Week in Review

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Week in Review

11/30/2019

For the week 11/25-11/29

[Posted 9:30 PM ET, Friday]

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Edition 1,076

This is going to be one interesting week coming up.  What should be front and center is the NATO summit in London, President Trump arriving there on Monday.  With Britain’s big election on Dec. 12, Prime Minister Boris Johnson is imploring Trump to stay out of it.

“What we don’t do traditionally as loving allies and friends, what we won’t do traditionally, is get involved in each other’s election campaigns.  The best (thing) when you have close friends and allies like the U.S. and the UK is for neither side to get involved,” Johnson said in a radio interview.

The summit itself is going to be contentious, with a major spat taking place this week between Presidents Macron of France and Erdogan of Turkey, as detailed below.  But President Trump will want to be the center of attention.

The impeachment inquiry will also reopen next week, this time in the House Judiciary Committee, but I have little to say about this for now, save for a few tidbits down below, including the latest polling.  I believe the IG report from Michael Horowitz out of the Justice Department will be a big deal, but everyone should just wait for the facts and its release, supposedly Dec. 9.

For now, I’ve been talking about the “generals being restless” going back about six weeks and I’ve been a bit cryptic about it.  But with recent developments you get a further sense as to where I’m coming from.  There are increasing reports the generals are indeed most unhappy with the president’s decision-making, as well as his interference in military matters, using political influence on issues beyond the normal scope of being commander in chief.   It’s eroding confidence and morale.

Look at what the president has done just in Syria and Afghanistan alone.  In the span of 10 months he ordered all American troops out of Syria immediately – only to reverse himself twice after aides implored him to reconsider, and on Afghanistan, he is now back in negotiations with the Taliban after quitting them three months ago, with zero change in behavior on behalf of the militants.

And while Trump wants Americans to believe he is withdrawing troops from the Middle East, the Pentagon has deployed 14,000 more to the region since May.

The president also loves to talk about how the “U.S. military is unsurpassed,” but then in the same breadth he rips the “Deep State,” the generals.

In the case of the following, Trump talked of “sticking up for three great warriors against the Deep State,” while disparaging someone like Lt. Col. Vindman.

President Trump is picking ‘winners’ and ‘losers’ based on who gets on Fox News.  It’s more than pathetic...it’s kind of sick.

So here we have a situation that no doubt riled up the generals in the way President Trump behaved.

Navy SEAL Edward (Eddie) Gallagher, whose demotion for posing for a photo with a combatant’s corpse was reversed by President Trump, will retire and a planned review of his status has been canceled, the Navy announced late Monday.

“He will retire from active duty,” Navy Cdr. Clay Doss said in a statement.  “We will not provide additional details due to privacy concerns.”

“The case of Eddie Gallagher has dragged on for months, and it’s distracting too many.  It must end,” Defense Secretary Mark Esper told reporters at the Pentagon on Monday.  “Eddie Gallagher will retain his Trident as the commander in chief directed, and will retire at the end of this month.”

Navy Secretary Richard V. Spencer was fired Sunday by Esper, supposedly because he was “deeply troubled” that Spencer had tried to work out a private deal with the White House that would avoid a direct presidential order scuttling a scheduled SEAL peer-review process.

Esper said Monday that Spencer had threatened to resign if ordered to allow Gallagher to keep his Trident pin, which Spencer denies.

“I never threatened to resign,” Spencer told CBS.

Trump argued that Gallagher’s case was mishandled by the Navy and said he is defending America’s warfighters from unfair and unfounded prosecution.  Trump had earlier tweeted, on learning of the Navy’s planned review of Gallagher’s status:

“The Navy will NOT be taking away Warfighter and Navy Seal Eddie Gallagher’s Trident Pin. This case was handled very badly from the beginning.  Get back to business!”

Richard Spencer, former secretary of the Navy / Washington Post

“The case of Chief Petty Officer Edward Gallagher, a Navy SEAL who was charged with multiple war crimes before being convicted of a single lesser charge earlier this year, was troubling enough before things became even more troubling over the past few weeks.  The trail of events that led to me being fired as secretary of the Navy is marked with lessons for me and for the nation.

