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04/27/2019

For the week 4/22-4/26

[Posted 11:30 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.

*Special thanks this week to longtime supporter Brad K., and to Dan and Jean C.  [Dan, don’t hesitate to write me about your business.]

Edition 1,046

Last week I wrote how we were uplifted the previous Sunday by Tiger Woods’ win at The Masters, and then depressed as hell the next day watching Notre Dame Cathedral go up in flames.

This week I was incredibly depressed watching a particularly vicious day of protests in Paris Saturday by the Yellow Vests; as many fires set as any weekend before, but what was particularly distressing was the reason given by the protesters for the violence...the amount of money raised for the rebuild of Notre Dame!  As I note down below, French President Macron is slowly making some concessions to the ‘have nots’ in French society, but you can see where this is headed.

Once the rebuild begins in earnest, there will be constant threats and protests near the cathedral.  And then we have the Paris Olympics in 2024.  Oh brother.

So this coming Wednesday is May Day, historically a time of protests in Europe by organized labor.  It’s also the day that far-right French leader Marine Le Pen normally stages an annual march from Jeanne d’Arc square (Joan of Arc), up to the Opera House.  Coincidentally, Joan of Arc was canonized as a saint by Pope Benedict XV at Notre Dame Cathedral in 1920.

As long-time readers know, I’m the only kid on my block who has twice gone to Paris specifically to march with Marine Le Pen and her then-National Front (Front National) party on May 1st...2011 and 2014.  In 2011 I was also in Paris when it was announced Osama bin Laden had been killed, which was kind of strange, in terms of gauging local sentiment.

Marine Le Pen and her new party (National Rally) will be gearing up for the coming European Parliament elections, May 23-26, and part of me wishes I was in Paris this Wednesday just to observe (which was my reason for being there before, not as a backer of Front National, though I was mere feet from her, and her racist father, Jean-Marie, every step of the way...they then had a fallout).

My point is I just hope Wednesday is a peaceful one in Paris, and throughout Europe.

Meanwhile, last week, amidst my review of the Mueller report, I said that continuing the battle, in Trumpian fashion, was a loser’s cause.

“Voters don’t care,” I wrote.  “The base isn’t moving, either side.  The battle, such as in 2018, is over suburban women. It was a loser for Republicans in the mid-terms.

“President Trump should drop it...and move on.  I detail below how this coming Friday could be a huge, positive, day for him in terms of the economy.  That’s his hole card.  Just shut up on the other stuff.”

Well, today, Friday, was indeed “a huge, positive day,” as spelled out below with the GDP report for the first quarter.  And Trump’s biggest supporters, such as Michael Goodwin, agreed with me.  But the president does his own thing.

Michael Goodwin / New York Post

“As President Trump searches for the right responses to the Mueller report, he would be wise to follow the idea that ‘revenge is a dish best served cold.’

“Trump’s temptation will be to nurse grudges and settle scores immediately.  A self-made man who became president his way, he will want to unleash his greatest ever punchback against those who put him through two years of hell.

“Who can blame him?  No modern president has endured such fanatical hatred from his opponents who still believe everything they read in The New York Times and see on CNN....

“Congressional Dems can’t help themselves and are committed to keeping the impeachment flames burning, and the 2020 candidates are acting as if Trump is actually as guilty as they said he was the day before the report cleared him. Either way, the party is not ready to move on.

“All the more reason why Trump must be.  After spending a few days cracking jokes and venting about the damage the investigation did, the president should embrace his second chance to be president.

“He is free of Mueller, his lease on the Oval Office is renewed.  He should make the most of it.

“He can begin by seeing the report as a gift. While it’s true that everything he said and did is depicted through the darkest possible lens, it is also true that Trump nearly wrecked his presidency.

“For example, had his orders to fire Mueller been followed, a replacement would have been demanded by Congress and an obstruction charge guaranteed.  Recall that stalwart allies like GOP Sen. Lindsey Graham warned him that firing Mueller would have sent Republicans fleeing.

“Under that scenario, even if he survived as president – a big if – Trump would have gotten nothing done in the first two years despite GOP control of both chambers. There would have been no tax cut, and the economy and stock markets would have drifted along much as they did in the Obama years....

“The larger truth the Mueller report reflects is that many in the permanent government, the Washington establishment and the media gatekeepers will never accept Trump as president. The blood lust that created the investigation, and that survives despite the report’s conclusions, should serve as a final warning to Trump that he has zero room for error. 

“When subpoenas are involved, everybody has loose lips.

“He also has little guaranteed time remaining. The 2020 election will be a dogfight and he’ll need every vote he can possibly get in every possible swing state.

“In practical terms, Trump should admit to himself that his policies are more popular than his personality. He can help his cause – and the country – by finalizing strong trade deals with China and Europe and keeping the pressure on North Korea and Iran – while keeping American soldiers out of big wars....

“Above all, Trump must trust the people around him as much as he trusts his gut. His recent shuffling of officials dealing with the border crisis should be his last upheaval before the election.

“He needs every person and idea he can find to stem the destructive migration surge.  If he can, it will be a transformative accomplishment.

“Besides, every day the media is focused on personnel changes is a good day for Democrats.

“Finally, there is one more temptation Trump must resist: He should trust William Barr to follow through on his promise to investigate the investigators....

“So...Trump can sit back and enjoy the show. And patiently wait to get the last laugh.”

Mr. Goodwin wrote this last weekend.  At least in the five days since, President Trump hasn’t followed this advice.

Similarly...Editorial / Wall Street Journal

“President Trump should be savoring the end of Special Counsel Robert Mueller’s investigation with no charges of collusion or obstruction of justice, but as ever he can’t stand prosperity.  His post-report scrap with former White House counsel Don McGahn shows how this President is so often his own worst enemy....

“We believe Mr. McGahn, but the needless dispute highlights several realities of the Trump Presidency. One point is that this episode is not evidence of obstruction of justice, despite claims by the Democratic-media chorus.  Mr. Trump would have had every constitutional right to fire Mr. Mueller, an inferior officer at the Justice Department.  Mr. Trump let Mr. McGahn and others talk to Mr. Mueller and turn over notes, which is the reason Mr. Mueller knows about all this.

“But firing Mr. Mueller would have been dumb and self-defeating, as Mr. McGahn and nearly everyone else in the White House understood.  Mr. Trump was raging against an investigation he thought deeply unfair, but firing Mr. Mueller would have made the President look guilty when we now know he wasn’t.  It would have triggered a political crisis for Democrats to exploit, which is why they were hoping he’d fire Mr. Mueller.

“Mr. McGahn thus saved Mr. Trump from his own bad political judgment....

“The episode underscores that Americans should be grateful that capable people have been willing to work for this President despite the political assault on them for doing so.  As former Bush State Department official Eliot Cohen put it, anyone who worked for this President would lose ‘nothing less than a piece of their souls.’ But men and women are serving the country and the Presidency more than Mr. Trump personally, and their sound judgment has saved the country from many blunders....

“So much of Mr. Trump’s dishonesty seems to flow from his ego, which can tolerate no slight and no suggestion that he is capable of mistakes like the rest of us. Yet the result of his falsehoods is to undermine the credibility that any President needs in a crisis.

“All of this also underscores that Mr. Trump’s character as President will be his main re-election vulnerability. On policy he should be a favorite based on the economy and the Democratic Party’s sharp left turn. But voters will balance that against Mr. Trump’s personal behavior and whether they want to spend four more years in the Trump maelstrom.

“Voters might not settle for prosperity if Mr. Trump won’t.  Meantime, thank you, Don McGahn.”

Again, President Trump didn’t follow the advice to move on, and so....

Trump World, continuing with the above....

--President Trump said he would resist all efforts by the House to question current and former administration officials about special counsel Robert Mueller’s report.

“We’re fighting all the subpoenas,” Trump said Wednesday.  “I say it’s enough.”

The White House is seeking to block a subpoena the House Judiciary Committee issued this week to former counsel Don McGahn, while the administration plans to rebuff other congressional requests for testimony from current and former officials.

Rep. Elijah Cummings (D., Md.), chairman of the House Oversight Committee, said Wednesday the White House was engaged in a “massive, unprecedented and growing pattern of obstruction.”

If an individual such as McGahn doesn’t comply with a subpoena, the House can hold him in contempt and pursue the matter in the courts.

Trump said on Wednesday: “The Democrats are trying to win 2020. The only way they can maybe luck out, and I don’t think that’s going to happen....is by constantly going after me on nonsense.”

--President Trump said in a tweet Thursday that he never asked then-White House counsel McGahn to fire special counsel Robert Mueller, directly contradicting a detailed account in Mr. Mueller’s report.

“As has been incorrectly reported by the Fake News Media, I never told then White House Counsel Don McGahn to fire Robert Mueller, even though I had the legal right to do so,’ Mr. Trump wrote.  “If I wanted to fire Mueller, I didn’t need McGahn to do it, I could have done it myself.”

The special counsel’s report on Russian interference in the 2016 presidential election said that Trump “called McGahn and directed him to have the Special Counsel removed.”  The report relied on interviews that Mr. McGahn gave Mueller’s team in March 2018, after which Mueller concluded that “McGahn is a credible witness with no motive to lie or exaggerate given the position he held in the White House.”

Mueller also wrote the president “made clear” to his chief of staff and chief strategist at the time – Reince Priebus and Steve Bannon, respectively – that he was considering firing the special counsel, both men speaking to Mueller’s investigators.

Going back to January 2018, Trump has denied he sought to have McGahn fire Mueller, calling it “fake news.”

Attorney General William Barr will answer questions from the Senate Judiciary Committee on May 1 and the House Judiciary Committee a day later about special counsel Mueller’s Russia probe, at least as of today.

--I’m sorry, but I found it appalling that Trump attorney Rudy Giuliani said the following on Jake Tapper’s Sunday show.

“There’s nothing wrong with taking information from Russians.”

Asked by Tapper if he would have taken information from a foreign source, Giuliani said, “I probably wouldn’t.”

“I wasn’t asked,” Giuliani went on.  “I would have advised, just out of excess of caution, don’t do it.”

This exchange came at the end of a long rebuttal by Giuliani of Sen. Mitt Romney’s post-Mueller report critique of the president.

“What a hypocrite,” Giuliani said of Romney.  “Man, man, I could tell you the things he wanted to do,” in reference to Romney’s past campaigns for the presidency.  “Stop the bull. Stop this pious act that you weren’t trying to dig up dirt on people.”

“Any candidate in the whole world, in America, would take information.”

Of course it was Romney who warned about Russia’s antagonism to the U.S. in the 2012 presidential campaign, after which in a debate, Obama made fun of Romney’s world view, which we all now know was spot on.

--Herman Cain did finally withdraw his name from nomination for a seat on the Federal Reserve Board.

--Daniel Henninger / Wall Street Journal...on how the Democrats have sought to change the narrative from “no collusion, no obstruction” to Donald Trump is “unfit to govern” and should be impeached for obstructing justice.

“Wasn’t Mr. Trump widely described as unfit when in 2015 he said tortured Vietnam War prisoner John McCain was no hero? You can’t go much lower than that. Or the awful day the ‘Access Hollywood’ tape surfaced?  Still, he somehow defeated 16 other, presumably ‘fit’ Republican primary candidates.  And then he won a fitness contest with a former secretary of state, Hillary Clinton, who with perfect absence of irony now says Mr. Trump deserved to be indicted for obstruction of justice.

“Character surely counts for something, though the last choirboy the voters elected president was Jimmy Carter, who got tossed out after one term by voters who thought that reversing a stagnant economy with high inflation and Americans held hostage by Iran trumped a president’s personal rectitude. The unemployment rate recently has been at a nearly 50-year low.

“Since the subject has been raised, one may ask: How ‘fit’ to govern the U.S. are Kamala Harris, Elizabeth Warren, Bernie Sanders, Beto O’Rourke or Pete Buttigieg?

“Among them, these presidential candidates have proposed or embraced Medicare for All, the Green New Deal, massive college-debt forgiveness and free public-college tuition – with a fanciful, wholly irresponsible cost in multi-trillions of dollars.  By comparison, Donald Trump’s $5.6 billion ‘wall’ looks like fiscal austerity. Still, he’s the one beyond the pale of fitness.

“Messrs. O’Rourke and Buttigieg, as far as anyone can tell, stand for pretty much nothing but personality. In their case the argument is that voters may now value celebrity over experience. So much for fitness to govern the U.S.

“Governance matters. Success at governance – running a country, state or city – should indeed be a measure of political fitness.  If so, fitness to govern looks to be in short supply in potholed New York City, homicidal Chicago, needle-park San Francisco and Baltimore, with its five police chiefs in the past five years.

“All these cities, protectorates of Democratic governance, are filled with upscale progressives convinced Donald Trump is morally unfit to govern, even as they step around and over the mentally ill homeless lying abandoned on their sidewalks.

“On this matter of morality, one more thing. As we’ve written before, there is a straight-line relationship between the country’s hyperpoliticized culture and why many people voted for Mr. Trump’s persona largely irrelevant to them.

“None of this means Mr. Trump is coasting to re-election. The 2020 campaign is a jump ball. It is true that Republicans lost heavily in the midterm elections because of suburban women grossed out by Mr. Trump, who personifies Lenin’s idea of ‘one step forward, two steps back.’

“All presidencies have flaws and failures. But with the collusion narrative finally ended, please spare us two years of the unfit-to-govern sequel.”

--In an interview on Fox News with Sean Hannity, President Trump again railed against late Republican Sen. John McCain, calling his vote against a skinny repeal of ObamaCare “disgraceful.”

“He did the Republican Party a tremendous disservice and he did the nation a tremendous disservice, tremendous, and it’s unfortunate,” Trump said of McCain.  “He went thumbs-down at the very last moment and I thought it was a disgraceful thing to do and very, very bad for our country and bad for health care.”

--Editorial / Washington Post

“When Russian interference in the U.S. election campaign was first detected in 2016, some confusion about its extent and import might have been understandable. Today, there can be no confusion.  As the Mueller report says, ‘the Russia government interfered in the 2016 presidential election in sweeping and systematic fashion.’

“Unfortunately, the first family remains in denial about this.  President Trump, who benefited from the interference, says the investigation was a ‘witch hunt’ and a ‘hoax.’  His son-in-law, Jared Kushner, dismissed it as a ‘distraction’ at a panel sponsored by Time magazine on Tuesday.  He said, ‘You look at what Russia did – you know, buying some Facebook ads to try to sow dissent and do it – and it’s a terrible thing.  But I think the investigations, and all of the speculation that’s happened for the last two years, has had a much harsher impact on our democracy than a couple of Facebook ads.’  He added, ‘Quite frankly, the whole thing is just a big distraction for the country.’

“This is just plain wrong.  Russia’s social media offensive originated at the Internet Research Agency in St. Petersburg, was financed by a crony of Russian President Vladimir Putin, and developed themes and tactics to use on social media to help Mr. Trump and disparage Democratic nominee Hillary Clinton.  According to the report, Facebook identified 470 Internet Research Agency-controlled accounts that collectively made 80,000 posts between January 2015 and August 2017, reaching as many as 126 million people.  In January 2018, Twitter said it identified 3,814 Internet Research Agency-controlled Twitter accounts.

“Two units of Russian military intelligence carried out a second prong of the Russian attack, breaching 29 computers at the Democratic Congressional Campaign Committee and 30 computers of the Democratic National Committee....

“Not just ‘a couple of Facebook ads.’

“The false reading of history matters because the White House should be leading the nation’s defense against another possible assault on election integrity.  But how can Mr. Trump and his team do so if they cannot acknowledge what already happened?    The New York Times reports that Mr. Trump’s acting chief of staff is wary of bringing before the president any proposals to prevent Russia from further interference.  That amounts to a dereliction of duty.”

As reported by the Times:

The opening page of the Worldwide Threat Assessment, a public document compiled by government intelligence agencies that was delivered to Congress in late January, warned that “the threat landscape could look very different in 2020 and future elections.”

“Russia’s social media efforts will continue to focus on aggravating social and racial tensions, undermining trust in authorities and criticizing perceived anti-Russia politicians,” the report noted.  It also predicted that “Moscow may employ additional influence tool kits – such as spreading disinformation, conducting hack-and-leak operations or manipulating data – in a more targeted fashion to influence U.S. policy, actions and elections.”

--Kind of ironic that Maria Butina, the Russian national who admitted being a secret agent for the Kremlin in an attempt to infiltrate the NRA, was sentenced to 18 months in prison on Friday, as President Trump was addressing the same NRA in Indianapolis.

--Trump tweets:

“Can anyone comprehend what a GREAT job Border Patrol and Law Enforcement is doing on our Southern Border.  So far this year they have APPREHENDED 418,000 plus illegal immigrants, way up from last year.  Mexico is doing very little for us.  DEMS IN CONGRESS MUST ACT NOW!”

“Mexico’s Soldiers recently pulled guns on our National Guard Soldiers, probably as a diversionary tactic for drug smugglers on the Border.  Better not happen again! We are now sending ARMED SOLDIERS to the Border. Mexico is not doing nearly enough in apprehending & returning!”

[There are serious doubts the above happened as described.]

“A very big Caravan of over 20,000 people started up through Mexico. It has been reduced in size by Mexico but is still coming.  Mexico must apprehend the remainder or we will be forced to close that section of the Border & call up the Military. The Coyotes & Cartels have weapons!”

“The Mueller Report, despite being written by Angry Democrats and Trump Haters, and with unlimited money behind it ($35,000,000), didn’t lay a glove on me.  I DID NOTHING WRONG.  If the partisan Dems ever tried to Impeach, I would first head to the U.S. Supreme Court.  Not only....

“....are there no ‘High Crimes and Misdemeanors,’ there are no Crimes by me at all.  All of the Crimes were committed by Crooked Hillary, the Dems, the DNC and Dirty Cops – and we caught them in the act!  We waited for Mueller and WON, so now the Dems look to Congress as last hope!”

“No Collusion, No Obstruction – there has NEVER been a President who has been more transparent.  Millions of pages of documents were given to the Mueller Angry Dems, plus I allowed everyone to testify, including W.H. counsel.  I didn’t have to do this, but now they want more...

“....Congress has no time to legislate, they only want to continue the Witch Hunt, which I have already won.  They should start looking at The Criminals who are already very well known to all. This was a Rigged System – WE WILL DRAIN THE SWAMP!”

“You mean the Stock Market hit an all-time record high today and they’re actually talking impeachment!  Will I ever be given credit for anything by the Fake News Media or Radical Liberal Dems?  NO COLLUSION!”

“In the ‘old days’ if you were President and you had a good economy, you were basically immune from criticism. Remember, ‘It’s the economy stupid.’ Today I have, as President, perhaps the greatest economy in history...and to the Mainstream Media, it means NOTHING.  But it will!”

Yes, Mr. President, it will...just stay focused on it, for crying out loud.

Wall Street and Trade

So the White House received some terrific news on the economy today, but first, earlier in the week, the picture on the housing front was mixed, with existing-home sales for March coming in less than expected, a 5.21 million annualized pace, down 4.9% over the prior month, and down 5.4% year-over-year and a 13th straight month of declines. The median price was up just 3.8% from a year ago, about half the pace of March 2018.

The data on new-home sales for March, however, was far better than expected, 692,000 on an annualized rate, but still well below pre-crisis and recession levels, with the median price at its lowest level in more than two years (owing in part to more homes on the market).

The key rate on a 30-year fixed mortgage has fallen from 4.94% in November to about 4.29% today (after hitting 4.17% the other week), according to Freddie Mac, but this hasn’t helped as much as expected.

Thursday, we had a report on durable goods for March and it was terrific, up 2.7%, and up a solid 0.4% ex-transportation, which is highly volatile.

So that led to today’s first look at GDP for the first quarter.  The Atlanta Fed’s GDPNow barometer, which I’ve been detailing, week by week has been rising substantially, was at 2.7% following the durable goods report, and then today, a lot of us were blown away by a 3.2% reading, as released by the Bureau of Economic Analysis.

So the last five quarters we have (annualized rates)....

Q1 2018...2.2
Q2 2018...4.2
Q3 2018...3.4
Q4 2018...2.2
Q1 2019...3.2

Recent history has shown the first quarter to be slower than the rest of the year, so there is a lot to admire in the 3.2 handle, as they’d say.

The increase reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, state and local government spending, and nonresidential fixed investment.  But these contributions were partly offset by a decrease in residential investment.

The buildup of inventories did inflate first-quarter growth, while there was a steep decline in imports (imports a subtraction), and many feel both trends are likely to reverse in the current quarter.  We’ll see.  Plus consumer spending, rising at just a 1.2% rate, was the worst showing in a year.  But this part of the equation could improve going forward, as there seems to be some positive momentum.

On the inflation front, the core PCE rose just 1.3%.

There are two more looks at the Q1 data and I would be surprised if the 3.2% figure doesn’t come down some, but this is something the Trump administration can rightly crow about.

National Economic Council Director Lawrence Kudlow called the first-quarter reading a “blowout number.”

“President Trump’s policies are rebuilding the economy, and actually the prosperity cycle we’re in is gaining momentum, not losing it,” Kudlow said on CNBC.  He credited tax cuts, deregulation and trade policy changes aimed at juicing growth for boosting production and investment in the economy.

As for stocks, we had a ton of earnings come in this week, as will be the case the next two, with the S&P 500 and Nasdaq hitting new all-time highs on Tuesday, before pulling back some Wednesday and Thursday, only to hit more records today.  [Details below.]

