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Week in Review

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03/09/2019

For the week 3/4-3/8

[Posted 10:30 PM ET, Friday]

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Edition 1,039

As I go to post tonight, there are growing signs that North Korea may be preparing a ballistic missile test or satellite launch, according to U.S. experts analyzing the latest satellite imagery.  I go into the topic in great detail below, but let’s hope the report isn’t true.  I shudder to think how President Trump may respond to such an event.

Otherwise this was a week that had it all, with Democrats clearly overreaching with their document demands.  All of us should understand the principle of congressional oversight, and elections have consequences, but the Democrats are making a huge mistake by not first letting the Mueller investigation play out, and, second, doing the same with the Southern District of New York, assuming the SDNY acts in a timely fashion.

Aside from Mueller and the SDNY, Democrats should be focused on just one thing at this time, going through the process to obtain President Trump’s tax returns, knowing that this could lead to the case going up to the Supreme Court.

Meanwhile, on Trump’s declaration of a national emergency, Sen. Rand Paul (R-Ky.) has become the fourth Republican to throw his support behind a resolution that would block it, joining fellow Republican Sens. Susan Collins (Maine), Lisa Murkowski (Alaska) and Thom Tillis (N.C.) in opposing Trump’s move, which will mean a veto from the president, his first; the Senate then not having the votes to override it.   Nonetheless, a big loss for Trump.

On a different topic, the global economy is slowing.  The Organization for Economic Cooperation & Development cut its forecast for global growth again in 2019 to 3.3% from an earlier forecast of 3.5% in November.

“High policy uncertainty, ongoing trade tensions, and a further erosion of business and consumer confidence are all contributing to the slowdown,” said the OECD in its report. Substantial policy uncertainty remains in Europe, including over Brexit. “A disorderly exit would raise the costs for European economies substantially.”

All covered in depth below.  With apologies to Chris Cuomo, let’s get after it....

Trump World...Hanoi Aftermath

New satellite images of North Korea suggest it is restoring a rocket launch site it had pledged to dismantle, according to analysts.  38 North, a Washington-based North Korea think tank, said the images showed that structures had been rebuilt sometime between Feb. 16 and March 2.  The Center for Strategic and International Studies released a separate report, also citing satellite imagery, that concluded North Korea was “pursuing a rapid rebuilding” at the site.

The images were taken two days after talks between Kim Jong Un and President Trump in Hanoi.

The Tongchang-ri site (Sohae) has been used for satellite launches and engine testing, never for ballistic missile launches.

Images last July appeared to show the North had begun to dismantle the site.

News of the rebuilding work was first reported by Yonhap news agency, which quoted South Korean lawmakers on details of a briefing by the country’s National Intelligence Service in Seoul.

Work at the site, which 38 North says began before the summit meeting between Trump and Kim, is seen by some experts as a sign that the North is unhappy about its failure to secure sanctions relief from the U.S. and is trying to pressure the U.S. for economic concessions.

North Korea could be setting up for a satellite launch, Pyongyang making the case that such launches aren’t covered by its moratorium on missile launches.  But the U.S. would no doubt view a satellite launch as a breach of Kim’s vow during his summits with Trump not to carry out launches.

“I would be very disappointed if that were happening,” President Trump told reporters in the Oval Office, when asked if North Korea was breaking a promise.  “It’s too early to see... It’s a very early report. We’re the ones that put it out. But I would be very, very disappointed in Chairman Kim, and I don’t think I will be, but we’ll see what happens.  We’ll take a look.  It’ll ultimately get solved.”

Trump also said: “We have a very nasty problem there.  We have to solve a problem,” while adding in apparent reference to Kim: “The relationship is good.”

The U.S. has left the door open for seeking tougher sanctions if Pyongyang refuses to give up its nuclear and missile forces and programs.

Secretary of State Mike Pompeo said on Monday he was hopeful he would send a delegation to North Korea in the coming weeks but that he had “no commitment yet.”

Meanwhile, the U.S. and South Korea confirmed they will no longer hold large-scale joint military exercises which have always infuriated North Korea.

President Trump tweeted this week: “The military drills, or war games as I call them, were never even discussed in my mtg w/Kim Jong Un of NK – FAKE NEWS! I made that decision long ago because it costs the U.S. far too much money to have those ‘games,’ especially since we are not reimbursed for the tremendous cost!”

Editorial / Wall Street Journal

“New satellite photos show North Korea may be prepping for another missile test after the summit in Hanoi.  That’s all the more reason for President Trump to rethink his cancellation of large military exercises with South Korea.

“ ‘We are not reimbursed for the tremendous cost!,’ he tweeted this week, and the Pentagon has canceled two large exercises with South Korea.  One is Foal Eagle that each year for four decades simulated a conventional ground conflict with air and naval participation. In 2017 some 3,600 troops joined 28,000 stationed in Korea for the exercise. The second is Key Resolve, which uses a computer simulation to set up a command headquarters that would be essential after a North Korean attack.

“The Pentagon says these demonstrations of force will be replaced with new headquarters exercises and ‘revised field training programs.’  By one count the U.S. has canceled at least nine exercises with the South Koreans, though smaller joint exercises continue.

“Mr. Trump claims that the exercises cost $100 million, but where he got this number is anyone’s guess.  The Pentagon hasn’t disclosed Foal Eagle’s costs, which are hard to determine across service branches.

“Last year the Pentagon said a canceled August exercise would have run about $14 million. Thomas Spoehr, who runs the Heritage Foundation’s defense center, says this sounds about right. The military pays personnel whether they’re training or not, and a U.S. carrier group is often deployed in the Western Pacific.

“Recalibrating the exercises won’t immediately compromise military readiness, and the brass say smaller exercises won’t sacrifice capability.  But there are trade-offs.  Nothing simulates the stresses of war like a larger effort on land, sea and air.

“One reason for large annual exercises is the high turnover of U.S. personnel in Korea.  Service members are constantly rotating to new locations, new jobs or both.  North Korea’s standing force of one million doesn’t have this problem.

“As for cost-sharing, South Korea has ‘invested more in its defense over the past 15 years than it had in the previous 50,’ as Gen. Robert Abrams, who commands U.S. forces in Korea, told Congress last month.  Its investment ‘exceeds the commitment of other allies and regional partners.’...South Korea also shares the cost of stationing U.S. troops on the peninsula....

“Mr. Trump has rightly argued that Barack Obama squeezed defense so much that core competencies like routine training and maintenance suffered.  Yet exercises are among the highest demonstrations of service training and proficiency.

“The military does sometimes burn money like it’s jet fuel, including procurement nightmares such as the F-35 fighter. But learning how to work with allies and stress-testing U.S. forces is not a waste of money.  Exercises are a crucial signal of resolve to North Korea and are essential to deterrence in one of the world’s most dangerous corners.”

Jackson Diehl / Washington Post

“By now, Trump’s shallow strategy for dealing with adversaries such as Kim has become painfully obvious: First hit them with sanctions and insults, then shower them with praise, excuse their abuses and hope that presidential charm will prompt them to make concessions their regimes have rejected for decades.

“The diplomatic disaster in Hanoi ought to make clear once and for all that the gambit won’t work – not even on the 35-year-old ruler of one of the world’s most isolated states.  The only apparent effect of Trump’s wooing of Kim was to make the dictator believe he could sell the president on a decidedly one-sided bargain that would have lifted most sanctions on North Korea while allowing it to keep its nuclear arsenal.

“The failure goes beyond Trump’s gross overestimation of his dealmaking ability.  The administration’s abrupt reversal on North Korean human rights shows that it fundamentally misunderstands the challenge presented by the world’s last Stalinist regime.  The president’s theory is that Kim will trade his nuclear arsenal for the prospect of transforming North Korea’s economy so that it produces the prosperity seen in the South.

“As U.S. intelligence professionals have tried to explain to Trump, Kim prefers holding nukes to feeding his people.  He knows that his regime would not exist without them; nor could the totalitarian system survive economic modernization....

“The simple truth is that the North Korean regime, its nuclear arsenal and its system of repression are intricately linked.  If Kim were serious about denuclearization, there would be signs of an internal easing.  There aren’t....

“Trump’s diplomacy with North Korea has been revealed as a fantasy. Real progress would require a restart based on patient diplomacy, ramped-up pressure, and a recognition that the problem entails not just nuclear reactors and missile factories, but torture chambers and concentration camps.”

Trumpets

--Paul Manafort, the former Trump campaign manager, was sentenced to 47 months in prison on Thursday in the financial fraud case that left his power-broker reputation, and grand lifestyle, in tatters.

But Judge T.S. Ellis III of the United States District Court in Alexandria, Va., declined to come anywhere near the federal sentencing guidelines that would have put the 70-year-old Manafort in prison for the rest of his life.

For nearly two years, prosecutors have pursued Manafort on two tracks, charging him with more than two dozen felonies, including obstruction of justice, bank fraud and violations of lobbying laws.  But while he had agreed to cooperate in the case of Russian election interference, prosecutors said Thursday that Manafort provided little information of value in that inquiry.

Manafort, hoping for a pardon from President Trump, expressed no remorse, while the president said he felt “very badly” for the convicted felon.  “I think it’s been a very, very tough time for him.”

But during Thursday’s proceedings, Judge Ellis noted that while the case was prosecuted by Robert Mueller’s office, it was unrelated to his core mission of investigating Russian interference in the 2016 election.

Ellis noted the distinction, saying that Manafort was “not before this court for anything having to do with collusion with the Russian government to influence this election.”

So Trump, in both a tweet and in speaking with reporters today, then incorrectly suggested Ellis’ comments had cleared his campaign of wrongdoing.

“Both [Manafort’s] lawyer, a very respected man, and a highly respected judge, the judge said there was no collusion with Russia.”  Trump said he was “very honored” by the judge’s words, adding: “It’s a collusion hoax. It’s a collusion witch hoax. I don’t collude with Russia.”

Sen. Angus King (I-Maine) shot back during an appearance on CNN.

“This case doesn’t prove there was no collusion because that wasn’t the subject of the trial.”

--Michael Cohen filed a lawsuit on Thursday accusing the Trump Organization of breaking a contract and refusing to pay about $1.9 million in legal fees after Cohen began cooperating with federal prosecutors.

The lawsuit, filed in New York Supreme Court in Manhattan, said that the Trump Organization had agreed to pay Cohen’s attorney fees or related costs connected to his work with the Trump Organization but had failed to live up to that promise.

The Trump Organization lived up to the deal until sometime last May, according to the lawsuit. Then, in June, when Cohen began telling people close to him that he would be willing to cooperate with Mueller’s investigation, the Trump Organization stopped paying Cohen’s lawyers.

Separately, Cohen’s current attorney, Lanny Davis, told the New York Post that Cohen considered seeking a presidential pardon last year as part of a joint defense agreement Cohen had with the president after Cohen’s Manhattan office was raided in April 2018.

Davis said in a statement: “During that time period, he directed his attorney to explore possibilities of a pardon at one point with Trump lawyer Rudy Giuliani, as well as other lawyers advising President Trump.”

The discussion of a pardon was broached by Cohen’s lawyer at the time, Stephen Ryan, who spoke with Trump’s attorneys in the months after the raid.

The revelation about Cohen appears to conflict with his statement to the House Oversight Committee last week.

“I have never asked for, nor would I accept, a pardon from Mr. Trump,” Cohen told the committee.

Needless to say, President Trump is making hay of this, as I note in a tweet below.       

--Bill Shine, the former Fox News executive who joined the White House last summer to manage the president’s communications operation, has resigned and will move to the re-election campaign, which was  a surprise move.  There is clearly more to the story.

Shine’s service as deputy White House chief of staff was seen as emblematic of how closely Trump has aligned himself with Fox, using the network to talk with his base and embracing lines of argument that the hosts advance on his behalf.

But, according to those covering the White House, Shine and the president just didn’t get along.

--Scott Gottlieb, the commissioner of the Food and Drug Administration, known for his aggressive efforts to regulate the e-cigarette and tobacco industries, resigned Tuesday.  Gottlieb said he was tired of the commute to his home in Westport, Conn., and missed his family.  But he has been under increasing pressure from Republicans in Congress for some of his tough stances.

--According to Customs and Border Protection, for the fourth time in five months, the number of migrant families crossing the southwest border has broken records, the CBP warning that government facilities are full and agents are overwhelmed.

More than 76,000 migrants crossed without authorization in February, more than double the levels from the same period last year and approaching the largest numbers seen in any February in the last 12 years.

More than 90 percent of the new arrivals were from Guatemala, officials said.               

--According to CNN, President Trump pressured his then-chief of staff John Kelly and White House counsel Don McGahn to grant his daughter and senior adviser, Ivanka, a security clearance against their recommendations, three people familiar with the matter told CNN.

This comes after word similar pressure was applied to get Jared Kushner’s clearance, which rankled West Wing officials.

Yes, the president has the legal authority to grant clearances, but most of the time this is left up to the White House personnel security office, which determines whether a staffer should be granted one after the FBI has conducted a background check.  But after concerns were raised in both cases, Kushner and Ivanka, Trump pushed Kelly and McGahn to get it done so it would not appear as if the president was tainting the process in favor of his family, sources told CNN.  After both refused, Trump then granted them their clearances.

Three weeks ago, Ivanka, in an interview with ABC News, said her father had “no involvement” regarding her or Kushner’s clearances.

--Last Saturday, thinking it was part of my job, I watched President Trump’s entire 2 hour, 2 minute speech at the Conservative Political Action Conference (CPAC) and those are two hours I’ll never get back.

Trump rambled on about every topic under the sun, including on crowd size, such as at the inauguration, and how a good friend who has known him since they were kids (Richard LeFrak) now insists on calling him “Mr. President,” and it was all very painful.

The president didn’t bring up North Korea, having just returned from the summit, until about the 2-hour mark.

Michael Gerson / Washington Post

“ ‘A great empire and little minds go ill together,’ said Edmund Burke.  The United States is not quite an empire, but one little mind was on full display during President Trump’s speech this past weekend to the Conservative Political Action Conference.  It was two hours of Trump unplugged, unleashed, uncensored, unreconstructed and unhinged.  It was a vivid reminder that the president of the United States, when he is most comfortable and authentic, is a rude, arrogant crank yelling profanities at the television.  Correction: through the television.

“Most Americans, I suspect, would judge the speech as bad and rambling.  To a former speechwriter, it was like watching a wound drain....

“As the organizing structure of the speech, Trump skipped from enemy to enemy – a taunt here, a mock there.  Hillary Clinton made an appearance. As did Robert S. Mueller III and Jeff Sessions, and Central American refugees, and weak-kneed generals, and socialist Democrats, and university administrators, and those horrible people who miscount inaugural crowds.

“This last point – that the size of his inaugural crowd was maliciously underestimated by evil forces – seems to be the Ur-myth of Trumpism.  It was the subject of his first order as president, compelling  a minion (poor Sean Spicer) to utter an absurd falsehood on his behalf.  Given the flood of lies that has followed, it must have felt darn good. Those who are willing to believe this original lie are the truest of believers – a core of supporters who will stomach absolutely anything.

“Trump’s CPAC speech was a bold assertion that he has learned nothing – absolutely nothing – during his first two years in office.  Not manners.  Not economics.  Not geopolitics.  Not simple decency.

“The speech seemed like the rhetorical spawn of Fidel Castro and George Wallace, combining demagoguery with bigotry in equal measure.  And it confirmed Trump’s place as the worst speaker in presidential history.

“Having gotten that out of my system, let me turn to what really bothered me.  Our president lacks dignity...

“The president has made the denial of dignity to certain people and groups a political rallying cry. This kind of cruelty and dehumanization is the defining commitment of his political life. He is not merely undignified as a leader; he is committed to stripping away the dignity possessed by others.

“There is a tie between incivility and injustice. When a president uses his office to demean others, he is undermining an essential democratic premise – that those out of power are still protected from abuse by general respect for their inherent worth and dignity. They are still partners in a common enterprise.  And they deserve better than cruelty and contempt.”

--Trump tweets:        

“Bad lawyer and fraudster Michael Cohen said under sworn testimony that he never asked for a Pardon. His lawyers totally contradicted him.  He lied!  Additionally, he directly asked me for a pardon.  I said NO. He lied again! He also badly wanted to work at the White House. He lied!”

“Both the Judge and the lawyer in the Paul Manafort case stated loudly and for the world to hear that there was NO COLLUSION with Russia. But the Witch Hunt Hoax continues as you now add these statements to House & Senate Intelligence & Senator Burr.  So bad for our Country!”

“PRESIDENTIAL HARASSMENT!”

“I cannot believe the level of dishonesty in the media.  It is totally out of control, but we are winning!”

“Thank you @foxandfriends. Great show!”

“The Wall is being built and is well under construction. Big impact will be made.  Many additional contracts are close to being signed. Far ahead of schedule despite all of the Democrat Obstruction and Fake News!”

“It was not a campaign contribution, and there were no violations of the campaign finance laws by me. Fake News!”

“The greatest overreach in the history of our Country.  The Dems are obstructing justice and will not get anything done. A big, fat, fishing expedition desperately in search of a crime, when in fact the real crime is what the Dems are doing, and have done!”

“Presidential Harassment by ‘crazed’ Democrats at the highest level in the history of our Country. Likewise, the most vicious and corrupt Mainstream Media that any president has ever had to endure – Yet the most successful first two years for any...

“...President.  We are WINNING big, the envy of the WORLD, but just think what it could be?”

Wall Street and China Trade Talks

It was not a good week for equities, the worst of the year thus far and the first down one across all the major indices, over 2% on each.  The economic news from Europe and China didn’t help, as detailed below.

We also had a slew of economic numbers on the domestic situation, again, as the government catches up with the data, post-shutdown, and we started off with December construction spending coming in worse than expected, down 0.6%. 

But December new-home sales were stronger than forecast, 621,000 annualized, and the February ISM figure for non-manufacturing (service sector) was better than expected, 59.7 (50 being the dividing line between growth and contraction).

A reading on productivity for the fourth quarter was also strong.  And a figure on January housing starts was solid, 1.23 million, above forecasts.

And then today, we had the jobs data for February and it came in way below estimates at 20,000, when 178,000 was the consensus.

No doubt, February’s brutal weather in large swaths of the country had something to do with the putrid figure, but, after slight upward revisions to December and January, the three-month average, which is what we should focus on, is a strong 186,000.

Also, while the unemployment rate fell back to 3.8%, wages rose 0.4%, or 3.4% the past 12 months, the highest level for this key metric since April 2009.

And the underemployment rate, U6, plummeted from 8.1% to 7.3%, which is terrific.

All in all, ignore the headline-grabbing 20,000 and focus on the balance of the report.

That said, while it is still very early in terms of the data that has been released, the Atlanta Fed’s GDPNow barometer for the first quarter is showing growth of just 0.5%, with most economists being around 1% thus far.  But next week we get another report on retail sales and that could be a positive, after December’s disastrous reading for same.

Finally, in keeping with the above, New York Fed President John Williams said in a speech at the Economic Club of New York on Wednesday that slowing growth in the U.S. is not necessarily “cause for alarm” but instead a “new normal” people should expect. Williams has slightly downgraded his forecast for GDP to 2 percent this year as turbulent markets late last year constrain consumer and business spending today. 

Williams also said interest rates are at a “neutral” level that neither encourages nor discourages economic activity.  Weakening Chinese and European economic growth justify the Fed’s patient stance on rates, he said, largely reiterating earlier comments from Chairman Jerome Powell and other members of the board.

“With a strong labor market, moderate growth, and no sign of any significant inflationary pressures, the baseline outlook is quite favorable.”

As for the trade issue with Beijing, at week’s end, no one in the White House or anyone involved in the talks is signaling a summit between Presidents Trump and Xi in Mar-a-Lago this month.  And as Secretary of State Mike Pompeo said in a media interview this week, President Trump will reject any deal that is not perfect, though the two sides will continue working on an agreement.  Others said that enforcement of any deal is the key issue, such as on intellectual property theft, as well as actual trade volumes. 

And there is no word on whether existing tariffs would be lifted immediately or over a period of time to allow the U.S. to monitor Chinese compliance.  The U.S. wants to continue to wield the threat of the tariffs as leverage.

China has apparently offered to lower tariffs on U.S. farm, chemical, auto and other products, including the purchase of a large amount of natural gas from Houston-based Cheniere Energy Inc.

Citing progress toward a deal, President Trump last week delayed a planned increase of tariffs on Chinese imports to 25 percent, from 10 percent, that was scheduled to take effect March 1.

