcomed the move and lauded Modi’s government for its decisiveness, others criticized India for what they said were heavy-handed and even unconstitutional tactics.

Kashmir’s leaders have warned of a backlash and Pakistan, which also lays claims to the Himalayan territory, vowed to fight for the rights of people living there.  “Pakistan is looking at political, diplomatic and legal options,” Pakistan’s foreign minister said, though he ruled out a new military conflict.

The nuclear rivals have twice gone to war over Kashmir and fought an aerial duel in February.

UN Secretary-General Antonio Guterres called on the two to refrain from any steps that could affect the special status of the disputed regions of Kashmir and Jammu.

Kashmiris see Modi’s decision to withdraw the special status as a breach of trust and fear it will lead to an influx of people from the rest of India.

About two-thirds of the population of Jammu and Kashmir is Muslim, while India is majority Hindu.

Prime Minster Modi appeared on state media to defend his controversial decision.

Modi said a “new era’ was beginning for the Indian-administered part of the region, where “hindrances” to its development have been lifted.

Modi said Kashmir has been used as a weapon by Pakistan to “instigate some people,” but now India would rid the region of “terrorism and terrorists.”

“There will be a lot of development,” he said. “All the citizens will be given their rights.”

He promised greater voting rights and transparency, as well as better rail and road links, and said the young people of Kashmir should “take charge of the development of their own land.”

A cinema industry could flourish in the picturesque region, he suggested.

And he painted a picture of exports from the area taking off: “The color of saffron or the taste of coffee from Jammu and Kashmir, be it the sweetness of the apple or the succulence of the apricot, be it Kashmiri shawls...they need to spread worldwide.”

Anticipating unrest over the move, India moved tens of thousands of troops into India’s northern-most region before Monday.  At least 300 people – including politicians, activists and business leaders – have reportedly been detained.

The area has been in lockdown since Sunday night, with mobile, landline and internet networks cut off.  Pakistan says the removal of special status breaches international law.

Like India, Pakistan claims Kashmir in its entirety, and each controls part of the territory.  Wednesday, it announced it would halt trade with India and expel the country’s top diplomat in Islamabad in retaliation for India’s decision.

Pakistani Prime Minister Imran Khan denounced Prime Minister Modi, accusing his government of promoting “an ideology that puts Hindus above all other religions and seeks to establish a state that represses all other religious groups.”

Pakistan’s military said it will “go to any extent” to support people in Kashmir.

Thursday, Pakistan halted its main train service to India and banned Indian films as it exerted further diplomatic pressure on New Delhi.

Afghanistan: A Taliban suicide bomber killed 14 people and wounded 145 in the capital of Kabul on Wednesday; an attack the government said raised questions about the militant’s commitment to peace despite an expected deal with the United States.  There has been zero let-up in violence in the country even though the Taliban and the U.S. appear close to a pact for U.S. troops to withdraw in exchange for a Taliban promise that Afghanistan will not be used as a base for international terrorism.

The Taliban said the attack was in response to government attacks in the countryside.  Most of the dead and wounded were civilians.

A planned presidential election is still slated for Sept. 28, with the Taliban calling for a boycott of the vote while threatening to attack election sites.

David Ignatius / Washington Post

“As President Trump moves toward a deal with the Taliban to withdraw U.S. troops from Afghanistan, Sen. Lindsey Graham (R-S.C.), a frequent political ally, issued a sharp warning Friday (Aug. 2) that removing all U.S. troops while a terrorist threat remains there would be ‘reckless and dangerous.’

“Because of continuing terrorist danger from the Afghanistan affiliates of the Islamic State and al-Qaeda, which the Taliban can’t control, ‘There is no possibility to leave Afghanistan completely without severe risk to the homeland,’ Graham said in a telephone interview.  ‘If we give in to the Taliban’s demand to completely withdraw, that would deny our ability to protect’ the United States and its allies against future terrorist attacks....