The bar had been lowered on earnings so much (currently expected to decline about 1% on the S&P from a year ago), it was easy for many companies to exceed expectations and a large majority of them have.  Revenues, up a projected 5% thus far, are encouraging.

The newly-dovish Federal Reserve has had a ton to do with the momentum in the equity markets, but now there will be some concern that if the economy is stronger than expected for the next two quarters, the Fed could be under pressure to abandon its current ‘no more rate hikes until 2020 at the earliest’ posture.  The inflation data will have a lot to say about that.  Actually, if inflation trends down, then a rate cut could be in the offing.

And we’ll see what happens when it comes to the following topic....

On the trade front....The White House announced Tuesday that U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing for trade talks beginning on April 30, with Chinese Vice Premier Liu He once again leading the Beijing delegation.  Liu He will then travel to Washington for more discussions starting on May 8.

“The subjects of next week’s discussions will cover trade issues including intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, purchases, and enforcement,” the White House said.

The aforementioned Larry Kudlow said the United States and China were making progress in the talks and he was “cautiously optimistic” about the prospects for striking a deal.

“We’re not there yet, but we’ve made a heck of a lot of progress,” Kudlow said, speaking at the National Press Club.  “We’ve come further and deeper, broader, larger-scale than anything in the history of U.S.-China trade.”

“We’ve gotten closer and we’re still working on the issues, so-called structural issues, technology transfers,” Kudlow added.  “Ownership enforcement is absolutely crucial.  Lowering barriers to buy and sell agriculture and industrial commodities.  It’s all on the table.”

A Chinese Foreign Ministry did not confirm the dates for the next round on Wednesday, but said the two sides were maintaining contact.

The thing is, it seems clear there has been zero progress made the last few weeks, but prior to that, progress was indeed made.

So next week could be critical, in that you want to hear both sides see the kind of progress warranting a return trip to Washington by Liu He.  It would be a terrible sign if we don’t hear that.

But one more....there are some out there saying China’s agreeing to enforcement mechanisms is a good thing.  But it would be reciprocal...and that is a very BAD thing for the United States, as we’ll find out years down the road.

Meanwhile, the United States and Japan are set to lay out the agenda for future trade talks, with Prime Minister Shinzo Abe meeting with President Trump this weekend.  While Trump has been busy slapping tariffs on China and other countries, Japan was concluding a pact with the European Union that lowered duties and other barriers to ease trade flows.

And Japan has been taking advantage of its participation in the 11-member successor to the Trans-Pacific Partnership that President Trump walked away from as one of his first acts as president.

As I noted last week, Japan is now starting to import substantially more from its free-trade partners, at America’s expense.

As Don Lee of the Los Angeles Times points out, “For some products, the difference in tariffs is stark. Australian wine entering Japan is taxed at 5.6% and will eventually drop to zero.  There’s no duty at all for wine from the EU and Chile.  But for California, it’s 15%.  The pain is only to get worse in this product category.

“ ‘U.S. exporters of wheat, beef, pork, dairy, wine, potatoes, fruits and vegetables and other products are facing collapse of their Japanese market share as these lucrative sales are handed over to their competitors,’ the Wine Institute and 87 other food and farm groups and companies said in a joint letter sent this week to Robert Lighthizer,” writes Lee.

The job for Prime Minister Abe is to continue to cultivate a personal relationship with Trump, so he doesn’t focus on the large trade gap between the two nations, Abe hosting a state dinner in Tokyo for Trump in late May.

But Trump was unhappy that when he pulled out of the TPP, Abe played a key role in reviving it among the remaining 11 nations.  Trump didn’t give Japan a break on steel tariffs.

This afternoon, though, Trump said trade talks were moving along nicely and the two sides might be able to reach a deal ahead of his visit to Japan next month.  Speaking at the start of a meeting with Abe, Trump said Japan was buying a large amount of military equipment from the United States, but he was pressing Tokyo to get rid of its agricultural tariffs.

Well that’s part of being in the TPP, Mr. President!

Europe and Asia

Eurostat released the fourth quarter government debt levels for the euro area, 85.1% for the EA19, down from 87.1% in Q4 2017.

Individually, Germany 60.9%, France 98.4%, Spain 97.1%, Portugal 121.5%, Italy 132.2%, and Greece 181.1%.

Portugal had been a worrisome case during the debt crisis, but seems to have gotten its act together; at least the debt level is on the right trajectory.

But Italy’s has risen a point over the past year, and is slated to continue rising, which is highly worrisome.

Greece’s has also risen over the year, but for various reasons is no longer in crisis mode, though in any euro-wide downturn, it will become an issue all over again.

Brexit: Having been granted an extension by the European Union until Oct. 31, British Prime Minister Theresa May has promised her fellow Tory MPs that she would go once she has delivered Brexit, but with the latest extension there is growing impatience among her critics.

The fear Tories have is that they will suffer heavy losses to Nigel Farage’s Brexit Party if – as now seems likely – the UK is forced to go ahead with voting in the European elections on May 23.

Among the potential candidates for Mr. Farage’s new outfit will be former shadow home secretary Ann Widdecombe, who told the Daily Express: “The public needs to send a very clear message and that is we expect the vote to be respected so just get on with the job of getting us out of the EU.”

Labour leader Jeremy Corbyn puts the blame for lack of progress on the Government’s refusal to shift on its “red lines.”

“We’ll continue putting our case but quite honestly there’s got to be change in the Government’s approach,” he said.  “They cannot keep on just regurgitating what has already been emphatically rejected three times by Parliament, there’s got to be a change.”

Back to Mrs. May’s survival, since she survived a confidence vote in December, under the party’s rules she cannot be challenged again for 12 months, but lawmakers are looking for a way to force her out sooner.

The prime minister has not set out what she will do if the Brexit deal is turned down a fourth time by parliament.

Wolfgang Munchau / Financial Times

“The biggest danger of the Brexit extension is a delusion over time.  The UK does not really have more than five months to make a decision.  In reality, the effective timescale is just a few weeks.  Once this drags beyond the scheduled elections of the European Parliament in late May, we enter a world of uncertain scenarios.

“The divisions that emerged among EU member states during the meeting of the European Council on April 10 are serious.  But it would be wrong to characterize the debate as one between France and the rest. Several leaders supported Emmanuel Macron. Come October, the threat is not one of a veto by the French president, but of a shifting consensus.  Heiko Maas, the German foreign minister, said in an FT interview that he believed the October deadline was hard.  This is becoming a wider consensus view in Germany.  Mr. Macron is not isolated.  He is winning the argument.

“The French president’s central point during the dinner on April 10 was that the UK would not make up its mind unless it was confronted with a hard deadline.  Triggering Article 50 of the Lisbon treaty was a grave decision.  It placed Britain under an obligation to make a choice between ratifying the agreed withdrawal treaty, leaving without a deal, or revoking Brexit.

“If the talks between the UK prime minister Theresa May and Jeremy Corbyn, leader of the Labour opposition party, comes to nothing, and nothing else is agreed, Britain will have to take part in the European elections. The campaigning has already started.  Nigel Farage’s new Brexit party has had a tremendous start with a campaign theme of betrayal.  Change UK, the party founded recently by the pro-Remain MPs of the Independent Group in the UK parliament, is almost invisible by contrast.

“My expectation is that the Brexit party will sweep the floor in those elections.  Such an outcome would have two important consequences.

“The first is that it will introduce a dose of realism into expectations among EU leaders of what a further delay, and especially a second referendum, might accomplish. Some of them, perhaps naively, equate a fresh vote with a Brexit reversal.  If Mr. Farage’s party were to come first in the European elections in the UK, EU leaders might start to see a second referendum in a different light.  Doubts will creep in. They will have to confront the question they have avoided so far: what if the country were to vote in favor of Brexit for a second time? And what happens if the UK parliament still cannot agree to the withdrawal treaty?

“The second consequence is more direct. The Brexit party would swell the ranks of populists in the European Parliament.  The newly elected British MEPs will keep their mandate for as long as the country stays a member of the EU, until October or earlier if the UK ratifies the withdrawal treaty.  These are going to be very busy months for the European Parliament, with hearings on new commissioners.  During that time Mr. Farage would keep his ringside seat in European politics.  While the election of Brexit party MEPs is entirely predictable, it will nevertheless come as a shock to the EU when it actually happens.

“When that reality sinks in, I would expect the consensus in the European Council to shift further towards a harder line on Brexit.  If EU leaders were to extend beyond October, they would be going beyond the foreseeable end of Mrs. May’s premiership. If there is one thing members of the council fear more than the sight of Mr. Farage in the European Parliament, it is a leadership frontrunner and former foreign secretary Boris Johnson as a member of their own club.”

France: President Emmanuel Macron has promised “significant” tax cuts for France’s middle class and cuts in public spending, but told the French they must work like their “neighbors,” in a much-awaited response to five months of “yellow vest” protests.

In what the French media is dubbing his “moment of truth,” the centrist Macron promised a “new act in our Republic” during a 140-minute press conference at the Elysee Palace – his first since his election – in which he confessed his way of running the country had lacked “humanity.”

Macron has been blindsided by nationwide protests, initially over fuel tax rises, which morphed into wider anger at the inability of provincial France to make ends meet.  Much of the fury has been directed at him directly, seen as an arrogant “president of the rich.”

“We must work more, I’ve said it before.  France works much less than its neighbors.  We need to have a real debate on this,” Macron said.

Separately, Macron said citizens should be allowed to launch policy referendums by petition, a partial concession to a key demand of the protesters.

But last weekend, as alluded to above, the yellow vests were furious over the amount pledged to rebuild Notre Dame, which the protesters say is better spent on fighting poverty.

Macron has pledged to rebuild the church “even more beautifully” in time for the 2024 Paris Olympics, which you can already see could be the scene of massive disruptions if the economic situation in France hasn’t improved significantly by then.

Turning to Asia...nothing out of China after all the data from the prior two weeks.  The PMIs for Asia and Europe will flow again next week at month’s end.

South Korea’s economy unexpectedly shrank in the first quarter, 0.3%, marking its worst performance since the global financial crisis, as companies slashed investment and exports slumped in response to Sino-U.S. trade tensions.

From a year earlier, the Korean economy grew 1.8% in the January-March quarter, compared with expectations of 2.5%, and 3.1% in the final quarter of 2018. Exports fell 2.6% quarter-on-quarter.

Street Bytes

--As noted above, the S&P and Nasdaq hit new all-time closing highs on Tuesday, the S&P closing at 2933, above its 2930 high set on Sept. 20, while Nasdaq closed at 8120, besting its previous high of 8109 from Aug. 29.  The Dow Jones is still below its all-time high of 26828, at 26543.

Today, the S&P and Nasdaq again set records of 2939 and 8146, respectively.

For the week, the Dow fell a fraction of a percent, 16 points, to 26543, while the S&P rose 1.2% and Nasdaq 1.9%.

The S&P is up 25% since the Christmas Eve low, and is off to its best start to a year since 1987, while for Nasdaq it’s the best start since 1991. 

--U.S. Treasury Yields

6-mo. 2.44%  2-yr. 2.28%  10-yr. 2.50%  30-yr. 2.92%

Treasuries rallied despite the strong GDP number, owing to a tame inflation component in the report, as well as the slowdown in consumer spending.

--Oil prices continued their surge early in the week, after the Trump administration’s decision to end waivers allowing imports of Iranian oil, but while the end of waivers would push down Iranian exports more quickly than some had initially anticipated, most expect OPEC (and ally Russia) and/or the U.S. to fill any production voids.

And by the end of the week oil had come off the high of $66.30 on Tuesday to finish all the way down to $62.80, breaking a seven-week winning streak, owing in part to the weekly report from the Energy Information Administration that showed crude-oil inventories soared 5.5 million barrels last week to 461 million barrels, the highest total since October 2017 and the fourth weekly increase in the past five weeks, though stockpiles remain at the five-year average for this time of year.  President Trump also said he had called OPEC and told the cartel to lower crude prices, without identifying who he spoke to.

--After being rebuffed several times, Occidental Petroleum Corp. on Wednesday launched a $38-billion hostile bid to buy Anadarko Petroleum Corp., seeking to break up a proposed takeover by Chevron Corp.  The $76-a-share cash-and-stock bid for the oil and natural gas producer is 20% more than Chevron’s $33-billion April 12 agreement.

The acquisition would be the largest ever proposed by Occidental, and would be the biggest purchase of an oil producer in at least four years.  Anadarko would pay a $1 million breakup fee to Chevron.

Anadarko’s shares jumped nearly 12% to $71.40 on the news (closing the week at $72.80), while Occidental’s stock slid more than 4% before recovering much of the loss. Chevron’s shares fell 3%.

It’s not known yet whether Chevron will sweeten its offer or not, analysts saying there isn’t a lot of shareholder approval for Oxy’s bid.

It’s all about the Permian Basin in West Texas and New Mexico, the fastest-growing major oil patch in the country that has helped turn the United States into a net exporter, making it a bigger producer than Saudi Arabia.

--Continuing the news on the energy front, Exxon Mobil Corp. reported first-quarter profit fell sharply on lower oil and gas prices and weakness in its refining and chemicals businesses that offset modest production gains. The largest U.S. oil producer’s first quarter earnings fell to $2.35 billion, from $4.65 billion a year ago, missing estimates.

Chevron posted earnings of $1.39 a share, down from $1.90 in the first quarter of 2018, though attention here is now focused on the battle for Anadarko.

--The Trump administration’s proposal to vastly expand offshore oil and gas drilling has been sidelined indefinitely by a recent court decision that blocks Arctic drilling, according to the Interior Department.

The ruling by a federal judge in Alaska last month may force officials to wait until the case goes through potentially lengthy appeals before they can make a final decision on what offshore areas to open up for the oil and gas industry.

All 17 governors of coastal states in the continental U.S. oppose offshore drilling.

--Tesla posted a first-quarter loss of $700 million, with CEO Elon Musk suggesting a capital raise could be imminent, as Musk attempts to convince investors that demand for the Model 3, which is considered crucial to the automaker’s future, is “insanely” high, and that it can be delivered efficiently and swiftly to customers  around the world.

The electric-car maker said it would lose money in the current quarter but predicted a return to profitability in the third.

But Tesla’s deliveries in the second quarter, 63,000 vehicles, were far short of the company’s own expectations. Tesla maintains, however, it will hit its 2019 delivery forecast of 360,000 to 400,000 vehicles (after delivering between 90,000 and 100,000 vehicles in Q2) and said it may produce as many as 500,000 vehicles if its factory in Shanghai reaches volume production in the fourth quarter.

Q1 revenue increased 33% to $4.54 billion, from $3.4 billion, but trailed analysts’ consensus of $5.18 billion.

On the earnings call, Musk said that global deliveries were “the most difficult logistics problem” he had ever seen.

Musk said he stepped back from an earlier prediction that the company’s Shanghai factory, which is currently being built, would produce 3,000 Model 3s per week by year’s end.  Instead, the so-called Gigafactory would build 1,000, or maybe 2,000 per week by the end of the year, he said.

Tesla said it ended its first quarter with $2.2 billion in cash after paying off a $920 million convertible bond obligation in March.

“There is some merit to raising capital,” responded Musk, after being asked why he had not done so yet.  “It’s probably about the right time.”

Earlier in the week, Musk, clearly attempting to divert attention from the pending earnings report and sliding demand, predicted Tesla would have over a million autonomous vehicles by next year, which Musk vows to pair with a sharing service that will make it crazy for consumers to buy other cars.

“Between now and when the robotaxis are fully deployed throughout the world, the sensible thing for us is to maximize the number of autonomous units made and drive the company toward cash-flow neutral,” Musk said.  “Once the robotaxi fleet is active, I would expect to be extremely cash-flow positive.”

Yup, more hype from Elon.

And this.  Tesla said it was investigating an incident where a parked car exploded in Shanghai, captured on a surveillance camera at the location, the video showing a parked Tesla Model S beginning to smoke and then explode, seemingly self-igniting, with a time stamp on the video showing the incident occurred on Sunday evening.

I saw the video a couple times and it just seems suspicious...as in too convenient with the way the camera just so happened to be focused directly on the vehicle.

This is just me, but there are a ton of electric car companies in China that would not want Tesla to succeed.  And this is probably the only time I will defend Elon Musk’s outfit.

Meanwhile, Musk’s SpaceX suffered a setback Saturday when an accident of some kind sent a plume of orange smoke rising from the pad where its Crew Dragon astronaut capsule’s escape system engines were being tested at Cape Canaveral. NASA said it was “assessing the anomaly,” the extent of damage unclear.

It’s a setback, as SpaceX had been set to fly the capsule with a crew aboard on another test flight this year.

SpaceX launched the Crew Dragon capsule for the first time in March on an uncrewed flight to the International Space Station, the capsule successfully docking with the station and then returning to Earth.

Lastly, this afternoon, Musk reached a deal with the Securities and Exchange Commission to settle a dispute over Musk’s use of Twitter.  Musk has agreed to submit public statements about the company’s finances to vetting by its legal counsel, a court filing said.  If it is approved by a judge, the deal means the Tesla founder no longer faces the prospect of being held in contempt for violating an earlier settlement with the agency that required him to submit any of his public statements that would be material to investors for prior review.

Shares in Tesla closed the week at $238, the lowest level since Jan. 2017.

--Boeing said it didn’t know when the 737 MAX would return to service, with executives defending the design and certification of their best-selling plane, grounded by regulators following two fatal crashes.

The aerospace giant is factoring in more than $1 billion in additional costs, while production of additional aircraft remains scaled back.

CEO Dennis Muilenburg said on the company’s first-quarter earnings call that there had been “no technical slip” in the development of the 737 MAX, this after investigators have implicated a flight-control system known as MCAS in the crashes in Indonesia and Ethiopia that claimed 346 lives.

Muilenburg told analysts: “There was no surprise or gap or unknown here or something that somehow slipped through a certification process.”

Boeing has said the MCAS system was designed and certified in a process consistent with previous new airplane models.

Muilenburg said the FAA would soon conduct certification flights to test the 737 MAX’s updated software, a key to restarting commercial flights.

More than 370 MAX planes had been delivered to customers, forcing carriers to cancel flights and reconfigure schedules ahead of the busy summer travel season.

The company reported first-quarter profit fell 13% to $2.15 billion, while sales slipped 2% to $22.92 billion.  Sales of Boeing’s other aircraft, such as the 787, as well as services and military hardware, limited the overall decline.

At the outset of the year, Boeing had planned to boost monthly 737 production by five planes to 57 this summer.  But now it has cut output to 42 a month, leaving MAX planes to pile up around its Seattle-area assembly plants as the global grounding put a stop to deliveries.

Separately, Natalie Kitroeff and David Gelles had a disturbing report in the New York Times that starts out:

“When Boeing broke ground on its new factory near Charleston in 2009, the plant was trumpeted as a state-of-the-art manufacturing hub, building one of the most advanced aircraft in the world. But in the decade since, the factory, which makes the 787 Dreamliner, has been plagued by shoddy production and weak oversight that have threatened to compromise safety.

“A New York Times review of hundreds of pages of internal emails, corporate documents and federal records, as well as interviews with more than a dozen current and former employees, reveals a culture that often valued production speed over quality.  Facing long manufacturing delays, Boeing pushed its work force to quickly turn out Dreamliners, at times ignoring issues raised by employees....

“Safety lapses at the North Charleston plant have drawn the scrutiny of airlines and regulators. Qatar Airways stopped accepting planes from the factory after manufacturing mishaps damaged jets and delayed deliveries. Workers have filed nearly a dozen whistle-blower claims and safety complaints with federal regulators, describing issues like defective manufacturing, debris left on planes and pressure to not report violations.  Others have sued Boeing, saying they were retaliated against for flagging manufacturing mistakes.”

Kevin McAllister, Boeing’s head of commercial airplanes, said in a statement: “Boeing South Carolina teammates are producing the highest levels of quality in our history.”

There is no evidence that the problems in South Carolina have led to any major safety incidents, and the Dreamliner has never crashed.

“But workers sometimes made dangerous mistakes, according to the current and former Boeing employees....

“Faulty parts have been installed in planes.  Tools and metal shavings have routinely been left inside jets, often near electrical systems.  Aircraft have taken test flights with debris in an engine and a tail, risking failure.”

--Microsoft Corp. briefly topped $1 trillion in value* for the first time after executives predicted continued growth for its cloud computing business.  Microsoft beat Wall Street’s estimates for quarterly profit and revenue, powered by an unexpected boost in Windows revenue and brisk growth in its cloud business which has reached tens of billions of dollars in sales.

*MSFT finished the week at $996bn in market cap (Apple $963bn, Amazon $959bn).

Under the terrific leadership of CEO Satya Nadella, the company has spent the past five years shifting from reliance on its once-dominant Windows operating system to selling cloud-based services.  Azure, Microsoft’s flagship cloud product, competes with market leader Amazon Web Services (AWS) to provide computing power to businesses.

CFO Amy Hood told investors that Microsoft expects to see strong growth in the fiscal fourth quarter in the business divisions in charge of Azure and Office 365, an online version of its longtime productivity software.

For the third quarter ended March 31, Azure’s growth slowed slightly to 73%, down from 76% in the second quarter.  But Azure brought in $13.5 billion in sales in fiscal 2019 with an overall growth rate of 75%, according to analysts.  This is phenomenal.

Total revenue rose 14% to $30.57 billion, handily beating the consensus of $29.84bn.

The only weak spot for the company was its gaming revenue rose only 5% versus 8% the quarter before.  And the company’s Surface hardware grew far less than the prior quarter, though this is because customers are waiting for updated hardware that is expected to be released soon.