“It is highly irregular for a secretary to become deeply involved in most personnel matters.  Normally, military justice works best when senior leadership stays far away.  A system that prevents command influence is what separates our armed forces from others.  Our system of military justice has helped build the world’s most powerful navy; good leaders get promoted, bad ones get moved out, and criminals are punished.

“In combat zones, the stakes are even higher.  We train our forces to be both disciplined and lethal.  We strive to use proportional force, protect civilians and treat detainees fairly.  Ethical conduct is what sets our military apart.  I have believed that every day since joining the Marine Corps in 1976.

“We are effective overseas not because we have the best equipment but because we are professionals.  Our troops are held to the highest standards.   We expect those who lead our forces to exercise excellent judgment.  The soldiers and sailors they lead must be able to count on that.

“Earlier this year, Gallagher was formally charged with more than a dozen criminal acts, including premeditated murder, which occurred during his eighth deployment overseas.  He was tried in a military court in San Diego and acquitted in July of all charges, except one count of wrongfully posing for photographs with the body of a dead Islamic State fighter.  The jury sentenced him to four months, the maximum possible; because he had served that amount of time waiting for trial, he was released.

“President Trump involved himself in the case almost from the start.  Before the trial began, in March, I received two calls from the president asking me to lift Gallagher’s confinement in a Navy brig; I pushed back twice, because the presiding judge, acting on information about the accused’s conduct, had decided that confinement was important.  Eventually, the president ordered me to have him transferred to the equivalent of an enlisted barracks.  I came to believe that Trump’s interest in the case stemmed partly from the way the defendant’s lawyers and others had worked to keep it front and center in the media.

“After the verdict was delivered, the Navy’s normal process wasn’t finished.  Gallagher had voluntarily submitted his request to retire.  In his case, there were three questions: Would he be permitted to retire at the rank of chief, which is also known as an E-7?  (The jury had said he should be busted to an E-6, a demotion). The second was: Should he be allowed to leave the service with an ‘honorable’ or ‘general under honorable’ discharge?  And a third: Should he be able to keep his Trident pin, the medal all SEALs wear and treasure as members of an elite force?

“On Nov. 14, partly because the president had already contacted me twice, I sent him a note asking him not to get involved in these questions.  The next day, White House Counsel Pat Cipollone called me and said the president would remain involved.  Shortly thereafter, I received a second call from Cipollone, who said the president would order me to restore Gallagher to the rank of chief.

“This was a shocking and unprecedented intervention in a low-level review.  It was also a reminder that the president has very little understanding of what it means to be in the military, to fight ethically or to be governed by a uniform set of rules and practices.

“Given my desire to resolve a festering issue, I tried to find a way that would prevent the president from further involvement while trying all avenues to get Gallagher’s file in front of a peer-review board.  Why?  The Naval Special Warfare community owns the Trident pin, not the secretary of the Navy, not the defense secretary, not even the president.  If the review board concluded that Gallagher deserve to keep it, so be it.

“I also began to work without personally consulting Defense Secretary Mark T. Esper on every step.  That was, I see in retrospect, a mistake for which I am solely responsible.

“On Nov. 19, I briefed Esper’s chief of staff concerning my plan.  I briefed acting White House chief of staff Mick Mulvaney that evening.

“The next day, the Navy established a review board to decide the status of Gallagher’s Trident pin.  According to long-standing procedure, a group of four senior enlisted SEALs would rule on the question.  This was critical: It would be Gallagher’s peers managing their own community.

“The senior enlisted ranks in our services are the foundation of good order and discipline.

“But the question was quickly made moot: On Nov. 21, the president tweeted that Gallagher would be allowed to keep his pin – Trump's third intervention in the case.  I recognized that the tweet revealed the president’s intent.  But I did not believe it to be an official order, chiefly because every action taken by the president in the case so far had either been a verbal or written command.

“The rest is history.  We must now move on and learn from what has transpired.  The public should know that we have extensive screening procedures in place to assess the health and well-being of our forces.  But we must keep fine-tuning those procedures to prevent a case such as this one from happening again.