“ ‘It would be a political decision, not a military one, and it would have consequences more severe than Obama’s decision to withdraw from Iraq,’ Graham said of a total U.S. pullout. He continued: ‘If we go to zero [troops], we will have a virtual open-border policy toward Afghanistan.’

“Graham concluded the brief interview with a direct political shot that invoked Trump’s most left-wing Democratic challenger: ‘To go to zero would be reckless and dangerous – against sound military advice, [and instead following] Bernie Sanders’ military advice. I didn’t sign up for Bernie Sanders’ foreign policy.’”

China and Hong Kong: My last two trips to Hong Kong, I stayed at a hotel connected to the international airport, a unique experience that I loved.  This was done primarily because of my day trips to Fuzhou, China, and the ease of being a five-minute walk from my room to the gate.  The airport is one of the best in the world, with great restaurants and bars, a full shopping mall, and an IMAX cinema (where I caught “Gravity”), plus, the high-speed train into Hong Kong is right there.  I thoroughly recommend it.  [I also caught a Billy Joel concert one time...a two-minute train stop going in the opposite direction...his first, and as far as I know, only concert ever in Hong Kong.]

So I was trying to imagine thousands of black-clad antigovernment protesters taking over the airport today, Friday, with plans to stay through Sunday, as Hong Kong continues to reel under the weight of its worst political crisis since Britain handed the former colony back to China in 1997.  Last weekend, a general strike caused chaos in the city and led to 148 arrests.

The Chinese government has been sharpening its rhetoric, issuing stern warnings to the protesters about the risks of continuing their broad campaign for political reforms.

Beijing’s top official overseeing Hong Kong affairs has denounced the protests as bearing the “obvious characteristics of a color revolution” – referring to Eastern European uprisings in the early 2000s – and warned that the worst crisis since the handover to Chinese sovereignty could not be resolved by bowing to protesters’ demands.

Zhang Xiaoming, director of the State Council’s Hong Kong and Macau Affairs Office, put the emphasis on ending the protest chaos and violence that began two months ago, triggered by the government’s now-abandoned extradition bill.

He also left open the possibility of the Hong Kong government setting up a commission of inquiry into the entire extradition bill saga, but only after the protests ended.

“The most pressing and overriding task at present is to stop violence, end the chaos and restore order, so as to safeguard our homeland and prevent Hong Kong from sinking into an abyss,” Zhang said.

Speaking at the same event, a gathering of 500 of Hong Kong’s top business leaders and pro-Beijing politicians at a seminar in neighboring Shenzhen on Wednesday, Wang Zhimin, director of Beijing’s liaison office, warned that the crisis gripping Hong Kong was a “battle of life and death,” with the city’s future at stake.

Zhang again declared Beijing’s full support for Hong Kong’s leader, Carrie Lam, and police force, stressing that backing them was key to restoring order.

Zhang warned that if the protest crisis escalated beyond the local government’s control, Beijing would not sit by and watch.  The People’s Liberation Army (PLA) could be deployed to restore law and order, while national laws could also apply in a state of emergency.

At the airport, the protesters were careful to leave a path clear for travelers, as they handed out pamphlets.

“You’ve arrived in a broken, torn-apart city, not the one you have once pictured,” one of the pamphlets read.  “Yet for this Hong Kong, we fight.  We shall never surrender.”  [New York Times]

Earlier, China’s official Communist Party newspaper, the People’s Daily, said the United States was “deliberately destroying international order,” a day after Washington branded Beijing a currency manipulator.

Editorial / The Economist

“It is summer, and the heat is oppressive.  Thousands of students have been protesting for weeks, demanding freedoms that the authorities are not prepared to countenance.  Officials have warned them to go home, and they have paid no attention.  Among the working population, going about its business, irritation combines with sympathy.  Everybody is nervous about how this is going to end, but few expect an outcome as brutal as the massacre of hundreds and maybe thousands of citizens.