Microsoft’s earnings also beat expectations.  Net income rose to $8.81 billion, from $7.42bn a year earlier.

--Facebook Inc. beat analysts’ estimates for quarterly revenue on Wednesday, aided by growth in its Instagram business and a surge in advertising sales, the company announcing it had set aside $3 billion to cover anticipated official U.S. privacy penalties, though it raised the potential high end to $5 billion. Ad sales jumped 26% to $14.91 billion, with monthly active users rising 8% to 2.38 billion.  Costs jumped 80.5% to $11.76 billion, as the company ramped up spending to improve content and security across its platforms.

Laura Forman / Wall Street Journal

“Facebook has favored radical transparency for its users lately. It might want to afford the same courtesy to its investors.

“The social-media giant reported generally strong first-quarter results on Wednesday, with revenue jumping 26% year over year to $15.1 billion, slightly beating Wall Street’s projections.  Of note, the company set aside $3 billion as a ‘probable loss’ for a one-time fine related to its ongoing investigation by the Federal Trade Commission.  Excluding that, operating earnings would have come to about $6.4 billion for the quarter, up 17% year over year, despite the company’s increased spending on efforts to clean up its network.

“Facebook, in other words, appears to be doing just fine as a business, despite relentless negative media and regulatory attention.  At $3 billion, the potential FTC fine would be the largest privacy-related sum in the agency’s history, yet it amounts to less than a quarter’s worth of free cash flow for the company....

“What is less clear is exactly which parts of the business are thriving. Facebook reported monthly average users of 2.38 billion, up just 8% year over year compared with a 26% jump in advertising revenue for the comparable period.  But the company doesn’t break out data for its properties that include the legacy Facebook app as well as the newer Instagram and WhatsApp platforms. If anything, the company seems intent on lumping user numbers for all its platforms together, noting that more than 2.1 billion people now use at least one of those services each day.

“But not all platforms are performing equally.  WhatsApp, for example, has yet to generate any significant revenue.  By contrast, data points to Instagram as a clear winner among its social-media peers in terms of ad dollars spent.  Kenshoo, a digital-advertising platform, claims Instagram spending grew 44% year over year in the first quarter, significantly more than a 27% increase in overall social spending. According to Michael Nathanson at Moffett Nathanson, advertiser reach grew 8% on Instagram Stories and 7% on Instagram overall between December of 2018 and March 2019. That compares with 4% growth at Facebook.  EMarketer estimates Instagram will represent more than 23% of Facebook’s world-wide mobile-ad revenue in 2019.

“Facebook has made clear that it is willing to overhaul its service to focus on privacy for the end user.  It need not be quite so private about its business, though.”

Much more on Facebook in the ‘Foreign Affairs’ section.  And it ain’t good.

--Amazon.com Inc. recorded its best-ever quarterly profit of $3.56 billion as it continued to transition to higher margin businesses, while keeping a tight lid on costs.  But expenses are expected to rise as the company invests $800 million to make one-day free shipping the standard for Prime members, instead of two days.

But revenue growth was slowed by flat sales at Amazon’s Whole Foods grocery chain and sluggish retail sales overseas.  Overall, revenue was up 17% to $59.7 billion. Growth was 43% in 2018’s first quarter, though it was boosted by the acquisition of Whole Foods.

Amazon’s biggest cash cow is cloud computing, Amazon Web Services (AWS), which had sales of $7.7 billion, up 41%, and an operating profit of $2.22 billion.

For years, Amazon has been spending heavily to build warehouses to meet surging retail demand and branch into new industries such as cloud computing, filmmaking and groceries.

So while the shares rose 2.5% on the news, the 17% revenue growth is the second straight below 20%, when the company had been averaging 30% quarterly growth over the past three years.

--Shares in Twitter Inc. rose sharply after the company reported record daily users and rising profit on Tuesday; the results signaling recent product tweaks are stabilizing the business.

Daily users rose 6% in the first quarter to 134 million from 126 million in the previous three months, driven primarily by strength in international markets.

Revenue rose 18% to $787 million in the first quarter, a sequential decline from the fourth quarter, which is typically the heaviest spending period for advertisers, but topped analyst projections of $774 million, according to FactSet.

Net income in Q1 was $191 million, from $61 million a year earlier, marking the sixth consecutive quarter of profitability after years of sustained losses.

Central to Twitter’s changes is a drive to promote healthy discourse, after the company struggled to rein in toxic behavior.

CEO Jack Dorsey told analysts the company is taking a more proactive approach to addressing abuse and its effects on the platform.

The same day as the earnings announcement, Dorsey traveled to the White House for a chat with President Trump, who earlier had tweeted of Twitter, “they don’t treat me well as a Republican. Very discriminatory, hard for people to sign on. Constantly taking people off list. Big complaints from many people...

“Different names-over 100 M....But should be much higher than that if Twitter wasn’t playing their political games,” he wrote before calling on Congress to intervene and for other companies to rise up and compete against Twitter.

“No wonder Congress wants to get involved – and they should.  Must be more, and fairer, companies to get out the WORD!”

After meeting with Dorsey in the Oval Office, Trump wrote: “Lots of subjects discussed regarding their platform, and the world of social media in general. Look forward to keeping an open dialogue!”

But it was reported the talk was mostly about Trump’s traffic and user base and his complaints the numbers were ticking down.

--Huawei Technologies Co. said its first-quarter revenue jumped 39% to $26.81 billion, as the Chinese telecom giant makes further inroads in the 5G wireless market.

Huawei said it has signed 40 commercial contracts to supply carriers with 5G technology, and shipped 70,000 5G base stations.

The highly-controversial company, that the United States says is state-funded and basically an operation under the People’s Liberation Army and a third branch of the Chinese state intelligence network, has become the world’s largest maker of telecommunications equipment and the dominant supplier of technology for 5G networks.

The report this week was the privately held company’s first-ever quarterly update, unaudited, though it publishes a detailed audited financial statement each year.

Huawei, which is a leading smartphone provider as well, shipped 59 million of them in the quarter.

The company continues to be a major target of the U.S., which has been urging its allies to block Huawei from their systems, Huawei gear effectively blacklisted from the U.S., though as I noted  weeks ago, Huawei technology, such as its base stations, are already highly prevalent in rural America, including near some of our missile bases.

--Shares in Intel Corp. fell 9% today, after the company reported its first decline in sales of data-center chips in seven years, reflecting slowing demand amid the U.S.-China trade dispute and general uncertainty in the business-computing market.  Revenue fell in the semiconductor giant’s memory and programmable-chips businesses, too.  Demand for chips used in personal computers did rise, leaving overall first-quarter revenue flat compared with the year earlier at $16.06 billion.  Profit fell 11% to $3.97 billion.

Intel also issued cautious guidance for the balance of the year, with both earnings and revenue below forecasts it issued three months ago.

CEO Bob Swan said the data-center business has been hurt by big cloud-computing companies deferring purchases of new chips as they maximize existing computing power.  And there’s China.  “We have a dramatic slowdown in China,” Swan said.  “It’s a big important market for us, and we’re seeing buying patterns for both enterprise and cloud players slow dramatically.”

--Caterpillar Inc. spooked investors for a second straight quarter as rising costs hit margins in its construction equipment business and tepid sales in the Asia Pacific region point to continuing subdued growth in China.  CAT forecast flat sales in China and the region for 2019, with China accounting for up to 10% of the company’s sales, a critical component for the company’s growth prospects; China being one of the world’s largest commodities importers.

Caterpillar reported first-quarter construction revenue of $5.87 billion, below expectations, though overall revenue rose about 5 percent to $13.5 billion, ahead of the Street. CAT maintained its earnings guidance for the year.

--Procter & Gamble Co. reported its strongest quarterly sales growth in eight years, as the maker of Tide detergent and Gillette razors got a boost from higher prices and growth in developing markets.

The leader in the consumer products industry, P&G was the first to unveil price increases and counted on the others, like Kimberly-Clark, following suit, and they have.

P&G changed course last summer after years of trying to combat weak demand by lowering prices, so it has gradually raised them on products such as Pampers, Bounty, Charmin and Puffs.

The company said that its organic sales – which strips out currency moves, acquisitions and divestitures – rose 5% in the fiscal third quarter, which is outstanding, in my mind.  It was the largest gain since the spring of 2011.

P&G’s results come a year after activist investor Nelson Peltz joined the board following a costly proxy fight, with the company saying it has implemented some of Peltz’s suggestions.

But P&G warned about the coming fiscal year, which begins in July, due to rising transportation and materials costs, and the ongoing trade tensions.

--United Technologies Corp. said its profit rose 3.7% for the first quarter and the industrial conglomerate boosted its earnings projections for 2019, citing better-than-expected results from its recent acquisition of airline-parts maker Rockwell Collins Inc.  UTX is spinning off the Otis elevator and Carrier building-systems businesses into separate companies by year-end, while the Collins Aerospace division, a combination of the $23 billion Rockwell Collins acquisition and United Technologies’ previous aerospace business, is expected to meet its goals despite losing 10 cents a share from the grounding of Boeing’s 737 MAX program.

Overall revenue of $18.37 billion in the quarter handily exceeded expectations, ditto adjusted earnings, with the company reporting net income of $1.35 billion.

--Ford Motor Co.’s first-quarter operating profit rose 12% to $2.4 billion, helped by strong pricing in the U.S. and narrower losses in China, Ford’s biggest trouble spot.  The earnings per share of 44 cents was far above estimates of 27 cents.

Revenue fell 4% to $40.3 billion, hurt by lower vehicle sales globally.  But the automaker’s operating profit in North America jumped 14%, despite having sold fewer vehicles, because Ford’s F-Series pickup truck sales continue to help drive higher profits in the region.

The company’s lending arm, Ford Credit, had its best quarter since 2010, with operating profit up 25% to $801 million.

--Uber Technologies Inc. is now aiming to price its shares between $44 and $50 apiece, raising $8 billion to $10 billion in its upcoming IPO, which would give the company a valuation of $80 billion to $90bn, down from a range of $90bn to $100bn.

Uber’s IPO is expected to be the second-largest U.S.-listed debut in history, behind Alibaba Group Holding Ltd., as measured by market capitalization.  Last year, lead underwriters Goldman Sachs and Morgan Stanley were pitching a valuation of $120 billion.

Uber no doubt has been spooked by the reception to smaller rival Lyft’s recent IPO, Lyft’s shares priced at $72 and now down to $57.

--Shares in 3M Co. suffered their worst drop on Thursday, 13%, since 1987, as the company announced it would cut 2,000 jobs and restructure its sprawling business amid slowing sales in China and Japan.

The maker of Post-it Notes and industrial products said its net sales fell 5% to $7.86 billion in the first quarter, worse-than-expected.

The poor quarter met some investors’ top fears of late, including the impact of U.S.-China trade tensions.  Organic sales in China fell 4.3%.

Overall revenue for 3M fell 2%, declining in 18 of its 22 corporate divisions.

As for the job cuts, they would impact about 2% of its 93,500 workforce.

--United Parcel Service Inc. reported Thursday that first-quarter profit fell 17% as revenue was flat from a year ago, as the company ran into higher spending to cope with a series of winter storms.

The results fell short of Wall Street expectations, and the shares tumbled.  UPS has been working to upgrade its network as the growth of online shopping puts more pressure on delivery speed.

The company said it earned $1.11 billion in the first quarter, with revenue flat at $17.16 billion.

--Verizon Communications Inc.’s core wireless business lost lucrative phone customers in the first quarter, as it offered fewer promotions and focused on upgrading its 5G network.

The carrier said it lost a net 44,000 postpaid phone connections during the period, though existing customers continued to upgrade to pricier tiers of its unlimited data plans.  That said, the losses were greater than expected and more severe than the same time last year.

Quarterly revenue ticked up about 1% to $32.1 billion.

The company is in the process of cutting $10 billion in costs by 2021, helped by a voluntary severance program and expense savings.

Verizon had 117.9 million wireless connections at the end of March, down from 118 million at the end of 2018.

The company’s landline business added 52,000 net new home broadband connections during the first quarter and lost a net 53,000 Fios video customers; the latter the result of ongoing cord-cutting and the growth of streaming services like Netflix Inc.

--AT&T reported a first-quarter revenue miss as its premium TV and streaming service lost subscribers while the telecom company said it was on track to meet its deleveraging goals.

The company said revenues rose 17.8% from a year ago to $44.8bn, primarily driven by its acquisition of Time Warner, but this was below estimates.

AT&T said it generated revenue of $8.38bn at WarnerMedia, which includes HBO, home to shows such as Game of Thrones and Insecure, but that was also short of forecasts.

The company lost 544,000 premium TV subscribers, which brought its total to 22.4m, and its DirectTV Now streaming service shed 83,000 subscribers, leaving its customer base at 1.5m.

Net income slipped to $4.1bn.

--Coca-Cola Co. is expanding its namesake brand, pushing forward with overseas rollouts of a coffee-infused variant (Coca-Cola Plus Coffee) and an energy-drink version (Coca-Cola Energy), though in the case of the latter it faces objections from its partner Monster Beverage Corp. (in which Coke owns an 18.5% stake, Monster the leading energy drink in the U.S.).  Monster has said the launch of Coca-Cola Energy is a violation of an agreement the companies struck in 2015 and the complaint is now in arbitration.

Separately, Coca-Cola Zero Sugar, a reformulated diet version, grew by double digits in the latest quarter.

I haven’t had a Coke in decades (being a Coors Light drinker...cough cough), but I have to admit, I will try Orange Vanilla Coke, its first new flavor in a decade, which launched in February and is driving growth thus far in the Coca-Cola brand.

The coffee version of Coke is designed to appeal to those needing a midafternoon pick-me-up at work, while Coca-Cola Energy offers a stronger caffeine boost than regular Coke and has a new taste, so they say.

--Samsung Electronics Co. delayed the rollout of the Galaxy Fold smartphone because of technical problems just ahead of its planned launch.  This is a big blow to the hardware giant and its hopes for a product billed as one of the smartphone market’s biggest innovations in years.

Samsung sent out phones to reviewers, and those reviews were awful.  The Fold is the first mainstream foldable-screen device, and was slated to hit U.S. shelves on Friday with a $2,000 price tag!  Good lord.  But the screens had creases, and the picture wasn’t good and this is a mini-disaster, for now.

--Starbucks Corp. beat profit expectations in its most recent quarter and boosted forecasts for sales growth for the full year.

The company said same-store sales grew by 3%, with sales up 4% in the company’s Americas region and 3% in China.

For the quarter ended March 31, Starbucks reported a profit of $663.2 million, up slightly from the year before.  Overall revenue was up 5%.

--Social Security’s costs are expected to exceed its income in 2020 for the first time since 1982, forcing the program to dip into its nearly $3 trillion trust fund to cover benefits.

But this new projection, issued by the trustees of Social Security and Medicare, is actually a little better than the one made as part of the 2018 annual report, which anticipated the program would run dry by the end of last year.

By 2035, the trust funds for both programs will be depleted, meaning Social Security would no longer be able to pay its full scheduled benefits unless Congress stepped in.  Otherwise, recipients would only get about three-quarters of their scheduled benefits.

What’s important to remember is that Social Security and Medicare represent about 45% of federal spending, today, and as every schoolchild knows by now, the costs are going to rise significantly, and in turn drive up budget deficits.

--New York State tax revenues fell by $3.7 billion, or 4.7 percent, last year – the largest collapse since the 9/11 attacks – but officials downplayed the significance, since a surge in collections last month staved off an even steeper drop.

The primary culprit was a 6.6 percent decrease in personal income tax revenues, which came in at $48.1 billion - $3.4 billion less than the previous year.

Comptroller Thomas DiNapoli cited sweeping changes to the federal tax code, including the $10,000 cap on state and local taxes that could be claimed on federal returns, which had many filers shifting payments to 2017 so they could claim more generous deductions under the old tax code...or they flat out fled the state.

Business tax receipts, on the other hand, were up $7.9 billion, an increase of 10.4 percent.

The state’s fiscal year runs through March 31.

--Abigail Disney, a family member and activist, wrote about wage inequality at Walt Disney Co. recently on Twitter and it went viral, largely because of the name attached to it.  Then, in a Washington Post op-ed, Abigail wrote in part:

“(The) Disney brand occupies a special place in our economic landscape.  Its profits are powered by emotion and sentiment and, yes, something as fundamental as the difference between right and wrong.  I believe that Disney would well lead the way, if its leaders so chose, to a more decent, humane way of doing business.

“I had to speak out about the naked indecency of chief executive Robert Iger’s pay.  According to Equilar, Iger took home more than $65 million in 2018. That’s 1,424 times the median pay of a Disney worker.  To put that gap in context, in 1978, the average CEO made about 30 times a typical worker’s salary. Since 1978, CEO pay has grown by 937 percent, while the pay of an average worker grew just 11.2 percent.

This growth in inequality has affected every corner of American life.  We are increasingly a lopsided, barbell nation, where the middle class is shrinking, a very few, very affluent people own a great deal and the majority have relatively little. What is more, as their wealth has grown, the super-rich have invested heavily in politicians, policies and social messaging to pad their already grotesque advantages.

“In 2017, with the quiet encouragement of corporations across the country, Congress passed the Tax Cuts and Jobs Act. As billions of dollars landed in the laps of management, they spent as a rule not on their workforces but on wealth-enriching strategies such as stock buybacks and, yes, executive pay.

“In 2018, Disney gave more than 125,000 employees a $1,000 bonus. But that $125 million or so was dwarfed by the $3.6 billion it spent to buy shares back to drive up its stock price and thus enrich its shareholders. Given that about 85 percent of stocks are held by the richest people in the country, this was a significant new investment in wealth inequality....

“There are just over 200,000 employees at Disney. If management wants to improve life for just the bottom 10 percent of its workers, Disney could probably set aside just half of its executive bonus pool, and it would likely have twice as much as it would need to give that bottom decile a $2,000 bonus.  Besides, at the pay levels we are talking about, an executive giving up half his bonus has zero effect on his quality of life.  For the people at the bottom, it could mean a ticket out of poverty or debt. It could offer access to decent health care or an education for a child.

“Here is my suggestion to the Walt Disney Co. leadership.  Lead. If any of this rings any moral bells for you, know that you are uniquely situated to model a different way of doing business.  Reward all of your workers fairly. Don’t turn away when they tell you they are unable to make ends meet.  You do not exist merely for the benefit of shareholders and managers.  Reward all the people who make you successful, help rebuild the American middle class and respect the dignity of the men and women who work just as hard as you do to make Disney the amazing company it is.”

--Dutch brewer Heineken has reported an increase in beer volumes in all regions, driven in particular by double-digit growth in Africa, Middle East and eastern Europe, but maintained its mid-single digit growth outlook for the full year.

The world’s second-largest beer maker reported a 15 percent rise in first-quarter net income, while beer sales by volume rose 4.3 percent, with the Heineken brand up 8.3 percent, which isn’t too shabby.

Africa, the Middle East and Eastern Europe posted a 15.5 percent rise in organic volume growth for the brand.

--Chipotle Grill, operator of Chipotle Mexican Grill restaurants, reported first-quarter results that topped the Street’s expectations on both the top and bottom line.  Same-stores sales growth was a super 9.9%, ahead of consensus for 6.8%, as the company guided higher for mid- to high-single digit comp sales in 2019, up from earlier expectations.

But after the shares rallied sharply on the earnings news, they plunged on word the company had received a new subpoena for information into illnesses at several restaurants, including in Simi Valley, Calif., Los Angeles, Boston and Sterling, Va.  In 2015, the Centers for Disease Control and Prevention reported 60 cases of E. coli from two outbreaks that were linked to Chipotle restaurants.  Across 14 states, a total of 22 people were hospitalized.

--We have another nightmare for the traveling public. Scandinavian airline SAS cancelled hundreds of flights globally today leaving thousands of passengers stranded after pilots in Norway, Sweden and Denmark went on strike.

SAS said 637 flights would be cancelled, affecting 72,000 passengers.

The pilot walkout came after negotiations over pay and work schedules broke dwon.

--We note the passing of Henry Bloch, the easygoing pitchman who helped found tax preparation giant H&R Block.  He was 96.

Bloch founded the company in 1955 in a tiny office on Main Street in Kansas City, Mo., with his brother, Richard, angling to take advantage of the vacuum left as the IRS stopped providing free income tax return service.  Richard died in 2004.

Henry Bloch retired as chief executive in 1992.

Foreign Affairs

North Korea: Kim Jong Un took his armored train to Vladivostok, Russia, for his first face-to-face talks with Russian President Vladimir Putin, with little of substance achieved.  There were no public promises of economic assistance from Moscow to mitigate the pressure of sanctions. 

Putin and Kim held the talks on an island off Vladivostok, two months after Kim’s summit with President Trump in Hanoi ended in disagreement, cooling hopes of a breakthrough in nuclear arms talks.

Afterwards, in a press conference, Putin said that U.S. security guarantees would probably not be enough to persuade Pyongyang to shut its nuclear program. 

While there were no breakthroughs, Putin used the summit to burnish Russia’s diplomatic credentials as a global player.

Putin said any U.S. guarantees might need to be supported by the other nations in previous six-party talks on the nuclear issue, which would mean including Russia, China, Japan and South Korea, as well as the U.S. and North Korea, a format long abandoned by the Trump administration.

Putin told reporters, “I’m deeply convinced that if we get to a situation when some kind of security guarantees are needed from one party, in this case for North Korea, that it won’t be possible to get by without international guarantees.  It’s unlikely that any agreements between two countries will be enough.”