“More importantly, Americans need to know that 99.9 percent of our uniformed members always have, always are and always will make the right decision.  Our allies need to know that we remain a force for good, and to please bear with us as we move through this moment in time.”

David Ignatius / Washington Post

“President Trump’s attempt to manipulate military justice had a sorry outcome Sunday with the firing of Navy Secretary Richard V. Spencer.  For the past nine months, Spencer had tried to dissuade Trump from dictating special treatment for Navy SEAL Edward Gallagher – but in the end Spencer was sacked for his efforts to protect his service.

“With Spencer’s firing, Trump has recklessly crossed a line he had generally observed before, which had exempted the military from his belligerent, government-by-tweet interference.  But the Gallagher case illustrates how an irascible, vengeful commander in chief is ready to override traditional limits to aid political allies in foreign policy, law enforcement and now military matters....

“ ‘The president wants you to go,’ Esper told Spencer on Sunday, according to this source.  Esper then toed the White House line and announced Spencer’s dismissal.

“For Pentagon officials who have wondered whether Esper would have the backbone to resist Trump, Sunday’s events were troubling.  The Pentagon, like the State Department under Mike Pompeo, is now overseen by an official whose overriding priority seems to be accommodating an impetuous boss in the White House....

“Trump began lobbying Spencer to exempt Gallagher from Navy discipline back in March, when he ordered the Navy secretary in an early-morning phone call to release Gallagher from the brig and give him more comfortable quarters.  Presidential pressure has been relentless, ever since.

“Gallagher has become a hero in the Trump echo chamber of Fox News commentary, where he’s seen as a victim of vengeful SEAL commanders.  His case may have caught White House attention because his legal team included two Trump friends who are former partners of Giuliani: investigator Bernard Kerik, a former New York police commissioner, and Marc Mukasey, who represents Trump.

“While Gallagher is celebrated on Fox, current and former senior officers of the SEALs and other elite units told me this weekend that his case has little support within the community of Special Operations forces.  One former SEAL commander noted that maintaining discipline among these elite units is so important that the SEAL peer-review panels have removed more than 150 Trident pins since 2011, or more than one a month.

“That’s the process of internal accountability that Spencer was trying to defend, and that Trump sabotaged.”

Editorial / Wall Street Journal

“President Trump has done much to lift military morale with his rhetorical and financial support after the Obama years of indifference.  So it’s troubling to see the Commander in Chief get crosswise with the officer corps over what the military calls ‘good order and discipline.’....

“It’s hard to sort the truth from fiction given the tendentious media coverage, but we’ll give it a try.  Mr. Trump has the clear authority to act as he did, and he isn’t the first Commander in Chief to intervene in military discipline.  Jimmy Carter pardoned thousands who dodged the draft in the Vietnam War. Mr. Esper was also right, even obliged, to fire Mr. Spencer if the Navy Secretary went behind his back.

“The question is whether Mr. Trump was wise to intervene and what unintentional damage he might be doing to discipline in the war-fighting ranks.  Chief Gallagher seems to have been brought to Mr. Trump’s attention after he became a cause celebre on TV.  ‘We train our boys to be killing machines, then prosecute them when they kill,’ Mr. Trump put it in an October 12 tweet.

“This is wrong.  The military doesn’t train young men and women to be killing machines.  The services train them to be soldiers with judgment who will kill when needed but within the laws of war.  Mr. Trump has loosened the rules of military engagement in some theaters, which has made sense.  But that doesn’t mean killing unarmed combatants and civilians or abusing captives.  This is a key difference between American soldiers and the unlawful enemy combatants in Islamic State.

“The military’s disciplinary process is also multilayered and fair.  Typical allegations arise from a soldier’s fellow troops, which is what happened in the case of Chief Gallagher.  The facts are then reviewed by the immediate commanding officer, who may recommend review by officers independent of the immediate chain of command....

“The concern among senior naval officers is that Chief Gallagher’s behavior is symptomatic of a larger cultural problem of ill-discipline that they say has developed in some SEAL units. This includes episodes of substance abuse, sexual harassment or assault, mistreating detainees and generally bending the rules.