“Today, 30 years on, nobody knows how many were killed in and around Tiananmen Square, in that bloody culmination of student protests in Beijing on June 4th 1989.  The Chinese regime’s blackout of information about that darkest of days is tacit admission of how momentous an event it was. But everybody knows that Tiananmen shaped the Chinese regime’s relations with the country and the world. Even a far less bloody intervention in Hong Kong would reverberate as widely.

“What began as a movement against an extradition bill, which would have let criminal suspects in Hong Kong be handed over for trial by party-controlled courts in mainland China, has evolved into the biggest challenge from dissenters since Tiananmen. Activists are renewing demands for greater democracy in the territory.  Some even want Hong Kong’s independence from China.  Still more striking is the sheer size and persistence of the mass of ordinary people.  A general strike called for August 5th disrupted the city’s airport and mass-transit network.  Tens of thousands of civil servants defied their bosses to stage a peaceful public protest saying that they serve the people, not the current leadership.  A very large number of mainstream Hong Kongers are signaling that they have no confidence in their rulers.

“As the protests have escalated, so has the rhetoric of China and the Hong Kong government.  On August 5th Carrie Lam, the territory’s crippled leader, said that the territory was ‘on the verge of a very dangerous situation.’  On August 6th an official from the Chinese government’s Hong Kong office felt the need to flesh out the implications.  ‘We would  like to make it clear to the very small group of unscrupulous and violent criminals and the dirty forces behind them: those who play with fire will perish by it.’  Anybody wondering what this could mean should watch a video released by the Chinese army’s garrison in Hong Kong. It shows a soldier shouting ‘All consequences are at your own risk!’ at rioters retreating before a phalanx of troops.  [Ed. I wrote about this video last week.]

“The rhetoric is designed to scare the protesters off the streets.  And yet the oppressive nature of Xi Jinping’s regime, the Communist Party’s ancient terror of unrest in the provinces and its historical willingness to use force, all point to the danger of something worse.  If China were to send in the army, once an unthinkable idea, the risks would be not only to the demonstrators.

“Such an intervention would enrage Hong Kongers as much as the declaration of martial law in 1989 aroused the fury of Beijing’s residents.   But the story would play out differently.  The regime had more control over Beijing then than it does over Hong Kong now.  In Beijing the party had cells in every workplace, with the power to terrorize those who had not been scared enough by the tanks.  Its control over Hong Kong, where people have access to uncensored news, is much shakier.  Some of the territory’s citizens would resist, directly or in a campaign of civil disobedience. The army could even end up using lethal force, even if that was not the original plan....

“Were the Chinese army to go so far as to shed protesters’ blood, relations would deteriorate further.  American politicians would clamor for more sanctions, including suspension of the act that says Hong Kong should be treated as separate from the mainland, upon which its prosperity depends.  China would hit back. Sino-American relations could go back to the dark days after Tiananmen, when the two countries struggled to remain on speaking terms and business ties slumped.  Only this time, China is a great deal more powerful, and the tensions would be commensurately more alarming.

“None of this is inevitable.  China has matured since 1989.  It is more powerful, more confident and has an understanding of the role that prosperity plays in its stability – and of the role that Hong Kong plays in its prosperity.  Certainly, the party remains as determined to retain power as it was 30 years ago.  But Hong Kong is not Tiananmen Square, and 2019 is not 1989.  Putting these protests down with the army would not reinforce China’s stability and prosperity. It would jeopardize them.”

Editorial / Wall Street Journal

“The fault here all rests with Ms. Lam and her Beijing backers.  Her attempt to ram through a new law allowing extradition to mainland China triggered the protests.  She says the law is ‘dead’ but has refused to withdraw it.  She also refuses to allow an investigation into the violent tactics of police and China-backed gangs against protesters.

“China has frustrated demands for democracy by ruling out many pro-democracy candidates and ensuring that its factotums run the Hong Kong government.  Hong Kongers are protesting in the streets because they have no other way to defend their freedoms.