The two leaders appeared to get along well, with nearly two hours of one-on-one talks with just a few aides present.

Putin said he thought a deal on Pyongyang’s nuclear program was possible and that the way to get there was to move forward step-by-step in order to build trust.

For his part, Kim Jong Un told Putin that peace and security on the Korean peninsula depended on the United States, warning that a state of hostility could easily return, North Korean media said on Friday.

Previously, Kim said he would wait until the end of the year for the United States to be more flexible.

“The situation on the Korean peninsula and the region is now at a standstill and has reached a critical point where it may return to its original state as the U.S. took a unilateral attitude in bad faith at the recent second DPRK-U.S. summit talks,” North Korea’s KCNA reported Kim as saying.

“The DPRK will gird itself for every possible situation,” KCNA quoted Kim as saying.

On Thursday, Pyongyang accused South Korea of violating a bilateral agreement meant to lower tensions by carrying out combined aerial drills with U.S. forces.  It labeled the exercises a provocation, while vowing a military response.

Also this week, North Korea removed Kim Yong Chol, Kim Jong Un’s right-hand man, a hard-liner, and Secretary of State Mike Pompeo’s negotiating partner, from a top post, according to South Korea’s Yonhap news agency.  Kim Yong Chol had been head of a department that handled ties with South Korea and increasingly the United States.  He was prominent at the summit in Hanoi, and visited the White House in January to meet President Trump.

But I didn’t see any confirmation of the South Korean report.  KYC is said to be extremely difficult to deal with, so some say this could be a good sign.  I say, ‘wait 24 hours.’

China:  Beijing accused Washington of violating the one-China principle with its recent sale of a $500 million military package to Taiwan, saying the act seriously hurt relations between the two countries and jeopardized stability in the Taiwan Strait.

“The Chinese side resolutely opposes any countries selling weapons to Taiwan,” the defense ministry said in a statement on Wednesday, while repeating its position that it regards the self-ruled island as an inalienable part of the mainland and its need to uphold its territorial integrity.

“What the U.S. side did not only strongly violated the one-China principle and the three communiques prescribing Sino-U.S. relations, but also interfered in China’s internal affairs and damaged the sovereignty and security of China,” the defense ministry said.

The act also “poisoned bilateral military ties and seriously sabotaged cross-strait relations and stability in the Taiwan Strait.”

I fully support arms sales to Taiwan.

But on a different matter, Brian Spegele and Kate O’Keeffe of the Wall Street Journal had the following disturbing report:

“Orbiting 22,000 miles above Earth, a fleet of American-built satellites is serving the Chinese government in ways that challenge the U.S.

“Nine of these satellites have been part of efforts to connect Chinese soldiers on contested outposts in the South China Sea, strengthen police forces against social unrest and make sure state messaging penetrates far and wide, according to corporate records, stock filings and interviews with executives.

“A tenth satellite, under construction by Boeing Co., would enhance China’s competitor to the U.S. Global Positioning System.  Besides civilian uses, the navigation system could help China in a potential conflict, such as in guiding missiles to their targets.

“U.S. law effectively prohibits American companies from exporting satellites to China, where domestic technology lags well behind America’s.  But the U.S. doesn’t regulate how a satellite’s bandwidth is used once the device is in space.  That has allowed China to essentially rent the capacity of U.S.-built satellites it wouldn’t be allowed to buy, a Wall Street Journal investigation found.

“Tangled webs of satellite ownership and offshore firms have helped China’s government achieve its goals. Some of America’s biggest companies, including private-equity firm Carlyle Group in addition to Boeing, have indirectly facilitated China’s efforts, the Journal found.”

This is nuts.

Lastly, there are concerns about President Xi Jinping’s health, and the lack of a succession plan.  On a recent tour of Europe, some observers said his “unusual gait” caught their eyes.  Television coverage appeared to catch him walking with a slight limp, and he appeared to need to steady himself while sitting down.

Xi, who turns 66 in June, has been publicly visible in China since the trip, but any limp or other perceived issue is of course going to be scrutinized.

Russia / Ukraine: President Putin signed a decree on Wednesday to allow residents of Moscow-backed rebel-held territories in eastern Ukraine to obtain Russian passports.

The decree – published on the Kremlin website just three days after Ukraine elected a new president in a landslide – allows residents of the two separatist “republics” in Ukraine’s coal-producing Donbass region to apply for Russian passports under a simplified three-month procedure.

Russia has de facto controlled the two territories since its armed forces helped them break away from Ukraine in 2014, the war claiming more than 13,000 lives since then.

This is an outrageous move on Putin’s part, and the U.S. State Department condemned the order. 

“Russia, through this highly provocative action, is intensifying its assault on Ukraine’s sovereignty and territorial integrity,” a State Department statement read.

Ukraine’s new president-elect, comedian Volodymyr Zelensky, has pledged to find a peaceful solution to the conflict, but he said Putin’s action showed Russia was waging war and brought the two sides no closer to peace, calling on the international community to threaten Russia with more sanctions.

Outgoing President Petro Poroshenko said Russia might try to annex the Donbass region.  Kiev also asked the European Union to take “prompt and decisive” action.

Sri Lanka:  The death toll in the Easter Sunday bombings at one point rose to 359, before the government lowered it to between 250 and 260.  A director of Sri Lanka’s health services said, “It could be 250 or 260.  I can’t exactly say.  There are so many body parts and it is difficult to give a precise figure.”  The deputy defense minister said the death toll had been revised down to 253 due to inaccurate figures provided by the country’s morgues.

The alleged ringleader behind the bombings, a radical preacher by the name of Zahran Hashim, died at the Shangri-La hotel in the capital, Colombo, according to President Maithripala Sirisena.

Sirisena said Hashim led the attack on the popular tourist hotel, accompanied by a second bomber.

Sirisena said Sri Lankan intelligence services believed around 130 suspects linked to Islamic State (IS) were in the country and that police were hunting 70 who were still at large, 60 in custody. 

Islamic State claimed responsibility on Tuesday, a government official having said the bombings were retaliation for the killing of 50 people last month at mosques in New Zealand, but he gave no evidence for his claim.

ISIS’ news agency, Amaq, released a bulletin on Tuesday stating that the attacks were carried out by “Islamic State fighters.”  The statement, disseminated on the group’s chat rooms on the app Telegram, also said the bombings targeted Christians as well as citizens of countries belonging to the coalition fighting ISIS.

The group’s wording did not make clear whether it had direct ties to the bombers, or if the attackers were heeding the Islamic State’s calls for Muslims to attack in their home countries.

Sri Lankan authorities have blamed a local Islamist extremist group, National Tawheed Jamath, for the attacks, though the sophistication of the plot suggested the involvement of an external group like ISIS.

The Sri Lankan government was forced to admit there had been a significant intelligence failure before the attacks, with reports of warnings of strikes not acted on amid feuds at the highest levels.  President Sirisena moved to sack the defense secretary and inspector general of police.

The intelligence came from India, with some top Sri Lankan intelligence officials then deliberately hiding the information, which is beyond scandalous.

After the attacks, Sri Lanka blocked several social media networks on Sunday, including Facebook, Instagram, YouTube and the messaging service WhatsApp.  The steps come amid growing global concerns about the capacity of American-owned networks to gin up violence.

In Sri Lanka, social media has been credited with helping bring democracy after years of civil war, but it is also accused of fomenting racial fear and hatred.  Last year, the government briefly blocked social networks after viral rumors and calls to violence, circulating largely on Facebook, appeared to provoke a wave of anti-Muslim riots and lynchings.

Government officials had repeatedly warned Facebook, which, again, owns Instagram and WhatsApp, that the posts could lead to violence.  “Company officials largely failed to respond until the government shut down access,  after which they promised to hire more moderators and improve communication.”  [Max Fisher / New York Times]

Recall what I wrote last Nov. 3, 2018, in this space.  After a superb two-part documentary on Facebook from PBS’ “Frontline,” I called for Mark Zuckerberg and Cheryl Sandberg to be “indicted.”

“Facebook made five insiders available to ‘Frontline’ and they were all dopes.  And the documentary unearthed some scathing video that spelled out how executives in the company, including Zuckerberg and Sandberg, despite countless warnings on how the data could be misused, refused to take action.

“A big part of the reason for this was Facebook was trying to build up its valuation before going public.

“But what you see on the program is that in light of the Russia investigation and the misuse of Facebook’s user profiles, they now proudly talk of hiring thousands to attack ‘misinformation’ and someone like me, experienced beyond belief in the world, can only shake their heads and think, ‘This massive group of 20-something know-nothings?  Are you kidding me?!’  Their boss, one of five allowed to talk to ‘Frontline,’ Tessa Lyons, is a flat-out idiot, and she’s apparently overseeing the entire operation.

“All five ‘team members’ also told producers the same thing when it comes to how they are going to attack the massive problems inherent in the platform.  ‘We’re having an ongoing conversation...’  What the blank does that mean?!

“Here’s what you learn.  ‘Frontline’ interviewed a UN investigator on the misuse of Facebook in Myanmar and he called the company ‘highly destructive.’  ‘Facebook turned into a beast,’ as the government literally spread deadly lies through the network, heavily used by the people there. The representative said, Facebook ‘played a significant role in the genocide.’

“The same thing has happened in the likes of India, Sri Lanka and the Philippines.”

Yes, I wrote that last November.  And look what happened last Sunday in one of the countries I named.

I continued, last November:

“And what is the company’s standard response to allowing all the deadly garbage on its network?

“ ‘We’re hiring more people versed in the language [plug in the country].’ Trust me, they aren’t hiring former CIA station chiefs, which is what would be required.”

And look what Facebook told Sri Lankan officials last year... “they promised to hire more moderators and improve communication.”

Well investors don’t care.  Look at the response to Facebook’s strong earnings this week...the stock rallied anew, far closer to its highs than its lows.

This is beyond sickening.  Zuckerberg and Sandberg should be hauled before the International Criminal Court in The Hague.

Iran: President Hassan Rouhani vowed Wednesday to make the U.S. regret its sanctions against the Islamic republic, while demanding that the U.S. drop them and offer an apology as conditions for the renewal of negotiations.

Rouhani spoke out following the Trump administration’s decision Tuesday not to renew sanctions exemptions granted to eight countries doing business with Iran.

“The United States, Saudi Arabia, and the United Arab Emirates, the three largest energy producers in the world, together with our friends and allies, are committed to ensuring the world’s oil markets receive all supplies, including the deficit created by the non-use of Iranian oil.

“The Trump administration and its allies are determined to continue and expand the campaign of economic pressure on Iran to put an end to the destabilizing activities of the regime, which is a threat to the United States, its partners, and its allies in the Middle East,” the White House said Tuesday.

The next day, Rouhani responded, saying Iran had “no choice but to resist.”

“The U.S. is not ready to hold negotiations at all and its measures are aimed at breaking up the Iranian nation.  We have to make the U.S. regret its decision for which we have no choice but to resist.”

Rouhani went on to suggest that his country was open to renewing talks with Washington – but only if the U.S. dismantles its sanctions regime against Iran as a precondition.  Rouhani said the U.S. must also apologize “for all wrongdoings and practice mutual respect.  In practice, we have to prove that Americans have made a mistake and miscalculated.”

Iranian Foreign Minister Javad Zarif (the man who wasn’t allowed to quit his job a month or two ago) said Iran would continue to sell its oil despite the expanded U.S. sanctions, and warned of unspecified consequences if the U.S. tried to block oil sales that go through the Strait of Hormuz, where 25-30% of the world’s oil passes.

But Zarif also floated an offer to the Trump administration to exchange prisoners, with at least five U.S. citizens held in Iran today.  Zarif also said President Trump wouldn’t get a better deal than the 2015 nuclear agreement.

U.S. sanctions against Iran have denied its government more than $10 billion in oil revenue, according to Brian Hook, U.S. Special Representative for Iran and Senior Policy Advisor to the Secretary of State.

Editorial / Wall Street Journal

“Italy, Greece and Taiwan (among the eight granted exemptions) have already ended their Iranian oil imports. That leaves five countries at risk of U.S. sanctions: China, India, Turkey, Japan and South Korea.  Two are close allies, and no doubt their leaders will protest this stiff medicine.  But the Trump Administration has given them enough warning, not to mention a six-month waiver.  That’s plenty of time to make other arrangements.

“By all accounts, Iran’s economy is in trouble.... ‘The regime would have used (the $10 billion) to support terror groups like Hamas and Hezbollah and continue its missile development’ and ‘it would have perpetuated the humanitarian crisis in Yemen,’ (said Sec. of State Mike Pompeo).

“Mr. Pompeo reiterated the White House goal ‘to deprive the outlaw regime of the funds it has used to destabilize the Middle East for four decades, and incentivize Iran to behave like a normal country.’  To that end, the U.S. intends to drive Iranian oil exports to zero.

“That’s a potential shock for global oil markets, but the Administration says it is working with Saudi Arabia and the United Arab Emirates to fill any gap in supplies.  American frackers will help, too, as they gear up in response to higher prices. The ability to increase sanctions on a major oil supplier without triggering a giant oil-price shock is another illustration that the U.S. energy boom offers strategic as well as economic benefits.

“To the extent Iran sanctions push up oil prices, they won’t be pain-free for Americans.  Gasoline in the U.S. is nearing an average of $3 a gallon – and surpassing $4 a gallon in the Progressive Republic of California.  Oil supplies worldwide were already tightening. Amid a socialist collapse, Venezuela is now pumping only 732,000 barrels a day, less than a third of its output in 2015.  Renewed fighting in Libya also has made oil analysts wary.

“Mr. Trump’s Iran strategy thus involves some political risks, especially considering how tightly oil prices are linked with public feelings of economic well-being.  No President wants to run for re-election with rising gasoline prices.  Yet the Trump Administration, to its credit, shows no signs of backing down. If Iran wants sanctions eased, it can stop spreading terror and renegotiate the nuclear deal."

Syria: According to Amnesty International and the monitoring group Airwars, the U.S.-backed assault to drive Islamic State from its Syrian capital Raqqa in 2017 killed more than 1,600 civilians, 10 times the toll the coalition itself has acknowledged.  Amnesty and Airwars spent 18 months researching civilian deaths including two months on the ground in Raqqa, they said.

Afghanistan: In a new report, the United Nations said more Afghan civilians are being killed by Afghan government and American forces than by the Taliban and other insurgents, as talks to end the 18-year war have faltered of late.

For the first time since it began compiling data more than a decade ago, the UN said pro-government forces caused more civilian deaths, accounting for 52.4% of the 581 deaths in the first three months of this year, compared with 39% by the Taliban, the local affiliate of Islamic State and “undetermined antigovernment elements.”  The remaining deaths were attributed to crossfire and other causes.

U.S. Army Col. Dave Butler, spokesman for the U.S.-led international forces in Afghanistan, said in response to the UN report:

“We strive for precision in all of our operations. The best way to end the suffering of noncombatants is to end the fighting through an agreed-upon reduction in violence on all sides.”

The number of civilian deaths did drop from 799 in the first quarter of 2018.

Israel: Hezbollah leader Hassan Nasrallah has denied reports the Lebanese terror organization is planning for war with Israel this summer, saying the IDF (Israel Defense Forces) would not start a military conflict with the group because the Israeli home-front is not prepared.

Nasrallah, in disputing press reports talking up war, said, “I personally eliminate any possibility for a Zionist war on Lebanon.”

The Hezbollah leader also said on Monday that while Israel boasts about their missile defense system, it cannot defend the country’s citizens against the threat posed by Hezbollah’s rocket arsenal. 

I have to admit I agree with this last point.

In any war with Israel, Hezbollah would not only launch its massive rocket arsenal, but, according to military experts, would also infiltrate into Israeli communities on the border to kill or kidnap civilians and soldiers, Hezbollah with an estimated force of 30,000 battle-hardened fighters. [Jerusalem Post]

Egypt: When I wrote last week of the changes to Egypt’s constitution that granted President Abdel Fattah al-Sisi the ability to remain in power until 2030, I didn’t realize the referendum to approve such changes would take place right away, and last week nearly 89% of Egyptians who cast ballots voted in favor of amendments that include an extension of the president’s term and expansion of his power over the judiciary, the National Election Authority said.

The constitutional amendments are thus effective immediately.

Sisi’s term is lengthened to six years from four, with a limit of two consecutive terms, extending his current term to 2024, while a special rule would also allow him to run for another six years after the end of the current one.  The changes also included granting Sisi final approval over judicial appointments.

Sudan: Reuters reported that a search of ousted President Omar al-Bashir’s home by military intelligence revealed $351,000 in cash and six million euros! (about $6.8 million), plus five million Sudanese pounds (for which I have no freakin’ idea as to the value).

Yes, he is under investigation on charges of money laundering and possession of large sums of foreign currency without legal grounds.

Random Musings

--Presidential tracking polls...

Gallup:  45% approval of Trump’s job performance, 51% disapproval; 89% Republicans, 39% Independents (Apr. 12)
Rasmussen: 49% approval, 49% disapproval (Apr. 26)

I missed the results of a Fox News poll released a day before I went to post last time, and post-release of the Mueller report.  45% of voters said they approved of Trump’s job performance and 51% disapproved, steady from the March poll.

Also, 52% said they were extremely interested in the 2020 presidential election, about equal to the 54% who said the same thing in the final days of the 2016 campaign.  Both Republicans (57%) and Democrats (56%) expressed strong interest.

On immigration, the Fox News survey finds that by a 12-point margin, voters say closing the border is a bad idea (41 good vs. 53 bad), and by a 24-point spread they believe immigration helps rather than hurts the country (48-24 percent).

Interestingly in this Fox survey, Trump is losing ground in his on-going feud with the late Sen. John McCain: by a 51-27 percent margin, more voters admire McCain than Trump.

--Former Vice President Joe Biden announced Thursday that he would seek the Democratic nomination to challenge President Trump in 2020, touting his experience and global stature in a bid to lead a party defined by a younger generation skeptical of his age and ideological moderation.

Biden wants to offer himself as a levelheaded leader for a country wracked by political conflict.

Biden began laying out his case in a 3 ½-minute video, which begins by recalling the white supremacist march through Charlottesville, Va., in 2017 and Trump’s comment that there were “very fine people on both sides.”  In that moment, Biden said, “I knew the threat to our nation was unlike any I’d ever seen in my lifetime.”

“We are in the battle for the soul of this nation,” Biden said.

Trump tweeted on Biden’s entrance: “Welcome to the race Sleepy Joe. I only hope you have the intelligence, long in doubt, to wage a successful primary campaign. It will be nasty – you will be dealing with people who truly have some very sick & demented ideas. But if you make it, I will see you at the Starting Gate!”

Biden apparently raised a very solid $6.3 million his first 24 hours.

And according to the Washington Examiner, John McCain’s widow, Cindy, and daughter Meghan, will publicly back Biden in the hope he can take the Oval Office from Trump.  Gee, that would elicit a tweet or two from the president, don’t you think?

--Anita Hill said she wasn’t satisfied with an apology she received from Biden for his handling of Justice Clarence Thomas’ confirmation hearings – and wants to see “real change” instead.

In an interview with the New York Times, Hill said she received a call from the former vice president and senator earlier this month and was left “deeply unsatisfied” with his act of contrition.

“I cannot be satisfied by simply saying I’m sorry for what happened to you. I will be satisfied when I know there is real change and real accountability and real purpose,” Hill told the paper.

Biden was chairman of the Senate Judiciary Committee in 1991, when the former law clerk came under intense scrutiny for exposing workplace harassment.

“The focus on apology to me is one thing,” Hill added.  “But he needs to give an apology to the other women and to the American public because we know now how deeply disappointed Americans around the country were about what they saw.  And not just women. There are women and men now who have just really lost confidence in our government to respond to the problem of gender violence.”

--According to the CDC, at midweek, there were 625 people diagnosed with the measles nationwide, the highest case count since the disease was considered eliminated in 2000.

This afternoon, Los Angeles County health officials told more than 1,000 college students and staff members who may have been exposed to measles to stay home this week, in one of the largest quarantine orders in state history.

The declaration has raised questions about how exactly the orders will be implemented at UCLA and Cal State Los Angeles, where students have been diagnosed with the disease, and how effective the mandate will be.

The 1,000 were unable to provide proof of vaccination.

As President Trump said today, get your kids vaccinated!  Don’t be a freakin’ idiot!  [This last one is me, but I wish the president had put it that way.]

--In Gallup’s annual Global Emotions Report, with some 150,000 people interviewed in over 140 countries, a third said they suffered stress, with the most negative country being Chad, followed by Niger.  The most positive country was Paraguay, which shocks me, having been to Paraguay myself.  Then again, I’m remembering how happy the workers were when I showed up at the little golf club that Carlos Franco grew up on in Asuncion.  [Then Mr. Franco screwed me, but that’s a long tale.]

Anyway, just another reason to cross Chad and Niger off the bucket list.  At the same time, I don’t need to go back to Paraguay.  That is one, long-ass journey.

---

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

God bless America.

---

Gold $1288
Oil $62.80

Returns for the week 4/22-4/26

Dow Jones  -0.06%  [26543]
S&P 500  +1.2%  [2939]*
S&P MidCap  N/A
Russell 2000  N/A
Nasdaq  +1.9%  [8146]*

*record high

Returns for the period 1/1/19-4/26/19

Dow Jones  +13.8%
S&P 500  +17.3%
S&P MidCap  +18.7%
Russell 2000  +18.0%
Nasdaq +22.8%

Bulls 53.4
Bears 18.4

Have a great week.  Happy May Day.  Keep the rioting to a minimum.