“Our sources say military leaders want to clean this up, and they are worried about a message of tolerance or misbehavior that Mr. Trump’s intervention into Chief Gallagher’s case might send.  This is the reason those officers, backed by Mr. Esper and Secretary Spencer, wanted a review board to consider Chief Gallagher’s standing as a SEAL.

“A generation of officers had to rebuild the war-fighting culture after Vietnam, which they did with great success, and the military is a rare institution that Americans say they still trust.  As Commander in Chief, Mr. Trump will undermine the officers under his command if he runs roughshod over their effort to maintain good order and discipline.”

The Navy then announced on Wednesday it would scrap plans to carry out reviews of three Navy SEALs that could have led to their ouster, after President Trump’s extraordinary intervention in the Gallagher case.

“I have determined that any failures in conduct, performance, judgment, or professionalism exhibited by these officers be addressed through other administrative measures as appropriate,” acting Navy Secretary Thomas Modly said in a statement.

The decision was a direct result of Trump’s order that Gallagher keep his status as a Navy SEAL.  The review of the other three was connected to Gallagher.

Trump World and the Impeachment Inquiry

--In a Quinnipiac University poll, 45% of Americans think President Trump should be impeached, 48% don’t think he should be.  In an October 23 poll, 48% thought he should be impeached and removed, 46% didn’t think so.

Only 4% of Republicans think Trump should be impeached and removed from office, while 86% of Democrats do, ditto 45% of independents (43% of whom say no).

86% told Quinnipiac their mind is made up on impeachment, 13% said they might change their mind.  50% think the impeachment inquiry is a legitimate investigation, 43% think it is a political witch hunt.

49% believe President Trump held up military aid to Ukraine because he wanted the Ukrainian president to announce investigations that would benefit Trump politically, while 40% don’t believe that. 

The margin for impeachment was 50% to 42% in a Morning Consult poll for Politico, and 50% to 43% in a new CNN poll.

A YouGov poll conducted for the Huffington Post had 45% in favor to 42% opposed.    86% of Democrats favor impeaching Trump, while 85% of Republicans oppose it in this one.

President Trump tweeted: “Support for Impeachment is dropping like a rock, down into the 20’s in some Polls.”

This isn’t true, unless he was referring to an Emerson College poll of Americans from November 17 to November 20 that found just 23% of independents want him impeached.  This poll showed an overall two-point gap, 45-43, tilted against impeaching the president.  [Same as the Quinnipiac survey on the latter, except that one had 45% of independents favoring impeachment.  CNN had 47% of independents supporting it, 45% opposed.]

According to an index maintained by Real Clear Politics, 48% of voters in recent published polls favor impeachment while 44.7% oppose it.

--Former Trump White House counsel Donald McGahn must comply with a House subpoena, a federal court ruled Monday, finding that “no one is above the law” and that top presidential advisers cannot ignore congressional demands for information.  The ruling raises the possibility that McGahn could be forced to testify as part of the impeachment inquiry.

U.S. District Judge Ketanji Brown Jackson of Washington found no basis for a White House claim that the former counsel is “absolutely immune from compelled congressional testimony,” setting the stage for a historic separation-of-powers confrontation between the executive and legislative branches of the government.

Of course the White House is appealing the ruling, meaning further delays, and no one should expect McGahn, Mick Mulvaney, Mike Pompeo, or John Bolton to be testifying anytime soon.

--Rudy Giuliani was in talks with Ukraine’s former top prosecutor while they worked to dig up potentially damaging information about President Trump’s potential 2020 rival Joe Biden, multiple outlets reported.

Giuliani sought to make a deal worth $200,000 with that prosecutor, Yuriy Lutsenko, earlier this year, according to the Washington Post, citing people familiar with the discussions.

According to the New York Times, Giuliani signed a proposal in February that called for his consulting business to be paid $300,000 by Ukraine’s justice ministry in return for locating assets the government lost overseas.