But on a topic I have harped on endlessly, how America’s farmers are getting killed by Trump’s trade practices.....

Sen. Michael Bennett (D-Colo.) / Wall Street Journal

“The Trump administration has been bad for American farmers. In 2018 farm incomes declined $9.1 billion and total farm debt rose to $410 billion, the highest in nearly 40 years. Bankruptcies are more frequent than during the Great Recession, and they are up 59% in the region that includes my home state of Colorado, compared with 2008.  Low commodity prices, persistent drought and labor shortages have pushed many farmers to the edge.

“Farmers have responded to these challenges with typical ingenuity – diversifying crops, introducing new technologies, and generating income from their land through conservation and recreation.    But the administration’s reckless trade and immigration agenda have made matters worse.

“It didn’t have to be this way. Although I disagree with President Trump on many things, I agree we need a tougher approach to end China’s unfair trade practices.  He could have pursued that goal in concert with America’s allies to maximize pressure.  Instead, he slapped Canada, Mexico and countries in the European Union with tariffs, leaving the U.S. isolated.

“The predictable retaliation against tariffs by China and many U.S. allies left American farmers to bear the brunt of a sprawling trade war.  As a consequence of the President’s policies, farmers saw crop prices drop even further and the expenses like fertilizer and equipment spike.  Corn and wheat prices have declined 15% since May 2018 in Colorado, in line with national trends.

“The longer the president’s slapdash trade policy persists, the more opportunities American farmers will lose to their competitors. China, the largest buyer of U.S. soybeans, has reduced American soybean imports by 90%.  Brazil is rushing to fill the void. Wheat growers stand to lose precious Japanese market share to Australia and the European Union.  The administration recently tried to distract from the damage by touting a tentative agreement with China to purchase 10 million tons of American soybeans – less than half of the 27 million tons they bought last year.

“Mr. Trump has also pursued an immigration agenda designed to stoke his political base, not fix our broken system.  Colorado’s farmers and ranchers have told me they need a steady flow of skilled workers....

“The spike in farm bankruptcies should be a wake-up call for Washington to treat the future of American agriculture with the same thoughtfulness and care that our farmers and ranchers apply to their work every single day.”

Finally, we received some data on the trade deficit in the United States and it widened to $891.3 billion, the highest in history as the U.S. imported a record number of products.

But it’s deceiving. The global economic slowdown and the relative strength of the dollar weakened demand for American goods, while U.S. demand has remained strong.  Countries run trade deficits when they consume more than they produce.

In December, the overall deficit in goods and services, which includes everything from computers and washing machines to tourism and intellectual property, rose 19 percent from the previous month, to $59.8 billion.  The trade gap in goods between the United States and China hit $419 billion in 2018, which isn’t helping Trump’s mood.

But as the Wall Street Journal editorialized:

“Everyone can calm down, and President Trump can take a bow that his tax reform and deregulation are working as intended.

“ ‘In a blow to Trump, America’s Trade Deficit Hit a Record $891 Billion in 2018 – the highest it’s ever been,’ read a summary in one newspaper that seems to want Mr. Trump to blow up at the news. The trade deficit grew 12% last year to $621 billion as imports rose $218 billion and exports climbed $149 billion.  Excluding services, the gap increased to $891 billion.

“This is not bad economic news.  Imports grew faster than exports as the U.S. economy accelerated and much of the world slowed. The dollar grew stronger as capital flowed into the U.S., and the trade deficit grew to offset the larger capital inflows as it must by definition under the national income accounts....

“Mr. Trump has a fixation with German-made cars, so it’s worth highlighting that imports of passenger cars declined $2.5 billion as U.S. consumers bought more trucks and SUVs produced at home.  But since American trucks include foreign components, imports of auto parts increased $10 billion at the same time that truck exports rose $1.1 billion.

“All of this reflects how U.S. manufacturers depend on global supply chains and underscores why it would be a mistake to impose tariffs on auto parts. The higher costs would flow to American manufacturers and ultimately be paid by consumers.

“On a sour note, retaliatory tariffs by China took a bite out of Farm Belt exports including soybeans (which fell by $4 billion), wheat ($660 million) and vegetables ($290 million).  Exports of iron and steel mill products also declined by $830 million as Canada and Mexico retaliated against the President’s tariffs on steel and aluminum.

“The main point is that a larger trade deficit is a benign byproduct of a healthier American economy.  Supply-side policies revived animal spirits and gave the economy a second wind.  Trade negotiations that further open foreign markets like China’s to U.S. goods and investment can keep growth humming, but tariffs that retard growth in the name of reducing the trade deficit are destructive.  The best way to respond to a trade deficit is to ignore it.”

But there is a deficit that matters...the federal budget deficit, which for the first four months of the fiscal year, beginning Oct. 1, was $310.3 billion, up from a deficit of $175.7 billion in the same period a year ago.  The surplus in January was $8.7 billion, down from a larger $49.2bn in January 2018.  Most years January is a surplus month, as both individuals and corporations make tax payments.

The higher deficit reflects greater spending in areas such as Social Security, defense and interest payments on the national debt, while the government is collecting lower taxes from individuals and corporations owing to the $1.5 trillion tax cut pushed through Congress in 2017.

Individual income taxes withheld from paychecks were down 3 percent for the Oct.-Jan. period, while corporate income taxes were down 23 percent.

Revenue from border taxes is, however, up 91 percent from the same period a year ago owing to the tariffs Trump loves to talk about but the border taxes are not paid by the countries where the goods are being produced but rather by the U.S. companies importing the products into the United States.  Those costs are generally passed on to American consumers.

The Congressional Budget Office is projecting that this year’s deficit will hit $897 billion, up 15.1 percent from the $779 billion deficit recorded last year.

Europe and Asia

The European Central Bank slashed its growth forecast for the eurozone (EA19) from 1.7% to 1.1% this year, while cutting its inflation target from 1.6% to 1.2%.  Euro bond yields tumbled in response, as ECB President Mario Draghi, whose term expires in October, announced that the central bank’s governing council voted unanimously to bring back a stimulus measure intended to encourage lending, a move also designed to help banks in countries with weaker economies, such as Italy, that otherwise may have trouble raising money at reasonable rates.

The slowdown in China is exacerbating the picture in Europe, with China an important market for its cars, pharmaceuticals and heavy machinery.

We also had the release of the composite PMI data for the EA19 in February, 51.9, with the services component at 52.8.

Service readings in other countries:

Germany 55.3 (up from 53.0 in January), France 50.2 (47.8 Jan.), Italy 50.4 (49.7), Spain 54.5, Ireland 55.9.

The U.K. was 51.3.

These are all better than February’s manufacturing data, released the prior week by IHS Markit, but you add it all up and it’s still looking like 0.2% GDP in the first quarter.

Which is what we learned this week was the growth rate in the fourth quarter for the eurozone; 1.1% for all of 2018, per Eurostat.

Germany 0.6% GDP annualized for 2018, France 0.9%, Italy 0.0%, Spain 2.4%.

One thing is for certain.  The ECB won’t be raising interest rates until well into 2020, for starters.

Brexit: British Prime Minister Theresa May was in Brussels this week for further negotiations on Brexit and the backstop (insurance plan) for the Irish border.  British lawmakers vote for a second time on Tuesday, less than three weeks before the U.K. is scheduled to leave the European Union, but as I go to post, there are few signs May is receiving the concessions that she needs to reverse her previous defeat in the House of Commons.

“History will judge both sides very badly if we get this wrong,” foreign minister Jeremy Hunt told the BBC today.

As for the backstop and the border between Northern Ireland and Ireland – the only land frontier between the United Kingdom and the bloc, Mrs. May wants legally binding assurances from the EU that Britain will not be trapped permanently in the backstop, which involves keeping Britain in a customs union.  Many business leaders are alarmed at the prospect of leaving the bloc’s single market, which underpins many of their operations, with no transition arrangements to soften the blow.  There are signs employers are holding off on hiring until there is certainty, and who can blame them?

In a speech today in Grimsby, Lincolnshire, Mrs. May said: “Just as MPs will face a big choice next week, the EU has to make a choice, too.   We are both participants in this process.  It is in the European interest for the UK to leave with a deal.  We are working with them, but the decisions that the European Union makes over the next few days will have a big impact on the outcome of (Tuesday’s) vote.”

Today, the EU’s chief Brexit negotiator, Michel Barnier, tweeted after briefing ambassadors of the 27 EU states that are staying on together after Brexit: “EU commits to give UK the option to exit the Single Customs Territory unilaterally, while the other elements of the backstop must be maintained to avoid a hard border.  UK will not be forced into customs union against its will.”

While this statement from Barnier would make legally binding commitments of the assurances the EU offered to London in January, that parliament then turned down, it is unlikely to be seen as enough by many of the hardline eurosceptics in May’s Conservative party, which doesn’t have a majority in parliament to begin with.

“The EU will continue working intensively over the coming days to ensure that the UK leaves the EU with an agreement,” Barnier said, talks slated to continue over the weekend.

But the sticking point is that while Britain would need to honor its commitment to preserve a border free of controls between Northern Ireland and the Ireland, this could mean some sort of customs border “in the Irish Sea.”  A nightmare.

If Commons defeats the plan Tuesday, lawmakers will be able to vote on Wednesday and Thursday on whether they want to leave the bloc without a deal (hard-Brexit), or ask for a short delay to Brexit.

The drop-dead date for the EU is March 21 and an EU summit with all its leaders.  Any decision to allow an extension would have to be unanimously approved by them at that time.  Brexit is March 29, unless delayed.

Turning to Asia, in China...I cover the annual gathering of the National People’s Congress further below, but for this space, this is the time each year when Premier Li Keqiang, who is in charge of the economy (at least on paper), gives the government’s growth forecasts, which you can then assume will be hit, within a tick or two.  Li announced a lower growth target for 2019 – a range of 6% to 6.5% compared with 6.6% last year (which was the slowest pace in 28 years).*

Li also said the government would aim to deliver nearly $300 billion in tax cuts and other reductions in fees.

Meanwhile, China’s exports for February tumbled the most in three years, down 20.7 percent from a year earlier, the largest decline since Feb. 2016, customs data showed.  Imports fell 5.2% year-on-year, both figures far worse than expected.  But analysts warn the data for January and February is always skewed by the long Lunar New Year holidays, which came in mid-February in 2018, but started on Feb. 4 this year.

Imports from Japan sank 19.3% in February compared with a month earlier.  [Taiwan also reported its biggest export drop in years, with shipments to China down 10.4%, further evidence of the slowdown in the region as a whole.]

On Wednesday, the U.S. reported its trade deficit with China surged to an all-time high last year, which isn’t making trade negotiations any easier.

*As all of us know, China’s GDP figures are not exactly accurate, ditto much of the data its National Bureau of Statistics releases.  It’s just too cute how the quarterly GDP figures never vary more than a tenth of a percent or so, whereas in the U.S., in just the last three quarters we’ve had 4.2%, 3.4% and 2.6% prints, for example.

But the Brookings Institution, the Washington think-tank, published a paper this week that examined the period 2008 to 2016 and concluded that China’s economy is 12 percent smaller than official figures indicate, with real growth overstated by about 2 percentage points annually in recent years.  Which of course adds to concerns that the slowdown is even more severe than the government has acknowledged.

The Chinese government’s emphasis on numerical targets – a legacy of Maoist state planning – has made GDP a politically sensitive figure, with local cadres’ performance based largely on growth in their respective regions, which gives an incentive to skew local statistics, not that readers of this space didn’t already know this, since at least twice a year I note the same thing. It’s just that now the Brookings Institution has reinforced longstanding skepticism.

As I’ve said since the beginning when it comes to China and its data, it’s trends that are important, and some of the numbers, such as on housing prices and inflation, are probably pretty accurate.

And the NBS has stated publicly that it would assert greater control over provincial data collection beginning this year to eliminate some of the discrepancies between local and national numbers.

One more reading on China’s economy...the private Caixin survey on the service sector for February came in at 51.1.

And tonight, China’s producer price, or factory-gate, report for February showed prices were flat from a month earlier (0.1% year-over-year), while consumer prices rose 1.5% from a year earlier.  Signs of deflation could prompt the government to roll out even more aggressive measures to halt a sharper slowdown.

Japan reported its non-manufacturing PMI for February, a respectable 52.3.

On the manufacturing side, PMIs for February: Taiwan 46.3, South Korea 47.2.  Both lousy.

Street Bytes

--Saturday marks the 10-year anniversary of the bull market.  The broad market’s rise, as represented by the S&P 500, 305%, is the third-biggest rally ever.

But this week was a bad one, the worst week since December, with the Dow Jones and S&P both down 2.2%, the Dow to 25450, while Nasdaq fell 2.5%.  Slowdown fears predominated, as well as uncertainty over the China trade talks.

--U.S. Treasury Yields

6-mo. 2.51%  2-yr. 2.46%  10-yr. 2.63%  30-yr. 3.01%

Treasuries rallied on the global slowdown news, as well as the European Central Bank’s statement it would deploy additional stimulus, which had investors looking to Treasuries for yield.  As in the German 10-year (bund) saw its yield fall back to 0.07% at week’s end. 2.63% on U.S. paper looks humongous by comparison.

Separately, in last weekend’s CPAC rant, President Trump targeted Fed Chairman Powell.

“We have a gentleman who likes raising interest rates, a gentleman who likes quantitative tightening,” said Trump.  “Can you imagine if we left interest rates where they were?  If we didn’t do quantitative tightening, taking money out of the market?”

--Oil prices rebounded slightly this week to $56.04, as investors focused on OPEC-led production cuts that have helped rebalance the market, while involuntary supply outages in Venezuela and Iran have helped offset rising U.S. output.  Compliance with the cuts has exceeded market expectations.

But we did have a bearish inventory report from the U.S. Energy Information Administration, which said U.S. stockpiles of crude had jumped by far more than expected, though gasoline stockpiles declined.  And today, the sour jobs report renewed slowdown fears.

--ExxonMobil announced plans to sharply step up its capital spending over the next few years, to deliver a “significant increase” in its volumes of production of oil and gas.

At a presentation for analysts in New York, the company said it planned capital spending of $30bn this year and $33bn-$35bn next year, up from about $26bn last year.  CEO Darren Woods said the investment opportunities available to Exxon, following its acquisition of assets in the Permian Basin in the U.S. and its oil discoveries in Guyana, were more attractive than at any time since Exxon and Mobil merged in 1999.

Woods said that in a world in which the goal is to cut greenhouse gas emissions as part of the goal of limiting global warming, there would still be a need for heavy investment in oil and gas production to offset natural decline in producing fields.

“Perhaps the biggest risk to the industry today is under-investment,” Woods said.  “Society needs us to make these investments.”

--The total net worth of U.S. households dropped by $3.73 trillion during the fourth quarter to $104.329 trillion amid the turbulence in the stock market.  Household net worth is the value of all assets such as stocks and real estate minus liabilities like mortgages and credit-card debt. 

The 3.5% decline was the largest quarterly drop in household net worth since the final quarter of 2008.  But barring a total collapse the next few weeks, the figure will rebound strongly with the hot start in equities in 2019.

--Chinese telecom giant Huawei filed a lawsuit against the U.S. government over a ban that restricts government agencies from using its products.

In a statement, Huawei said Congress has “failed to produce any evidence to support its restrictions.”

The U.S. has been lobbying allies to prohibit Huawei equipment on national security grounds.

But Huawei’s rotating chairman Guo Ping said: “The U.S. Congress has repeatedly failed to produce any evidence to support its restrictions on Huawei products. We are compelled to take this legal action as a proper and last resort.

“This ban not only is unlawful, but also restricts Huawei from engaging in fair competition, ultimately harming U.S. consumers.”

Guo also accused the U.S. of previously hacking into its servers, though he provided no evidence to support the charge.

“The U.S. government has long branded Huawei a threat. It has hacked our servers and stolen our emails and source code.”

Last week, Guo said part of the reason for U.S. attacks on Huawei can be found in documents leaked by whistle-blower and former U.S. government contractor Edward Snowden about the activities of the U.S. National Security Agency.

Australia, New Zealand and the U.S. have all banned or blocked Huawei from supplying equipment for their future 5G mobile broadband networks.

Separately, China expressed its outrage at Canada’s decision to proceed with the extradition to the United States of Huawei executive Meng Wanzhou.  The foreign ministry in Beijing issued a statement, saying: “It is a serious political incident. We again urge the U.S. to rescind its request for the extradition...and call for Canada to release her immediately.”

Canada’s move comes despite mounting pressure from China, which has included the detention of several Canadian citizens.

A statement by Canada’s Justice Department said that officials had conducted a “thorough and diligent review of the evidence” and determined it was sufficient to present the case to a judge for extradition.

The Chinese embassy likened Ottawa’s actions to “political persecution.”

President Trump had said last week that discussions on dropping criminal charges against Huawei would be held soon, prompting speculation he was looking to use the case as a bargaining chip in the trade negotiations.

I have previously written in this space how a senior adviser to the Chinese Communist Party, Xie Maosong, had predicted Huawei would become part of the trade talks and that Meng would be released in the coming months.

--Hyundai Motor Co. is considering plans to suspend production at its oldest plant in China, the South Korean carmaker said on Wednesday, as it reels from plummeting sales and massive overcapacity in its biggest market.

Hyundai, together with affiliate Kia Motors, was the No. 3 automaker in China until 2016, but the duo, already grappling with increased competition from Chinese rivals and global automakers, have this overcapacity issue, with three plants in Beijing alone.  The company has five factories in China overall, in a joint venture with Chinese partner BAIC Motor Corp.

Hyundai is receiving strong reviews for its redesigned Sonata sedan, sparking hopes of a comeback.

Hyundai’s sales in China amounted to only half its total production capacity in the country last year.

--Tesla Inc. faces criticisms from Chinese customers who ended up paying thousands of dollars more for their new cars because they bought before the company’s recently enacted price cuts.

The timing couldn’t be worse, as Tesla aims to start mass production of the Model 3 sedan at a factory in Shanghai, and ultimately wants to make 500,000 cars a year there to capitalize on China’s booming market for electric vehicles.

So in response to the complaints, the company said anyone who bought a Tesla before the price cut would get a 50% discount on the company’s autopilot or full self-driving options.

One customer told the Wall Street Journal he paid about $141,650 for a Model X SUV that was delivered to him Feb. 23, and now the car costs only $114,800.  He expressed disappointment that nobody from Tesla had called him to apologize or offer compensation.

“The extra $26,850 ‘is just my contribution to Elon Musk’s rocket-building project,’ Ethen Hou said, referring to the Tesla chief executive’s company SpaceX.”

But wait, there’s more!  Customs authorities in Shanghai found various irregularities in 1,600 imported Model 3 cars, including improper labelling of the vehicles, according to financial publication Caixin (which puts out the private PMIs on China).  It’s difficult to ascertain if this is pure harassment, but this is an example of what could happen to any American company attempting to do business there during these tense times in the trade relationship.

Perhaps even more seriously, U.S. authorities are investigating a fatal Tesla Model S crash in Florida Sunday, Feb. 24, that killed the driver and caused a massive fire, the second fatal Tesla crash in the state in the week of 2/25 being probed, the National Highway Traffic Safety Administration said last Saturday.

The South Florida Sun Sentinel reported Monday, 2/25, the 2016 Model S caught fire and burned the 48-year-old driver beyond recognition.  The newspaper said the Tesla battery repeatedly caught fire after being transported to a towing facility.

NHTSA can demand a recall if it believes a defect poses an unreasonable safety risk, and I’d say ‘instant cremation’ could be a good reason for one.

As for Musk’s SpaceX, and the latest launch of a rocket to the International Space Station, the Crew Dragon capsule successfully docked with the ISS, marking another milestone.

The capsule, aside from carrying a mannequin passenger named Ripley for testing of future human missions, carried 400 pounds of supplies.  It was the first time a SpaceX capsule attempted to attach itself to the station.

The operation moves SpaceX closer to ferrying NASA astronauts to the ISS.

Today, the Dragon vehicle successfully splashed down in the Atlantic.

Meanwhile, back to Tesla, by Monday, Musk must file his defense against contempt charges leveled against him by the SEC; the agency saying he violated terms of a fraud settlement reached in September that put restrictions on Musk’s use of Twitter to communicate material information – information likely to affect the company’s stock price.

--Ford Motor Co. is considering closing two major plants in Russia as part of its global plan to restructure operations in unprofitable regions, according to Reuters.  Faced with fourth-quarter losses in every part of the world except North America, Ford is making cuts in Europe, while closing down vehicle lines in South America and laying off thousands in China.