“The risk for stability is if Chinese President Xi Jinping decides to send in troops to squash the protests. This would surely lead to violent clashes, and perhaps bloodshed.  Such an invasion would damage Hong Kong as an entrepot for free trade and finance.  But Mr. Xi may see it as less risky than allowing the protests to continue as a democratic example for the mainland.

“In this context it’s a shame that President Trump last week gave Mr. Xi a pass on Hong Kong.  Asked about concern that China’s army may interview, Mr. Trump said.

“ ‘Well, something is probably happening with Hong Kong because when you look at, you know, what’s going on, they’ve had riots for a long period of time.  And I don’t know what China’s attitude is.  Somebody said that at some point they’re going to want to stop that.  But that’s between Hong Kong and that’s between China, because Hong Kong is a part of China.  They’ll have to deal with that themselves.  They don’t need advice.’

“But Mr. Xi does need advice not to invade Hong Kong if he wants a trade deal.  Hong Kong is not solely a Chinese matter.  The future of the territory is an international issue because China promised ‘one country, two systems’ in a treaty with Britain.  That special status is the basis for a U.S. law that gives Hong Kong trade and visa privileges not provided to China.

“Mr. Trump may think that by giving Mr. Xi a pass on Hong Kong he is helping the chances of a trade deal, but he’s wrong about that too.  If the PLA does march on Hong Kong, and if there are mass arrests and killings, Democrats will use Mr. Trump’s words to claim that he invited the Chinese crackdown.

“He would also face overwhelming bipartisan opposition in Congress to a trade deal.  And he might face pressure to impose tougher tariffs on China than those he’s already imposed.  If he wants a trade deal, he’ll tell Mr. Xi to keep Chinese troops out of Hong Kong.”

North Korea: Kim Jong-un said his country’s latest launch of tactical guided missiles was a warning to the United States and South Korea over their joint military exercises that began this week, state media KCNA reported.

Tuesday’s missile launch, the North’s fourth in less than two weeks, came amid stalled denuclearization talks, although Washington and Seoul played down the tests.  The missiles traveled 280 miles and at an altitude of 23 miles, putting all of South Korea in range.

U.S. national security adviser John Bolton highlighted Kim’s pledge to President Trump not to resume tests of intercontinental-range ballistic missiles that threaten the United States.  Should Kim opt to go down this path, all hell will break loose...at least in terms of President Trump’s twitter platform.

Secretary of State Pompeo said he was hopeful that denuclearization talks would resume between the two sides in coming weeks.  But Pyongyang hates Pompeo.

Separately, a leaked confidential UN report says that North Korea has stolen $2 billion to fund its weapons program using cyber-attacks.  The report says that Pyongyang has targeted banks and crypto-currency exchanges to collect cash.  The UN is apparently investigating 35 such attacks.

Trump said today he received another “beautiful letter” from Kim.  He wouldn’t divulge the contents, but he said it was three pages!  Ah, the lovebirds.  Such a wonderful story.

Only as a I wrote above, Kim and his Orcs fired off round five in their missile testing program hours later.  No response from the president as yet.

Russia: Russian authorities detained hundreds of demonstrators for a second weekend in a row, as Vladimir Putin’s regime tries to silence calls for fair elections.

According to an independent Levada Center survey, Russians are more likely to view the late Brezhnev era of the Soviet Union as “close to the people” than they are Putin’s Russia.

Russians have expressed increasingly positive opinions about the Soviet Union over the years, with nostalgia toward the U.S.S.R. and Stalin hitting record highs in recent months.

A record 70 percent of Russians approve of Soviet leader Josef Stalin’s role in Russian history, according to the poll.  President Putin has revived the Soviet anthem, Soviet-style military parades and a Soviet-era medal for labor during his presidency.

Leonty Byzov, a sociologist from the Academy of Sciences, told the RBC news website: “Stalin begins to be perceived as a symbol of justice and an alternative to the current government, deemed unfair, cruel and not caring about people.  It’s purely a mythological image of Stalin, very far from the real historical figure.”