A subsequent agreement drafted in March called for Giuliani’s consulting business to receive $300,000 and also included a role for the lawyers Victoria Toensing and Joe diGenova (two Fox shills), who operate a husband-and-wife legal team in Washington, both the Times and Post reported.

None of the deal with Giuliani ultimately came to fruition, the papers reported.

Giuliani and his consulting business have been under scrutiny by federal prosecutors in New York.

--Former Republican Sen. Slade Gorton (Washington) / New York Times

“John Adams said, ‘Facts are stubborn things.’  Forty-five years after (Richard) Nixon resigned before he could be impeached by the House, the facts should be the focus of every elected official, Republican or Democrat, as they decide what to do about another president facing impeachment and a possible Senate trial.

“To my fellow Republicans, I give this grave and genuine warning: It’s not enough merely to dismiss the Ukraine investigation as a partisan witch hunt or to hide behind attacks against the ‘deep state,’ or to try to find some reason to denounce every witness who steps forward, from decorated veterans to Trump megadonors.

“History demands that we all wrestle with the facts at hand.  They are unavoidable.  Fifty years from now, history will not accept the position that impeachment was a referendum on the House speaker Nancy Pelosi.  It must be a verdict reached on the facts.

“My judgment so far as an objective observer is that there are multiple actions on this president’s part that warrant a vote of impeachment in the House, based on corroborated testimony that Mr. Trump and his personal lawyer, Rudy Giuliani, pressured leaders of Ukraine to investigate the Democratic presidential candidate Joseph Biden and his family.

“From what I have read, it seems clear that President Volodymyr Zelensky of Ukraine was subjected to a shakedown – pressured to become a foreign participant in President Trump’s re-election campaign, a violation of the law....

“(Make) no mistake: This is precisely the kind of crisis Alexander Hamilton feared.  In Federalist No. 75, he warned that a president might be tempted to betray the interests of the country for his own benefit, ‘to sacrifice his duty to his interest, which it would require superlative virtue to withstand’; that ‘an avaricious man might be tempted to betray the interests of the state to the acquisition of wealth’; that a president might ‘make his own aggrandizement, by the aid of a foreign power, the price of his treachery to his constituents.’

“Given the temptations a president might have in dealing with foreign powers, Hamilton’s solution was equally clear: Congress should be involved.  ‘The participation of the whole or a portion of the legislative body in the office of making them,’ he wrote of treaties.  And in the same vein, the founders gave Congress the power to check a president accused of abusing the power of his office. They expected Congress to render its judgment on the facts.

“So, to my fellow Republicans who have been willing only to attack the process, I say: engage in the process.  If the president is innocent, use the process to surface those exculpatory facts so that Congress and the country can agree whether or not Mr. Trump should be removed from office. The facts – not rhetoric – should answer this question: Is there an offense serious enough to undo the results of the 2016 election?

“A heavy burden to meet, but not an impossible one.”

--Trump Tweets

“The D.C. Wolves and Fake News Media are reading far too much into people being forced by Courts to testify before Congress.  I am fighting for future Presidents and the Office of the President.  Other than that, I would actually like people to testify.  Don McGahn’s respected....

“....lawyer has already stated that I did nothing wrong.  John Bolton is a patriot and may know that I held back the money from Ukraine because it is considered a corrupt country, & I wanted to know why nearby European countries weren’t putting up money also.  Likewise, I would....

“....love to have Mike Pompeo, Rick Perry, Mick Mulvaney and many others testify about the phony impeachment Hoax.  It is a Democrat Scam that is going nowhere but, future Presidents should in no way be compromised. What has happened to me should never happen to another President!”

Wall Street and the China Trade War

After a one-week respite, stocks resumed their advances, hitting new all-time highs Monday, Tuesday and Wednesday, before pausing in today’s holiday-shortened session.  The economic news was a little better than expected, on the whole, and you had the continued optimism a trade deal with China was finally going to be consummated.

So in terms of the data, the S&P CoreLogic Case-Shiller home price index for September was up 0.4%, but just 2.1% year-over-year, near a 7-year low in terms of rate of growth.

October new home sales came in better than expected at an annualized pace of 733,000.