In Russia, Ford’s plants have a total capacity of 360,000 vehicles a year.

--Former Nissan boss Carlos Ghosn was finally released from prison in Japan on bail, more than three months after being arrested, the Japanese still not spelling out the specifics on exactly what Ghosn was put in prison for in the first place.  A Tokyo court set bail at $8.9 million.

Ghosn has been charged with financial misconduct and aggravated breach of trust, but denies wrongdoing.

Ghosn was the architect of the alliance between Nissan and the French carmaker Renault. He then brought Mitsubishi on board in 2016.

He ran the alliance of the three global carmakers as both CEO and chairman, with Ghosn saying his arrest was the result of a “plot and treason” against him – a bid by some Nissan executives wanting to stop his plan to integrate Renault, Nissan and Mitsubishi.

--Last week, shares in General Electric rose on the news it had sold a stake in its biopharma business to Danaher in an effort to reduce its debt load. 

But then the stock cratered anew, from about $12 back down to $9, before closing the week at $9.60, after CEO Larry Culp surprised investors Tuesday by forecasting a net cash outflow from the conglomerate’s industrial business this year, a far more negative outlook than he had previously offered.

In a webcast with analysts, Culp said, “We lost $2.7 billion last year in free cash in power,” referring to expectations that GE’s power business would take years to turn around.  “I don’t want to sugarcoat that in any way, shape or form....We’ll see that be a greater negative number in this year as we work through the restructuring, as we work through the runoff liabilities there and just the localization of timing around projects,” Culp said.

--Southwest Airlines’ CEO Gary Kelly said a surge in planes grounded by mechanics’ concerns is costing the carrier millions of dollars each week by causing more delayed and canceled flights, though Kelly didn’t give a precise figure.

The airline has filed a lawsuit against the Aircraft Mechanics Fraternal Assn., which Southwest says is aiding in an illegal work slowdown.

Southwest says some workers are writing up minor mechanical problems such as missing seat-row numbers and grounding planes to gain leverage in contract negotiations. The union denies it is conducting a slowdown. That’s a lie.

Southwest says the number of planes grounded for mechanical issues jumped to between 30 and 62 a day last month, from the usual 14 a day, forcing numerous cancelations.

On Tuesday, for example, Southwest had canceled 110 flights by midafternoon, far more than any other U.S. carrier, according to FlightAware.

Tonight, the FAA took the unusual step of warning Southwest and its mechanics that their high-profile labor dispute threatens to damage the airline’s safety practices.

--Facebook CEO Mark Zuckerberg has said he believes secure, private messaging services will become more popular than open platforms, as he outlined his vision to transform Facebook into a “privacy-focused platform.”

Facebook owns Messenger and WhatsApp, but message encryption limits its ability to make money through targeted adverts.

With all of Facebook’s recent scandals, though, some critics see the proposed changes as a way of Facebook abandoning its responsibilities.

BBC tech reporter Dave Lee said if what happens on Facebook is more private and temporary, it may be harder to hold the site accountable.

Zuckerberg said: “Facebook and Instagram have helped people connect with friends, communities, and interests in the digital equivalent of a town square. But people increasingly also want to connect privately in the digital equivalent of the living room.”

As part of his privacy goals, he said Facebook would not “store sensitive data in countries with weak records on human rights like privacy and freedom of expression.”

“Upholding this principle may mean that our services will get blocked in some countries, or that we won’t be able to enter others anytime soon. That’s a tradeoff we’re willing to make,” he continued.

Of course he gave no timeline for these changes, except to say it would take place “over the next few years.”

“I believe we should be working towards a world where people can speak privately and live freely knowing that their information will only be seen by who they want to see it and won’t all stick around forever.”

Whatever. We’re all already screwed.

Meanwhile, today, Sen. Elizabeth Warren (D-Mass.), who is running for president, called for the breakup of Amazon.com, Alphabet Inc.’s Google and Facebook.

“Today’s big tech companies have too much power – too much power over our economy, our society and our democracy,” Warren said in an online post.  “They’ve bulldozed competition, used our private information for profit and tilted the playing field against everyone else.  And in the process, they have hurt small business and stifled innovation.”

Warren would target deals such as Amazon’s acquisition of Whole Foods, and Facebook’s purchase of WhatsApp and Instagram.

You know what?  I don’t disagree with the senator on this topic. But then I’m the guy who can’t believe Mark Zuckerberg and Sheryl Sandberg haven’t been indicted for Facebook’s role in the murder of scores in places like Myanmar.  The two can’t be sleeping well at night.

--Salesforce.com Inc. said it expects revenue to nearly double in four years, as more companies shift their spending to tech innovation.  Monday, the San Francisco-based company said it expects revenue of $16 billion this year and $26 to $28 billion by fiscal 2023.

CFO Mark Hawkins said on an earnings call that financial-services companies used to direct about 90% of information-technology spending to maintenance.  These days it is split 50/50.

Salesforce points to strong demand from cloud computing, artificial intelligence and other areas it considers part of its Fourth Industrial Revolution.

Co-CEO Marc Benioff said, “(Companies) know they need to invest in becoming more customer-centric, more efficient and more automated.”

But Salesforce shares closed down on the earnings news because of guidance that fell short of Wall Street’s expectations.  That said, profit in the year ended Jan. 31 still more than doubled to $1.11 billion.  [Maria Armental / Wall Street Journal]

--Target Corp. forecast full-year adjusted profit above Wall Street’s estimates on Tuesday and posted better-than-expected holiday quarter results, driven by strong digital sales and higher customer traffic at its stores.

Online sales grew 31% in the quarter, while comparable sales, which include both in-store and online, rose 5.3%, beating estimates.

Earnings per share were also better than forecast.

In 2018, Target opened more smaller stores in cities and remodeled more than 300 locations, with plans to remodel another 300 this year. 

--Kohl’s shares rose after the company, like Target, reported solid results for Q4, with earnings and revenues that topped expectations, while providing solid guidance for fiscal 2019, though comp store sales are expected to be flat to up 2%, after being up 1% in the latest quarter, which ended Feb. 2.  They rose 1.7% for the year.

Like Walmart, both Target and Kohl’s said they benefited from closures at Toys ‘R’ Us and other retailers last year and added that they plan to continue taking market share from struggling rivals.

--Discount retailer Dollar Tree is accelerating the pace of store closures at its Family Dollar unit, with as many as 390 underperforming stores to be closed this year, more than three times the level of last year.  Dollar Tree bought Family Dollar in 2015.  Now it is taking a multibillion-dollar charge as it warned “there were indictors that the goodwill of the business may be impaired.”

Hedge fund manager Starboard Value, which has a 2% stake in Dollar Tree, has pressed for changes, including the sale of Family Dollar.

But DLTR is focusing on refurbishments of up to 1,000 Family Dollar stores this year.

Overall, the company reported net sales of $6.21bn in the quarter ending early February, less than last year, though 2018 had an extra week.  On a same-store basis, sales increased 2.4%.

--Shares in Kroger Co., the largest U.S. supermarket chain, fell 10% on Thursday after the company reported lower revenue and profit for its latest quarter.  Kroger has been investing hundreds of millions of dollars in online operations that are weighing on profitability as the grocer also faces pressure to keep prices low.

Kroger and its ilk are having a tough time with competition from Walmart, Amazon.com, and deep-discount chains such as Aldi.

Kroger said its digital sales rose 58% during its most recent fiscal year, and the company said it is offering delivery or online pickup at 91% of its stores.

As reported by the Wall Street Journal the other day, Amazon plans to launch urban grocery stores that could offer a wider range of consumer products than its Whole Foods stores.

--Shares in Brown-Forman – owner of Jack Daniel’s – fell after the liquor and wine company released mixed quarterly results, with net sales up only 3% from a year earlier to $904 million.  Brown-Forman said results were hurt by a percentage point because of lower net prices to distributors in certain markets used to offset tariffs.

For the entire 2019 fiscal year, Brown sees increased competition amid recently enacted “retaliatory” tariffs on American whiskey.

--France intends to tax the revenue of about 30 Internet giants such as Amazon.com to help ensure “fiscal justice,” according to Finance Minister Bruno Le Maire. The tax of as much as 5 percent of French sales will start Jan. 1 and potentially raise as much as $570 million for the state.  The tax would apply to any company with global revenue of more than 750 million euros and French sales above 25 million euros, Le Maire said.

Spain and the U.K. are also working on digital sales taxes.

--Australia’s fourth-quarter GDP came in at a 2.3% annual rate, a little less than expectations, with house prices falling 10 percent in Sydney and 9 percent in Melbourne over the past 12 months due to a combination of tight credit conditions and lack of affordability.

But Australia has gone 27 years without a recession.

--I was reading a piece in the South China Morning Post on how robust ship traffic has been through the Singapore Strait (Strait of Malacca) and its nearly 100,000 each year, accounting for about one-quarter of the world’s traded goods, according to Singapore’s Ministry of Defense, which predicts shipping volumes to increase 29 percent by 2025. 

So easy for terrorists to slip a WMD through here, I can’t help but muse.

Additionally....

“Major ports across Asia are at a breaking point and it’s often cheaper for shipping companies to anchor in the strait than dock in a berth, creating long lines of boats waiting around for anything from a few days to months at a time.

“ ‘A vast amount of world trade is coming through there, all the oil from the Middle East, all the iron ore into China, coal from Indonesia to India, it’s an incredibly busy shipping channel. In terms of tonnage, [the] Singapore Strait is still the busiest in the world,’ said Tim Huxley, CEO of Mandarin Shipping in Hong Kong and one of Asia’s top ship brokers.”

In a sign of demand in the global economy, despite stories to the contrary, there’s been about a 10 percent increase in shipping in the last year, Huxley notes.

--ABC’s “World News Tonight” with anchor David Muir posted across-the-board ratings wins over rival “NBC Nightly News” with Lester Holt last week during the Hanoi summit, including in the key 25-54 demographic.  ABC’s strategy is to place Muir all over the world to cover major events and breaking news, which it seems NBC has begun emulating with Holt.

Muir’s newscast drew a total audience of 9.356 million viewers, well ahead of Holt’s 8.510 million.  “CBS Evening News” with Jeff Glor was a distant third at 6.34 million.

In the 25-54 demo prized by advertisers, ABC beat NBC 1.972 million to 1.928m.

--Forbes named Kylie Jenner as the world’s youngest “self-made” billionaire, Jenner just 21.  But the title of “self-made” earned her all kinds of scorn on social media because of her ties to her wealthy family, as in this is hardly all self-made.

But Jenner is the youngest, according to Forbes, as Mark Zuckerberg had become a billionaire at age 23.

Forbes credit’s Jenner’s Kylie Cosmetics with at least $900 million of her fortune.  Kylie credits social media – ignoring her powerfully connected lineage.

“It’s the power of social media,” Jenner told the magazine.  “I popped up at a few stores, I did my usual social media – I did what I  usually do, and it just worked,” she said.

Zuckerberg fell to No. 8, from No. 5 a year ago, amid the endless controversy for his company.

Jeff Bezos is still number one, worth an estimated $131 billion, with Bill Gates second at $96.5 billion, and Warren Buffett third at $82.5 billion.

President Trump’s estimated net worth of $3.1 billion was unchanged, which allowed him to rise to No. 715 from No. 766 in 2018 by merely holding his own, while many on the list suffered due to the falling stock market.

--Our best wishes to “Jeopardy” host Alex Trebek, who in a video message Wednesday said he’s been diagnosed with stage 4 pancreatic cancer.

Trebek said in part, “normally the prognosis for this is not very encouraging, but I’m going to fight this and I’m going to keep working and with the love and support from my family and friends and with the help of your prayers also, I plan to beat the low survival rate statistics for this disease.  Truth be told, I have to because under the terms of my contract, I have to host ‘Jeopardy’ for three more years, so help me.  Keep the faith and we will win.  We will get it done.”

The 78-year-old Trebek had indeed recently renewed his contract to host the show through the 2021-22 season.

According to the American Cancer Society, the five-year survival rate for those with pancreatic cancer is 9%, and in the early stages often the disease does not manifest itself in any signs of symptoms, so “by the time they do cause symptoms, they have often already spread outside the pancreas.”

--At President Trump’s inaugural meeting of the American Workforce Policy Advisory Board to discuss the importance of technology in education at the White House, the president sitting next to Apple CEO Tim Cook, Trump said, “We appreciate it very much, Tim Apple.”

Foreign Affairs

Syria: The Trump administration is pressuring its European allies to commit to a U.S. proposal to stabilize northeastern Syria.  With U.S.-backed forces poised to seize the last remaining pocket of ISIS resistance in the country, U.S. officials have asked France, the U.K., Turkey and others to remain part of the alliance to ensure the Islamic State doesn’t regain a foothold.  But the administration is also trying to avert a potential clash between Turkey and Washington’s Kurdish allies.

Under the latest plan, the remaining U.S. troops would continue joint patrols with Turkish counterparts, while a second group would be part of a safe zone between Turkey and Syria.  U.S. forces would help train and advise local forces so they can secure reclaimed territory once under ISIS, defense officials have said.

A third U.S. contingent would remain in the southern city of al Tanf, primarily to serve as a buffer against Iranian expansion in the region.

So far, France is the only ally to indicate it is willing to keep forces in Syria.  Others have indicated they will stay, but they haven’t committed yet, defense officials told reporters.

Meanwhile, defense officials said U.S.-backed forces in Syria are holding more than 2,000 suspected Islamic State fighters, double previous estimates and an obstacle to President Trump’s plans to withdraw American forces from Syria.

The challenge is on relocating the fighters to their home countries, and the high number may require more U.S. troops than currently planned to help hold the prisoners. 

Last fall the estimate was 800 foreign fighters from more than 50 countries.  Officials say the number has increased as the American-supported Syrian Democratic Forces, or SDF, reclaim territory from Islamic State and take the  last fighters into custody.

Defense officials also cited another group of at least 1,000 suspected Syrian and Iraqi extremist fighters who are in detention in Syria, a figure not previously disclosed.  This figure could also be higher.

Separately, Turkish President Recep Tayyip Erdogan has dismissed U.S. threats to cancel the sale of high-tech F-35 jets to Turkey, saying his country will move ahead with the purchase of Russian S-400 air-defense missiles.

In an interview with Turkish television, Erdogan said Turkey could consider purchasing the more advanced Russian S-500 system in the future.

This week, top U.S. military commander for Europe, Gen. Curtis Scaparrotti, told the U.S. Congress that NATO member Turkey should reconsider its plan to buy the S-400 from Russia or forfeit other future American military aircraft and systems. He said Turkey’s use of the Russian surface-to-air missile defense system would be a threat to the F-35.

It was the latest in a series of warnings the U.S. has made to Turkey over its plan to buy the S-400, with other NATO allies repeatedly complaining the purchase isn’t compatible with other allied systems and would represent a security threat.

Iran: An Iranian cleric known for his role in condemning thousands of political prisoners to death in the 1980s is taking leadership of Iran’s powerful judiciary, another sign the hard-liners remain firmly in control.

Ebrahim Raisi was to take the oath as the new chief of judiciary today, according to Iran’s state media.  He succeeds another conservative cleric, Sadegh Larijani, who served in the post for 10 years before becoming an adviser to Supreme Leader Ayatollah Ali Khamenei.

Separately, Microsoft Corp. said cyberattacks linked to Iranian hackers have targeted thousands of people at more than 200 companies over the past two years, stealing corporate secrets and wiping out data from computers.  Oil and gas companies, heavy-machinery manufacturers and international conglomerates in more than a half-dozen countries including Saudi Arabia, Germany, the U.K., India and the U.S., according to researchers at Microsoft.

“These destructive attacks...are massively destabilizing events,” said John Lambert, the head of Microsoft’s Threat Intelligence Center.

A spokesman for Iran’s mission to the United Nations said his country “denies any involvement in cyber crimes against any nation.”

Thus far, Microsoft’s research says a vast majority of the attacks are centered in the Middle East, but with rising tensions, the U.S. could be increasingly targeted.

John Hultquist, director of intelligence analysis at the cybersecurity firm FireEye Inc., told the Wall Street Journal, “They’re definitely sharpening their skills and moving up their capabilities.  When they turn their attention back to the United States, we may be surprised by how much more advanced they are.”

India / Pakistan:  Indian and Pakistani soldiers again targeted each other’s posts and villages along their volatile frontier in disputed Kashmir, with at least six civilians and two Pakistani troops killed in battles last Saturday.

Pakistani Prime Minister Imran Khan on Friday said no militant group would be allowed to operate on Pakistani soil and carry out attacks abroad, days after his government began a crackdown against Islamist militant organization.

“This government will not allow Pakistan’s land to be used for any kind of outside terrorism,” Khan said while addressing a rally in the southern part of the country.  “We will not allow any militant group to function in our country now.”

Separately, last week I noted how Russia and China were trying to keep U.S. influence out of the region, China long an ally of Pakistan, and Russia increasingly looking to become a prime ally of India.

This week, a move by President Trump certainly didn’t make things easier for the U.S.  In a letter to Congress, Trump said he intends to end India’s preferential trade treatment under a program that allows $5.6 billion worth of Indian exports to enter the United States duty free.

“I am taking this step because, after intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India,” Trump said in the letter.

Afghanistan: Suicide bombers and gunmen attacked a construction company office in the city of Jalalabad on Wednesday, killing 16 employees. There was no immediate claim of responsibility.

Jalalabad is the capital of Nangarhar province, which is on the border with Pakistan.  The area has become the main stronghold of ISIS in Afghanistan.

Israel: Bret Stephens / New York Times

“When the final chapter on Benjamin Netanyahu’s political life is written – and it may be a long time from now – he is likely to go down as the Richard Nixon of Israel: politically cunning, strategically canny, toxically flawed.

“The flaws came further to light on Thursday (2/28) when Attorney General Avichai Mandelblit announced that he would indict the prime minister on charges of bribery, fraud and breach of trust.  Netanyahu called the inquiry ‘a witch hunt’ and accused Mandelblit of being ‘weak,’ sounding (surely not by coincidence) just like Donald Trump on the subject of Jeff Sessions and the Russia investigation.

“Israeli law allows Netanyahu to contest the indictment through a hearing, a process that could take as long as a year.  He has no intention of resigning and hopes to win a fifth term when elections are held on April 9.

‘Perhaps he will.  He shouldn’t.

“That’s not because Netanyahu is necessarily guilty, or guilty of much.  Previous Israeli leaders, including Yitzhak Rabin, have been subject to legal inquests that hinge on relatively trivial crimes. The charges against Netanyahu – the most serious of which involves the claim that he helped a businessman obtain favorable regulatory decisions in exchange for positive media coverage – are still far from conclusive.

“Then again, what was Watergate other than a third-rate burglary?

“Just as the real crime of Watergate was the bungled cover-up, the real scandal of Bibigate has been the repugnant political patch-up.  Until last month, Netanyahu looked as if he would coast to re-election.  But the race became tighter with the creation of the center-right Blue and White party, led by the former army chief of staff, Benny Gantz, and the former finance minister, Yair Lapid.  The pending indictment only increases Netanyahu’s political peril.

“Netanyahu’s solution has been to scrounge for votes on the father – and farthest – right....

“That alone is reason enough to want to see Netanyahu given the boot.  Add to the list his demagogic attacks on Israeli Arabs, his closeness to far-right European leaders such as Hungary’s Viktor Orban and his public sympathy for an Israeli soldier who killed a wounded Palestinian terrorist in cold blood, and a consistent picture emerges.  Netanyahu is a man for whom no moral consideration comes before political interest and whose chief political interest is himself.  He is a cynic wrapped in an ideology inside a scheme.”

China: Appearing at the annual assembly of the National People’s Congress, Chinese Premier Li Keqiang, in the keynote economic address, issued some stark warnings, China facing difficulties “of a kind rarely seen in many years.”  Perhaps most sobering for the 3,000 delegates, Li conceded the people of China are unhappy with the government’s performance in many ways.

“There is still public dissatisfaction in many areas such as education, healthcare, elderly care, housing, food and drug safety and income distribution,” Li said, in a rare admission for a senior Chinese leader.  The government is juggling a slowing economy with rising public demands for better services, a clean environment and an end to corruption and wrongdoing.

Li’s speech also highlighted the anxiety at the heart of Chinese leadership over the potential for economic problems to fuel social unrest.

“Only alertness to danger will ensure safety,” Li said. “Instability and uncertainty are visibly increasing and externally generated risks are on the rise.”