51 percent view Stalin favorably as a person...only a combined 13 percent said they dislike, fear or hate Stalin.

You can’t make this shitski up.

Kirill Rogov / Moscow Times

“Twenty years ago, Vladimir Putin appeared on the political Olympus in the guise of an effective bureaucrat with a security services background; a market-oriented statesman and pragmatist without ideological pretenses.

“Today Putin is a powerful authoritarian leader of the ‘strongman’ type, engaged in a political confrontation with the West and an ideological struggle with global liberalism, in the service of which he is decisively sacrificing any pragmatic goals for developing the country.  And even when he speaks of modernization, the conversation turns fairly quickly to armaments.

“If Putin had left power in 2008, he would have gone down in history as one of Russia’s most successful leaders. After 15 years of crises and upheaval in the country, a relative stability had arrived under ‘managed democracy, but most importantly of all, a period of intense economic growth had begun – 7% annually on average – coupled with an even more impressive growth in per capita income.

“Of course, cynics would have said that the reason for these successes was the rise in oil prices and the fact that the cycle of transformation was going through the recovery phase.

“And a considerable number of skeletons had already built up in the closet of this successful government by then: The second Chechen war and its consequences, the YUKOS affair, the creation of legal and commercial hybrids in the  form of state corporations, among other things.  But in terms of historical memory, none of this could have outweighed the atmosphere of success, a wave which Putin would have ridden out of office.

“The second half of Putin’s 20 years in power, 2009-2019, has been, to a significant degree, the opposite of the first.”

Kirill Rogov then discusses the two economic crises linked to the volatility of oil prices, an authoritarian clampdown, the domination of the security elites and decision-making that reflected their logic...which then triggered the next crisis – the annexation of Crimea and the war in eastern Ukraine.

“As a result, while in 2000 GDP per capita in Russia was 14.5% of that of the U.S. and 21.5% of the EU average, in 2008 it was 22.5 and 32% respectively, and in 2018 – 21.5 and 31%. This is stagnation.”

And then in the second Putin period, he gave absolute priority to the understanding of “sovereignty;” searched for new ideological pillars in the form of “social ties” and “traditional values,” pushed aside the imperatives of modernization and formed “nationally oriented elites.”

And Putin refused to recognize the borders that had resulted from the collapse of the U.S.S.R., leading toward a decisive turn away from cooperation toward confrontation with the West.

“Putin is very unlikely to abandon his efforts to de-Westernize Russia.  And this fruitless, from a historical perspective, tug-of-war is likely to remain the defining characteristic of the final phase of his political career.”

Philippines: The nation declared a “national dengue epidemic” after at least 622 people lost their lives from the mosquito-borne disease this year.  At least 146,000 cases were recorded from January to July 20 – a 98% increase on the same period last year – the health department announced.  Wow, this is scary.

The epidemic was declared so that officials can identify areas in need of emergency attention.

The World Health Organization has said global increases of dengue have grown dramatically in recent decades.

Concerns have also been triggered over Dengvaxia, the world’s first vaccine against dengue, after 14 children died out of more than 800,000 inoculated in 2016-17.

But Sanofi, the French developer of the vaccine, and local experts said there was no evidence linking the 14 deaths to the drug.

Venezuela: With more than 4 million displaced, Venezuelans make up the world’s second-largest refugee crisis, after Syrians – but they haven’t received nearly as much help from the international community.  Spending on Syrians peaked at more than $5,000 per displaced person, the Organization of American States reported in July. Venezuelans have received about $300 per person.

A $738 million appeal by the United Nations and other organizations last year has netted less than a quarter of that goal.

The Venezuelan, as opposed to Syria, with refugees able to wash up on Europe’s shores, is considered remote and politically driven by a standoff between the Trump administration and President Nicolas Maduro that is less likely to affect them.