October durable goods orders (big-ticket items) were up a solid 0.6%, including ex-transportation, far better than forecast, with a reading on business investment showing a solid advance, which has not been the norm recently and thus the cause of major concern.

And then we had data on personal income for last month, unchanged when an increase of 0.3% was expected, but consumption (consumer spending) rose in line with forecasts, 0.3%, which is good.  The Fed’s core inflation barometer, the personal consumption expenditures index, for October was also just 1.6%.

A reading on November Chicago manufacturing came in at 46.3 (50 being the dividing line between growth and contraction) and the second poor month in a row.

But a revision on third-quarter GDP showed a rise from the initial reading of 1.9% to 2.1%, better than expected.   The personal consumption component was solid, while business investment in Q3 didn’t quite decline as much as first indicated.

So the last few quarters we have:

Q3 2019...2.1% (ann. growth)
Q2 2019...2.0%
Q1 2019...3.1%
Q4 2018...1.1%

Ergo, call it 2.1%, though this is down from the 3.1% pace of the four quarters prior, Q4 2017-Q3 2018.

As for the current quarter, I’ve been writing how the Atlanta Fed’s GDPNow barometer seemed to be an outlier with its very low forecasts for growth, including 0.4% last week, but with this week’s numbers, that figure rose to 1.7%, which is essentially consensus, though another quarter of essentially 2% overall.

There isn’t anything wrong with 2%, and the stock market can do just fine in that environment, as it has, but the budget deficits will continue to pile up.

Fed Chairman Jerome Powell, speaking on the economy Monday, said, “at this point in the long expansion, I see the glass as much more than half full.”  The Fed’s Beige Book, prepared for the Dec. 10-11 Open Market Committee meeting coming up, said the economy continued to expand “modestly” with manufacturing picking up, while the labor market remained “tight.”

The Fed is finished cutting rates for the time being, so December’s meeting will yield no fireworks.  Chairman Powell said in his remarks at the Greater Providence Chamber of Commerce, “Monetary policy is now well positioned to support a strong labor market and return inflation decisively to” the Fed’s 2% target.  “If the outlook changes materially, policy will change as well.”

As for the holiday shopping season, a short one this year, though with retailers having more pre-Black Friday deals than usual as a result, no reason why it won’t be solid.

Adobe Analytics reported that online shopping was off to a big start, up 15.8% for the period Nov. 1 to Nov. 26 over last year.  For the full Christmas season, Adobe is calling for a 14.1% increase compared with 2018.  For the coming Cyber Monday, Adobe is forecasting sales to be up 18.9% from last year.

As for the trade talks between the U.S. and China, Beijing offered its most positive message in recent weeks following a phone call between the countries’ top negotiators on Tuesday, raising prospects for a limited deal sought by both come year end.

China’s Commerce Ministry said the two sides had “reached a consensus on properly resolving related issues.”  This tells you nothing, but the fact it followed a call between China’s chief trade negotiator, Liu He, and his U.S. counterparts, Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, suggested there was some cause for optimism and that the two sides could reach a compromise on their differences.

While the Chinese need a deal to bolster its struggling economy, President Trump wants one to aid his reelection effort.

There is an important looming deadline, Dec. 15, when President Trump has threatened to impose punitive tariffs on about $156 billion worth of consumer goods, including smartphones, laptops and other products.  Neither side really wants to see this, but China wants some of the existing tariffs rolled back as part of any deal.

Then we have the Hong Kong legislation that the House and Senate passed almost unanimously that supports the protesters’ cause and essentially tells Beijing to lay off.  President Trump didn’t want to sign it, thinking it would hurt the chances for a trade deal, but as I discuss in detail below he caved.  Which upset China to no end, but they need the trade deal.  Beijing will find other ways to retaliate down the road.

Which brings me back to my first missives on this trade confrontation.  I have been consistent since day one in discussing the issue.  I support President Trump confronting President Xi on trade.  I have a painful personal history with the Chinese.  I get it.

But my point has been, Americans just need to be aware there will be consequences in other areas down the road.  This relationship has changed, for the worse, and for our remaining lifetimes.  Period.  Which is what drives some of us up the wall when we hear President Trump talk of Xi as his ‘dear friend.’ 