Brian Trumbore



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Week in Review

04/27/2019

For the week 4/22-4/26

[Posted 11:30 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.

*Special thanks this week to longtime supporter Brad K., and to Dan and Jean C.  [Dan, don’t hesitate to write me about your business.]

Edition 1,046

Last week I wrote how we were uplifted the previous Sunday by Tiger Woods’ win at The Masters, and then depressed as hell the next day watching Notre Dame Cathedral go up in flames.

This week I was incredibly depressed watching a particularly vicious day of protests in Paris Saturday by the Yellow Vests; as many fires set as any weekend before, but what was particularly distressing was the reason given by the protesters for the violence...the amount of money raised for the rebuild of Notre Dame!  As I note down below, French President Macron is slowly making some concessions to the ‘have nots’ in French society, but you can see where this is headed.

Once the rebuild begins in earnest, there will be constant threats and protests near the cathedral.  And then we have the Paris Olympics in 2024.  Oh brother.

So this coming Wednesday is May Day, historically a time of protests in Europe by organized labor.  It’s also the day that far-right French leader Marine Le Pen normally stages an annual march from Jeanne d’Arc square (Joan of Arc), up to the Opera House.  Coincidentally, Joan of Arc was canonized as a saint by Pope Benedict XV at Notre Dame Cathedral in 1920.

As long-time readers know, I’m the only kid on my block who has twice gone to Paris specifically to march with Marine Le Pen and her then-National Front (Front National) party on May 1st...2011 and 2014.  In 2011 I was also in Paris when it was announced Osama bin Laden had been killed, which was kind of strange, in terms of gauging local sentiment.

Marine Le Pen and her new party (National Rally) will be gearing up for the coming European Parliament elections, May 23-26, and part of me wishes I was in Paris this Wednesday just to observe (which was my reason for being there before, not as a backer of Front National, though I was mere feet from her, and her racist father, Jean-Marie, every step of the way...they then had a fallout).

My point is I just hope Wednesday is a peaceful one in Paris, and throughout Europe.

Meanwhile, last week, amidst my review of the Mueller report, I said that continuing the battle, in Trumpian fashion, was a loser’s cause.

“Voters don’t care,” I wrote.  “The base isn’t moving, either side.  The battle, such as in 2018, is over suburban women. It was a loser for Republicans in the mid-terms.

“President Trump should drop it...and move on.  I detail below how this coming Friday could be a huge, positive, day for him in terms of the economy.  That’s his hole card.  Just shut up on the other stuff.”

Well, today, Friday, was indeed “a huge, positive day,” as spelled out below with the GDP report for the first quarter.  And Trump’s biggest supporters, such as Michael Goodwin, agreed with me.  But the president does his own thing.

Michael Goodwin / New York Post

“As President Trump searches for the right responses to the Mueller report, he would be wise to follow the idea that ‘revenge is a dish best served cold.’

“Trump’s temptation will be to nurse grudges and settle scores immediately.  A self-made man who became president his way, he will want to unleash his greatest ever punchback against those who put him through two years of hell.

“Who can blame him?  No modern president has endured such fanatical hatred from his opponents who still believe everything they read in The New York Times and see on CNN....

“Congressional Dems can’t help themselves and are committed to keeping the impeachment flames burning, and the 2020 candidates are acting as if Trump is actually as guilty as they said he was the day before the report cleared him. Either way, the party is not ready to move on.

“All the more reason why Trump must be.  After spending a few days cracking jokes and venting about the damage the investigation did, the president should embrace his second chance to be president.

“He is free of Mueller, his lease on the Oval Office is renewed.  He should make the most of it.

“He can begin by seeing the report as a gift. While it’s true that everything he said and did is depicted through the darkest possible lens, it is also true that Trump nearly wrecked his presidency.

“For example, had his orders to fire Mueller been followed, a replacement would have been demanded by Congress and an obstruction charge guaranteed.  Recall that stalwart allies like GOP Sen. Lindsey Graham warned him that firing Mueller would have sent Republicans fleeing.

“Under that scenario, even if he survived as president – a big if – Trump would have gotten nothing done in the first two years despite GOP control of both chambers. There would have been no tax cut, and the economy and stock markets would have drifted along much as they did in the Obama years....

“The larger truth the Mueller report reflects is that many in the permanent government, the Washington establishment and the media gatekeepers will never accept Trump as president. The blood lust that created the investigation, and that survives despite the report’s conclusions, should serve as a final warning to Trump that he has zero room for error. 

“When subpoenas are involved, everybody has loose lips.

“He also has little guaranteed time remaining. The 2020 election will be a dogfight and he’ll need every vote he can possibly get in every possible swing state.

“In practical terms, Trump should admit to himself that his policies are more popular than his personality. He can help his cause – and the country – by finalizing strong trade deals with China and Europe and keeping the pressure on North Korea and Iran – while keeping American soldiers out of big wars....

“Above all, Trump must trust the people around him as much as he trusts his gut. His recent shuffling of officials dealing with the border crisis should be his last upheaval before the election.

“He needs every person and idea he can find to stem the destructive migration surge.  If he can, it will be a transformative accomplishment.

“Besides, every day the media is focused on personnel changes is a good day for Democrats.

“Finally, there is one more temptation Trump must resist: He should trust William Barr to follow through on his promise to investigate the investigators....

“So...Trump can sit back and enjoy the show. And patiently wait to get the last laugh.”

Mr. Goodwin wrote this last weekend.  At least in the five days since, President Trump hasn’t followed this advice.

Similarly...Editorial / Wall Street Journal

“President Trump should be savoring the end of Special Counsel Robert Mueller’s investigation with no charges of collusion or obstruction of justice, but as ever he can’t stand prosperity.  His post-report scrap with former White House counsel Don McGahn shows how this President is so often his own worst enemy....

“We believe Mr. McGahn, but the needless dispute highlights several realities of the Trump Presidency. One point is that this episode is not evidence of obstruction of justice, despite claims by the Democratic-media chorus.  Mr. Trump would have had every constitutional right to fire Mr. Mueller, an inferior officer at the Justice Department.  Mr. Trump let Mr. McGahn and others talk to Mr. Mueller and turn over notes, which is the reason Mr. Mueller knows about all this.

“But firing Mr. Mueller would have been dumb and self-defeating, as Mr. McGahn and nearly everyone else in the White House understood.  Mr. Trump was raging against an investigation he thought deeply unfair, but firing Mr. Mueller would have made the President look guilty when we now know he wasn’t.  It would have triggered a political crisis for Democrats to exploit, which is why they were hoping he’d fire Mr. Mueller.

“Mr. McGahn thus saved Mr. Trump from his own bad political judgment....

“The episode underscores that Americans should be grateful that capable people have been willing to work for this President despite the political assault on them for doing so.  As former Bush State Department official Eliot Cohen put it, anyone who worked for this President would lose ‘nothing less than a piece of their souls.’ But men and women are serving the country and the Presidency more than Mr. Trump personally, and their sound judgment has saved the country from many blunders....

“So much of Mr. Trump’s dishonesty seems to flow from his ego, which can tolerate no slight and no suggestion that he is capable of mistakes like the rest of us. Yet the result of his falsehoods is to undermine the credibility that any President needs in a crisis.

“All of this also underscores that Mr. Trump’s character as President will be his main re-election vulnerability. On policy he should be a favorite based on the economy and the Democratic Party’s sharp left turn. But voters will balance that against Mr. Trump’s personal behavior and whether they want to spend four more years in the Trump maelstrom.

“Voters might not settle for prosperity if Mr. Trump won’t.  Meantime, thank you, Don McGahn.”

Again, President Trump didn’t follow the advice to move on, and so....

Trump World, continuing with the above....

--President Trump said he would resist all efforts by the House to question current and former administration officials about special counsel Robert Mueller’s report.

“We’re fighting all the subpoenas,” Trump said Wednesday.  “I say it’s enough.”

The White House is seeking to block a subpoena the House Judiciary Committee issued this week to former counsel Don McGahn, while the administration plans to rebuff other congressional requests for testimony from current and former officials.

Rep. Elijah Cummings (D., Md.), chairman of the House Oversight Committee, said Wednesday the White House was engaged in a “massive, unprecedented and growing pattern of obstruction.”

If an individual such as McGahn doesn’t comply with a subpoena, the House can hold him in contempt and pursue the matter in the courts.

Trump said on Wednesday: “The Democrats are trying to win 2020. The only way they can maybe luck out, and I don’t think that’s going to happen....is by constantly going after me on nonsense.”

--President Trump said in a tweet Thursday that he never asked then-White House counsel McGahn to fire special counsel Robert Mueller, directly contradicting a detailed account in Mr. Mueller’s report.

“As has been incorrectly reported by the Fake News Media, I never told then White House Counsel Don McGahn to fire Robert Mueller, even though I had the legal right to do so,’ Mr. Trump wrote.  “If I wanted to fire Mueller, I didn’t need McGahn to do it, I could have done it myself.”

The special counsel’s report on Russian interference in the 2016 presidential election said that Trump “called McGahn and directed him to have the Special Counsel removed.”  The report relied on interviews that Mr. McGahn gave Mueller’s team in March 2018, after which Mueller concluded that “McGahn is a credible witness with no motive to lie or exaggerate given the position he held in the White House.”

Mueller also wrote the president “made clear” to his chief of staff and chief strategist at the time – Reince Priebus and Steve Bannon, respectively – that he was considering firing the special counsel, both men speaking to Mueller’s investigators.

Going back to January 2018, Trump has denied he sought to have McGahn fire Mueller, calling it “fake news.”

Attorney General William Barr will answer questions from the Senate Judiciary Committee on May 1 and the House Judiciary Committee a day later about special counsel Mueller’s Russia probe, at least as of today.

--I’m sorry, but I found it appalling that Trump attorney Rudy Giuliani said the following on Jake Tapper’s Sunday show.

“There’s nothing wrong with taking information from Russians.”

Asked by Tapper if he would have taken information from a foreign source, Giuliani said, “I probably wouldn’t.”

“I wasn’t asked,” Giuliani went on.  “I would have advised, just out of excess of caution, don’t do it.”

This exchange came at the end of a long rebuttal by Giuliani of Sen. Mitt Romney’s post-Mueller report critique of the president.

“What a hypocrite,” Giuliani said of Romney.  “Man, man, I could tell you the things he wanted to do,” in reference to Romney’s past campaigns for the presidency.  “Stop the bull. Stop this pious act that you weren’t trying to dig up dirt on people.”

“Any candidate in the whole world, in America, would take information.”

Of course it was Romney who warned about Russia’s antagonism to the U.S. in the 2012 presidential campaign, after which in a debate, Obama made fun of Romney’s world view, which we all now know was spot on.

--Herman Cain did finally withdraw his name from nomination for a seat on the Federal Reserve Board.

--Daniel Henninger / Wall Street Journal...on how the Democrats have sought to change the narrative from “no collusion, no obstruction” to Donald Trump is “unfit to govern” and should be impeached for obstructing justice.

“Wasn’t Mr. Trump widely described as unfit when in 2015 he said tortured Vietnam War prisoner John McCain was no hero? You can’t go much lower than that. Or the awful day the ‘Access Hollywood’ tape surfaced?  Still, he somehow defeated 16 other, presumably ‘fit’ Republican primary candidates.  And then he won a fitness contest with a former secretary of state, Hillary Clinton, who with perfect absence of irony now says Mr. Trump deserved to be indicted for obstruction of justice.

“Character surely counts for something, though the last choirboy the voters elected president was Jimmy Carter, who got tossed out after one term by voters who thought that reversing a stagnant economy with high inflation and Americans held hostage by Iran trumped a president’s personal rectitude. The unemployment rate recently has been at a nearly 50-year low.

“Since the subject has been raised, one may ask: How ‘fit’ to govern the U.S. are Kamala Harris, Elizabeth Warren, Bernie Sanders, Beto O’Rourke or Pete Buttigieg?

“Among them, these presidential candidates have proposed or embraced Medicare for All, the Green New Deal, massive college-debt forgiveness and free public-college tuition – with a fanciful, wholly irresponsible cost in multi-trillions of dollars.  By comparison, Donald Trump’s $5.6 billion ‘wall’ looks like fiscal austerity. Still, he’s the one beyond the pale of fitness.

“Messrs. O’Rourke and Buttigieg, as far as anyone can tell, stand for pretty much nothing but personality. In their case the argument is that voters may now value celebrity over experience. So much for fitness to govern the U.S.

“Governance matters. Success at governance – running a country, state or city – should indeed be a measure of political fitness.  If so, fitness to govern looks to be in short supply in potholed New York City, homicidal Chicago, needle-park San Francisco and Baltimore, with its five police chiefs in the past five years.

“All these cities, protectorates of Democratic governance, are filled with upscale progressives convinced Donald Trump is morally unfit to govern, even as they step around and over the mentally ill homeless lying abandoned on their sidewalks.

“On this matter of morality, one more thing. As we’ve written before, there is a straight-line relationship between the country’s hyperpoliticized culture and why many people voted for Mr. Trump’s persona largely irrelevant to them.

“None of this means Mr. Trump is coasting to re-election. The 2020 campaign is a jump ball. It is true that Republicans lost heavily in the midterm elections because of suburban women grossed out by Mr. Trump, who personifies Lenin’s idea of ‘one step forward, two steps back.’

“All presidencies have flaws and failures. But with the collusion narrative finally ended, please spare us two years of the unfit-to-govern sequel.”

--In an interview on Fox News with Sean Hannity, President Trump again railed against late Republican Sen. John McCain, calling his vote against a skinny repeal of ObamaCare “disgraceful.”

“He did the Republican Party a tremendous disservice and he did the nation a tremendous disservice, tremendous, and it’s unfortunate,” Trump said of McCain.  “He went thumbs-down at the very last moment and I thought it was a disgraceful thing to do and very, very bad for our country and bad for health care.”

--Editorial / Washington Post

“When Russian interference in the U.S. election campaign was first detected in 2016, some confusion about its extent and import might have been understandable. Today, there can be no confusion.  As the Mueller report says, ‘the Russia government interfered in the 2016 presidential election in sweeping and systematic fashion.’

“Unfortunately, the first family remains in denial about this.  President Trump, who benefited from the interference, says the investigation was a ‘witch hunt’ and a ‘hoax.’  His son-in-law, Jared Kushner, dismissed it as a ‘distraction’ at a panel sponsored by Time magazine on Tuesday.  He said, ‘You look at what Russia did – you know, buying some Facebook ads to try to sow dissent and do it – and it’s a terrible thing.  But I think the investigations, and all of the speculation that’s happened for the last two years, has had a much harsher impact on our democracy than a couple of Facebook ads.’  He added, ‘Quite frankly, the whole thing is just a big distraction for the country.’

“This is just plain wrong.  Russia’s social media offensive originated at the Internet Research Agency in St. Petersburg, was financed by a crony of Russian President Vladimir Putin, and developed themes and tactics to use on social media to help Mr. Trump and disparage Democratic nominee Hillary Clinton.  According to the report, Facebook identified 470 Internet Research Agency-controlled accounts that collectively made 80,000 posts between January 2015 and August 2017, reaching as many as 126 million people.  In January 2018, Twitter said it identified 3,814 Internet Research Agency-controlled Twitter accounts.

“Two units of Russian military intelligence carried out a second prong of the Russian attack, breaching 29 computers at the Democratic Congressional Campaign Committee and 30 computers of the Democratic National Committee....

“Not just ‘a couple of Facebook ads.’

“The false reading of history matters because the White House should be leading the nation’s defense against another possible assault on election integrity.  But how can Mr. Trump and his team do so if they cannot acknowledge what already happened?    The New York Times reports that Mr. Trump’s acting chief of staff is wary of bringing before the president any proposals to prevent Russia from further interference.  That amounts to a dereliction of duty.”

As reported by the Times:

The opening page of the Worldwide Threat Assessment, a public document compiled by government intelligence agencies that was delivered to Congress in late January, warned that “the threat landscape could look very different in 2020 and future elections.”

“Russia’s social media efforts will continue to focus on aggravating social and racial tensions, undermining trust in authorities and criticizing perceived anti-Russia politicians,” the report noted.  It also predicted that “Moscow may employ additional influence tool kits – such as spreading disinformation, conducting hack-and-leak operations or manipulating data – in a more targeted fashion to influence U.S. policy, actions and elections.”

--Kind of ironic that Maria Butina, the Russian national who admitted being a secret agent for the Kremlin in an attempt to infiltrate the NRA, was sentenced to 18 months in prison on Friday, as President Trump was addressing the same NRA in Indianapolis.

--Trump tweets:

“Can anyone comprehend what a GREAT job Border Patrol and Law Enforcement is doing on our Southern Border.  So far this year they have APPREHENDED 418,000 plus illegal immigrants, way up from last year.  Mexico is doing very little for us.  DEMS IN CONGRESS MUST ACT NOW!”

“Mexico’s Soldiers recently pulled guns on our National Guard Soldiers, probably as a diversionary tactic for drug smugglers on the Border.  Better not happen again! We are now sending ARMED SOLDIERS to the Border. Mexico is not doing nearly enough in apprehending & returning!”

[There are serious doubts the above happened as described.]

“A very big Caravan of over 20,000 people started up through Mexico. It has been reduced in size by Mexico but is still coming.  Mexico must apprehend the remainder or we will be forced to close that section of the Border & call up the Military. The Coyotes & Cartels have weapons!”

“The Mueller Report, despite being written by Angry Democrats and Trump Haters, and with unlimited money behind it ($35,000,000), didn’t lay a glove on me.  I DID NOTHING WRONG.  If the partisan Dems ever tried to Impeach, I would first head to the U.S. Supreme Court.  Not only....

“....are there no ‘High Crimes and Misdemeanors,’ there are no Crimes by me at all.  All of the Crimes were committed by Crooked Hillary, the Dems, the DNC and Dirty Cops – and we caught them in the act!  We waited for Mueller and WON, so now the Dems look to Congress as last hope!”

“No Collusion, No Obstruction – there has NEVER been a President who has been more transparent.  Millions of pages of documents were given to the Mueller Angry Dems, plus I allowed everyone to testify, including W.H. counsel.  I didn’t have to do this, but now they want more...

“....Congress has no time to legislate, they only want to continue the Witch Hunt, which I have already won.  They should start looking at The Criminals who are already very well known to all. This was a Rigged System – WE WILL DRAIN THE SWAMP!”

“You mean the Stock Market hit an all-time record high today and they’re actually talking impeachment!  Will I ever be given credit for anything by the Fake News Media or Radical Liberal Dems?  NO COLLUSION!”

“In the ‘old days’ if you were President and you had a good economy, you were basically immune from criticism. Remember, ‘It’s the economy stupid.’ Today I have, as President, perhaps the greatest economy in history...and to the Mainstream Media, it means NOTHING.  But it will!”

Yes, Mr. President, it will...just stay focused on it, for crying out loud.

Wall Street and Trade

So the White House received some terrific news on the economy today, but first, earlier in the week, the picture on the housing front was mixed, with existing-home sales for March coming in less than expected, a 5.21 million annualized pace, down 4.9% over the prior month, and down 5.4% year-over-year and a 13th straight month of declines. The median price was up just 3.8% from a year ago, about half the pace of March 2018.

The data on new-home sales for March, however, was far better than expected, 692,000 on an annualized rate, but still well below pre-crisis and recession levels, with the median price at its lowest level in more than two years (owing in part to more homes on the market).

The key rate on a 30-year fixed mortgage has fallen from 4.94% in November to about 4.29% today (after hitting 4.17% the other week), according to Freddie Mac, but this hasn’t helped as much as expected.

Thursday, we had a report on durable goods for March and it was terrific, up 2.7%, and up a solid 0.4% ex-transportation, which is highly volatile.

So that led to today’s first look at GDP for the first quarter.  The Atlanta Fed’s GDPNow barometer, which I’ve been detailing, week by week has been rising substantially, was at 2.7% following the durable goods report, and then today, a lot of us were blown away by a 3.2% reading, as released by the Bureau of Economic Analysis.

So the last five quarters we have (annualized rates)....

Q1 2018...2.2
Q2 2018...4.2
Q3 2018...3.4
Q4 2018...2.2
Q1 2019...3.2

Recent history has shown the first quarter to be slower than the rest of the year, so there is a lot to admire in the 3.2 handle, as they’d say.

The increase reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, state and local government spending, and nonresidential fixed investment.  But these contributions were partly offset by a decrease in residential investment.

The buildup of inventories did inflate first-quarter growth, while there was a steep decline in imports (imports a subtraction), and many feel both trends are likely to reverse in the current quarter.  We’ll see.  Plus consumer spending, rising at just a 1.2% rate, was the worst showing in a year.  But this part of the equation could improve going forward, as there seems to be some positive momentum.

On the inflation front, the core PCE rose just 1.3%.

There are two more looks at the Q1 data and I would be surprised if the 3.2% figure doesn’t come down some, but this is something the Trump administration can rightly crow about.

National Economic Council Director Lawrence Kudlow called the first-quarter reading a “blowout number.”

“President Trump’s policies are rebuilding the economy, and actually the prosperity cycle we’re in is gaining momentum, not losing it,” Kudlow said on CNBC.  He credited tax cuts, deregulation and trade policy changes aimed at juicing growth for boosting production and investment in the economy.

As for stocks, we had a ton of earnings come in this week, as will be the case the next two, with the S&P 500 and Nasdaq hitting new all-time highs on Tuesday, before pulling back some Wednesday and Thursday, only to hit more records today.  [Details below.]