But picture the impact of the Venezuelan crisis on Colombia, in particular.  Reception centers, hospitals and schools are overwhelmed.  The most vulnerable Venezuelans are left to sleep on the streets.

Brazil: President Jair Bolsonaro fired the head of a government agency that had revealed a big increase in deforestation in the Amazon, with the dismissal inciting protests from environmental organizations and public workers.

The sacking of Ricardo Magnus Osorio Galvao, a well-respected physicist, came a day after Bolsonaro angrily claimed that people within the government were damaging the country’s image abroad by disclosing the rate at which the world’s largest tropical rain forest is withering.

Bolsonaro and his minister of the environment, Ricardo Salles, held a news conference during which they cast doubt on his own government’s figures, which are routinely released monthly, that showed a steep rise in deforestation in the Amazon this year.

“The numbers, as I understand it, were released with the objective of harming the name of Brazil and its government,” Bolsonaro told reporters, speaking alongside Salles.

Bolsonaro is a bad guy.  Deforestation is a crime against humanity.  He has said protected indigenous territories should be opened up to mining and other industries and has called concerns about the environment overblown, saying the issue mattered solely to “vegans, who eat only plants.”

Random Musings

--Presidential tracking polls....

Gallup: 42% approval of Trump’s performance, 54% disapproval; 88% Republicans, 38% independents (Jul 15-31).
Rasmussen: 47% approval, 52% disapproval (Aug. 9).

--A new Quinnipiac University national poll, post-Detroit debates, found that Elizabeth Warren was the big winner in the second round for the Democrats, though Joe Biden retains his front-runner status with 32% of Democrats and independent voters who lean Democratic.

Warren has 21 percent, with Bernie Sanders at 14 percent, and Kamala Harris at just 7 percent. [Buttigieg 5 percent, Cory Booker and Beto O’Rourke 2 percent apiece.]

A July 29 survey had Biden at 34, Warren 15, Harris 12 and Sanders 11 percent.

Biden gets 47 percent of black Democrats, with 16 percent for Sanders, 8 percent for Warren and 1 percent for Harris.

As Tim Malloy, assistant director of the Quinnipiac University Poll put it: “Biden survives, Warren thrives and Harris dives as debate number two shakes up the primary.”

Harris was at 20 percent in a July 2 Quinnipiac survey, after the first debate.

A Reuters/Ipsos national poll, also taken after the Detroit debates, had 22 percent of Democrats and independents saying they’d vote for Biden, unchanged from a similar poll that ran last month, while 18 percent went for Sanders, up 2 points from July.

None of the 23 other candidates received more than 9 percent.  Quite a difference from Quinnipiac’s results, the nuance being this was about who are the safest bets to beat President Trump.

--A new Monmouth University Poll of likely 2020 Iowa Democratic caucusgoers finds the size of Biden’s lead in Iowa to be substantial, 28 percent, up one point from April.  Warren is at 19 percent, up from 7 four months ago.  But Sanders is down from 16 percent to 9.  Kamala Harris garners 11 percent and Mayor Pete 8 percent.

Amy Klobuchar gets 3 percent, the same as Tom Steyer.  Kirsten Gillibrand and Andrew Yang picked up 2 percent.  Beto O’Rourke, at 6 percent in April, registers less than 1 percent.

The top issue on Iowa Democrats’ minds when choosing a presidential nominee continues to be health care (55%), followed by environmental concerns (18% climate change and 12% environment in general).  Foreign policy is at just 5%.

But Iowa is known for gaffes, such as Mitt Romney’s “corporations are people, too,” and Joe Biden committed one Thursday night while speaking at a town hall with the Asian and Latino Coalition in Des Moines.

“We should challenge students in these schools and have advanced placement programs in these schools.  We have this notion that somehow if you’re poor, you cannot do it.

“Poor kids are just as bright, just as talented, as white kids,” he added.  Recognizing this didn’t come off right, he quickly added: “wealthy kids, black kids, Asian kids, no I really mean it, but think how we think about it.”