Li promised to improve market access to foreign firms doing business in China (Chinese officials say this every year) and to protect their intellectual property (ha!).

Li also studiously avoided any reference to the government’s Made in China 2025 policy – its central ambition to emerge as a global leader in 10 key high-tech sectors – which has triggered alarm in Washington and the West, contributing to trade tensions.  China is still seeking to transform itself from a producer of cheap goods to a superpower that dominates in areas such as artificial intelligence, robotics, aeronautics and driverless cars.

But Li conceded: “Our capacity for innovation is not strong and our weakness in terms of core technologies for key fields remains a salient problem.”  [Robyn Dixon / Los Angeles Times]

Ergo, more hacking and stealing of the West’s intellectual property is to be expected.

Along these lines, from Dustin Volz of the Wall Street Journal:

“Chinese hackers have targeted more than two dozen universities in the U.S. and around the globe as part of an elaborate scheme to steal research about maritime technology being developed for military use, cybersecurity experts and current and former U.S. officials said.

“The University of Hawaii, the University of Washington and Massachusetts Institute of Technology are among at least 27 universities in the U.S., Canada and Southeast Asia that Beijing has targeted, according to iDefense, a cybersecurity intelligence unit of Accenture Security.

“The research to be published this week, is the latest indication that Chinese cyberattacks to steal U.S. military and economic secrets are on the rise....

“The majority of the universities targeted either house research hubs focused on undersea technology or have faculty on staff with extensive experience in a relevant field, and nearly all have links to a Massachusetts oceanographic institute [Ed. Woods Hole] that also was likely compromised in the cyber campaign, iDefense said.”

Separately, China targeted a 7.5 percent increase in defense spending in 2019, a slowdown from last year’s projected 8.1 percent, though still seen as consistent with Xi’s plans to grow and advance the military.

Chinese Foreign Minister Wang Yi held his annual press conference on the sidelines of the National People’s Congress today and talked of China’s relations with major powers and neighboring countries, and diplomacy in a rapidly changing world order filled with growing tensions and uncertainties.

Wang tried to put a positive spin on China’s deteriorating ties with the United States amid the protracted trade war and the escalating tussle over Chinese tech giant Huawei.

He hailed China’s relations with Russia, Japan, India, North Korea and Southeast Asian nations.

Wang also sought to play down growing international concerns over China’s “Belt and Road Initiative,” Beijing’s expanding footprint in Africa, the Middle East and Latin America, as well as the increasingly assertive posture of Chinese diplomats around the world.

Wang dismissed the rising calls in Washington for economic and trade disengagement from Beijing amid frustrations among American political and think tank elites that decades-long economic, social and cultural engagement policies have failed to transform China into a liberal democracy.

“Decoupling is apparently unrealistic.  Decoupling from China means to decouple from opportunities, the future and even the world,” Wang said.

Wang did say China-U.S. relations faced a series of mounting challenges over the past two years, which was “contrary to the historical trend.”

January marked the 40th anniversary of the normalization of diplomatic ties between China and the U.S., yet there were no celebrations, especially given the sour mood over the trade talks.  Recently, a group of 20 leading American experts on China issued a new report warning bilateral ties were on a collision course as a result of Beijing’s diplomatic ambitions and oppressive domestic policies, as well as President Trump’s hardline approach.  China is a national security threat.

The U.S. has observed a rise in Chinese military activity in the South China Sea area over the last year, according to the top American military officer in the region.

Admiral Philip Davidson, the commander of the U.S. Indo-Pacific Command, while declining to quantify the increased activity, underscored American resolve to remain engaged, describing the U.S. as an “enduring Pacific power.”

Davidson addressed reporters in Singapore this week and said of Chinese activity, “It’s building, it’s not reducing in any sense of the world. There has been more activity with ships, fighters and bombers over the last year than in previous years, absolutely.”

Davidson added: “It’s a hazard to trade flows, the commercial activity, the financial information that flows on cables under the South China Sea, writ large.”

Davidson was attempting to reassure allies in Southeast Asia of the American commitment to the region.  The week before, Secretary of State Mike Pompeo assured the Philippines that a defense treaty would apply if its vessels or planes are attacked in the South China Sea.

Jonathan Kolatch / Wall Street Journal

“Xi Jinping came into office in 2012 with guns drawn. He needed to tame the Communist Party and enthrall the Chinese people.  He achieved the first, to great applause, by bringing down corrupt party powerhouses such as Bo Xilai and Zhou Yongkang. He defined his China Dream as the ‘Great Rejuvenation of the Chinese People,’ playing to the historical humiliation by foreign occupiers drummed into every Chinese schoolchild: the Opium Wars, foreign spheres of influence, Japanese occupation. Finally, China had shucked off its albatross.  Even party skeptics bought into his hypernationalism....

“With the people in his pocket, Mr. Xi effortlessly designated himself ‘core leader’ and erased term limitations.  The updated party constitution underlines in red ‘Xi Jinping’s Thought on Socialism With Chinese Characteristics for a New Era’ as China’s guiding principle. The Gospel According to President Xi is what is being sold.

“Then came the Chinese economic downturn, overlaid with American tariffs.  Reality cannot be papered over with political slogans: sliding China sales for Apple, shrinking demand for new cars, major manufacturers such as Uniqlo moving out of China as production costs rise.  Sixty-five million apartments remain empty, according to Prof. Gan Li of China’s Southwestern University of Finance and Economics: ‘We are already in a difficult economic situation. The decline will only get worse.’  No wonder Beijing is anxious for a trade deal.

“If the Chinese economy teeters further, Mr. Xi will have to address his abiding worry: instability.  With the Chinese Dream flickering and less money in Chinese pockets, Mr. Xi will need to work very hard to continue to ingratiate his subjects....

“The Chinese miracle cannot be denied, but now Xi Jinping has reached a crossroads in his reign.  Communing with his 5,000-year-old tradition, which preaches modesty, would help return him to mortality.”

Venezuela: President Nicolas Maduro remains in office, opposition leader Juan Guaido having returned from his travels seeking support.  Guaido, who declared himself interim president in January, announced a public sector strike to increase pressure on Maduro to give up power.

Guaido promised union representatives that employees who turn against Maduro would be granted “amnesty,” Guaido having made  a similar offer to the army.

Maduro had suggested Guaido could be arrested when he returned to Venezuela, but he was allowed to pass through the main Caracas airport.

Thursday, though, Caracas was plunged into complete darkness during rush hour with the worst power outage to ever hit the country, the crisis extending to other areas.  Maduro blamed the opposition, accusing them of sabotage.

The lack of electricity has caused flights to be diverted from the main airport in Caracas.

Venezuela depends on its vast hydroelectric infrastructure, rather than its oil reserves, for its domestic electricity supply.

However, decades of underinvestment have damaged the major dams, and sporadic blackouts are commonplace, but nothing on this scale.

Guaido said the blackout was a matter of “chaos, concern and anger” and “evidence of the usurper’s inefficiency.”

As I go to post, power apparently is back on in parts of Caracas, but 15 of 23 states are reporting issues.

Russia: Lawmakers pushed through a package of bills Thursday seeking to punish internet users and journalists for disrespecting the authorities and spreading fake news.

You can stop laughing.  Observers have suggested that the controversial legislation introduced in December could lead to mass arrests due to its loose wording.  Free speech and internet activists are scheduled to protest the law this Sunday.

Under the new laws, online news outlets will be fined for spreading “false information that is socially significant under the guise of accurate reports.”

Disrespecting authorities such as President Putin will carry a fine and potential jail time.

The legislation targets online news outlets and exempts traditional organizations including newspapers, television networks, radio stations and online news feeds.

It needs to pass Russia’s upper house and secure the president’s signature before entering into force.

Meanwhile, Putin signed a decree suspending Russia’s participation in the Intermediate-range Nuclear Forces Treaty with the United States, Russia having announced last month it was suspending the treaty after the U.S. said it would withdraw because of violations by Moscow. Russia denies flouting the accord and has accused Washington of breaking the treaty itself.

Random Musings

--Presidential tracking polls....

Gallup: 44% approve of Trump’s job performance, 52% disapprove; 89% Republicans, 38% Independents (Feb. 15).
Rasmussen: 50% approval, 49% disapproval (Mar. 8)

A new Wall Street Journal/NBC News poll finds President Trump’s job approval rating at 46%,  52% disapproval.  This is an improvement from a 43-54 split in the prior two months.

Trump’s approval rating in this survey has been between 43% and 47% since last June.

Trump cumulatively leads a generic Democratic opponent, 46% to 40%, in four Midwestern states he carried in 2016 – Indiana, Michigan, Ohio and Wisconsin – along with Pennsylvania, but he trails a generic Democrat, 50% to 39%, in five Sunbelt states Democrats aim to flip in 2020: Arizona, Florida, Georgia, North Carolina and Texas.

On Trump’s effort to declare a national emergency to fund a border wall with Mexico, 60% oppose it, 39% approve.

Among Democrats, just 36% of primary voters say they are comfortable with a candidate who is at least 75 years old, a warning sign for Sen. Bernie Sanders, 77, and potential candidate Joe Biden, 76.

A new Quinnipiac University National Poll has President Trump with just a 38% job approval rating, 55% disapproval, compared to 38-57 in a January 29 survey.  82% of Republicans approve, 34% Independents.  48% Men, just 30% Women.  12% of Blacks approve, 20% of Hispanics.

Separately, by a 59-35 margin, voters say Congress should not begin impeachment proceedings against Trump, but by 58-35, they believe Congress should do more to investigate “Michael Cohen’s claims about President Trump’s unethical and illegal behavior.”

On the immigration issue, only 40% approve of Trump’s handling of it, 58% disapprove.

On the border wall, voters oppose it 55-41 (women 62-34).  And as for the declaration of a national emergency to fund it, voters disapprove 66-31.

By a 65-30 margin, voters don’t believe Trump is honest, his worst grade ever on that count.

--Former New York City mayor Michael Bloomberg announced he would not run for the White House in an op-ed in which he ripped President Trump as “a con” whose first term will be remembered as “four years of chaos, disruption and deceit.”

“I’ve never made any secret of my belief that Donald Trump is a threat to our country.  At the 2016 Democratic National Convention, I said: ‘New Yorkers know a con when we see one,’” Bloomberg said in a lengthy piece published on his eponymous news site.

“Last fall I spent more than $100 million supporting Democrats in the midterm elections.  Republicans in Congress had failed – and are still failing – to fulfill their constitutional duty to hold the president accountable. Instead, they indulge his worst impulses and refuse to work with Democrats on the most urgent issues,” Bloomberg said.

The three-time mayor of Gotham said that he could have beaten Trump in a 2020 face-off.

“I know what it takes to run a winning campaign, and every day when I read the news, I grow more frustrated by the incompetence in the Oval Office,” he said.

“I know we can do better as a country.  And I believe I would defeat Donald Trump in a general election. But I am clear-eyed about the difficulty of winning the Democratic nomination in such a crowded field.”

Bloomberg concluded:

“In the weeks and months ahead, I will dive even deeper into the work of turning around our country, through concrete actions and results. And I will continue supporting candidates who can provide the leadership we need – on climate change, gun violence, education, health, voting rights, and other critical issues – and continue holding their feet to the fire to deliver what they promise.

“I hope those who have urged me to run, and to stand up for the values and principles that they hold dear, will understand that my decision was guided by one question: How can I best serve the country?

“While there would be no higher honor than serving as president, my highest obligation as a citizen is to help the country the best way I can, right now.”

--Editorial / Wall Street Journal

“In a Democratic Party newly enamored with socialism, a potential counterweight is John Hickenlooper, the former Colorado Governor, who announced Monday that he’s running for president.  ‘We need dreamers in Washington,’ Mr. Hickenlooper said in a campaign video pointedly stressing his pragmatic political credentials, ‘but we also need to get things done.’

“Mr. Hickenlooper, age 67, has a degree in geology, and he first came to Colorado in the 1980s to work in the oil business. After being laid off, he cofounded a Denver brewpub – and then added more restaurants in other towns.  He served eight years as Denver’s mayor, then another eight as Governor of a state that has gradually been moving left.

“Mr. Hickenlooper’s launch video brags that ‘Colorado went from 40th in job growth to the No. 1 economy in America.’  During his tenure, the state adopted rules limiting methane emissions from oil-and-gas wells.  Yet the Governor resisted bans on shale drilling and even made headlines for taking a swig of Halliburton’s food-grade fracking fluid.  ‘While I’m not going to stand here and say that it’s something that I’d have with my steak,’ he recounted, ‘it went down easy enough.’  We’d guess it tastes better than the Green New Deal....

“On a few issues Mr. Hickenlooper has been of two minds.  He opposed the Colorado referendum that legalized marijuana, calling it a ‘bad idea’ as recently as 2015.  A year later, he said ‘it’s beginning to look like it might work.’  As of last spring, it wasn’t clear where the Governor stood: ‘This is one of the great social experiments of the last 100 years. We have to keep an open mind.’

“It’s similar with guns. After the mass shooting in 2012 at an Aurora movie theater, Mr. Hickenlooper signed bills to ban large ammo magazines and expand background checks.  Then he was caught on tape telling a group of sheriffs that the legislation had been rushed: ‘I think we screwed that up completely.’

“The passel of socialist candidates will no doubt push him to crystallize his positions, and his refusal to ban fossil fuels will hurt him on the left.  Another challenge is Mr. Hickenlooper’s low national profile....

“Mr. Hickenlooper may be the first of several centrist Democrats to join the 2020 race, and primary voters deserve a policy debate. The question is whether there’s still room in the Democratic Party for a nominee who isn’t a socialist in name or agenda.”

One who won’t be running in that lane is Ohio Sen. Sherrod Brown, who I’ve been saying would survive Iowa and New Hampshire.  Doh!

Meanwhile, some folks are getting tired of Joe Biden’s waiting game.

--Hillary Clinton says she won’t run for president in 2020, but vows she’s “not going anywhere.”

Please just go away, typed the editor.

--Editorial / New York Post

“The House of Representatives votes Wednesday on a resolution that’s billed as a slap at Rep. Ilhan Omar over her persistent anti-Semitic remarks – but it doesn’t even mention her.

“Drafted by House Speaker Nancy Pelosi and the help of New York’s own Eliot Engel and Jerry Nadler, the measure merely denounces a host of anti-Semitic tropes, such as ‘the myth of dual loyalty, including all allegations that Jews should be suspected of being disloyal neighbors or citizens.’

“This, after Omar in a DC speech last week insisted on her right to ‘talk about the political influence in this country that says it is OK for people to push for allegiance to a foreign country.’

“She plainly meant that Israel supporters are more loyal to the Jewish state than to America.  And even as criticism rose over the weekend, she doubled down with similar claims.

“This is at least the third time Omar’s trafficked in this filth in just her first two months in Congress.  Clearly, her earlier apologies were insincere.

“She’s not just criticizing US policy on Israel, as she claims: She’s smearing those who disagree with her as either Jews who put Israel first, or others in the pay (or under the mind control) of the Jewish lobby.

“Pelosi & Co. won’t get her to stop with their ‘educational’ resolution. In the end, they’re going to have to take a stand against not just anti-Semitism, but their colleague who wallows in it.”

In light of the above, the House voted 407-23 to condemn anti-Semitism and other forms of hate.  But while few defended Omar’s words, some asked why the House would so quickly condemn remarks from one of the first female Muslim lawmakers while allowing similarly racially charged comments by President Trump and congressional Republicans to go unchecked by a formal response.

The resolution was rewritten to address all forms of hate – including Islamophobia and white nationalism – in part to ensure Democrats supported it.  An hour before the vote was held, the seven-page resolution underwent another rewrite to recognize discrimination against Latinos, Asian Americans, Pacific Islanders and LGBTQ people.

House Speaker Nancy Pelosi defended Omar before the vote.  “I don’t think that the congresswoman perhaps appreciates the full weight of how that is heard by other people, although I don’t believe that it was intended in an anti-Semitic way. But the fact is that that’s how it was interpreted. We have to remove all doubt.”

Rep. Ted Deutch (D-Fla.) said on the House floor prior to the vote: “We are having this debate because of the language of one of our colleagues – language that suggests that Jews like me who serve in the United States Congress and whose father earned a Purple Heart fighting the Nazis in the Battle of the Bulge, that we are not loyal Americans. Why are we unable to singularly condemn anti-Semitism?”

Republicans were quick to take advantage of the fissure in the Democratic Party by claiming the GOP is the party to defend Israel.  President Trump then piled on further today, calling the Democrats the “anti-Israel” and “anti-Jewish party.”

--Right-wing firebrand Michelle Malkin at the annual Conservative Political Action Conference slammed moderate Republicans on immigration in a despicable fashion.

“It’s the GOP sell-outs, not just the radical, open-borders left, that is in bed with immigration saboteurs,” she said.  “Like the ones who hijacked the tea party movement to shill for amnesty.  Those are the real grifters cashing in and practicing deceit at the expense of their base and at the expense of our country....

“Both parties are to blame.  And yes, I’m looking at you, retired Paul Ryan, and yes, I’m looking at you, Mitch McConnell,” Malkin added.

“And yes, I’m looking at you, Bush family, and yes, I’m looking at you, the ghost of John McCain,” she continued with a gesture toward the ceiling.  The line drew a standing ovation from the audience.

I’m biting my tongue...straight through.

--Sen. Martha McSally (R-Ariz.), the first female fighter pilot to fly in combat, said Wednesday that she was raped in the Air Force by a superior officer.

McSally, a 26-year military veteran, made the disclosure at a Senate hearing on the armed services’ efforts to prevent sexual assaults and improve the response when they occur.

McSally said she did not report being sexually assaulted because she did not trust the system, and she said she was ashamed and confused.  McSally did not name the officer who she says raped her.

--According to an analysis of Centers for Disease Control and Prevention data by two public health nonprofits, the number of deaths from alcohol, drugs and suicide in 2017 hit the highest level since federal data collection in 1999, the national rate hitting 46.6 per 100,000 people in 2017, up from 43.9, or 6 percent.

Deaths from suicides rose from 13.9 to 14.5 deaths per 100,000.

In most states, deaths from alcohol, drugs and suicides increased in 2017, while they fell in five – Massachusetts, Oklahoma, Rhode Island, Utah and Wyoming.

--The death toll from the tornado that ripped through Lee County, Alabama, 23, was the highest tornado death toll in the country since 2013. Staggeringly, ten of the victims were from one family.  The tornado, estimated to be an F-4, packed wind speed of 170 mph and cut a path stretching nearly a mile wide, while one that was spawned from the storm traveled for about 70 miles. 

President Trump visited the area most impacted today, with forecasters calling for more severe weather in the region tonight and tomorrow.

--Finally, in a far more uplifting note, I was reading the March issue of Wired magazine (perhaps the best publication around these days), and this is from Sarah Scholes:

“In the past two decades, astronomers have confirmed the existence of about 4,000 planets – out of an estimated 100-plus billion – in our galaxy.  That’s way more than anyone knew about before the Kepler Space Telescope launched.  All this is good news for alien hunters, whose work has always been on the fringe of scientific pursuits.  After decades of ignoring and underfunding the search for extraterrestrial life, NASA is finally taking the idea seriously.”

What exciting work.  Scientists are looking for “technosignatures” – evidence of ET technology.

As Ms. Scholes writes:

“While other types of an alien ‘Hi there!’ might exist, astronomers have spent the most time searching for radio messages.  They’re watching for something unnatural in an otherwise normal sky: a broadcast at a thin slice of frequencies, like our FM stations; a quick burst of loud blips, like our airport radars; complex signals spread across wave-lengths, like our satellite-transmitted sitcoms.”  

One thing astronomers probably don’t want to hear is a guy imitating Michael Buffer.

“Ahhh, let’s get ready to rum-ble!!!”

---

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

God bless America.

---

Gold $1298
Oil $56.04

Returns for the week 3/4–3/8

Dow Jones  -2.2%  [25450]
S&P 500  -2.2%  [2743]
S&P MidCap  -3.4%
Russell 2000 -4.3%
Nasdaq  -2.5%  [7408]

Returns for the period 1/1/19-3/8/19

Dow Jones  +9.1%
S&P 500  +9.4%
S&P MidCap  +11.9%
Russell 2000  +12.9%
Nasdaq  +11.7%

Bulls 52.9
Bears 20.6

Dr. Bortrum posted a new column! Henry Heinz, ketchup and more.  

Have a great week.

*Arsenal vs. Manchester United in the Premier League, Sunday.  As big as it gets.