The bar had been lowered on earnings so much (currently expected to decline about 1% on the S&P from a year ago), it was easy for many companies to exceed expectations and a large majority of them have.  Revenues, up a projected 5% thus far, are encouraging.

The newly-dovish Federal Reserve has had a ton to do with the momentum in the equity markets, but now there will be some concern that if the economy is stronger than expected for the next two quarters, the Fed could be under pressure to abandon its current ‘no more rate hikes until 2020 at the earliest’ posture.  The inflation data will have a lot to say about that.  Actually, if inflation trends down, then a rate cut could be in the offing.

And we’ll see what happens when it comes to the following topic....

On the trade front....The White House announced Tuesday that U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing for trade talks beginning on April 30, with Chinese Vice Premier Liu He once again leading the Beijing delegation.  Liu He will then travel to Washington for more discussions starting on May 8.

“The subjects of next week’s discussions will cover trade issues including intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, purchases, and enforcement,” the White House said.

The aforementioned Larry Kudlow said the United States and China were making progress in the talks and he was “cautiously optimistic” about the prospects for striking a deal.

“We’re not there yet, but we’ve made a heck of a lot of progress,” Kudlow said, speaking at the National Press Club.  “We’ve come further and deeper, broader, larger-scale than anything in the history of U.S.-China trade.”

“We’ve gotten closer and we’re still working on the issues, so-called structural issues, technology transfers,” Kudlow added.  “Ownership enforcement is absolutely crucial.  Lowering barriers to buy and sell agriculture and industrial commodities.  It’s all on the table.”

A Chinese Foreign Ministry did not confirm the dates for the next round on Wednesday, but said the two sides were maintaining contact.

The thing is, it seems clear there has been zero progress made the last few weeks, but prior to that, progress was indeed made.

So next week could be critical, in that you want to hear both sides see the kind of progress warranting a return trip to Washington by Liu He.  It would be a terrible sign if we don’t hear that.

But one more....there are some out there saying China’s agreeing to enforcement mechanisms is a good thing.  But it would be reciprocal...and that is a very BAD thing for the United States, as we’ll find out years down the road.

Meanwhile, the United States and Japan are set to lay out the agenda for future trade talks, with Prime Minister Shinzo Abe meeting with President Trump this weekend.  While Trump has been busy slapping tariffs on China and other countries, Japan was concluding a pact with the European Union that lowered duties and other barriers to ease trade flows.

And Japan has been taking advantage of its participation in the 11-member successor to the Trans-Pacific Partnership that President Trump walked away from as one of his first acts as president.

As I noted last week, Japan is now starting to import substantially more from its free-trade partners, at America’s expense.

As Don Lee of the Los Angeles Times points out, “For some products, the difference in tariffs is stark. Australian wine entering Japan is taxed at 5.6% and will eventually drop to zero.  There’s no duty at all for wine from the EU and Chile.  But for California, it’s 15%.  The pain is only to get worse in this product category.

“ ‘U.S. exporters of wheat, beef, pork, dairy, wine, potatoes, fruits and vegetables and other products are facing collapse of their Japanese market share as these lucrative sales are handed over to their competitors,’ the Wine Institute and 87 other food and farm groups and companies said in a joint letter sent this week to Robert Lighthizer,” writes Lee.

The job for Prime Minister Abe is to continue to cultivate a personal relationship with Trump, so he doesn’t focus on the large trade gap between the two nations, Abe hosting a state dinner in Tokyo for Trump in late May.

But Trump was unhappy that when he pulled out of the TPP, Abe played a key role in reviving it among the remaining 11 nations.  Trump didn’t give Japan a break on steel tariffs.

This afternoon, though, Trump said trade talks were moving along nicely and the two sides might be able to reach a deal ahead of his visit to Japan next month.  Speaking at the start of a meeting with Abe, Trump said Japan was buying a large amount of military equipment from the United States, but he was pressing Tokyo to get rid of its agricultural tariffs.

Well that’s part of being in the TPP, Mr. President!

Europe and Asia

Eurostat released the fourth quarter government debt levels for the euro area, 85.1% for the EA19, down from 87.1% in Q4 2017.

Individually, Germany 60.9%, France 98.4%, Spain 97.1%, Portugal 121.5%, Italy 132.2%, and Greece 181.1%.

Portugal had been a worrisome case during the debt crisis, but seems to have gotten its act together; at least the debt level is on the right trajectory.

But Italy’s has risen a point over the past year, and is slated to continue rising, which is highly worrisome.

Greece’s has also risen over the year, but for various reasons is no longer in crisis mode, though in any euro-wide downturn, it will become an issue all over again.

Brexit: Having been granted an extension by the European Union until Oct. 31, British Prime Minister Theresa May has promised her fellow Tory MPs that she would go once she has delivered Brexit, but with the latest extension there is growing impatience among her critics.

The fear Tories have is that they will suffer heavy losses to Nigel Farage’s Brexit Party if – as now seems likely – the UK is forced to go ahead with voting in the European elections on May 23.

Among the potential candidates for Mr. Farage’s new outfit will be former shadow home secretary Ann Widdecombe, who told the Daily Express: “The public needs to send a very clear message and that is we expect the vote to be respected so just get on with the job of getting us out of the EU.”

Labour leader Jeremy Corbyn puts the blame for lack of progress on the Government’s refusal to shift on its “red lines.”

“We’ll continue putting our case but quite honestly there’s got to be change in the Government’s approach,” he said.  “They cannot keep on just regurgitating what has already been emphatically rejected three times by Parliament, there’s got to be a change.”

Back to Mrs. May’s survival, since she survived a confidence vote in December, under the party’s rules she cannot be challenged again for 12 months, but lawmakers are looking for a way to force her out sooner.

The prime minister has not set out what she will do if the Brexit deal is turned down a fourth time by parliament.

Wolfgang Munchau / Financial Times

“The biggest danger of the Brexit extension is a delusion over time.  The UK does not really have more than five months to make a decision.  In reality, the effective timescale is just a few weeks.  Once this drags beyond the scheduled elections of the European Parliament in late May, we enter a world of uncertain scenarios.

“The divisions that emerged among EU member states during the meeting of the European Council on April 10 are serious.  But it would be wrong to characterize the debate as one between France and the rest. Several leaders supported Emmanuel Macron. Come October, the threat is not one of a veto by the French president, but of a shifting consensus.  Heiko Maas, the German foreign minister, said in an FT interview that he believed the October deadline was hard.  This is becoming a wider consensus view in Germany.  Mr. Macron is not isolated.  He is winning the argument.

“The French president’s central point during the dinner on April 10 was that the UK would not make up its mind unless it was confronted with a hard deadline.  Triggering Article 50 of the Lisbon treaty was a grave decision.  It placed Britain under an obligation to make a choice between ratifying the agreed withdrawal treaty, leaving without a deal, or revoking Brexit.

“If the talks between the UK prime minister Theresa May and Jeremy Corbyn, leader of the Labour opposition party, comes to nothing, and nothing else is agreed, Britain will have to take part in the European elections. The campaigning has already started.  Nigel Farage’s new Brexit party has had a tremendous start with a campaign theme of betrayal.  Change UK, the party founded recently by the pro-Remain MPs of the Independent Group in the UK parliament, is almost invisible by contrast.

“My expectation is that the Brexit party will sweep the floor in those elections.  Such an outcome would have two important consequences.

“The first is that it will introduce a dose of realism into expectations among EU leaders of what a further delay, and especially a second referendum, might accomplish. Some of them, perhaps naively, equate a fresh vote with a Brexit reversal.  If Mr. Farage’s party were to come first in the European elections in the UK, EU leaders might start to see a second referendum in a different light.  Doubts will creep in. They will have to confront the question they have avoided so far: what if the country were to vote in favor of Brexit for a second time? And what happens if the UK parliament still cannot agree to the withdrawal treaty?

“The second consequence is more direct. The Brexit party would swell the ranks of populists in the European Parliament.  The newly elected British MEPs will keep their mandate for as long as the country stays a member of the EU, until October or earlier if the UK ratifies the withdrawal treaty.  These are going to be very busy months for the European Parliament, with hearings on new commissioners.  During that time Mr. Farage would keep his ringside seat in European politics.  While the election of Brexit party MEPs is entirely predictable, it will nevertheless come as a shock to the EU when it actually happens.

“When that reality sinks in, I would expect the consensus in the European Council to shift further towards a harder line on Brexit.  If EU leaders were to extend beyond October, they would be going beyond the foreseeable end of Mrs. May’s premiership. If there is one thing members of the council fear more than the sight of Mr. Farage in the European Parliament, it is a leadership frontrunner and former foreign secretary Boris Johnson as a member of their own club.”

France: President Emmanuel Macron has promised “significant” tax cuts for France’s middle class and cuts in public spending, but told the French they must work like their “neighbors,” in a much-awaited response to five months of “yellow vest” protests.

In what the French media is dubbing his “moment of truth,” the centrist Macron promised a “new act in our Republic” during a 140-minute press conference at the Elysee Palace – his first since his election – in which he confessed his way of running the country had lacked “humanity.”

Macron has been blindsided by nationwide protests, initially over fuel tax rises, which morphed into wider anger at the inability of provincial France to make ends meet.  Much of the fury has been directed at him directly, seen as an arrogant “president of the rich.”

“We must work more, I’ve said it before.  France works much less than its neighbors.  We need to have a real debate on this,” Macron said.

Separately, Macron said citizens should be allowed to launch policy referendums by petition, a partial concession to a key demand of the protesters.

But last weekend, as alluded to above, the yellow vests were furious over the amount pledged to rebuild Notre Dame, which the protesters say is better spent on fighting poverty.

Macron has pledged to rebuild the church “even more beautifully” in time for the 2024 Paris Olympics, which you can already see could be the scene of massive disruptions if the economic situation in France hasn’t improved significantly by then.

Turning to Asia...nothing out of China after all the data from the prior two weeks.  The PMIs for Asia and Europe will flow again next week at month’s end.

South Korea’s economy unexpectedly shrank in the first quarter, 0.3%, marking its worst performance since the global financial crisis, as companies slashed investment and exports slumped in response to Sino-U.S. trade tensions.

From a year earlier, the Korean economy grew 1.8% in the January-March quarter, compared with expectations of 2.5%, and 3.1% in the final quarter of 2018. Exports fell 2.6% quarter-on-quarter.

Street Bytes

--As noted above, the S&P and Nasdaq hit new all-time closing highs on Tuesday, the S&P closing at 2933, above its 2930 high set on Sept. 20, while Nasdaq closed at 8120, besting its previous high of 8109 from Aug. 29.  The Dow Jones is still below its all-time high of 26828, at 26543.

Today, the S&P and Nasdaq again set records of 2939 and 8146, respectively.

For the week, the Dow fell a fraction of a percent, 16 points, to 26543, while the S&P rose 1.2% and Nasdaq 1.9%.

The S&P is up 25% since the Christmas Eve low, and is off to its best start to a year since 1987, while for Nasdaq it’s the best start since 1991. 

--U.S. Treasury Yields

6-mo. 2.44%  2-yr. 2.28%  10-yr. 2.50%  30-yr. 2.92%

Treasuries rallied despite the strong GDP number, owing to a tame inflation component in the report, as well as the slowdown in consumer spending.

--Oil prices continued their surge early in the week, after the Trump administration’s decision to end waivers allowing imports of Iranian oil, but while the end of waivers would push down Iranian exports more quickly than some had initially anticipated, most expect OPEC (and ally Russia) and/or the U.S. to fill any production voids.

And by the end of the week oil had come off the high of $66.30 on Tuesday to finish all the way down to $62.80, breaking a seven-week winning streak, owing in part to the weekly report from the Energy Information Administration that showed crude-oil inventories soared 5.5 million barrels last week to 461 million barrels, the highest total since October 2017 and the fourth weekly increase in the past five weeks, though stockpiles remain at the five-year average for this time of year.  President Trump also said he had called OPEC and told the cartel to lower crude prices, without identifying who he spoke to.

--After being rebuffed several times, Occidental Petroleum Corp. on Wednesday launched a $38-billion hostile bid to buy Anadarko Petroleum Corp., seeking to break up a proposed takeover by Chevron Corp.  The $76-a-share cash-and-stock bid for the oil and natural gas producer is 20% more than Chevron’s $33-billion April 12 agreement.

The acquisition would be the largest ever proposed by Occidental, and would be the biggest purchase of an oil producer in at least four years.  Anadarko would pay a $1 million breakup fee to Chevron.

Anadarko’s shares jumped nearly 12% to $71.40 on the news (closing the week at $72.80), while Occidental’s stock slid more than 4% before recovering much of the loss. Chevron’s shares fell 3%.

It’s not known yet whether Chevron will sweeten its offer or not, analysts saying there isn’t a lot of shareholder approval for Oxy’s bid.

It’s all about the Permian Basin in West Texas and New Mexico, the fastest-growing major oil patch in the country that has helped turn the United States into a net exporter, making it a bigger producer than Saudi Arabia.

--Continuing the news on the energy front, Exxon Mobil Corp. reported first-quarter profit fell sharply on lower oil and gas prices and weakness in its refining and chemicals businesses that offset modest production gains. The largest U.S. oil producer’s first quarter earnings fell to $2.35 billion, from $4.65 billion a year ago, missing estimates.

Chevron posted earnings of $1.39 a share, down from $1.90 in the first quarter of 2018, though attention here is now focused on the battle for Anadarko.

--The Trump administration’s proposal to vastly expand offshore oil and gas drilling has been sidelined indefinitely by a recent court decision that blocks Arctic drilling, according to the Interior Department.

The ruling by a federal judge in Alaska last month may force officials to wait until the case goes through potentially lengthy appeals before they can make a final decision on what offshore areas to open up for the oil and gas industry.

All 17 governors of coastal states in the continental U.S. oppose offshore drilling.

--Tesla posted a first-quarter loss of $700 million, with CEO Elon Musk suggesting a capital raise could be imminent, as Musk attempts to convince investors that demand for the Model 3, which is considered crucial to the automaker’s future, is “insanely” high, and that it can be delivered efficiently and swiftly to customers  around the world.

The electric-car maker said it would lose money in the current quarter but predicted a return to profitability in the third.

But Tesla’s deliveries in the second quarter, 63,000 vehicles, were far short of the company’s own expectations. Tesla maintains, however, it will hit its 2019 delivery forecast of 360,000 to 400,000 vehicles (after delivering between 90,000 and 100,000 vehicles in Q2) and said it may produce as many as 500,000 vehicles if its factory in Shanghai reaches volume production in the fourth quarter.

Q1 revenue increased 33% to $4.54 billion, from $3.4 billion, but trailed analysts’ consensus of $5.18 billion.

On the earnings call, Musk said that global deliveries were “the most difficult logistics problem” he had ever seen.

Musk said he stepped back from an earlier prediction that the company’s Shanghai factory, which is currently being built, would produce 3,000 Model 3s per week by year’s end.  Instead, the so-called Gigafactory would build 1,000, or maybe 2,000 per week by the end of the year, he said.

Tesla said it ended its first quarter with $2.2 billion in cash after paying off a $920 million convertible bond obligation in March.

“There is some merit to raising capital,” responded Musk, after being asked why he had not done so yet.  “It’s probably about the right time.”

Earlier in the week, Musk, clearly attempting to divert attention from the pending earnings report and sliding demand, predicted Tesla would have over a million autonomous vehicles by next year, which Musk vows to pair with a sharing service that will make it crazy for consumers to buy other cars.

“Between now and when the robotaxis are fully deployed throughout the world, the sensible thing for us is to maximize the number of autonomous units made and drive the company toward cash-flow neutral,” Musk said.  “Once the robotaxi fleet is active, I would expect to be extremely cash-flow positive.”

Yup, more hype from Elon.

And this.  Tesla said it was investigating an incident where a parked car exploded in Shanghai, captured on a surveillance camera at the location, the video showing a parked Tesla Model S beginning to smoke and then explode, seemingly self-igniting, with a time stamp on the video showing the incident occurred on Sunday evening.

I saw the video a couple times and it just seems suspicious...as in too convenient with the way the camera just so happened to be focused directly on the vehicle.

This is just me, but there are a ton of electric car companies in China that would not want Tesla to succeed.  And this is probably the only time I will defend Elon Musk’s outfit.

Meanwhile, Musk’s SpaceX suffered a setback Saturday when an accident of some kind sent a plume of orange smoke rising from the pad where its Crew Dragon astronaut capsule’s escape system engines were being tested at Cape Canaveral. NASA said it was “assessing the anomaly,” the extent of damage unclear.

It’s a setback, as SpaceX had been set to fly the capsule with a crew aboard on another test flight this year.

SpaceX launched the Crew Dragon capsule for the first time in March on an uncrewed flight to the International Space Station, the capsule successfully docking with the station and then returning to Earth.

Lastly, this afternoon, Musk reached a deal with the Securities and Exchange Commission to settle a dispute over Musk’s use of Twitter.  Musk has agreed to submit public statements about the company’s finances to vetting by its legal counsel, a court filing said.  If it is approved by a judge, the deal means the Tesla founder no longer faces the prospect of being held in contempt for violating an earlier settlement with the agency that required him to submit any of his public statements that would be material to investors for prior review.

Shares in Tesla closed the week at $238, the lowest level since Jan. 2017.

--Boeing said it didn’t know when the 737 MAX would return to service, with executives defending the design and certification of their best-selling plane, grounded by regulators following two fatal crashes.

The aerospace giant is factoring in more than $1 billion in additional costs, while production of additional aircraft remains scaled back.

CEO Dennis Muilenburg said on the company’s first-quarter earnings call that there had been “no technical slip” in the development of the 737 MAX, this after investigators have implicated a flight-control system known as MCAS in the crashes in Indonesia and Ethiopia that claimed 346 lives.

Muilenburg told analysts: “There was no surprise or gap or unknown here or something that somehow slipped through a certification process.”

Boeing has said the MCAS system was designed and certified in a process consistent with previous new airplane models.

Muilenburg said the FAA would soon conduct certification flights to test the 737 MAX’s updated software, a key to restarting commercial flights.

More than 370 MAX planes had been delivered to customers, forcing carriers to cancel flights and reconfigure schedules ahead of the busy summer travel season.

The company reported first-quarter profit fell 13% to $2.15 billion, while sales slipped 2% to $22.92 billion.  Sales of Boeing’s other aircraft, such as the 787, as well as services and military hardware, limited the overall decline.

At the outset of the year, Boeing had planned to boost monthly 737 production by five planes to 57 this summer.  But now it has cut output to 42 a month, leaving MAX planes to pile up around its Seattle-area assembly plants as the global grounding put a stop to deliveries.

Separately, Natalie Kitroeff and David Gelles had a disturbing report in the New York Times that starts out:

“When Boeing broke ground on its new factory near Charleston in 2009, the plant was trumpeted as a state-of-the-art manufacturing hub, building one of the most advanced aircraft in the world. But in the decade since, the factory, which makes the 787 Dreamliner, has been plagued by shoddy production and weak oversight that have threatened to compromise safety.

“A New York Times review of hundreds of pages of internal emails, corporate documents and federal records, as well as interviews with more than a dozen current and former employees, reveals a culture that often valued production speed over quality.  Facing long manufacturing delays, Boeing pushed its work force to quickly turn out Dreamliners, at times ignoring issues raised by employees....

“Safety lapses at the North Charleston plant have drawn the scrutiny of airlines and regulators. Qatar Airways stopped accepting planes from the factory after manufacturing mishaps damaged jets and delayed deliveries. Workers have filed nearly a dozen whistle-blower claims and safety complaints with federal regulators, describing issues like defective manufacturing, debris left on planes and pressure to not report violations.  Others have sued Boeing, saying they were retaliated against for flagging manufacturing mistakes.”

Kevin McAllister, Boeing’s head of commercial airplanes, said in a statement: “Boeing South Carolina teammates are producing the highest levels of quality in our history.”

There is no evidence that the problems in South Carolina have led to any major safety incidents, and the Dreamliner has never crashed.

“But workers sometimes made dangerous mistakes, according to the current and former Boeing employees....

“Faulty parts have been installed in planes.  Tools and metal shavings have routinely been left inside jets, often near electrical systems.  Aircraft have taken test flights with debris in an engine and a tail, risking failure.”

--Microsoft Corp. briefly topped $1 trillion in value* for the first time after executives predicted continued growth for its cloud computing business.  Microsoft beat Wall Street’s estimates for quarterly profit and revenue, powered by an unexpected boost in Windows revenue and brisk growth in its cloud business which has reached tens of billions of dollars in sales.

*MSFT finished the week at $996bn in market cap (Apple $963bn, Amazon $959bn).

Under the terrific leadership of CEO Satya Nadella, the company has spent the past five years shifting from reliance on its once-dominant Windows operating system to selling cloud-based services.  Azure, Microsoft’s flagship cloud product, competes with market leader Amazon Web Services (AWS) to provide computing power to businesses.

CFO Amy Hood told investors that Microsoft expects to see strong growth in the fiscal fourth quarter in the business divisions in charge of Azure and Office 365, an online version of its longtime productivity software.

For the third quarter ended March 31, Azure’s growth slowed slightly to 73%, down from 76% in the second quarter.  But Azure brought in $13.5 billion in sales in fiscal 2019 with an overall growth rate of 75%, according to analysts.  This is phenomenal.

Total revenue rose 14% to $30.57 billion, handily beating the consensus of $29.84bn.

The only weak spot for the company was its gaming revenue rose only 5% versus 8% the quarter before.  And the company’s Surface hardware grew far less than the prior quarter, though this is because customers are waiting for updated hardware that is expected to be released soon.