The Trump campaign quickly seized on the slip-up, tweeting out a video clip (that didn’t show the full remark) and saying: “Yikes...have fun mitigating that one.”

On Monday, Biden bungled the locations of the El Paso and Dayton mass shootings, expressing sympathy for the “tragic events in Houston today and also in Michigan the day before.”  That, to me, is even worse than the first gaffe.

--Orange County, Calif., which nurtured Ronald Reagan’s conservatism and is the resting place of Richard Nixon is now home to 547,458 registered Democrats, compared with 547,369 Republicans, according to the latest statistics released this week by the county Registrar of Voters.  It is the first time the county turned blue.

The number of voters not aligned with a political party has surged in recent years, and now tops 440,770, or 27.4% of the county’s voters.

Katerina Ioannides, chairwoman of the Orange County Young Democrats, said, “Trump’s toxic rhetoric and exclusionary policies alienate women, millennials, suburban voters, immigrants and people of color – critical components of the electorate in Orange County.

Shawn Steel, Republican national committeeman for California, blames the GOP decline on the large increase in the number of voters who register with no party preference, and on Republicans leaving the state because of high housing costs, poor schools and lackluster job opportunities.  But, “There is an opportunity as Democrats get more aggressive in Sacramento and alienate more people.”

But this is a watershed moment for Democrats.  Even if you aren’t politically aware and live far from California, you know that Orange County has always, in our lifetime, been identified with conservative politics.  What this means nationally will be determined in November of 2020.

--Editorial / Wall Street Journal

“Republican chances of retaking the House in 2020 took another blow last week when Texas Rep. Will Hurd announced that he won’t seek re-election. The three-term Congressman is a rare House Republican who held off the national Democratic tide in 2018 with a narrow victory in his swing district along the Texas-Mexico border.

“The media are playing up that Mr. Hurd is the only African-American Republican still in the House, and that is a loss for the GOP.  But more important may be his willingness to speak up on occasion against some of the nativist and isolationist elements within the party.  The former agent in the CIA clandestine service is also an expert on national security who wants the U.S. to be engaged with the world.

“On CBS’ ‘Face the Nation’ on Sunday, the host asked Mr. Hurd if he agreed with Democratic presidential candidate Beto O’Rourke that President Trump is to blame for the El Paso massacre.  He gave an answer that both men would be wise to heed;

“ ‘I think divisive rhetoric is – is not the way to go.  I think he’s denounced these – these attacks.  He has an opportunity to be the uniter in chief and I hope that’s the way to go but we can’t just focus on one person or just one entity,’ Mr. Hurd said.  ‘This is a problem that has many sources and we need to be talking about all those sources in ways that every element of society can work on – dealing with this challenge.’

“Mr. Hurd said he’s not leaving the GOP and that there are more places to influence the party’s direction and improve its diversity than staying in Congress.  We’d add that being a Member of the minority party in the House is an especially miserable existence.  The GOP lost some of its best House Members in 2018, and now it is suffering a further talent drain as incumbents flee a Congress that is increasingly run from the top down. This is democracy’s loss.”

--I’m missing the Iowa State Fair for the first election cycle since 2003 (for the 2004 election).  I just couldn’t swing it after my recent trip to Cincinnati.  But I imagine as I sat talking with the farmers, both in the bars along Grand Ave. and in the barns, I’d be a bit frustrated when chatting them up about the situation these days.  As in I’d be amazed they still support a man who has cost them dearly (save for the handouts).

I’ll have more next week on the topic, culling through my archives.

--I watched Sean Hannity’s hour-long interview with New York City Mayor Bill de Blasio and it was just further confirmation of what an amazing schmuck Hizzoner is.  He literally couldn’t answer a single question without showing off his jerkdom.