Brian Trumbore

 



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Week in Review

03/09/2019

For the week 3/4-3/8

[Posted 10:30 PM ET, Friday]

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

Edition 1,039

As I go to post tonight, there are growing signs that North Korea may be preparing a ballistic missile test or satellite launch, according to U.S. experts analyzing the latest satellite imagery.  I go into the topic in great detail below, but let’s hope the report isn’t true.  I shudder to think how President Trump may respond to such an event.

Otherwise this was a week that had it all, with Democrats clearly overreaching with their document demands.  All of us should understand the principle of congressional oversight, and elections have consequences, but the Democrats are making a huge mistake by not first letting the Mueller investigation play out, and, second, doing the same with the Southern District of New York, assuming the SDNY acts in a timely fashion.

Aside from Mueller and the SDNY, Democrats should be focused on just one thing at this time, going through the process to obtain President Trump’s tax returns, knowing that this could lead to the case going up to the Supreme Court.

Meanwhile, on Trump’s declaration of a national emergency, Sen. Rand Paul (R-Ky.) has become the fourth Republican to throw his support behind a resolution that would block it, joining fellow Republican Sens. Susan Collins (Maine), Lisa Murkowski (Alaska) and Thom Tillis (N.C.) in opposing Trump’s move, which will mean a veto from the president, his first; the Senate then not having the votes to override it.   Nonetheless, a big loss for Trump.

On a different topic, the global economy is slowing.  The Organization for Economic Cooperation & Development cut its forecast for global growth again in 2019 to 3.3% from an earlier forecast of 3.5% in November.

“High policy uncertainty, ongoing trade tensions, and a further erosion of business and consumer confidence are all contributing to the slowdown,” said the OECD in its report. Substantial policy uncertainty remains in Europe, including over Brexit. “A disorderly exit would raise the costs for European economies substantially.”

All covered in depth below.  With apologies to Chris Cuomo, let’s get after it....

Trump World...Hanoi Aftermath

New satellite images of North Korea suggest it is restoring a rocket launch site it had pledged to dismantle, according to analysts.  38 North, a Washington-based North Korea think tank, said the images showed that structures had been rebuilt sometime between Feb. 16 and March 2.  The Center for Strategic and International Studies released a separate report, also citing satellite imagery, that concluded North Korea was “pursuing a rapid rebuilding” at the site.

The images were taken two days after talks between Kim Jong Un and President Trump in Hanoi.

The Tongchang-ri site (Sohae) has been used for satellite launches and engine testing, never for ballistic missile launches.

Images last July appeared to show the North had begun to dismantle the site.

News of the rebuilding work was first reported by Yonhap news agency, which quoted South Korean lawmakers on details of a briefing by the country’s National Intelligence Service in Seoul.

Work at the site, which 38 North says began before the summit meeting between Trump and Kim, is seen by some experts as a sign that the North is unhappy about its failure to secure sanctions relief from the U.S. and is trying to pressure the U.S. for economic concessions.

North Korea could be setting up for a satellite launch, Pyongyang making the case that such launches aren’t covered by its moratorium on missile launches.  But the U.S. would no doubt view a satellite launch as a breach of Kim’s vow during his summits with Trump not to carry out launches.

“I would be very disappointed if that were happening,” President Trump told reporters in the Oval Office, when asked if North Korea was breaking a promise.  “It’s too early to see... It’s a very early report. We’re the ones that put it out. But I would be very, very disappointed in Chairman Kim, and I don’t think I will be, but we’ll see what happens.  We’ll take a look.  It’ll ultimately get solved.”

Trump also said: “We have a very nasty problem there.  We have to solve a problem,” while adding in apparent reference to Kim: “The relationship is good.”

The U.S. has left the door open for seeking tougher sanctions if Pyongyang refuses to give up its nuclear and missile forces and programs.

Secretary of State Mike Pompeo said on Monday he was hopeful he would send a delegation to North Korea in the coming weeks but that he had “no commitment yet.”

Meanwhile, the U.S. and South Korea confirmed they will no longer hold large-scale joint military exercises which have always infuriated North Korea.

President Trump tweeted this week: “The military drills, or war games as I call them, were never even discussed in my mtg w/Kim Jong Un of NK – FAKE NEWS! I made that decision long ago because it costs the U.S. far too much money to have those ‘games,’ especially since we are not reimbursed for the tremendous cost!”

Editorial / Wall Street Journal

“New satellite photos show North Korea may be prepping for another missile test after the summit in Hanoi.  That’s all the more reason for President Trump to rethink his cancellation of large military exercises with South Korea.

“ ‘We are not reimbursed for the tremendous cost!,’ he tweeted this week, and the Pentagon has canceled two large exercises with South Korea.  One is Foal Eagle that each year for four decades simulated a conventional ground conflict with air and naval participation. In 2017 some 3,600 troops joined 28,000 stationed in Korea for the exercise. The second is Key Resolve, which uses a computer simulation to set up a command headquarters that would be essential after a North Korean attack.

“The Pentagon says these demonstrations of force will be replaced with new headquarters exercises and ‘revised field training programs.’  By one count the U.S. has canceled at least nine exercises with the South Koreans, though smaller joint exercises continue.

“Mr. Trump claims that the exercises cost $100 million, but where he got this number is anyone’s guess.  The Pentagon hasn’t disclosed Foal Eagle’s costs, which are hard to determine across service branches.

“Last year the Pentagon said a canceled August exercise would have run about $14 million. Thomas Spoehr, who runs the Heritage Foundation’s defense center, says this sounds about right. The military pays personnel whether they’re training or not, and a U.S. carrier group is often deployed in the Western Pacific.

“Recalibrating the exercises won’t immediately compromise military readiness, and the brass say smaller exercises won’t sacrifice capability.  But there are trade-offs.  Nothing simulates the stresses of war like a larger effort on land, sea and air.

“One reason for large annual exercises is the high turnover of U.S. personnel in Korea.  Service members are constantly rotating to new locations, new jobs or both.  North Korea’s standing force of one million doesn’t have this problem.

“As for cost-sharing, South Korea has ‘invested more in its defense over the past 15 years than it had in the previous 50,’ as Gen. Robert Abrams, who commands U.S. forces in Korea, told Congress last month.  Its investment ‘exceeds the commitment of other allies and regional partners.’...South Korea also shares the cost of stationing U.S. troops on the peninsula....

“Mr. Trump has rightly argued that Barack Obama squeezed defense so much that core competencies like routine training and maintenance suffered.  Yet exercises are among the highest demonstrations of service training and proficiency.

“The military does sometimes burn money like it’s jet fuel, including procurement nightmares such as the F-35 fighter. But learning how to work with allies and stress-testing U.S. forces is not a waste of money.  Exercises are a crucial signal of resolve to North Korea and are essential to deterrence in one of the world’s most dangerous corners.”

Jackson Diehl / Washington Post

“By now, Trump’s shallow strategy for dealing with adversaries such as Kim has become painfully obvious: First hit them with sanctions and insults, then shower them with praise, excuse their abuses and hope that presidential charm will prompt them to make concessions their regimes have rejected for decades.

“The diplomatic disaster in Hanoi ought to make clear once and for all that the gambit won’t work – not even on the 35-year-old ruler of one of the world’s most isolated states.  The only apparent effect of Trump’s wooing of Kim was to make the dictator believe he could sell the president on a decidedly one-sided bargain that would have lifted most sanctions on North Korea while allowing it to keep its nuclear arsenal.

“The failure goes beyond Trump’s gross overestimation of his dealmaking ability.  The administration’s abrupt reversal on North Korean human rights shows that it fundamentally misunderstands the challenge presented by the world’s last Stalinist regime.  The president’s theory is that Kim will trade his nuclear arsenal for the prospect of transforming North Korea’s economy so that it produces the prosperity seen in the South.

“As U.S. intelligence professionals have tried to explain to Trump, Kim prefers holding nukes to feeding his people.  He knows that his regime would not exist without them; nor could the totalitarian system survive economic modernization....

“The simple truth is that the North Korean regime, its nuclear arsenal and its system of repression are intricately linked.  If Kim were serious about denuclearization, there would be signs of an internal easing.  There aren’t....

“Trump’s diplomacy with North Korea has been revealed as a fantasy. Real progress would require a restart based on patient diplomacy, ramped-up pressure, and a recognition that the problem entails not just nuclear reactors and missile factories, but torture chambers and concentration camps.”

Trumpets

--Paul Manafort, the former Trump campaign manager, was sentenced to 47 months in prison on Thursday in the financial fraud case that left his power-broker reputation, and grand lifestyle, in tatters.

But Judge T.S. Ellis III of the United States District Court in Alexandria, Va., declined to come anywhere near the federal sentencing guidelines that would have put the 70-year-old Manafort in prison for the rest of his life.

For nearly two years, prosecutors have pursued Manafort on two tracks, charging him with more than two dozen felonies, including obstruction of justice, bank fraud and violations of lobbying laws.  But while he had agreed to cooperate in the case of Russian election interference, prosecutors said Thursday that Manafort provided little information of value in that inquiry.

Manafort, hoping for a pardon from President Trump, expressed no remorse, while the president said he felt “very badly” for the convicted felon.  “I think it’s been a very, very tough time for him.”

But during Thursday’s proceedings, Judge Ellis noted that while the case was prosecuted by Robert Mueller’s office, it was unrelated to his core mission of investigating Russian interference in the 2016 election.

Ellis noted the distinction, saying that Manafort was “not before this court for anything having to do with collusion with the Russian government to influence this election.”

So Trump, in both a tweet and in speaking with reporters today, then incorrectly suggested Ellis’ comments had cleared his campaign of wrongdoing.

“Both [Manafort’s] lawyer, a very respected man, and a highly respected judge, the judge said there was no collusion with Russia.”  Trump said he was “very honored” by the judge’s words, adding: “It’s a collusion hoax. It’s a collusion witch hoax. I don’t collude with Russia.”

Sen. Angus King (I-Maine) shot back during an appearance on CNN.

“This case doesn’t prove there was no collusion because that wasn’t the subject of the trial.”

--Michael Cohen filed a lawsuit on Thursday accusing the Trump Organization of breaking a contract and refusing to pay about $1.9 million in legal fees after Cohen began cooperating with federal prosecutors.

The lawsuit, filed in New York Supreme Court in Manhattan, said that the Trump Organization had agreed to pay Cohen’s attorney fees or related costs connected to his work with the Trump Organization but had failed to live up to that promise.

The Trump Organization lived up to the deal until sometime last May, according to the lawsuit. Then, in June, when Cohen began telling people close to him that he would be willing to cooperate with Mueller’s investigation, the Trump Organization stopped paying Cohen’s lawyers.

Separately, Cohen’s current attorney, Lanny Davis, told the New York Post that Cohen considered seeking a presidential pardon last year as part of a joint defense agreement Cohen had with the president after Cohen’s Manhattan office was raided in April 2018.

Davis said in a statement: “During that time period, he directed his attorney to explore possibilities of a pardon at one point with Trump lawyer Rudy Giuliani, as well as other lawyers advising President Trump.”

The discussion of a pardon was broached by Cohen’s lawyer at the time, Stephen Ryan, who spoke with Trump’s attorneys in the months after the raid.

The revelation about Cohen appears to conflict with his statement to the House Oversight Committee last week.

“I have never asked for, nor would I accept, a pardon from Mr. Trump,” Cohen told the committee.

Needless to say, President Trump is making hay of this, as I note in a tweet below.       

--Bill Shine, the former Fox News executive who joined the White House last summer to manage the president’s communications operation, has resigned and will move to the re-election campaign, which was  a surprise move.  There is clearly more to the story.

Shine’s service as deputy White House chief of staff was seen as emblematic of how closely Trump has aligned himself with Fox, using the network to talk with his base and embracing lines of argument that the hosts advance on his behalf.

But, according to those covering the White House, Shine and the president just didn’t get along.

--Scott Gottlieb, the commissioner of the Food and Drug Administration, known for his aggressive efforts to regulate the e-cigarette and tobacco industries, resigned Tuesday.  Gottlieb said he was tired of the commute to his home in Westport, Conn., and missed his family.  But he has been under increasing pressure from Republicans in Congress for some of his tough stances.

--According to Customs and Border Protection, for the fourth time in five months, the number of migrant families crossing the southwest border has broken records, the CBP warning that government facilities are full and agents are overwhelmed.

More than 76,000 migrants crossed without authorization in February, more than double the levels from the same period last year and approaching the largest numbers seen in any February in the last 12 years.

More than 90 percent of the new arrivals were from Guatemala, officials said.               

--According to CNN, President Trump pressured his then-chief of staff John Kelly and White House counsel Don McGahn to grant his daughter and senior adviser, Ivanka, a security clearance against their recommendations, three people familiar with the matter told CNN.

This comes after word similar pressure was applied to get Jared Kushner’s clearance, which rankled West Wing officials.

Yes, the president has the legal authority to grant clearances, but most of the time this is left up to the White House personnel security office, which determines whether a staffer should be granted one after the FBI has conducted a background check.  But after concerns were raised in both cases, Kushner and Ivanka, Trump pushed Kelly and McGahn to get it done so it would not appear as if the president was tainting the process in favor of his family, sources told CNN.  After both refused, Trump then granted them their clearances.

Three weeks ago, Ivanka, in an interview with ABC News, said her father had “no involvement” regarding her or Kushner’s clearances.

--Last Saturday, thinking it was part of my job, I watched President Trump’s entire 2 hour, 2 minute speech at the Conservative Political Action Conference (CPAC) and those are two hours I’ll never get back.

Trump rambled on about every topic under the sun, including on crowd size, such as at the inauguration, and how a good friend who has known him since they were kids (Richard LeFrak) now insists on calling him “Mr. President,” and it was all very painful.

The president didn’t bring up North Korea, having just returned from the summit, until about the 2-hour mark.

Michael Gerson / Washington Post

“ ‘A great empire and little minds go ill together,’ said Edmund Burke.  The United States is not quite an empire, but one little mind was on full display during President Trump’s speech this past weekend to the Conservative Political Action Conference.  It was two hours of Trump unplugged, unleashed, uncensored, unreconstructed and unhinged.  It was a vivid reminder that the president of the United States, when he is most comfortable and authentic, is a rude, arrogant crank yelling profanities at the television.  Correction: through the television.

“Most Americans, I suspect, would judge the speech as bad and rambling.  To a former speechwriter, it was like watching a wound drain....

“As the organizing structure of the speech, Trump skipped from enemy to enemy – a taunt here, a mock there.  Hillary Clinton made an appearance. As did Robert S. Mueller III and Jeff Sessions, and Central American refugees, and weak-kneed generals, and socialist Democrats, and university administrators, and those horrible people who miscount inaugural crowds.

“This last point – that the size of his inaugural crowd was maliciously underestimated by evil forces – seems to be the Ur-myth of Trumpism.  It was the subject of his first order as president, compelling  a minion (poor Sean Spicer) to utter an absurd falsehood on his behalf.  Given the flood of lies that has followed, it must have felt darn good. Those who are willing to believe this original lie are the truest of believers – a core of supporters who will stomach absolutely anything.

“Trump’s CPAC speech was a bold assertion that he has learned nothing – absolutely nothing – during his first two years in office.  Not manners.  Not economics.  Not geopolitics.  Not simple decency.

“The speech seemed like the rhetorical spawn of Fidel Castro and George Wallace, combining demagoguery with bigotry in equal measure.  And it confirmed Trump’s place as the worst speaker in presidential history.

“Having gotten that out of my system, let me turn to what really bothered me.  Our president lacks dignity...

“The president has made the denial of dignity to certain people and groups a political rallying cry. This kind of cruelty and dehumanization is the defining commitment of his political life. He is not merely undignified as a leader; he is committed to stripping away the dignity possessed by others.

“There is a tie between incivility and injustice. When a president uses his office to demean others, he is undermining an essential democratic premise – that those out of power are still protected from abuse by general respect for their inherent worth and dignity. They are still partners in a common enterprise.  And they deserve better than cruelty and contempt.”

--Trump tweets:        

“Bad lawyer and fraudster Michael Cohen said under sworn testimony that he never asked for a Pardon. His lawyers totally contradicted him.  He lied!  Additionally, he directly asked me for a pardon.  I said NO. He lied again! He also badly wanted to work at the White House. He lied!”

“Both the Judge and the lawyer in the Paul Manafort case stated loudly and for the world to hear that there was NO COLLUSION with Russia. But the Witch Hunt Hoax continues as you now add these statements to House & Senate Intelligence & Senator Burr.  So bad for our Country!”

“PRESIDENTIAL HARASSMENT!”

“I cannot believe the level of dishonesty in the media.  It is totally out of control, but we are winning!”

“Thank you @foxandfriends. Great show!”

“The Wall is being built and is well under construction. Big impact will be made.  Many additional contracts are close to being signed. Far ahead of schedule despite all of the Democrat Obstruction and Fake News!”

“It was not a campaign contribution, and there were no violations of the campaign finance laws by me. Fake News!”

“The greatest overreach in the history of our Country.  The Dems are obstructing justice and will not get anything done. A big, fat, fishing expedition desperately in search of a crime, when in fact the real crime is what the Dems are doing, and have done!”

“Presidential Harassment by ‘crazed’ Democrats at the highest level in the history of our Country. Likewise, the most vicious and corrupt Mainstream Media that any president has ever had to endure – Yet the most successful first two years for any...

“...President.  We are WINNING big, the envy of the WORLD, but just think what it could be?”

Wall Street and China Trade Talks

It was not a good week for equities, the worst of the year thus far and the first down one across all the major indices, over 2% on each.  The economic news from Europe and China didn’t help, as detailed below.

We also had a slew of economic numbers on the domestic situation, again, as the government catches up with the data, post-shutdown, and we started off with December construction spending coming in worse than expected, down 0.6%. 

But December new-home sales were stronger than forecast, 621,000 annualized, and the February ISM figure for non-manufacturing (service sector) was better than expected, 59.7 (50 being the dividing line between growth and contraction).

A reading on productivity for the fourth quarter was also strong.  And a figure on January housing starts was solid, 1.23 million, above forecasts.

And then today, we had the jobs data for February and it came in way below estimates at 20,000, when 178,000 was the consensus.

No doubt, February’s brutal weather in large swaths of the country had something to do with the putrid figure, but, after slight upward revisions to December and January, the three-month average, which is what we should focus on, is a strong 186,000.

Also, while the unemployment rate fell back to 3.8%, wages rose 0.4%, or 3.4% the past 12 months, the highest level for this key metric since April 2009.

And the underemployment rate, U6, plummeted from 8.1% to 7.3%, which is terrific.

All in all, ignore the headline-grabbing 20,000 and focus on the balance of the report.

That said, while it is still very early in terms of the data that has been released, the Atlanta Fed’s GDPNow barometer for the first quarter is showing growth of just 0.5%, with most economists being around 1% thus far.  But next week we get another report on retail sales and that could be a positive, after December’s disastrous reading for same.

Finally, in keeping with the above, New York Fed President John Williams said in a speech at the Economic Club of New York on Wednesday that slowing growth in the U.S. is not necessarily “cause for alarm” but instead a “new normal” people should expect. Williams has slightly downgraded his forecast for GDP to 2 percent this year as turbulent markets late last year constrain consumer and business spending today. 

Williams also said interest rates are at a “neutral” level that neither encourages nor discourages economic activity.  Weakening Chinese and European economic growth justify the Fed’s patient stance on rates, he said, largely reiterating earlier comments from Chairman Jerome Powell and other members of the board.

“With a strong labor market, moderate growth, and no sign of any significant inflationary pressures, the baseline outlook is quite favorable.”

As for the trade issue with Beijing, at week’s end, no one in the White House or anyone involved in the talks is signaling a summit between Presidents Trump and Xi in Mar-a-Lago this month.  And as Secretary of State Mike Pompeo said in a media interview this week, President Trump will reject any deal that is not perfect, though the two sides will continue working on an agreement.  Others said that enforcement of any deal is the key issue, such as on intellectual property theft, as well as actual trade volumes. 

And there is no word on whether existing tariffs would be lifted immediately or over a period of time to allow the U.S. to monitor Chinese compliance.  The U.S. wants to continue to wield the threat of the tariffs as leverage.

China has apparently offered to lower tariffs on U.S. farm, chemical, auto and other products, including the purchase of a large amount of natural gas from Houston-based Cheniere Energy Inc.

Citing progress toward a deal, President Trump last week delayed a planned increase of tariffs on Chinese imports to 25 percent, from 10 percent, that was scheduled to take effect March 1.