Microsoft’s earnings also beat expectations.  Net income rose to $8.81 billion, from $7.42bn a year earlier.

--Facebook Inc. beat analysts’ estimates for quarterly revenue on Wednesday, aided by growth in its Instagram business and a surge in advertising sales, the company announcing it had set aside $3 billion to cover anticipated official U.S. privacy penalties, though it raised the potential high end to $5 billion. Ad sales jumped 26% to $14.91 billion, with monthly active users rising 8% to 2.38 billion.  Costs jumped 80.5% to $11.76 billion, as the company ramped up spending to improve content and security across its platforms.

Laura Forman / Wall Street Journal

“Facebook has favored radical transparency for its users lately. It might want to afford the same courtesy to its investors.

“The social-media giant reported generally strong first-quarter results on Wednesday, with revenue jumping 26% year over year to $15.1 billion, slightly beating Wall Street’s projections.  Of note, the company set aside $3 billion as a ‘probable loss’ for a one-time fine related to its ongoing investigation by the Federal Trade Commission.  Excluding that, operating earnings would have come to about $6.4 billion for the quarter, up 17% year over year, despite the company’s increased spending on efforts to clean up its network.

“Facebook, in other words, appears to be doing just fine as a business, despite relentless negative media and regulatory attention.  At $3 billion, the potential FTC fine would be the largest privacy-related sum in the agency’s history, yet it amounts to less than a quarter’s worth of free cash flow for the company....

“What is less clear is exactly which parts of the business are thriving. Facebook reported monthly average users of 2.38 billion, up just 8% year over year compared with a 26% jump in advertising revenue for the comparable period.  But the company doesn’t break out data for its properties that include the legacy Facebook app as well as the newer Instagram and WhatsApp platforms. If anything, the company seems intent on lumping user numbers for all its platforms together, noting that more than 2.1 billion people now use at least one of those services each day.

“But not all platforms are performing equally.  WhatsApp, for example, has yet to generate any significant revenue.  By contrast, data points to Instagram as a clear winner among its social-media peers in terms of ad dollars spent.  Kenshoo, a digital-advertising platform, claims Instagram spending grew 44% year over year in the first quarter, significantly more than a 27% increase in overall social spending. According to Michael Nathanson at Moffett Nathanson, advertiser reach grew 8% on Instagram Stories and 7% on Instagram overall between December of 2018 and March 2019. That compares with 4% growth at Facebook.  EMarketer estimates Instagram will represent more than 23% of Facebook’s world-wide mobile-ad revenue in 2019.

“Facebook has made clear that it is willing to overhaul its service to focus on privacy for the end user.  It need not be quite so private about its business, though.”

Much more on Facebook in the ‘Foreign Affairs’ section.  And it ain’t good.

--Amazon.com Inc. recorded its best-ever quarterly profit of $3.56 billion as it continued to transition to higher margin businesses, while keeping a tight lid on costs.  But expenses are expected to rise as the company invests $800 million to make one-day free shipping the standard for Prime members, instead of two days.

But revenue growth was slowed by flat sales at Amazon’s Whole Foods grocery chain and sluggish retail sales overseas.  Overall, revenue was up 17% to $59.7 billion. Growth was 43% in 2018’s first quarter, though it was boosted by the acquisition of Whole Foods.

Amazon’s biggest cash cow is cloud computing, Amazon Web Services (AWS), which had sales of $7.7 billion, up 41%, and an operating profit of $2.22 billion.

For years, Amazon has been spending heavily to build warehouses to meet surging retail demand and branch into new industries such as cloud computing, filmmaking and groceries.

So while the shares rose 2.5% on the news, the 17% revenue growth is the second straight below 20%, when the company had been averaging 30% quarterly growth over the past three years.

--Shares in Twitter Inc. rose sharply after the company reported record daily users and rising profit on Tuesday; the results signaling recent product tweaks are stabilizing the business.

Daily users rose 6% in the first quarter to 134 million from 126 million in the previous three months, driven primarily by strength in international markets.

Revenue rose 18% to $787 million in the first quarter, a sequential decline from the fourth quarter, which is typically the heaviest spending period for advertisers, but topped analyst projections of $774 million, according to FactSet.

Net income in Q1 was $191 million, from $61 million a year earlier, marking the sixth consecutive quarter of profitability after years of sustained losses.

Central to Twitter’s changes is a drive to promote healthy discourse, after the company struggled to rein in toxic behavior.

CEO Jack Dorsey told analysts the company is taking a more proactive approach to addressing abuse and its effects on the platform.

The same day as the earnings announcement, Dorsey traveled to the White House for a chat with President Trump, who earlier had tweeted of Twitter, “they don’t treat me well as a Republican. Very discriminatory, hard for people to sign on. Constantly taking people off list. Big complaints from many people...

“Different names-over 100 M....But should be much higher than that if Twitter wasn’t playing their political games,” he wrote before calling on Congress to intervene and for other companies to rise up and compete against Twitter.

“No wonder Congress wants to get involved – and they should.  Must be more, and fairer, companies to get out the WORD!”

After meeting with Dorsey in the Oval Office, Trump wrote: “Lots of subjects discussed regarding their platform, and the world of social media in general. Look forward to keeping an open dialogue!”

But it was reported the talk was mostly about Trump’s traffic and user base and his complaints the numbers were ticking down.

--Huawei Technologies Co. said its first-quarter revenue jumped 39% to $26.81 billion, as the Chinese telecom giant makes further inroads in the 5G wireless market.

Huawei said it has signed 40 commercial contracts to supply carriers with 5G technology, and shipped 70,000 5G base stations.

The highly-controversial company, that the United States says is state-funded and basically an operation under the People’s Liberation Army and a third branch of the Chinese state intelligence network, has become the world’s largest maker of telecommunications equipment and the dominant supplier of technology for 5G networks.

The report this week was the privately held company’s first-ever quarterly update, unaudited, though it publishes a detailed audited financial statement each year.

Huawei, which is a leading smartphone provider as well, shipped 59 million of them in the quarter.

The company continues to be a major target of the U.S., which has been urging its allies to block Huawei from their systems, Huawei gear effectively blacklisted from the U.S., though as I noted  weeks ago, Huawei technology, such as its base stations, are already highly prevalent in rural America, including near some of our missile bases.

--Shares in Intel Corp. fell 9% today, after the company reported its first decline in sales of data-center chips in seven years, reflecting slowing demand amid the U.S.-China trade dispute and general uncertainty in the business-computing market.  Revenue fell in the semiconductor giant’s memory and programmable-chips businesses, too.  Demand for chips used in personal computers did rise, leaving overall first-quarter revenue flat compared with the year earlier at $16.06 billion.  Profit fell 11% to $3.97 billion.

Intel also issued cautious guidance for the balance of the year, with both earnings and revenue below forecasts it issued three months ago.

CEO Bob Swan said the data-center business has been hurt by big cloud-computing companies deferring purchases of new chips as they maximize existing computing power.  And there’s China.  “We have a dramatic slowdown in China,” Swan said.  “It’s a big important market for us, and we’re seeing buying patterns for both enterprise and cloud players slow dramatically.”

--Caterpillar Inc. spooked investors for a second straight quarter as rising costs hit margins in its construction equipment business and tepid sales in the Asia Pacific region point to continuing subdued growth in China.  CAT forecast flat sales in China and the region for 2019, with China accounting for up to 10% of the company’s sales, a critical component for the company’s growth prospects; China being one of the world’s largest commodities importers.

Caterpillar reported first-quarter construction revenue of $5.87 billion, below expectations, though overall revenue rose about 5 percent to $13.5 billion, ahead of the Street. CAT maintained its earnings guidance for the year.

--Procter & Gamble Co. reported its strongest quarterly sales growth in eight years, as the maker of Tide detergent and Gillette razors got a boost from higher prices and growth in developing markets.

The leader in the consumer products industry, P&G was the first to unveil price increases and counted on the others, like Kimberly-Clark, following suit, and they have.

P&G changed course last summer after years of trying to combat weak demand by lowering prices, so it has gradually raised them on products such as Pampers, Bounty, Charmin and Puffs.

The company said that its organic sales – which strips out currency moves, acquisitions and divestitures – rose 5% in the fiscal third quarter, which is outstanding, in my mind.  It was the largest gain since the spring of 2011.

P&G’s results come a year after activist investor Nelson Peltz joined the board following a costly proxy fight, with the company saying it has implemented some of Peltz’s suggestions.

But P&G warned about the coming fiscal year, which begins in July, due to rising transportation and materials costs, and the ongoing trade tensions.

--United Technologies Corp. said its profit rose 3.7% for the first quarter and the industrial conglomerate boosted its earnings projections for 2019, citing better-than-expected results from its recent acquisition of airline-parts maker Rockwell Collins Inc.  UTX is spinning off the Otis elevator and Carrier building-systems businesses into separate companies by year-end, while the Collins Aerospace division, a combination of the $23 billion Rockwell Collins acquisition and United Technologies’ previous aerospace business, is expected to meet its goals despite losing 10 cents a share from the grounding of Boeing’s 737 MAX program.

Overall revenue of $18.37 billion in the quarter handily exceeded expectations, ditto adjusted earnings, with the company reporting net income of $1.35 billion.

--Ford Motor Co.’s first-quarter operating profit rose 12% to $2.4 billion, helped by strong pricing in the U.S. and narrower losses in China, Ford’s biggest trouble spot.  The earnings per share of 44 cents was far above estimates of 27 cents.

Revenue fell 4% to $40.3 billion, hurt by lower vehicle sales globally.  But the automaker’s operating profit in North America jumped 14%, despite having sold fewer vehicles, because Ford’s F-Series pickup truck sales continue to help drive higher profits in the region.

The company’s lending arm, Ford Credit, had its best quarter since 2010, with operating profit up 25% to $801 million.

--Uber Technologies Inc. is now aiming to price its shares between $44 and $50 apiece, raising $8 billion to $10 billion in its upcoming IPO, which would give the company a valuation of $80 billion to $90bn, down from a range of $90bn to $100bn.

Uber’s IPO is expected to be the second-largest U.S.-listed debut in history, behind Alibaba Group Holding Ltd., as measured by market capitalization.  Last year, lead underwriters Goldman Sachs and Morgan Stanley were pitching a valuation of $120 billion.

Uber no doubt has been spooked by the reception to smaller rival Lyft’s recent IPO, Lyft’s shares priced at $72 and now down to $57.

--Shares in 3M Co. suffered their worst drop on Thursday, 13%, since 1987, as the company announced it would cut 2,000 jobs and restructure its sprawling business amid slowing sales in China and Japan.

The maker of Post-it Notes and industrial products said its net sales fell 5% to $7.86 billion in the first quarter, worse-than-expected.

The poor quarter met some investors’ top fears of late, including the impact of U.S.-China trade tensions.  Organic sales in China fell 4.3%.

Overall revenue for 3M fell 2%, declining in 18 of its 22 corporate divisions.

As for the job cuts, they would impact about 2% of its 93,500 workforce.

--United Parcel Service Inc. reported Thursday that first-quarter profit fell 17% as revenue was flat from a year ago, as the company ran into higher spending to cope with a series of winter storms.

The results fell short of Wall Street expectations, and the shares tumbled.  UPS has been working to upgrade its network as the growth of online shopping puts more pressure on delivery speed.

The company said it earned $1.11 billion in the first quarter, with revenue flat at $17.16 billion.

--Verizon Communications Inc.’s core wireless business lost lucrative phone customers in the first quarter, as it offered fewer promotions and focused on upgrading its 5G network.

The carrier said it lost a net 44,000 postpaid phone connections during the period, though existing customers continued to upgrade to pricier tiers of its unlimited data plans.  That said, the losses were greater than expected and more severe than the same time last year.

Quarterly revenue ticked up about 1% to $32.1 billion.

The company is in the process of cutting $10 billion in costs by 2021, helped by a voluntary severance program and expense savings.

Verizon had 117.9 million wireless connections at the end of March, down from 118 million at the end of 2018.

The company’s landline business added 52,000 net new home broadband connections during the first quarter and lost a net 53,000 Fios video customers; the latter the result of ongoing cord-cutting and the growth of streaming services like Netflix Inc.

--AT&T reported a first-quarter revenue miss as its premium TV and streaming service lost subscribers while the telecom company said it was on track to meet its deleveraging goals.

The company said revenues rose 17.8% from a year ago to $44.8bn, primarily driven by its acquisition of Time Warner, but this was below estimates.

AT&T said it generated revenue of $8.38bn at WarnerMedia, which includes HBO, home to shows such as Game of Thrones and Insecure, but that was also short of forecasts.

The company lost 544,000 premium TV subscribers, which brought its total to 22.4m, and its DirectTV Now streaming service shed 83,000 subscribers, leaving its customer base at 1.5m.

Net income slipped to $4.1bn.

--Coca-Cola Co. is expanding its namesake brand, pushing forward with overseas rollouts of a coffee-infused variant (Coca-Cola Plus Coffee) and an energy-drink version (Coca-Cola Energy), though in the case of the latter it faces objections from its partner Monster Beverage Corp. (in which Coke owns an 18.5% stake, Monster the leading energy drink in the U.S.).  Monster has said the launch of Coca-Cola Energy is a violation of an agreement the companies struck in 2015 and the complaint is now in arbitration.

Separately, Coca-Cola Zero Sugar, a reformulated diet version, grew by double digits in the latest quarter.

I haven’t had a Coke in decades (being a Coors Light drinker...cough cough), but I have to admit, I will try Orange Vanilla Coke, its first new flavor in a decade, which launched in February and is driving growth thus far in the Coca-Cola brand.

The coffee version of Coke is designed to appeal to those needing a midafternoon pick-me-up at work, while Coca-Cola Energy offers a stronger caffeine boost than regular Coke and has a new taste, so they say.

--Samsung Electronics Co. delayed the rollout of the Galaxy Fold smartphone because of technical problems just ahead of its planned launch.  This is a big blow to the hardware giant and its hopes for a product billed as one of the smartphone market’s biggest innovations in years.

Samsung sent out phones to reviewers, and those reviews were awful.  The Fold is the first mainstream foldable-screen device, and was slated to hit U.S. shelves on Friday with a $2,000 price tag!  Good lord.  But the screens had creases, and the picture wasn’t good and this is a mini-disaster, for now.

--Starbucks Corp. beat profit expectations in its most recent quarter and boosted forecasts for sales growth for the full year.

The company said same-store sales grew by 3%, with sales up 4% in the company’s Americas region and 3% in China.

For the quarter ended March 31, Starbucks reported a profit of $663.2 million, up slightly from the year before.  Overall revenue was up 5%.

--Social Security’s costs are expected to exceed its income in 2020 for the first time since 1982, forcing the program to dip into its nearly $3 trillion trust fund to cover benefits.

But this new projection, issued by the trustees of Social Security and Medicare, is actually a little better than the one made as part of the 2018 annual report, which anticipated the program would run dry by the end of last year.

By 2035, the trust funds for both programs will be depleted, meaning Social Security would no longer be able to pay its full scheduled benefits unless Congress stepped in.  Otherwise, recipients would only get about three-quarters of their scheduled benefits.

What’s important to remember is that Social Security and Medicare represent about 45% of federal spending, today, and as every schoolchild knows by now, the costs are going to rise significantly, and in turn drive up budget deficits.

--New York State tax revenues fell by $3.7 billion, or 4.7 percent, last year – the largest collapse since the 9/11 attacks – but officials downplayed the significance, since a surge in collections last month staved off an even steeper drop.

The primary culprit was a 6.6 percent decrease in personal income tax revenues, which came in at $48.1 billion - $3.4 billion less than the previous year.

Comptroller Thomas DiNapoli cited sweeping changes to the federal tax code, including the $10,000 cap on state and local taxes that could be claimed on federal returns, which had many filers shifting payments to 2017 so they could claim more generous deductions under the old tax code...or they flat out fled the state.

Business tax receipts, on the other hand, were up $7.9 billion, an increase of 10.4 percent.

The state’s fiscal year runs through March 31.

--Abigail Disney, a family member and activist, wrote about wage inequality at Walt Disney Co. recently on Twitter and it went viral, largely because of the name attached to it.  Then, in a Washington Post op-ed, Abigail wrote in part:

“(The) Disney brand occupies a special place in our economic landscape.  Its profits are powered by emotion and sentiment and, yes, something as fundamental as the difference between right and wrong.  I believe that Disney would well lead the way, if its leaders so chose, to a more decent, humane way of doing business.

“I had to speak out about the naked indecency of chief executive Robert Iger’s pay.  According to Equilar, Iger took home more than $65 million in 2018. That’s 1,424 times the median pay of a Disney worker.  To put that gap in context, in 1978, the average CEO made about 30 times a typical worker’s salary. Since 1978, CEO pay has grown by 937 percent, while the pay of an average worker grew just 11.2 percent.

This growth in inequality has affected every corner of American life.  We are increasingly a lopsided, barbell nation, where the middle class is shrinking, a very few, very affluent people own a great deal and the majority have relatively little. What is more, as their wealth has grown, the super-rich have invested heavily in politicians, policies and social messaging to pad their already grotesque advantages.

“In 2017, with the quiet encouragement of corporations across the country, Congress passed the Tax Cuts and Jobs Act. As billions of dollars landed in the laps of management, they spent as a rule not on their workforces but on wealth-enriching strategies such as stock buybacks and, yes, executive pay.

“In 2018, Disney gave more than 125,000 employees a $1,000 bonus. But that $125 million or so was dwarfed by the $3.6 billion it spent to buy shares back to drive up its stock price and thus enrich its shareholders. Given that about 85 percent of stocks are held by the richest people in the country, this was a significant new investment in wealth inequality....

“There are just over 200,000 employees at Disney. If management wants to improve life for just the bottom 10 percent of its workers, Disney could probably set aside just half of its executive bonus pool, and it would likely have twice as much as it would need to give that bottom decile a $2,000 bonus.  Besides, at the pay levels we are talking about, an executive giving up half his bonus has zero effect on his quality of life.  For the people at the bottom, it could mean a ticket out of poverty or debt. It could offer access to decent health care or an education for a child.

“Here is my suggestion to the Walt Disney Co. leadership.  Lead. If any of this rings any moral bells for you, know that you are uniquely situated to model a different way of doing business.  Reward all of your workers fairly. Don’t turn away when they tell you they are unable to make ends meet.  You do not exist merely for the benefit of shareholders and managers.  Reward all the people who make you successful, help rebuild the American middle class and respect the dignity of the men and women who work just as hard as you do to make Disney the amazing company it is.”

--Dutch brewer Heineken has reported an increase in beer volumes in all regions, driven in particular by double-digit growth in Africa, Middle East and eastern Europe, but maintained its mid-single digit growth outlook for the full year.

The world’s second-largest beer maker reported a 15 percent rise in first-quarter net income, while beer sales by volume rose 4.3 percent, with the Heineken brand up 8.3 percent, which isn’t too shabby.

Africa, the Middle East and Eastern Europe posted a 15.5 percent rise in organic volume growth for the brand.

--Chipotle Grill, operator of Chipotle Mexican Grill restaurants, reported first-quarter results that topped the Street’s expectations on both the top and bottom line.  Same-stores sales growth was a super 9.9%, ahead of consensus for 6.8%, as the company guided higher for mid- to high-single digit comp sales in 2019, up from earlier expectations.

But after the shares rallied sharply on the earnings news, they plunged on word the company had received a new subpoena for information into illnesses at several restaurants, including in Simi Valley, Calif., Los Angeles, Boston and Sterling, Va.  In 2015, the Centers for Disease Control and Prevention reported 60 cases of E. coli from two outbreaks that were linked to Chipotle restaurants.  Across 14 states, a total of 22 people were hospitalized.

--We have another nightmare for the traveling public. Scandinavian airline SAS cancelled hundreds of flights globally today leaving thousands of passengers stranded after pilots in Norway, Sweden and Denmark went on strike.

SAS said 637 flights would be cancelled, affecting 72,000 passengers.

The pilot walkout came after negotiations over pay and work schedules broke dwon.

--We note the passing of Henry Bloch, the easygoing pitchman who helped found tax preparation giant H&R Block.  He was 96.

Bloch founded the company in 1955 in a tiny office on Main Street in Kansas City, Mo., with his brother, Richard, angling to take advantage of the vacuum left as the IRS stopped providing free income tax return service.  Richard died in 2004.

Henry Bloch retired as chief executive in 1992.

Foreign Affairs

North Korea: Kim Jong Un took his armored train to Vladivostok, Russia, for his first face-to-face talks with Russian President Vladimir Putin, with little of substance achieved.  There were no public promises of economic assistance from Moscow to mitigate the pressure of sanctions. 

Putin and Kim held the talks on an island off Vladivostok, two months after Kim’s summit with President Trump in Hanoi ended in disagreement, cooling hopes of a breakthrough in nuclear arms talks.

Afterwards, in a press conference, Putin said that U.S. security guarantees would probably not be enough to persuade Pyongyang to shut its nuclear program. 

While there were no breakthroughs, Putin used the summit to burnish Russia’s diplomatic credentials as a global player.

Putin said any U.S. guarantees might need to be supported by the other nations in previous six-party talks on the nuclear issue, which would mean including Russia, China, Japan and South Korea, as well as the U.S. and North Korea, a format long abandoned by the Trump administration.

Putin told reporters, “I’m deeply convinced that if we get to a situation when some kind of security guarantees are needed from one party, in this case for North Korea, that it won’t be possible to get by without international guarantees.  It’s unlikely that any agreements between two countries will be enough.”