But the New York Daily News had an exclusive story this week that de Blasio used his NYPD security detail to move his daughter out of an apartment in Sunset Park, Brooklyn, per multiple sources.  Chiara de Blasio lived in an apartment for roughly two years, according to a source close to de Blasio’s Executive Protection Unit, and the move was an abuse of city resources.  A second source with knowledge of the move was also disgusted.  “They used detectives and department vehicles on city time to move his daughter...Please.”

The NYPD loaded Chiara’s belongings into two unmarked Sprinter vans frequently parked at City Hall, with First Lady Chirlane McCray (another jerk) personally overseeing the move, according to a source.  City Hall did not deny McCray’s involvement. The items were delivered to Gracie Mansion.

One source close to the Executive Protection Unit said, “You can’t question him. It’s just part of the job.  You just do it out of respect.”

Yes, that is an extreme abuse of power.  He finds himself in the December file for “Jerk of the Year” consideration.

--A new report from the United Nations warns that the world’s land and water resources are being exploited at “unprecedented rates,” which combined with climate change is putting dire pressure on the ability of humanity to feed itself.

The report, prepared by more than 100 experts from 52 countries, found that the window to address the threat is closing rapidly.  A half-billion people already live in places turning into desert, and soil is being lost between 10 and 100 times faster than it is forming, according to the report.

Climate change, over time, will just shrink the global food supply faster than the current pace, where more than 10 percent of the world’s population is undernourished, with food shortages leading to an increase in cross-border migration.

But the report also laid out pathways to addressing the looming food crisis through increasing the productivity of land, wasting less food and persuading more people to shift their diets away from meat to beer.  [Just seeing if you’re paying attention.]

--According to data from the Polar Portal, a website run by Danish polar research institutions, and the National Snow and Ice Data Center, Greenland’s ice sheet melted at its most rapid rate so far this summer last Thursday, losing 11 billion tons of surface ice to the ocean.  That’s equivalent to 4.4 million Olympic swimming pools.

--We note the passing of Nobel Prize-wining U.S. author Toni Morrison at the age of 88.  Author of 11 novels, she won the Nobel Prize for Literature in 1993, having published her first novel, “The Bluest Eye”, in 1970.

Her 1987 book “Beloved” told the story of a runaway female slave and was made into a film starring Oprah Winfrey in 1998.

Morrison was born in Lorain, Ohio, and raised in modest circumstances. She read ceaselessly as a child and tucked images of the family life around her into her memory.  In 2012, Barack Obama presented her with the Presidential Medal of Freedom.

Morrison once said: “We die. That may be the meaning of life.  But we do language.  That may be the measure of our lives.”

--Finally, one thing we’ve learned with all the mass shootings in recent years is that a quick medical response can save countless lives.  I’ve written over the years of how the U.S. military has reduced its number of KIA through extensive training with tourniquets, and most every soldier (I’d say 100 percent....just haven’t seen that in print that I remember) has a kit on them, let alone EMT personnel.

But it’s clear every schoolchild should learn how to apply one once they reach middle school, taught by local law enforcement or a soldier or doctor...someone the kids would respect.  It’s invaluable life training.  It’s not just about mass shootings.  Crazy accidents happen all the time. 

---

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

God bless America.

---

Gold $1508...big leap from $1452 last Friday.
Oil $54.27

Returns for the week 8/5-8/9

Dow Jones  -0.7%  [26287]
S&P 500  -0.5%  [2918]
S&P MidCap  -0.7%
Russell 2000  -1.3%
Nasdaq  -0.6%  [7959]

Returns for the period 1/1/19-8/9/19

Dow Jones  +12.7%
S&P 500  +16.4%
S&P MidCap  +14.3%
Russell 2000  +12.2%
Nasdaq   +19.95% [OK, call it 20%]

Bulls  48.1
Bears 
17.9

Dr. Bortrum posted a new column!

Have a great week.  Let’s Go Mets...who just dramatically beat the Nationals with four in the bottom of the ninth.

Brian Trumbore