But on a topic I have harped on endlessly, how America’s farmers are getting killed by Trump’s trade practices.....

Sen. Michael Bennett (D-Colo.) / Wall Street Journal

“The Trump administration has been bad for American farmers. In 2018 farm incomes declined $9.1 billion and total farm debt rose to $410 billion, the highest in nearly 40 years. Bankruptcies are more frequent than during the Great Recession, and they are up 59% in the region that includes my home state of Colorado, compared with 2008.  Low commodity prices, persistent drought and labor shortages have pushed many farmers to the edge.

“Farmers have responded to these challenges with typical ingenuity – diversifying crops, introducing new technologies, and generating income from their land through conservation and recreation.    But the administration’s reckless trade and immigration agenda have made matters worse.

“It didn’t have to be this way. Although I disagree with President Trump on many things, I agree we need a tougher approach to end China’s unfair trade practices.  He could have pursued that goal in concert with America’s allies to maximize pressure.  Instead, he slapped Canada, Mexico and countries in the European Union with tariffs, leaving the U.S. isolated.

“The predictable retaliation against tariffs by China and many U.S. allies left American farmers to bear the brunt of a sprawling trade war.  As a consequence of the President’s policies, farmers saw crop prices drop even further and the expenses like fertilizer and equipment spike.  Corn and wheat prices have declined 15% since May 2018 in Colorado, in line with national trends.

“The longer the president’s slapdash trade policy persists, the more opportunities American farmers will lose to their competitors. China, the largest buyer of U.S. soybeans, has reduced American soybean imports by 90%.  Brazil is rushing to fill the void. Wheat growers stand to lose precious Japanese market share to Australia and the European Union.  The administration recently tried to distract from the damage by touting a tentative agreement with China to purchase 10 million tons of American soybeans – less than half of the 27 million tons they bought last year.

“Mr. Trump has also pursued an immigration agenda designed to stoke his political base, not fix our broken system.  Colorado’s farmers and ranchers have told me they need a steady flow of skilled workers....

“The spike in farm bankruptcies should be a wake-up call for Washington to treat the future of American agriculture with the same thoughtfulness and care that our farmers and ranchers apply to their work every single day.”

Finally, we received some data on the trade deficit in the United States and it widened to $891.3 billion, the highest in history as the U.S. imported a record number of products.

But it’s deceiving. The global economic slowdown and the relative strength of the dollar weakened demand for American goods, while U.S. demand has remained strong.  Countries run trade deficits when they consume more than they produce.

In December, the overall deficit in goods and services, which includes everything from computers and washing machines to tourism and intellectual property, rose 19 percent from the previous month, to $59.8 billion.  The trade gap in goods between the United States and China hit $419 billion in 2018, which isn’t helping Trump’s mood.

But as the Wall Street Journal editorialized:

“Everyone can calm down, and President Trump can take a bow that his tax reform and deregulation are working as intended.

“ ‘In a blow to Trump, America’s Trade Deficit Hit a Record $891 Billion in 2018 – the highest it’s ever been,’ read a summary in one newspaper that seems to want Mr. Trump to blow up at the news. The trade deficit grew 12% last year to $621 billion as imports rose $218 billion and exports climbed $149 billion.  Excluding services, the gap increased to $891 billion.

“This is not bad economic news.  Imports grew faster than exports as the U.S. economy accelerated and much of the world slowed. The dollar grew stronger as capital flowed into the U.S., and the trade deficit grew to offset the larger capital inflows as it must by definition under the national income accounts....

“Mr. Trump has a fixation with German-made cars, so it’s worth highlighting that imports of passenger cars declined $2.5 billion as U.S. consumers bought more trucks and SUVs produced at home.  But since American trucks include foreign components, imports of auto parts increased $10 billion at the same time that truck exports rose $1.1 billion.

“All of this reflects how U.S. manufacturers depend on global supply chains and underscores why it would be a mistake to impose tariffs on auto parts. The higher costs would flow to American manufacturers and ultimately be paid by consumers.

“On a sour note, retaliatory tariffs by China took a bite out of Farm Belt exports including soybeans (which fell by $4 billion), wheat ($660 million) and vegetables ($290 million).  Exports of iron and steel mill products also declined by $830 million as Canada and Mexico retaliated against the President’s tariffs on steel and aluminum.

“The main point is that a larger trade deficit is a benign byproduct of a healthier American economy.  Supply-side policies revived animal spirits and gave the economy a second wind.  Trade negotiations that further open foreign markets like China’s to U.S. goods and investment can keep growth humming, but tariffs that retard growth in the name of reducing the trade deficit are destructive.  The best way to respond to a trade deficit is to ignore it.”

But there is a deficit that matters...the federal budget deficit, which for the first four months of the fiscal year, beginning Oct. 1, was $310.3 billion, up from a deficit of $175.7 billion in the same period a year ago.  The surplus in January was $8.7 billion, down from a larger $49.2bn in January 2018.  Most years January is a surplus month, as both individuals and corporations make tax payments.

The higher deficit reflects greater spending in areas such as Social Security, defense and interest payments on the national debt, while the government is collecting lower taxes from individuals and corporations owing to the $1.5 trillion tax cut pushed through Congress in 2017.

Individual income taxes withheld from paychecks were down 3 percent for the Oct.-Jan. period, while corporate income taxes were down 23 percent.

Revenue from border taxes is, however, up 91 percent from the same period a year ago owing to the tariffs Trump loves to talk about but the border taxes are not paid by the countries where the goods are being produced but rather by the U.S. companies importing the products into the United States.  Those costs are generally passed on to American consumers.

The Congressional Budget Office is projecting that this year’s deficit will hit $897 billion, up 15.1 percent from the $779 billion deficit recorded last year.

Europe and Asia

The European Central Bank slashed its growth forecast for the eurozone (EA19) from 1.7% to 1.1% this year, while cutting its inflation target from 1.6% to 1.2%.  Euro bond yields tumbled in response, as ECB President Mario Draghi, whose term expires in October, announced that the central bank’s governing council voted unanimously to bring back a stimulus measure intended to encourage lending, a move also designed to help banks in countries with weaker economies, such as Italy, that otherwise may have trouble raising money at reasonable rates.

The slowdown in China is exacerbating the picture in Europe, with China an important market for its cars, pharmaceuticals and heavy machinery.

We also had the release of the composite PMI data for the EA19 in February, 51.9, with the services component at 52.8.

Service readings in other countries:

Germany 55.3 (up from 53.0 in January), France 50.2 (47.8 Jan.), Italy 50.4 (49.7), Spain 54.5, Ireland 55.9.

The U.K. was 51.3.

These are all better than February’s manufacturing data, released the prior week by IHS Markit, but you add it all up and it’s still looking like 0.2% GDP in the first quarter.

Which is what we learned this week was the growth rate in the fourth quarter for the eurozone; 1.1% for all of 2018, per Eurostat.

Germany 0.6% GDP annualized for 2018, France 0.9%, Italy 0.0%, Spain 2.4%.

One thing is for certain.  The ECB won’t be raising interest rates until well into 2020, for starters.

Brexit: British Prime Minister Theresa May was in Brussels this week for further negotiations on Brexit and the backstop (insurance plan) for the Irish border.  British lawmakers vote for a second time on Tuesday, less than three weeks before the U.K. is scheduled to leave the European Union, but as I go to post, there are few signs May is receiving the concessions that she needs to reverse her previous defeat in the House of Commons.

“History will judge both sides very badly if we get this wrong,” foreign minister Jeremy Hunt told the BBC today.

As for the backstop and the border between Northern Ireland and Ireland – the only land frontier between the United Kingdom and the bloc, Mrs. May wants legally binding assurances from the EU that Britain will not be trapped permanently in the backstop, which involves keeping Britain in a customs union.  Many business leaders are alarmed at the prospect of leaving the bloc’s single market, which underpins many of their operations, with no transition arrangements to soften the blow.  There are signs employers are holding off on hiring until there is certainty, and who can blame them?

In a speech today in Grimsby, Lincolnshire, Mrs. May said: “Just as MPs will face a big choice next week, the EU has to make a choice, too.   We are both participants in this process.  It is in the European interest for the UK to leave with a deal.  We are working with them, but the decisions that the European Union makes over the next few days will have a big impact on the outcome of (Tuesday’s) vote.”

Today, the EU’s chief Brexit negotiator, Michel Barnier, tweeted after briefing ambassadors of the 27 EU states that are staying on together after Brexit: “EU commits to give UK the option to exit the Single Customs Territory unilaterally, while the other elements of the backstop must be maintained to avoid a hard border.  UK will not be forced into customs union against its will.”

While this statement from Barnier would make legally binding commitments of the assurances the EU offered to London in January, that parliament then turned down, it is unlikely to be seen as enough by many of the hardline eurosceptics in May’s Conservative party, which doesn’t have a majority in parliament to begin with.

“The EU will continue working intensively over the coming days to ensure that the UK leaves the EU with an agreement,” Barnier said, talks slated to continue over the weekend.

But the sticking point is that while Britain would need to honor its commitment to preserve a border free of controls between Northern Ireland and the Ireland, this could mean some sort of customs border “in the Irish Sea.”  A nightmare.

If Commons defeats the plan Tuesday, lawmakers will be able to vote on Wednesday and Thursday on whether they want to leave the bloc without a deal (hard-Brexit), or ask for a short delay to Brexit.

The drop-dead date for the EU is March 21 and an EU summit with all its leaders.  Any decision to allow an extension would have to be unanimously approved by them at that time.  Brexit is March 29, unless delayed.

Turning to Asia, in China...I cover the annual gathering of the National People’s Congress further below, but for this space, this is the time each year when Premier Li Keqiang, who is in charge of the economy (at least on paper), gives the government’s growth forecasts, which you can then assume will be hit, within a tick or two.  Li announced a lower growth target for 2019 – a range of 6% to 6.5% compared with 6.6% last year (which was the slowest pace in 28 years).*

Li also said the government would aim to deliver nearly $300 billion in tax cuts and other reductions in fees.

Meanwhile, China’s exports for February tumbled the most in three years, down 20.7 percent from a year earlier, the largest decline since Feb. 2016, customs data showed.  Imports fell 5.2% year-on-year, both figures far worse than expected.  But analysts warn the data for January and February is always skewed by the long Lunar New Year holidays, which came in mid-February in 2018, but started on Feb. 4 this year.

Imports from Japan sank 19.3% in February compared with a month earlier.  [Taiwan also reported its biggest export drop in years, with shipments to China down 10.4%, further evidence of the slowdown in the region as a whole.]

On Wednesday, the U.S. reported its trade deficit with China surged to an all-time high last year, which isn’t making trade negotiations any easier.

*As all of us know, China’s GDP figures are not exactly accurate, ditto much of the data its National Bureau of Statistics releases.  It’s just too cute how the quarterly GDP figures never vary more than a tenth of a percent or so, whereas in the U.S., in just the last three quarters we’ve had 4.2%, 3.4% and 2.6% prints, for example.

But the Brookings Institution, the Washington think-tank, published a paper this week that examined the period 2008 to 2016 and concluded that China’s economy is 12 percent smaller than official figures indicate, with real growth overstated by about 2 percentage points annually in recent years.  Which of course adds to concerns that the slowdown is even more severe than the government has acknowledged.

The Chinese government’s emphasis on numerical targets – a legacy of Maoist state planning – has made GDP a politically sensitive figure, with local cadres’ performance based largely on growth in their respective regions, which gives an incentive to skew local statistics, not that readers of this space didn’t already know this, since at least twice a year I note the same thing. It’s just that now the Brookings Institution has reinforced longstanding skepticism.

As I’ve said since the beginning when it comes to China and its data, it’s trends that are important, and some of the numbers, such as on housing prices and inflation, are probably pretty accurate.

And the NBS has stated publicly that it would assert greater control over provincial data collection beginning this year to eliminate some of the discrepancies between local and national numbers.

One more reading on China’s economy...the private Caixin survey on the service sector for February came in at 51.1.

And tonight, China’s producer price, or factory-gate, report for February showed prices were flat from a month earlier (0.1% year-over-year), while consumer prices rose 1.5% from a year earlier.  Signs of deflation could prompt the government to roll out even more aggressive measures to halt a sharper slowdown.

Japan reported its non-manufacturing PMI for February, a respectable 52.3.

On the manufacturing side, PMIs for February: Taiwan 46.3, South Korea 47.2.  Both lousy.

Street Bytes

--Saturday marks the 10-year anniversary of the bull market.  The broad market’s rise, as represented by the S&P 500, 305%, is the third-biggest rally ever.

But this week was a bad one, the worst week since December, with the Dow Jones and S&P both down 2.2%, the Dow to 25450, while Nasdaq fell 2.5%.  Slowdown fears predominated, as well as uncertainty over the China trade talks.

--U.S. Treasury Yields

6-mo. 2.51%  2-yr. 2.46%  10-yr. 2.63%  30-yr. 3.01%

Treasuries rallied on the global slowdown news, as well as the European Central Bank’s statement it would deploy additional stimulus, which had investors looking to Treasuries for yield.  As in the German 10-year (bund) saw its yield fall back to 0.07% at week’s end. 2.63% on U.S. paper looks humongous by comparison.

Separately, in last weekend’s CPAC rant, President Trump targeted Fed Chairman Powell.

“We have a gentleman who likes raising interest rates, a gentleman who likes quantitative tightening,” said Trump.  “Can you imagine if we left interest rates where they were?  If we didn’t do quantitative tightening, taking money out of the market?”

--Oil prices rebounded slightly this week to $56.04, as investors focused on OPEC-led production cuts that have helped rebalance the market, while involuntary supply outages in Venezuela and Iran have helped offset rising U.S. output.  Compliance with the cuts has exceeded market expectations.

But we did have a bearish inventory report from the U.S. Energy Information Administration, which said U.S. stockpiles of crude had jumped by far more than expected, though gasoline stockpiles declined.  And today, the sour jobs report renewed slowdown fears.

--ExxonMobil announced plans to sharply step up its capital spending over the next few years, to deliver a “significant increase” in its volumes of production of oil and gas.

At a presentation for analysts in New York, the company said it planned capital spending of $30bn this year and $33bn-$35bn next year, up from about $26bn last year.  CEO Darren Woods said the investment opportunities available to Exxon, following its acquisition of assets in the Permian Basin in the U.S. and its oil discoveries in Guyana, were more attractive than at any time since Exxon and Mobil merged in 1999.

Woods said that in a world in which the goal is to cut greenhouse gas emissions as part of the goal of limiting global warming, there would still be a need for heavy investment in oil and gas production to offset natural decline in producing fields.

“Perhaps the biggest risk to the industry today is under-investment,” Woods said.  “Society needs us to make these investments.”

--The total net worth of U.S. households dropped by $3.73 trillion during the fourth quarter to $104.329 trillion amid the turbulence in the stock market.  Household net worth is the value of all assets such as stocks and real estate minus liabilities like mortgages and credit-card debt. 

The 3.5% decline was the largest quarterly drop in household net worth since the final quarter of 2008.  But barring a total collapse the next few weeks, the figure will rebound strongly with the hot start in equities in 2019.

--Chinese telecom giant Huawei filed a lawsuit against the U.S. government over a ban that restricts government agencies from using its products.

In a statement, Huawei said Congress has “failed to produce any evidence to support its restrictions.”

The U.S. has been lobbying allies to prohibit Huawei equipment on national security grounds.

But Huawei’s rotating chairman Guo Ping said: “The U.S. Congress has repeatedly failed to produce any evidence to support its restrictions on Huawei products. We are compelled to take this legal action as a proper and last resort.

“This ban not only is unlawful, but also restricts Huawei from engaging in fair competition, ultimately harming U.S. consumers.”

Guo also accused the U.S. of previously hacking into its servers, though he provided no evidence to support the charge.

“The U.S. government has long branded Huawei a threat. It has hacked our servers and stolen our emails and source code.”

Last week, Guo said part of the reason for U.S. attacks on Huawei can be found in documents leaked by whistle-blower and former U.S. government contractor Edward Snowden about the activities of the U.S. National Security Agency.

Australia, New Zealand and the U.S. have all banned or blocked Huawei from supplying equipment for their future 5G mobile broadband networks.

Separately, China expressed its outrage at Canada’s decision to proceed with the extradition to the United States of Huawei executive Meng Wanzhou.  The foreign ministry in Beijing issued a statement, saying: “It is a serious political incident. We again urge the U.S. to rescind its request for the extradition...and call for Canada to release her immediately.”

Canada’s move comes despite mounting pressure from China, which has included the detention of several Canadian citizens.

A statement by Canada’s Justice Department said that officials had conducted a “thorough and diligent review of the evidence” and determined it was sufficient to present the case to a judge for extradition.

The Chinese embassy likened Ottawa’s actions to “political persecution.”

President Trump had said last week that discussions on dropping criminal charges against Huawei would be held soon, prompting speculation he was looking to use the case as a bargaining chip in the trade negotiations.

I have previously written in this space how a senior adviser to the Chinese Communist Party, Xie Maosong, had predicted Huawei would become part of the trade talks and that Meng would be released in the coming months.

--Hyundai Motor Co. is considering plans to suspend production at its oldest plant in China, the South Korean carmaker said on Wednesday, as it reels from plummeting sales and massive overcapacity in its biggest market.

Hyundai, together with affiliate Kia Motors, was the No. 3 automaker in China until 2016, but the duo, already grappling with increased competition from Chinese rivals and global automakers, have this overcapacity issue, with three plants in Beijing alone.  The company has five factories in China overall, in a joint venture with Chinese partner BAIC Motor Corp.

Hyundai is receiving strong reviews for its redesigned Sonata sedan, sparking hopes of a comeback.

Hyundai’s sales in China amounted to only half its total production capacity in the country last year.

--Tesla Inc. faces criticisms from Chinese customers who ended up paying thousands of dollars more for their new cars because they bought before the company’s recently enacted price cuts.

The timing couldn’t be worse, as Tesla aims to start mass production of the Model 3 sedan at a factory in Shanghai, and ultimately wants to make 500,000 cars a year there to capitalize on China’s booming market for electric vehicles.

So in response to the complaints, the company said anyone who bought a Tesla before the price cut would get a 50% discount on the company’s autopilot or full self-driving options.

One customer told the Wall Street Journal he paid about $141,650 for a Model X SUV that was delivered to him Feb. 23, and now the car costs only $114,800.  He expressed disappointment that nobody from Tesla had called him to apologize or offer compensation.

“The extra $26,850 ‘is just my contribution to Elon Musk’s rocket-building project,’ Ethen Hou said, referring to the Tesla chief executive’s company SpaceX.”

But wait, there’s more!  Customs authorities in Shanghai found various irregularities in 1,600 imported Model 3 cars, including improper labelling of the vehicles, according to financial publication Caixin (which puts out the private PMIs on China).  It’s difficult to ascertain if this is pure harassment, but this is an example of what could happen to any American company attempting to do business there during these tense times in the trade relationship.

Perhaps even more seriously, U.S. authorities are investigating a fatal Tesla Model S crash in Florida Sunday, Feb. 24, that killed the driver and caused a massive fire, the second fatal Tesla crash in the state in the week of 2/25 being probed, the National Highway Traffic Safety Administration said last Saturday.

The South Florida Sun Sentinel reported Monday, 2/25, the 2016 Model S caught fire and burned the 48-year-old driver beyond recognition.  The newspaper said the Tesla battery repeatedly caught fire after being transported to a towing facility.

NHTSA can demand a recall if it believes a defect poses an unreasonable safety risk, and I’d say ‘instant cremation’ could be a good reason for one.

As for Musk’s SpaceX, and the latest launch of a rocket to the International Space Station, the Crew Dragon capsule successfully docked with the ISS, marking another milestone.

The capsule, aside from carrying a mannequin passenger named Ripley for testing of future human missions, carried 400 pounds of supplies.  It was the first time a SpaceX capsule attempted to attach itself to the station.

The operation moves SpaceX closer to ferrying NASA astronauts to the ISS.

Today, the Dragon vehicle successfully splashed down in the Atlantic.

Meanwhile, back to Tesla, by Monday, Musk must file his defense against contempt charges leveled against him by the SEC; the agency saying he violated terms of a fraud settlement reached in September that put restrictions on Musk’s use of Twitter to communicate material information – information likely to affect the company’s stock price.

--Ford Motor Co. is considering closing two major plants in Russia as part of its global plan to restructure operations in unprofitable regions, according to Reuters.  Faced with fourth-quarter losses in every part of the world except North America, Ford is making cuts in Europe, while closing down vehicle lines in South America and laying off thousands in China.