The two leaders appeared to get along well, with nearly two hours of one-on-one talks with just a few aides present.

Putin said he thought a deal on Pyongyang’s nuclear program was possible and that the way to get there was to move forward step-by-step in order to build trust.

For his part, Kim Jong Un told Putin that peace and security on the Korean peninsula depended on the United States, warning that a state of hostility could easily return, North Korean media said on Friday.

Previously, Kim said he would wait until the end of the year for the United States to be more flexible.

“The situation on the Korean peninsula and the region is now at a standstill and has reached a critical point where it may return to its original state as the U.S. took a unilateral attitude in bad faith at the recent second DPRK-U.S. summit talks,” North Korea’s KCNA reported Kim as saying.

“The DPRK will gird itself for every possible situation,” KCNA quoted Kim as saying.

On Thursday, Pyongyang accused South Korea of violating a bilateral agreement meant to lower tensions by carrying out combined aerial drills with U.S. forces.  It labeled the exercises a provocation, while vowing a military response.

Also this week, North Korea removed Kim Yong Chol, Kim Jong Un’s right-hand man, a hard-liner, and Secretary of State Mike Pompeo’s negotiating partner, from a top post, according to South Korea’s Yonhap news agency.  Kim Yong Chol had been head of a department that handled ties with South Korea and increasingly the United States.  He was prominent at the summit in Hanoi, and visited the White House in January to meet President Trump.

But I didn’t see any confirmation of the South Korean report.  KYC is said to be extremely difficult to deal with, so some say this could be a good sign.  I say, ‘wait 24 hours.’

China:  Beijing accused Washington of violating the one-China principle with its recent sale of a $500 million military package to Taiwan, saying the act seriously hurt relations between the two countries and jeopardized stability in the Taiwan Strait.

“The Chinese side resolutely opposes any countries selling weapons to Taiwan,” the defense ministry said in a statement on Wednesday, while repeating its position that it regards the self-ruled island as an inalienable part of the mainland and its need to uphold its territorial integrity.

“What the U.S. side did not only strongly violated the one-China principle and the three communiques prescribing Sino-U.S. relations, but also interfered in China’s internal affairs and damaged the sovereignty and security of China,” the defense ministry said.

The act also “poisoned bilateral military ties and seriously sabotaged cross-strait relations and stability in the Taiwan Strait.”

I fully support arms sales to Taiwan.

But on a different matter, Brian Spegele and Kate O’Keeffe of the Wall Street Journal had the following disturbing report:

“Orbiting 22,000 miles above Earth, a fleet of American-built satellites is serving the Chinese government in ways that challenge the U.S.

“Nine of these satellites have been part of efforts to connect Chinese soldiers on contested outposts in the South China Sea, strengthen police forces against social unrest and make sure state messaging penetrates far and wide, according to corporate records, stock filings and interviews with executives.

“A tenth satellite, under construction by Boeing Co., would enhance China’s competitor to the U.S. Global Positioning System.  Besides civilian uses, the navigation system could help China in a potential conflict, such as in guiding missiles to their targets.

“U.S. law effectively prohibits American companies from exporting satellites to China, where domestic technology lags well behind America’s.  But the U.S. doesn’t regulate how a satellite’s bandwidth is used once the device is in space.  That has allowed China to essentially rent the capacity of U.S.-built satellites it wouldn’t be allowed to buy, a Wall Street Journal investigation found.

“Tangled webs of satellite ownership and offshore firms have helped China’s government achieve its goals. Some of America’s biggest companies, including private-equity firm Carlyle Group in addition to Boeing, have indirectly facilitated China’s efforts, the Journal found.”

This is nuts.

Lastly, there are concerns about President Xi Jinping’s health, and the lack of a succession plan.  On a recent tour of Europe, some observers said his “unusual gait” caught their eyes.  Television coverage appeared to catch him walking with a slight limp, and he appeared to need to steady himself while sitting down.

Xi, who turns 66 in June, has been publicly visible in China since the trip, but any limp or other perceived issue is of course going to be scrutinized.

Russia / Ukraine: President Putin signed a decree on Wednesday to allow residents of Moscow-backed rebel-held territories in eastern Ukraine to obtain Russian passports.

The decree – published on the Kremlin website just three days after Ukraine elected a new president in a landslide – allows residents of the two separatist “republics” in Ukraine’s coal-producing Donbass region to apply for Russian passports under a simplified three-month procedure.

Russia has de facto controlled the two territories since its armed forces helped them break away from Ukraine in 2014, the war claiming more than 13,000 lives since then.

This is an outrageous move on Putin’s part, and the U.S. State Department condemned the order. 

“Russia, through this highly provocative action, is intensifying its assault on Ukraine’s sovereignty and territorial integrity,” a State Department statement read.

Ukraine’s new president-elect, comedian Volodymyr Zelensky, has pledged to find a peaceful solution to the conflict, but he said Putin’s action showed Russia was waging war and brought the two sides no closer to peace, calling on the international community to threaten Russia with more sanctions.

Outgoing President Petro Poroshenko said Russia might try to annex the Donbass region.  Kiev also asked the European Union to take “prompt and decisive” action.

Sri Lanka:  The death toll in the Easter Sunday bombings at one point rose to 359, before the government lowered it to between 250 and 260.  A director of Sri Lanka’s health services said, “It could be 250 or 260.  I can’t exactly say.  There are so many body parts and it is difficult to give a precise figure.”  The deputy defense minister said the death toll had been revised down to 253 due to inaccurate figures provided by the country’s morgues.

The alleged ringleader behind the bombings, a radical preacher by the name of Zahran Hashim, died at the Shangri-La hotel in the capital, Colombo, according to President Maithripala Sirisena.

Sirisena said Hashim led the attack on the popular tourist hotel, accompanied by a second bomber.

Sirisena said Sri Lankan intelligence services believed around 130 suspects linked to Islamic State (IS) were in the country and that police were hunting 70 who were still at large, 60 in custody. 

Islamic State claimed responsibility on Tuesday, a government official having said the bombings were retaliation for the killing of 50 people last month at mosques in New Zealand, but he gave no evidence for his claim.

ISIS’ news agency, Amaq, released a bulletin on Tuesday stating that the attacks were carried out by “Islamic State fighters.”  The statement, disseminated on the group’s chat rooms on the app Telegram, also said the bombings targeted Christians as well as citizens of countries belonging to the coalition fighting ISIS.

The group’s wording did not make clear whether it had direct ties to the bombers, or if the attackers were heeding the Islamic State’s calls for Muslims to attack in their home countries.

Sri Lankan authorities have blamed a local Islamist extremist group, National Tawheed Jamath, for the attacks, though the sophistication of the plot suggested the involvement of an external group like ISIS.

The Sri Lankan government was forced to admit there had been a significant intelligence failure before the attacks, with reports of warnings of strikes not acted on amid feuds at the highest levels.  President Sirisena moved to sack the defense secretary and inspector general of police.

The intelligence came from India, with some top Sri Lankan intelligence officials then deliberately hiding the information, which is beyond scandalous.

After the attacks, Sri Lanka blocked several social media networks on Sunday, including Facebook, Instagram, YouTube and the messaging service WhatsApp.  The steps come amid growing global concerns about the capacity of American-owned networks to gin up violence.

In Sri Lanka, social media has been credited with helping bring democracy after years of civil war, but it is also accused of fomenting racial fear and hatred.  Last year, the government briefly blocked social networks after viral rumors and calls to violence, circulating largely on Facebook, appeared to provoke a wave of anti-Muslim riots and lynchings.

Government officials had repeatedly warned Facebook, which, again, owns Instagram and WhatsApp, that the posts could lead to violence.  “Company officials largely failed to respond until the government shut down access,  after which they promised to hire more moderators and improve communication.”  [Max Fisher / New York Times]

Recall what I wrote last Nov. 3, 2018, in this space.  After a superb two-part documentary on Facebook from PBS’ “Frontline,” I called for Mark Zuckerberg and Cheryl Sandberg to be “indicted.”

“Facebook made five insiders available to ‘Frontline’ and they were all dopes.  And the documentary unearthed some scathing video that spelled out how executives in the company, including Zuckerberg and Sandberg, despite countless warnings on how the data could be misused, refused to take action.

“A big part of the reason for this was Facebook was trying to build up its valuation before going public.

“But what you see on the program is that in light of the Russia investigation and the misuse of Facebook’s user profiles, they now proudly talk of hiring thousands to attack ‘misinformation’ and someone like me, experienced beyond belief in the world, can only shake their heads and think, ‘This massive group of 20-something know-nothings?  Are you kidding me?!’  Their boss, one of five allowed to talk to ‘Frontline,’ Tessa Lyons, is a flat-out idiot, and she’s apparently overseeing the entire operation.

“All five ‘team members’ also told producers the same thing when it comes to how they are going to attack the massive problems inherent in the platform.  ‘We’re having an ongoing conversation...’  What the blank does that mean?!

“Here’s what you learn.  ‘Frontline’ interviewed a UN investigator on the misuse of Facebook in Myanmar and he called the company ‘highly destructive.’  ‘Facebook turned into a beast,’ as the government literally spread deadly lies through the network, heavily used by the people there. The representative said, Facebook ‘played a significant role in the genocide.’

“The same thing has happened in the likes of India, Sri Lanka and the Philippines.”

Yes, I wrote that last November.  And look what happened last Sunday in one of the countries I named.

I continued, last November:

“And what is the company’s standard response to allowing all the deadly garbage on its network?

“ ‘We’re hiring more people versed in the language [plug in the country].’ Trust me, they aren’t hiring former CIA station chiefs, which is what would be required.”

And look what Facebook told Sri Lankan officials last year... “they promised to hire more moderators and improve communication.”

Well investors don’t care.  Look at the response to Facebook’s strong earnings this week...the stock rallied anew, far closer to its highs than its lows.

This is beyond sickening.  Zuckerberg and Sandberg should be hauled before the International Criminal Court in The Hague.

Iran: President Hassan Rouhani vowed Wednesday to make the U.S. regret its sanctions against the Islamic republic, while demanding that the U.S. drop them and offer an apology as conditions for the renewal of negotiations.

Rouhani spoke out following the Trump administration’s decision Tuesday not to renew sanctions exemptions granted to eight countries doing business with Iran.

“The United States, Saudi Arabia, and the United Arab Emirates, the three largest energy producers in the world, together with our friends and allies, are committed to ensuring the world’s oil markets receive all supplies, including the deficit created by the non-use of Iranian oil.

“The Trump administration and its allies are determined to continue and expand the campaign of economic pressure on Iran to put an end to the destabilizing activities of the regime, which is a threat to the United States, its partners, and its allies in the Middle East,” the White House said Tuesday.

The next day, Rouhani responded, saying Iran had “no choice but to resist.”

“The U.S. is not ready to hold negotiations at all and its measures are aimed at breaking up the Iranian nation.  We have to make the U.S. regret its decision for which we have no choice but to resist.”

Rouhani went on to suggest that his country was open to renewing talks with Washington – but only if the U.S. dismantles its sanctions regime against Iran as a precondition.  Rouhani said the U.S. must also apologize “for all wrongdoings and practice mutual respect.  In practice, we have to prove that Americans have made a mistake and miscalculated.”

Iranian Foreign Minister Javad Zarif (the man who wasn’t allowed to quit his job a month or two ago) said Iran would continue to sell its oil despite the expanded U.S. sanctions, and warned of unspecified consequences if the U.S. tried to block oil sales that go through the Strait of Hormuz, where 25-30% of the world’s oil passes.

But Zarif also floated an offer to the Trump administration to exchange prisoners, with at least five U.S. citizens held in Iran today.  Zarif also said President Trump wouldn’t get a better deal than the 2015 nuclear agreement.

U.S. sanctions against Iran have denied its government more than $10 billion in oil revenue, according to Brian Hook, U.S. Special Representative for Iran and Senior Policy Advisor to the Secretary of State.

Editorial / Wall Street Journal

“Italy, Greece and Taiwan (among the eight granted exemptions) have already ended their Iranian oil imports. That leaves five countries at risk of U.S. sanctions: China, India, Turkey, Japan and South Korea.  Two are close allies, and no doubt their leaders will protest this stiff medicine.  But the Trump Administration has given them enough warning, not to mention a six-month waiver.  That’s plenty of time to make other arrangements.

“By all accounts, Iran’s economy is in trouble.... ‘The regime would have used (the $10 billion) to support terror groups like Hamas and Hezbollah and continue its missile development’ and ‘it would have perpetuated the humanitarian crisis in Yemen,’ (said Sec. of State Mike Pompeo).

“Mr. Pompeo reiterated the White House goal ‘to deprive the outlaw regime of the funds it has used to destabilize the Middle East for four decades, and incentivize Iran to behave like a normal country.’  To that end, the U.S. intends to drive Iranian oil exports to zero.

“That’s a potential shock for global oil markets, but the Administration says it is working with Saudi Arabia and the United Arab Emirates to fill any gap in supplies.  American frackers will help, too, as they gear up in response to higher prices. The ability to increase sanctions on a major oil supplier without triggering a giant oil-price shock is another illustration that the U.S. energy boom offers strategic as well as economic benefits.

“To the extent Iran sanctions push up oil prices, they won’t be pain-free for Americans.  Gasoline in the U.S. is nearing an average of $3 a gallon – and surpassing $4 a gallon in the Progressive Republic of California.  Oil supplies worldwide were already tightening. Amid a socialist collapse, Venezuela is now pumping only 732,000 barrels a day, less than a third of its output in 2015.  Renewed fighting in Libya also has made oil analysts wary.

“Mr. Trump’s Iran strategy thus involves some political risks, especially considering how tightly oil prices are linked with public feelings of economic well-being.  No President wants to run for re-election with rising gasoline prices.  Yet the Trump Administration, to its credit, shows no signs of backing down. If Iran wants sanctions eased, it can stop spreading terror and renegotiate the nuclear deal."

Syria: According to Amnesty International and the monitoring group Airwars, the U.S.-backed assault to drive Islamic State from its Syrian capital Raqqa in 2017 killed more than 1,600 civilians, 10 times the toll the coalition itself has acknowledged.  Amnesty and Airwars spent 18 months researching civilian deaths including two months on the ground in Raqqa, they said.

Afghanistan: In a new report, the United Nations said more Afghan civilians are being killed by Afghan government and American forces than by the Taliban and other insurgents, as talks to end the 18-year war have faltered of late.

For the first time since it began compiling data more than a decade ago, the UN said pro-government forces caused more civilian deaths, accounting for 52.4% of the 581 deaths in the first three months of this year, compared with 39% by the Taliban, the local affiliate of Islamic State and “undetermined antigovernment elements.”  The remaining deaths were attributed to crossfire and other causes.

U.S. Army Col. Dave Butler, spokesman for the U.S.-led international forces in Afghanistan, said in response to the UN report:

“We strive for precision in all of our operations. The best way to end the suffering of noncombatants is to end the fighting through an agreed-upon reduction in violence on all sides.”

The number of civilian deaths did drop from 799 in the first quarter of 2018.

Israel: Hezbollah leader Hassan Nasrallah has denied reports the Lebanese terror organization is planning for war with Israel this summer, saying the IDF (Israel Defense Forces) would not start a military conflict with the group because the Israeli home-front is not prepared.

Nasrallah, in disputing press reports talking up war, said, “I personally eliminate any possibility for a Zionist war on Lebanon.”

The Hezbollah leader also said on Monday that while Israel boasts about their missile defense system, it cannot defend the country’s citizens against the threat posed by Hezbollah’s rocket arsenal. 

I have to admit I agree with this last point.

In any war with Israel, Hezbollah would not only launch its massive rocket arsenal, but, according to military experts, would also infiltrate into Israeli communities on the border to kill or kidnap civilians and soldiers, Hezbollah with an estimated force of 30,000 battle-hardened fighters. [Jerusalem Post]

Egypt: When I wrote last week of the changes to Egypt’s constitution that granted President Abdel Fattah al-Sisi the ability to remain in power until 2030, I didn’t realize the referendum to approve such changes would take place right away, and last week nearly 89% of Egyptians who cast ballots voted in favor of amendments that include an extension of the president’s term and expansion of his power over the judiciary, the National Election Authority said.

The constitutional amendments are thus effective immediately.

Sisi’s term is lengthened to six years from four, with a limit of two consecutive terms, extending his current term to 2024, while a special rule would also allow him to run for another six years after the end of the current one.  The changes also included granting Sisi final approval over judicial appointments.

Sudan: Reuters reported that a search of ousted President Omar al-Bashir’s home by military intelligence revealed $351,000 in cash and six million euros! (about $6.8 million), plus five million Sudanese pounds (for which I have no freakin’ idea as to the value).

Yes, he is under investigation on charges of money laundering and possession of large sums of foreign currency without legal grounds.

Random Musings

--Presidential tracking polls...

Gallup:  45% approval of Trump’s job performance, 51% disapproval; 89% Republicans, 39% Independents (Apr. 12)
Rasmussen: 49% approval, 49% disapproval (Apr. 26)

I missed the results of a Fox News poll released a day before I went to post last time, and post-release of the Mueller report.  45% of voters said they approved of Trump’s job performance and 51% disapproved, steady from the March poll.

Also, 52% said they were extremely interested in the 2020 presidential election, about equal to the 54% who said the same thing in the final days of the 2016 campaign.  Both Republicans (57%) and Democrats (56%) expressed strong interest.

On immigration, the Fox News survey finds that by a 12-point margin, voters say closing the border is a bad idea (41 good vs. 53 bad), and by a 24-point spread they believe immigration helps rather than hurts the country (48-24 percent).

Interestingly in this Fox survey, Trump is losing ground in his on-going feud with the late Sen. John McCain: by a 51-27 percent margin, more voters admire McCain than Trump.

--Former Vice President Joe Biden announced Thursday that he would seek the Democratic nomination to challenge President Trump in 2020, touting his experience and global stature in a bid to lead a party defined by a younger generation skeptical of his age and ideological moderation.

Biden wants to offer himself as a levelheaded leader for a country wracked by political conflict.

Biden began laying out his case in a 3 ½-minute video, which begins by recalling the white supremacist march through Charlottesville, Va., in 2017 and Trump’s comment that there were “very fine people on both sides.”  In that moment, Biden said, “I knew the threat to our nation was unlike any I’d ever seen in my lifetime.”

“We are in the battle for the soul of this nation,” Biden said.

Trump tweeted on Biden’s entrance: “Welcome to the race Sleepy Joe. I only hope you have the intelligence, long in doubt, to wage a successful primary campaign. It will be nasty – you will be dealing with people who truly have some very sick & demented ideas. But if you make it, I will see you at the Starting Gate!”

Biden apparently raised a very solid $6.3 million his first 24 hours.

And according to the Washington Examiner, John McCain’s widow, Cindy, and daughter Meghan, will publicly back Biden in the hope he can take the Oval Office from Trump.  Gee, that would elicit a tweet or two from the president, don’t you think?

--Anita Hill said she wasn’t satisfied with an apology she received from Biden for his handling of Justice Clarence Thomas’ confirmation hearings – and wants to see “real change” instead.

In an interview with the New York Times, Hill said she received a call from the former vice president and senator earlier this month and was left “deeply unsatisfied” with his act of contrition.

“I cannot be satisfied by simply saying I’m sorry for what happened to you. I will be satisfied when I know there is real change and real accountability and real purpose,” Hill told the paper.

Biden was chairman of the Senate Judiciary Committee in 1991, when the former law clerk came under intense scrutiny for exposing workplace harassment.

“The focus on apology to me is one thing,” Hill added.  “But he needs to give an apology to the other women and to the American public because we know now how deeply disappointed Americans around the country were about what they saw.  And not just women. There are women and men now who have just really lost confidence in our government to respond to the problem of gender violence.”

--According to the CDC, at midweek, there were 625 people diagnosed with the measles nationwide, the highest case count since the disease was considered eliminated in 2000.

This afternoon, Los Angeles County health officials told more than 1,000 college students and staff members who may have been exposed to measles to stay home this week, in one of the largest quarantine orders in state history.

The declaration has raised questions about how exactly the orders will be implemented at UCLA and Cal State Los Angeles, where students have been diagnosed with the disease, and how effective the mandate will be.

The 1,000 were unable to provide proof of vaccination.

As President Trump said today, get your kids vaccinated!  Don’t be a freakin’ idiot!  [This last one is me, but I wish the president had put it that way.]

--In Gallup’s annual Global Emotions Report, with some 150,000 people interviewed in over 140 countries, a third said they suffered stress, with the most negative country being Chad, followed by Niger.  The most positive country was Paraguay, which shocks me, having been to Paraguay myself.  Then again, I’m remembering how happy the workers were when I showed up at the little golf club that Carlos Franco grew up on in Asuncion.  [Then Mr. Franco screwed me, but that’s a long tale.]

Anyway, just another reason to cross Chad and Niger off the bucket list.  At the same time, I don’t need to go back to Paraguay.  That is one, long-ass journey.

---

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

God bless America.

---

Gold $1288
Oil $62.80

Returns for the week 4/22-4/26

Dow Jones  -0.06%  [26543]
S&P 500  +1.2%  [2939]*
S&P MidCap  N/A
Russell 2000  N/A
Nasdaq  +1.9%  [8146]*

*record high

Returns for the period 1/1/19-4/26/19

Dow Jones  +13.8%
S&P 500  +17.3%
S&P MidCap  +18.7%
Russell 2000  +18.0%
Nasdaq +22.8%

Bulls 53.4
Bears 18.4

Have a great week.  Happy May Day.  Keep the rioting to a minimum.

Brian Trumbore