In Russia, Ford’s plants have a total capacity of 360,000 vehicles a year.

--Former Nissan boss Carlos Ghosn was finally released from prison in Japan on bail, more than three months after being arrested, the Japanese still not spelling out the specifics on exactly what Ghosn was put in prison for in the first place.  A Tokyo court set bail at $8.9 million.

Ghosn has been charged with financial misconduct and aggravated breach of trust, but denies wrongdoing.

Ghosn was the architect of the alliance between Nissan and the French carmaker Renault. He then brought Mitsubishi on board in 2016.

He ran the alliance of the three global carmakers as both CEO and chairman, with Ghosn saying his arrest was the result of a “plot and treason” against him – a bid by some Nissan executives wanting to stop his plan to integrate Renault, Nissan and Mitsubishi.

--Last week, shares in General Electric rose on the news it had sold a stake in its biopharma business to Danaher in an effort to reduce its debt load. 

But then the stock cratered anew, from about $12 back down to $9, before closing the week at $9.60, after CEO Larry Culp surprised investors Tuesday by forecasting a net cash outflow from the conglomerate’s industrial business this year, a far more negative outlook than he had previously offered.

In a webcast with analysts, Culp said, “We lost $2.7 billion last year in free cash in power,” referring to expectations that GE’s power business would take years to turn around.  “I don’t want to sugarcoat that in any way, shape or form....We’ll see that be a greater negative number in this year as we work through the restructuring, as we work through the runoff liabilities there and just the localization of timing around projects,” Culp said.

--Southwest Airlines’ CEO Gary Kelly said a surge in planes grounded by mechanics’ concerns is costing the carrier millions of dollars each week by causing more delayed and canceled flights, though Kelly didn’t give a precise figure.

The airline has filed a lawsuit against the Aircraft Mechanics Fraternal Assn., which Southwest says is aiding in an illegal work slowdown.

Southwest says some workers are writing up minor mechanical problems such as missing seat-row numbers and grounding planes to gain leverage in contract negotiations. The union denies it is conducting a slowdown. That’s a lie.

Southwest says the number of planes grounded for mechanical issues jumped to between 30 and 62 a day last month, from the usual 14 a day, forcing numerous cancelations.

On Tuesday, for example, Southwest had canceled 110 flights by midafternoon, far more than any other U.S. carrier, according to FlightAware.

Tonight, the FAA took the unusual step of warning Southwest and its mechanics that their high-profile labor dispute threatens to damage the airline’s safety practices.

--Facebook CEO Mark Zuckerberg has said he believes secure, private messaging services will become more popular than open platforms, as he outlined his vision to transform Facebook into a “privacy-focused platform.”

Facebook owns Messenger and WhatsApp, but message encryption limits its ability to make money through targeted adverts.

With all of Facebook’s recent scandals, though, some critics see the proposed changes as a way of Facebook abandoning its responsibilities.

BBC tech reporter Dave Lee said if what happens on Facebook is more private and temporary, it may be harder to hold the site accountable.

Zuckerberg said: “Facebook and Instagram have helped people connect with friends, communities, and interests in the digital equivalent of a town square. But people increasingly also want to connect privately in the digital equivalent of the living room.”

As part of his privacy goals, he said Facebook would not “store sensitive data in countries with weak records on human rights like privacy and freedom of expression.”

“Upholding this principle may mean that our services will get blocked in some countries, or that we won’t be able to enter others anytime soon. That’s a tradeoff we’re willing to make,” he continued.

Of course he gave no timeline for these changes, except to say it would take place “over the next few years.”

“I believe we should be working towards a world where people can speak privately and live freely knowing that their information will only be seen by who they want to see it and won’t all stick around forever.”

Whatever. We’re all already screwed.

Meanwhile, today, Sen. Elizabeth Warren (D-Mass.), who is running for president, called for the breakup of Amazon.com, Alphabet Inc.’s Google and Facebook.

“Today’s big tech companies have too much power – too much power over our economy, our society and our democracy,” Warren said in an online post.  “They’ve bulldozed competition, used our private information for profit and tilted the playing field against everyone else.  And in the process, they have hurt small business and stifled innovation.”

Warren would target deals such as Amazon’s acquisition of Whole Foods, and Facebook’s purchase of WhatsApp and Instagram.

You know what?  I don’t disagree with the senator on this topic. But then I’m the guy who can’t believe Mark Zuckerberg and Sheryl Sandberg haven’t been indicted for Facebook’s role in the murder of scores in places like Myanmar.  The two can’t be sleeping well at night.

--Salesforce.com Inc. said it expects revenue to nearly double in four years, as more companies shift their spending to tech innovation.  Monday, the San Francisco-based company said it expects revenue of $16 billion this year and $26 to $28 billion by fiscal 2023.

CFO Mark Hawkins said on an earnings call that financial-services companies used to direct about 90% of information-technology spending to maintenance.  These days it is split 50/50.

Salesforce points to strong demand from cloud computing, artificial intelligence and other areas it considers part of its Fourth Industrial Revolution.

Co-CEO Marc Benioff said, “(Companies) know they need to invest in becoming more customer-centric, more efficient and more automated.”

But Salesforce shares closed down on the earnings news because of guidance that fell short of Wall Street’s expectations.  That said, profit in the year ended Jan. 31 still more than doubled to $1.11 billion.  [Maria Armental / Wall Street Journal]

--Target Corp. forecast full-year adjusted profit above Wall Street’s estimates on Tuesday and posted better-than-expected holiday quarter results, driven by strong digital sales and higher customer traffic at its stores.

Online sales grew 31% in the quarter, while comparable sales, which include both in-store and online, rose 5.3%, beating estimates.

Earnings per share were also better than forecast.

In 2018, Target opened more smaller stores in cities and remodeled more than 300 locations, with plans to remodel another 300 this year. 

--Kohl’s shares rose after the company, like Target, reported solid results for Q4, with earnings and revenues that topped expectations, while providing solid guidance for fiscal 2019, though comp store sales are expected to be flat to up 2%, after being up 1% in the latest quarter, which ended Feb. 2.  They rose 1.7% for the year.

Like Walmart, both Target and Kohl’s said they benefited from closures at Toys ‘R’ Us and other retailers last year and added that they plan to continue taking market share from struggling rivals.

--Discount retailer Dollar Tree is accelerating the pace of store closures at its Family Dollar unit, with as many as 390 underperforming stores to be closed this year, more than three times the level of last year.  Dollar Tree bought Family Dollar in 2015.  Now it is taking a multibillion-dollar charge as it warned “there were indictors that the goodwill of the business may be impaired.”

Hedge fund manager Starboard Value, which has a 2% stake in Dollar Tree, has pressed for changes, including the sale of Family Dollar.

But DLTR is focusing on refurbishments of up to 1,000 Family Dollar stores this year.

Overall, the company reported net sales of $6.21bn in the quarter ending early February, less than last year, though 2018 had an extra week.  On a same-store basis, sales increased 2.4%.

--Shares in Kroger Co., the largest U.S. supermarket chain, fell 10% on Thursday after the company reported lower revenue and profit for its latest quarter.  Kroger has been investing hundreds of millions of dollars in online operations that are weighing on profitability as the grocer also faces pressure to keep prices low.

Kroger and its ilk are having a tough time with competition from Walmart, Amazon.com, and deep-discount chains such as Aldi.

Kroger said its digital sales rose 58% during its most recent fiscal year, and the company said it is offering delivery or online pickup at 91% of its stores.

As reported by the Wall Street Journal the other day, Amazon plans to launch urban grocery stores that could offer a wider range of consumer products than its Whole Foods stores.

--Shares in Brown-Forman – owner of Jack Daniel’s – fell after the liquor and wine company released mixed quarterly results, with net sales up only 3% from a year earlier to $904 million.  Brown-Forman said results were hurt by a percentage point because of lower net prices to distributors in certain markets used to offset tariffs.

For the entire 2019 fiscal year, Brown sees increased competition amid recently enacted “retaliatory” tariffs on American whiskey.

--France intends to tax the revenue of about 30 Internet giants such as Amazon.com to help ensure “fiscal justice,” according to Finance Minister Bruno Le Maire. The tax of as much as 5 percent of French sales will start Jan. 1 and potentially raise as much as $570 million for the state.  The tax would apply to any company with global revenue of more than 750 million euros and French sales above 25 million euros, Le Maire said.

Spain and the U.K. are also working on digital sales taxes.

--Australia’s fourth-quarter GDP came in at a 2.3% annual rate, a little less than expectations, with house prices falling 10 percent in Sydney and 9 percent in Melbourne over the past 12 months due to a combination of tight credit conditions and lack of affordability.

But Australia has gone 27 years without a recession.

--I was reading a piece in the South China Morning Post on how robust ship traffic has been through the Singapore Strait (Strait of Malacca) and its nearly 100,000 each year, accounting for about one-quarter of the world’s traded goods, according to Singapore’s Ministry of Defense, which predicts shipping volumes to increase 29 percent by 2025. 

So easy for terrorists to slip a WMD through here, I can’t help but muse.

Additionally....

“Major ports across Asia are at a breaking point and it’s often cheaper for shipping companies to anchor in the strait than dock in a berth, creating long lines of boats waiting around for anything from a few days to months at a time.

“ ‘A vast amount of world trade is coming through there, all the oil from the Middle East, all the iron ore into China, coal from Indonesia to India, it’s an incredibly busy shipping channel. In terms of tonnage, [the] Singapore Strait is still the busiest in the world,’ said Tim Huxley, CEO of Mandarin Shipping in Hong Kong and one of Asia’s top ship brokers.”

In a sign of demand in the global economy, despite stories to the contrary, there’s been about a 10 percent increase in shipping in the last year, Huxley notes.

--ABC’s “World News Tonight” with anchor David Muir posted across-the-board ratings wins over rival “NBC Nightly News” with Lester Holt last week during the Hanoi summit, including in the key 25-54 demographic.  ABC’s strategy is to place Muir all over the world to cover major events and breaking news, which it seems NBC has begun emulating with Holt.

Muir’s newscast drew a total audience of 9.356 million viewers, well ahead of Holt’s 8.510 million.  “CBS Evening News” with Jeff Glor was a distant third at 6.34 million.

In the 25-54 demo prized by advertisers, ABC beat NBC 1.972 million to 1.928m.

--Forbes named Kylie Jenner as the world’s youngest “self-made” billionaire, Jenner just 21.  But the title of “self-made” earned her all kinds of scorn on social media because of her ties to her wealthy family, as in this is hardly all self-made.

But Jenner is the youngest, according to Forbes, as Mark Zuckerberg had become a billionaire at age 23.

Forbes credit’s Jenner’s Kylie Cosmetics with at least $900 million of her fortune.  Kylie credits social media – ignoring her powerfully connected lineage.

“It’s the power of social media,” Jenner told the magazine.  “I popped up at a few stores, I did my usual social media – I did what I  usually do, and it just worked,” she said.

Zuckerberg fell to No. 8, from No. 5 a year ago, amid the endless controversy for his company.

Jeff Bezos is still number one, worth an estimated $131 billion, with Bill Gates second at $96.5 billion, and Warren Buffett third at $82.5 billion.

President Trump’s estimated net worth of $3.1 billion was unchanged, which allowed him to rise to No. 715 from No. 766 in 2018 by merely holding his own, while many on the list suffered due to the falling stock market.

--Our best wishes to “Jeopardy” host Alex Trebek, who in a video message Wednesday said he’s been diagnosed with stage 4 pancreatic cancer.

Trebek said in part, “normally the prognosis for this is not very encouraging, but I’m going to fight this and I’m going to keep working and with the love and support from my family and friends and with the help of your prayers also, I plan to beat the low survival rate statistics for this disease.  Truth be told, I have to because under the terms of my contract, I have to host ‘Jeopardy’ for three more years, so help me.  Keep the faith and we will win.  We will get it done.”

The 78-year-old Trebek had indeed recently renewed his contract to host the show through the 2021-22 season.

According to the American Cancer Society, the five-year survival rate for those with pancreatic cancer is 9%, and in the early stages often the disease does not manifest itself in any signs of symptoms, so “by the time they do cause symptoms, they have often already spread outside the pancreas.”

--At President Trump’s inaugural meeting of the American Workforce Policy Advisory Board to discuss the importance of technology in education at the White House, the president sitting next to Apple CEO Tim Cook, Trump said, “We appreciate it very much, Tim Apple.”

Foreign Affairs

Syria: The Trump administration is pressuring its European allies to commit to a U.S. proposal to stabilize northeastern Syria.  With U.S.-backed forces poised to seize the last remaining pocket of ISIS resistance in the country, U.S. officials have asked France, the U.K., Turkey and others to remain part of the alliance to ensure the Islamic State doesn’t regain a foothold.  But the administration is also trying to avert a potential clash between Turkey and Washington’s Kurdish allies.

Under the latest plan, the remaining U.S. troops would continue joint patrols with Turkish counterparts, while a second group would be part of a safe zone between Turkey and Syria.  U.S. forces would help train and advise local forces so they can secure reclaimed territory once under ISIS, defense officials have said.

A third U.S. contingent would remain in the southern city of al Tanf, primarily to serve as a buffer against Iranian expansion in the region.

So far, France is the only ally to indicate it is willing to keep forces in Syria.  Others have indicated they will stay, but they haven’t committed yet, defense officials told reporters.

Meanwhile, defense officials said U.S.-backed forces in Syria are holding more than 2,000 suspected Islamic State fighters, double previous estimates and an obstacle to President Trump’s plans to withdraw American forces from Syria.

The challenge is on relocating the fighters to their home countries, and the high number may require more U.S. troops than currently planned to help hold the prisoners. 

Last fall the estimate was 800 foreign fighters from more than 50 countries.  Officials say the number has increased as the American-supported Syrian Democratic Forces, or SDF, reclaim territory from Islamic State and take the  last fighters into custody.

Defense officials also cited another group of at least 1,000 suspected Syrian and Iraqi extremist fighters who are in detention in Syria, a figure not previously disclosed.  This figure could also be higher.

Separately, Turkish President Recep Tayyip Erdogan has dismissed U.S. threats to cancel the sale of high-tech F-35 jets to Turkey, saying his country will move ahead with the purchase of Russian S-400 air-defense missiles.

In an interview with Turkish television, Erdogan said Turkey could consider purchasing the more advanced Russian S-500 system in the future.

This week, top U.S. military commander for Europe, Gen. Curtis Scaparrotti, told the U.S. Congress that NATO member Turkey should reconsider its plan to buy the S-400 from Russia or forfeit other future American military aircraft and systems. He said Turkey’s use of the Russian surface-to-air missile defense system would be a threat to the F-35.

It was the latest in a series of warnings the U.S. has made to Turkey over its plan to buy the S-400, with other NATO allies repeatedly complaining the purchase isn’t compatible with other allied systems and would represent a security threat.

Iran: An Iranian cleric known for his role in condemning thousands of political prisoners to death in the 1980s is taking leadership of Iran’s powerful judiciary, another sign the hard-liners remain firmly in control.

Ebrahim Raisi was to take the oath as the new chief of judiciary today, according to Iran’s state media.  He succeeds another conservative cleric, Sadegh Larijani, who served in the post for 10 years before becoming an adviser to Supreme Leader Ayatollah Ali Khamenei.

Separately, Microsoft Corp. said cyberattacks linked to Iranian hackers have targeted thousands of people at more than 200 companies over the past two years, stealing corporate secrets and wiping out data from computers.  Oil and gas companies, heavy-machinery manufacturers and international conglomerates in more than a half-dozen countries including Saudi Arabia, Germany, the U.K., India and the U.S., according to researchers at Microsoft.

“These destructive attacks...are massively destabilizing events,” said John Lambert, the head of Microsoft’s Threat Intelligence Center.

A spokesman for Iran’s mission to the United Nations said his country “denies any involvement in cyber crimes against any nation.”

Thus far, Microsoft’s research says a vast majority of the attacks are centered in the Middle East, but with rising tensions, the U.S. could be increasingly targeted.

John Hultquist, director of intelligence analysis at the cybersecurity firm FireEye Inc., told the Wall Street Journal, “They’re definitely sharpening their skills and moving up their capabilities.  When they turn their attention back to the United States, we may be surprised by how much more advanced they are.”

India / Pakistan:  Indian and Pakistani soldiers again targeted each other’s posts and villages along their volatile frontier in disputed Kashmir, with at least six civilians and two Pakistani troops killed in battles last Saturday.

Pakistani Prime Minister Imran Khan on Friday said no militant group would be allowed to operate on Pakistani soil and carry out attacks abroad, days after his government began a crackdown against Islamist militant organization.

“This government will not allow Pakistan’s land to be used for any kind of outside terrorism,” Khan said while addressing a rally in the southern part of the country.  “We will not allow any militant group to function in our country now.”

Separately, last week I noted how Russia and China were trying to keep U.S. influence out of the region, China long an ally of Pakistan, and Russia increasingly looking to become a prime ally of India.

This week, a move by President Trump certainly didn’t make things easier for the U.S.  In a letter to Congress, Trump said he intends to end India’s preferential trade treatment under a program that allows $5.6 billion worth of Indian exports to enter the United States duty free.

“I am taking this step because, after intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India,” Trump said in the letter.

Afghanistan: Suicide bombers and gunmen attacked a construction company office in the city of Jalalabad on Wednesday, killing 16 employees. There was no immediate claim of responsibility.

Jalalabad is the capital of Nangarhar province, which is on the border with Pakistan.  The area has become the main stronghold of ISIS in Afghanistan.

Israel: Bret Stephens / New York Times

“When the final chapter on Benjamin Netanyahu’s political life is written – and it may be a long time from now – he is likely to go down as the Richard Nixon of Israel: politically cunning, strategically canny, toxically flawed.

“The flaws came further to light on Thursday (2/28) when Attorney General Avichai Mandelblit announced that he would indict the prime minister on charges of bribery, fraud and breach of trust.  Netanyahu called the inquiry ‘a witch hunt’ and accused Mandelblit of being ‘weak,’ sounding (surely not by coincidence) just like Donald Trump on the subject of Jeff Sessions and the Russia investigation.

“Israeli law allows Netanyahu to contest the indictment through a hearing, a process that could take as long as a year.  He has no intention of resigning and hopes to win a fifth term when elections are held on April 9.

‘Perhaps he will.  He shouldn’t.

“That’s not because Netanyahu is necessarily guilty, or guilty of much.  Previous Israeli leaders, including Yitzhak Rabin, have been subject to legal inquests that hinge on relatively trivial crimes. The charges against Netanyahu – the most serious of which involves the claim that he helped a businessman obtain favorable regulatory decisions in exchange for positive media coverage – are still far from conclusive.

“Then again, what was Watergate other than a third-rate burglary?

“Just as the real crime of Watergate was the bungled cover-up, the real scandal of Bibigate has been the repugnant political patch-up.  Until last month, Netanyahu looked as if he would coast to re-election.  But the race became tighter with the creation of the center-right Blue and White party, led by the former army chief of staff, Benny Gantz, and the former finance minister, Yair Lapid.  The pending indictment only increases Netanyahu’s political peril.

“Netanyahu’s solution has been to scrounge for votes on the father – and farthest – right....

“That alone is reason enough to want to see Netanyahu given the boot.  Add to the list his demagogic attacks on Israeli Arabs, his closeness to far-right European leaders such as Hungary’s Viktor Orban and his public sympathy for an Israeli soldier who killed a wounded Palestinian terrorist in cold blood, and a consistent picture emerges.  Netanyahu is a man for whom no moral consideration comes before political interest and whose chief political interest is himself.  He is a cynic wrapped in an ideology inside a scheme.”

China: Appearing at the annual assembly of the National People’s Congress, Chinese Premier Li Keqiang, in the keynote economic address, issued some stark warnings, China facing difficulties “of a kind rarely seen in many years.”  Perhaps most sobering for the 3,000 delegates, Li conceded the people of China are unhappy with the government’s performance in many ways.

“There is still public dissatisfaction in many areas such as education, healthcare, elderly care, housing, food and drug safety and income distribution,” Li said, in a rare admission for a senior Chinese leader.  The government is juggling a slowing economy with rising public demands for better services, a clean environment and an end to corruption and wrongdoing.

Li’s speech also highlighted the anxiety at the heart of Chinese leadership over the potential for economic problems to fuel social unrest.

“Only alertness to danger will ensure safety,” Li said. “Instability and uncertainty are visibly increasing and externally generated risks are on the rise.”

Li promised to improve market access to foreign firms doing business in China (Chinese officials say this every year) and to protect their intellectual property (ha!).

Li also studiously avoided any reference to the government’s Made in China 2025 policy – its central ambition to emerge as a global leader in 10 key high-tech sectors – which has triggered alarm in Washington and the West, contributing to trade tensions.  China is still seeking to transform itself from a producer of cheap goods to a superpower that dominates in areas such as artificial intelligence, robotics, aeronautics and driverless cars.

But Li conceded: “Our capacity for innovation is not strong and our weakness in terms of core technologies for key fields remains a salient problem.”  [Robyn Dixon / Los Angeles Times]

Ergo, more hacking and stealing of the West’s intellectual property is to be expected.

Along these lines, from Dustin Volz of the Wall Street Journal:

“Chinese hackers have targeted more than two dozen universities in the U.S. and around the globe as part of an elaborate scheme to steal research about maritime technology being developed for military use, cybersecurity experts and current and former U.S. officials said.

“The University of Hawaii, the University of Washington and Massachusetts Institute of Technology are among at least 27 universities in the U.S., Canada and Southeast Asia that Beijing has targeted, according to iDefense, a cybersecurity intelligence unit of Accenture Security.

“The research to be published this week, is the latest indication that Chinese cyberattacks to steal U.S. military and economic secrets are on the rise....

“The majority of the universities targeted either house research hubs focused on undersea technology or have faculty on staff with extensive experience in a relevant field, and nearly all have links to a Massachusetts oceanographic institute [Ed. Woods Hole] that also was likely compromised in the cyber campaign, iDefense said.”

Separately, China targeted a 7.5 percent increase in defense spending in 2019, a slowdown from last year’s projected 8.1 percent, though still seen as consistent with Xi’s plans to grow and advance the military.

Chinese Foreign Minister Wang Yi held his annual press conference on the sidelines of the National People’s Congress today and talked of China’s relations with major powers and neighboring countries, and diplomacy in a rapidly changing world order filled with growing tensions and uncertainties.

Wang tried to put a positive spin on China’s deteriorating ties with the United States amid the protracted trade war and the escalating tussle over Chinese tech giant Huawei.

He hailed China’s relations with Russia, Japan, India, North Korea and Southeast Asian nations.

Wang also sought to play down growing international concerns over China’s “Belt and Road Initiative,” Beijing’s expanding footprint in Africa, the Middle East and Latin America, as well as the increasingly assertive posture of Chinese diplomats around the world.

Wang dismissed the rising calls in Washington for economic and trade disengagement from Beijing amid frustrations among American political and think tank elites that decades-long economic, social and cultural engagement policies have failed to transform China into a liberal democracy.

“Decoupling is apparently unrealistic.  Decoupling from China means to decouple from opportunities, the future and even the world,” Wang said.

Wang did say China-U.S. relations faced a series of mounting challenges over the past two years, which was “contrary to the historical trend.”

January marked the 40th anniversary of the normalization of diplomatic ties between China and the U.S., yet there were no celebrations, especially given the sour mood over the trade talks.  Recently, a group of 20 leading American experts on China issued a new report warning bilateral ties were on a collision course as a result of Beijing’s diplomatic ambitions and oppressive domestic policies, as well as President Trump’s hardline approach.  China is a national security threat.

The U.S. has observed a rise in Chinese military activity in the South China Sea area over the last year, according to the top American military officer in the region.

Admiral Philip Davidson, the commander of the U.S. Indo-Pacific Command, while declining to quantify the increased activity, underscored American resolve to remain engaged, describing the U.S. as an “enduring Pacific power.”

Davidson addressed reporters in Singapore this week and said of Chinese activity, “It’s building, it’s not reducing in any sense of the world. There has been more activity with ships, fighters and bombers over the last year than in previous years, absolutely.”

Davidson added: “It’s a hazard to trade flows, the commercial activity, the financial information that flows on cables under the South China Sea, writ large.”

Davidson was attempting to reassure allies in Southeast Asia of the American commitment to the region.  The week before, Secretary of State Mike Pompeo assured the Philippines that a defense treaty would apply if its vessels or planes are attacked in the South China Sea.

Jonathan Kolatch / Wall Street Journal

“Xi Jinping came into office in 2012 with guns drawn. He needed to tame the Communist Party and enthrall the Chinese people.  He achieved the first, to great applause, by bringing down corrupt party powerhouses such as Bo Xilai and Zhou Yongkang. He defined his China Dream as the ‘Great Rejuvenation of the Chinese People,’ playing to the historical humiliation by foreign occupiers drummed into every Chinese schoolchild: the Opium Wars, foreign spheres of influence, Japanese occupation. Finally, China had shucked off its albatross.  Even party skeptics bought into his hypernationalism....

“With the people in his pocket, Mr. Xi effortlessly designated himself ‘core leader’ and erased term limitations.  The updated party constitution underlines in red ‘Xi Jinping’s Thought on Socialism With Chinese Characteristics for a New Era’ as China’s guiding principle. The Gospel According to President Xi is what is being sold.

“Then came the Chinese economic downturn, overlaid with American tariffs.  Reality cannot be papered over with political slogans: sliding China sales for Apple, shrinking demand for new cars, major manufacturers such as Uniqlo moving out of China as production costs rise.  Sixty-five million apartments remain empty, according to Prof. Gan Li of China’s Southwestern University of Finance and Economics: ‘We are already in a difficult economic situation. The decline will only get worse.’  No wonder Beijing is anxious for a trade deal.

“If the Chinese economy teeters further, Mr. Xi will have to address his abiding worry: instability.  With the Chinese Dream flickering and less money in Chinese pockets, Mr. Xi will need to work very hard to continue to ingratiate his subjects....

“The Chinese miracle cannot be denied, but now Xi Jinping has reached a crossroads in his reign.  Communing with his 5,000-year-old tradition, which preaches modesty, would help return him to mortality.”

Venezuela: President Nicolas Maduro remains in office, opposition leader Juan Guaido having returned from his travels seeking support.  Guaido, who declared himself interim president in January, announced a public sector strike to increase pressure on Maduro to give up power.

Guaido promised union representatives that employees who turn against Maduro would be granted “amnesty,” Guaido having made  a similar offer to the army.

Maduro had suggested Guaido could be arrested when he returned to Venezuela, but he was allowed to pass through the main Caracas airport.

Thursday, though, Caracas was plunged into complete darkness during rush hour with the worst power outage to ever hit the country, the crisis extending to other areas.  Maduro blamed the opposition, accusing them of sabotage.

The lack of electricity has caused flights to be diverted from the main airport in Caracas.

Venezuela depends on its vast hydroelectric infrastructure, rather than its oil reserves, for its domestic electricity supply.

However, decades of underinvestment have damaged the major dams, and sporadic blackouts are commonplace, but nothing on this scale.

Guaido said the blackout was a matter of “chaos, concern and anger” and “evidence of the usurper’s inefficiency.”

As I go to post, power apparently is back on in parts of Caracas, but 15 of 23 states are reporting issues.

Russia: Lawmakers pushed through a package of bills Thursday seeking to punish internet users and journalists for disrespecting the authorities and spreading fake news.

You can stop laughing.  Observers have suggested that the controversial legislation introduced in December could lead to mass arrests due to its loose wording.  Free speech and internet activists are scheduled to protest the law this Sunday.

Under the new laws, online news outlets will be fined for spreading “false information that is socially significant under the guise of accurate reports.”

Disrespecting authorities such as President Putin will carry a fine and potential jail time.

The legislation targets online news outlets and exempts traditional organizations including newspapers, television networks, radio stations and online news feeds.

It needs to pass Russia’s upper house and secure the president’s signature before entering into force.

Meanwhile, Putin signed a decree suspending Russia’s participation in the Intermediate-range Nuclear Forces Treaty with the United States, Russia having announced last month it was suspending the treaty after the U.S. said it would withdraw because of violations by Moscow. Russia denies flouting the accord and has accused Washington of breaking the treaty itself.

Random Musings

--Presidential tracking polls....

Gallup: 44% approve of Trump’s job performance, 52% disapprove; 89% Republicans, 38% Independents (Feb. 15).
Rasmussen: 50% approval, 49% disapproval (Mar. 8)

A new Wall Street Journal/NBC News poll finds President Trump’s job approval rating at 46%,  52% disapproval.  This is an improvement from a 43-54 split in the prior two months.

Trump’s approval rating in this survey has been between 43% and 47% since last June.

Trump cumulatively leads a generic Democratic opponent, 46% to 40%, in four Midwestern states he carried in 2016 – Indiana, Michigan, Ohio and Wisconsin – along with Pennsylvania, but he trails a generic Democrat, 50% to 39%, in five Sunbelt states Democrats aim to flip in 2020: Arizona, Florida, Georgia, North Carolina and Texas.

On Trump’s effort to declare a national emergency to fund a border wall with Mexico, 60% oppose it, 39% approve.

Among Democrats, just 36% of primary voters say they are comfortable with a candidate who is at least 75 years old, a warning sign for Sen. Bernie Sanders, 77, and potential candidate Joe Biden, 76.

A new Quinnipiac University National Poll has President Trump with just a 38% job approval rating, 55% disapproval, compared to 38-57 in a January 29 survey.  82% of Republicans approve, 34% Independents.  48% Men, just 30% Women.  12% of Blacks approve, 20% of Hispanics.

Separately, by a 59-35 margin, voters say Congress should not begin impeachment proceedings against Trump, but by 58-35, they believe Congress should do more to investigate “Michael Cohen’s claims about President Trump’s unethical and illegal behavior.”

On the immigration issue, only 40% approve of Trump’s handling of it, 58% disapprove.

On the border wall, voters oppose it 55-41 (women 62-34).  And as for the declaration of a national emergency to fund it, voters disapprove 66-31.

By a 65-30 margin, voters don’t believe Trump is honest, his worst grade ever on that count.

--Former New York City mayor Michael Bloomberg announced he would not run for the White House in an op-ed in which he ripped President Trump as “a con” whose first term will be remembered as “four years of chaos, disruption and deceit.”

“I’ve never made any secret of my belief that Donald Trump is a threat to our country.  At the 2016 Democratic National Convention, I said: ‘New Yorkers know a con when we see one,’” Bloomberg said in a lengthy piece published on his eponymous news site.

“Last fall I spent more than $100 million supporting Democrats in the midterm elections.  Republicans in Congress had failed – and are still failing – to fulfill their constitutional duty to hold the president accountable. Instead, they indulge his worst impulses and refuse to work with Democrats on the most urgent issues,” Bloomberg said.

The three-time mayor of Gotham said that he could have beaten Trump in a 2020 face-off.

“I know what it takes to run a winning campaign, and every day when I read the news, I grow more frustrated by the incompetence in the Oval Office,” he said.

“I know we can do better as a country.  And I believe I would defeat Donald Trump in a general election. But I am clear-eyed about the difficulty of winning the Democratic nomination in such a crowded field.”

Bloomberg concluded:

“In the weeks and months ahead, I will dive even deeper into the work of turning around our country, through concrete actions and results. And I will continue supporting candidates who can provide the leadership we need – on climate change, gun violence, education, health, voting rights, and other critical issues – and continue holding their feet to the fire to deliver what they promise.

“I hope those who have urged me to run, and to stand up for the values and principles that they hold dear, will understand that my decision was guided by one question: How can I best serve the country?

“While there would be no higher honor than serving as president, my highest obligation as a citizen is to help the country the best way I can, right now.”

--Editorial / Wall Street Journal

“In a Democratic Party newly enamored with socialism, a potential counterweight is John Hickenlooper, the former Colorado Governor, who announced Monday that he’s running for president.  ‘We need dreamers in Washington,’ Mr. Hickenlooper said in a campaign video pointedly stressing his pragmatic political credentials, ‘but we also need to get things done.’

“Mr. Hickenlooper, age 67, has a degree in geology, and he first came to Colorado in the 1980s to work in the oil business. After being laid off, he cofounded a Denver brewpub – and then added more restaurants in other towns.  He served eight years as Denver’s mayor, then another eight as Governor of a state that has gradually been moving left.

“Mr. Hickenlooper’s launch video brags that ‘Colorado went from 40th in job growth to the No. 1 economy in America.’  During his tenure, the state adopted rules limiting methane emissions from oil-and-gas wells.  Yet the Governor resisted bans on shale drilling and even made headlines for taking a swig of Halliburton’s food-grade fracking fluid.  ‘While I’m not going to stand here and say that it’s something that I’d have with my steak,’ he recounted, ‘it went down easy enough.’  We’d guess it tastes better than the Green New Deal....

“On a few issues Mr. Hickenlooper has been of two minds.  He opposed the Colorado referendum that legalized marijuana, calling it a ‘bad idea’ as recently as 2015.  A year later, he said ‘it’s beginning to look like it might work.’  As of last spring, it wasn’t clear where the Governor stood: ‘This is one of the great social experiments of the last 100 years. We have to keep an open mind.’

“It’s similar with guns. After the mass shooting in 2012 at an Aurora movie theater, Mr. Hickenlooper signed bills to ban large ammo magazines and expand background checks.  Then he was caught on tape telling a group of sheriffs that the legislation had been rushed: ‘I think we screwed that up completely.’

“The passel of socialist candidates will no doubt push him to crystallize his positions, and his refusal to ban fossil fuels will hurt him on the left.  Another challenge is Mr. Hickenlooper’s low national profile....

“Mr. Hickenlooper may be the first of several centrist Democrats to join the 2020 race, and primary voters deserve a policy debate. The question is whether there’s still room in the Democratic Party for a nominee who isn’t a socialist in name or agenda.”

One who won’t be running in that lane is Ohio Sen. Sherrod Brown, who I’ve been saying would survive Iowa and New Hampshire.  Doh!

Meanwhile, some folks are getting tired of Joe Biden’s waiting game.

--Hillary Clinton says she won’t run for president in 2020, but vows she’s “not going anywhere.”

Please just go away, typed the editor.

--Editorial / New York Post

“The House of Representatives votes Wednesday on a resolution that’s billed as a slap at Rep. Ilhan Omar over her persistent anti-Semitic remarks – but it doesn’t even mention her.

“Drafted by House Speaker Nancy Pelosi and the help of New York’s own Eliot Engel and Jerry Nadler, the measure merely denounces a host of anti-Semitic tropes, such as ‘the myth of dual loyalty, including all allegations that Jews should be suspected of being disloyal neighbors or citizens.’

“This, after Omar in a DC speech last week insisted on her right to ‘talk about the political influence in this country that says it is OK for people to push for allegiance to a foreign country.’

“She plainly meant that Israel supporters are more loyal to the Jewish state than to America.  And even as criticism rose over the weekend, she doubled down with similar claims.

“This is at least the third time Omar’s trafficked in this filth in just her first two months in Congress.  Clearly, her earlier apologies were insincere.

“She’s not just criticizing US policy on Israel, as she claims: She’s smearing those who disagree with her as either Jews who put Israel first, or others in the pay (or under the mind control) of the Jewish lobby.

“Pelosi & Co. won’t get her to stop with their ‘educational’ resolution. In the end, they’re going to have to take a stand against not just anti-Semitism, but their colleague who wallows in it.”

In light of the above, the House voted 407-23 to condemn anti-Semitism and other forms of hate.  But while few defended Omar’s words, some asked why the House would so quickly condemn remarks from one of the first female Muslim lawmakers while allowing similarly racially charged comments by President Trump and congressional Republicans to go unchecked by a formal response.

The resolution was rewritten to address all forms of hate – including Islamophobia and white nationalism – in part to ensure Democrats supported it.  An hour before the vote was held, the seven-page resolution underwent another rewrite to recognize discrimination against Latinos, Asian Americans, Pacific Islanders and LGBTQ people.

House Speaker Nancy Pelosi defended Omar before the vote.  “I don’t think that the congresswoman perhaps appreciates the full weight of how that is heard by other people, although I don’t believe that it was intended in an anti-Semitic way. But the fact is that that’s how it was interpreted. We have to remove all doubt.”

Rep. Ted Deutch (D-Fla.) said on the House floor prior to the vote: “We are having this debate because of the language of one of our colleagues – language that suggests that Jews like me who serve in the United States Congress and whose father earned a Purple Heart fighting the Nazis in the Battle of the Bulge, that we are not loyal Americans. Why are we unable to singularly condemn anti-Semitism?”

Republicans were quick to take advantage of the fissure in the Democratic Party by claiming the GOP is the party to defend Israel.  President Trump then piled on further today, calling the Democrats the “anti-Israel” and “anti-Jewish party.”

--Right-wing firebrand Michelle Malkin at the annual Conservative Political Action Conference slammed moderate Republicans on immigration in a despicable fashion.

“It’s the GOP sell-outs, not just the radical, open-borders left, that is in bed with immigration saboteurs,” she said.  “Like the ones who hijacked the tea party movement to shill for amnesty.  Those are the real grifters cashing in and practicing deceit at the expense of their base and at the expense of our country....

“Both parties are to blame.  And yes, I’m looking at you, retired Paul Ryan, and yes, I’m looking at you, Mitch McConnell,” Malkin added.

“And yes, I’m looking at you, Bush family, and yes, I’m looking at you, the ghost of John McCain,” she continued with a gesture toward the ceiling.  The line drew a standing ovation from the audience.

I’m biting my tongue...straight through.

--Sen. Martha McSally (R-Ariz.), the first female fighter pilot to fly in combat, said Wednesday that she was raped in the Air Force by a superior officer.

McSally, a 26-year military veteran, made the disclosure at a Senate hearing on the armed services’ efforts to prevent sexual assaults and improve the response when they occur.

McSally said she did not report being sexually assaulted because she did not trust the system, and she said she was ashamed and confused.  McSally did not name the officer who she says raped her.

--According to an analysis of Centers for Disease Control and Prevention data by two public health nonprofits, the number of deaths from alcohol, drugs and suicide in 2017 hit the highest level since federal data collection in 1999, the national rate hitting 46.6 per 100,000 people in 2017, up from 43.9, or 6 percent.

Deaths from suicides rose from 13.9 to 14.5 deaths per 100,000.

In most states, deaths from alcohol, drugs and suicides increased in 2017, while they fell in five – Massachusetts, Oklahoma, Rhode Island, Utah and Wyoming.

--The death toll from the tornado that ripped through Lee County, Alabama, 23, was the highest tornado death toll in the country since 2013. Staggeringly, ten of the victims were from one family.  The tornado, estimated to be an F-4, packed wind speed of 170 mph and cut a path stretching nearly a mile wide, while one that was spawned from the storm traveled for about 70 miles. 

President Trump visited the area most impacted today, with forecasters calling for more severe weather in the region tonight and tomorrow.

--Finally, in a far more uplifting note, I was reading the March issue of Wired magazine (perhaps the best publication around these days), and this is from Sarah Scholes:

“In the past two decades, astronomers have confirmed the existence of about 4,000 planets – out of an estimated 100-plus billion – in our galaxy.  That’s way more than anyone knew about before the Kepler Space Telescope launched.  All this is good news for alien hunters, whose work has always been on the fringe of scientific pursuits.  After decades of ignoring and underfunding the search for extraterrestrial life, NASA is finally taking the idea seriously.”

What exciting work.  Scientists are looking for “technosignatures” – evidence of ET technology.

As Ms. Scholes writes:

“While other types of an alien ‘Hi there!’ might exist, astronomers have spent the most time searching for radio messages.  They’re watching for something unnatural in an otherwise normal sky: a broadcast at a thin slice of frequencies, like our FM stations; a quick burst of loud blips, like our airport radars; complex signals spread across wave-lengths, like our satellite-transmitted sitcoms.”  

One thing astronomers probably don’t want to hear is a guy imitating Michael Buffer.

“Ahhh, let’s get ready to rum-ble!!!”

---

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

God bless America.

---

Gold $1298
Oil $56.04

Returns for the week 3/4–3/8

Dow Jones  -2.2%  [25450]
S&P 500  -2.2%  [2743]
S&P MidCap  -3.4%
Russell 2000 -4.3%
Nasdaq  -2.5%  [7408]

Returns for the period 1/1/19-3/8/19

Dow Jones  +9.1%
S&P 500  +9.4%
S&P MidCap  +11.9%
Russell 2000  +12.9%
Nasdaq  +11.7%

Bulls 52.9
Bears 20.6

Dr. Bortrum posted a new column! Henry Heinz, ketchup and more.  

Have a great week.

*Arsenal vs. Manchester United in the Premier League, Sunday.  As big as it gets.

Brian Trumbore