Xi is no friend.  He is a very bad guy.  Look at Xinjiang.  I just want our presidents to stick up for human rights, at every turn.  Often, President Trump doesn’t...and that’s a problem.

Europe and Asia

Some data for the eurozone (EA19) this week via Eurostat.  A flash reading on November inflation came in at 1.0% annualized, better than October’s 0.7% pace, and good news for the ECB, which has been struggling for years to boost inflation, to no effect, despite unprecedented stimulus, including negative interest rates and massive bond purchases.

More importantly in terms of the ECB’s 2% target, core inflation, ex-food and energy, rose to 1.5%.

Individually, inflation is running at a 1.2% pace in Germany, 1.2% in France, 0.4% in Italy, and 0.5% in Spain.

Also important for the ECB and its policy considerations, October employment for the euro region came in at 7.5%, the lowest since July 2008, and vs. 8.0% a year earlier.  Despite ongoing signs of a slowdown, employers at least seem to be maintaining their workforces, though European automakers are beginning to talk of huge layoffs, as detailed below.

Germany’s unemployment rate is 3.1%, France 8.5%, Italy 9.7%, Ireland 4.8%, Netherlands 3.5%, and Greece 16.7% (August).

Next week will be PMI week in the eurozone, and elsewhere.

Brexit / UK Election:  The numbers show that Prime Minister Boris Johnson’s Conservatives have a considerable lead in most polls ahead of the Dec. 12 election, anywhere from 7 to 19 points, with a poll of polls by Britain Elects at a 12-point lead over the opposition Labour Party.

But more importantly, a respected survey of 100,000 residents by YouGov has the Conservatives winning 359 of the 650 seats in Britain’s parliament, giving Johnson a sizable majority (there are actually less than 650 that stand in parliament, so 359 is far more than the 326 simple math would tell you, like a majority of 68 seats).

So this is big, if it holds.  But Britain is notorious for proving pollsters wrong, and Johnson’s top advisor, Dominic Cummings, issued a warning on Wednesday.

“Trust me, as someone who has worked on lots of campaigns, things are MUCH tighter than they seem and there is a very real possibility of a hung parliament.”

For now, helping the Conservative Party is the capitulation of the euroskeptic Brexit Party.  As I noted a few weeks ago, many feared the Brexit Party’s well-known leader Nigel Farage would split pro-Brexit support and siphon voters from Johnson.  But the Brexit Party then stood down in Conservative-held seats and has since collapsed in the polls.

With the Conservatives able to consolidate support in pro-Brexit districts, YouGov forecasts that Labour will lose 44 seats to the Conservatives.  Britain has a first-past-the-post system, under which candidates don’t need to win a majority of votes to claim victory; just get more than anyone else.

By the way, as one of his campaign pledges, Johnson promised over $30 billion worth of tax cuts and public spending between 2020 and 2024, including capital spending on flood control, rail links and road improvements.  Plus Johnson said he would employ 50,000 more nurses.  Here at StockandNews, we are pro-nurse.

France: The government said it is willing to compromise on its pension reform but will not abandon plans to rebuild a system that allows some workers to retire in their fifties, the announcement coming a week before a planned transport workers’ strike.

President Emmanuel Macron was elected in May 2017 on a pledge to overhaul the generous social security system and has promised to introduce a points-based pension system under which all workers have the same rights.  But unions at state-owned rail and metro operators – where some workers can retire in their early fifties – plan a nationwide transportation strike for Dec. 5.

Italy: The government’s national statistics bureau confirmed that third-quarter growth was just 0.1% over the second quarter, 0.3% year-on-year.  For all of 2019, growth is expected to be just 0.2%.

Turning to Asia....China reported that profits at industrial firms continued to slide in October, posting their steepest fall since 2011 as producer prices remained weak and trade tensions with the U.S. weighed on the world’s second-largest economy.

As reported by the National Bureau of Statistics, industrial profits plummeted 9.9 percent from a year earlier, down from a 5.3 percent contraction in September.

In the first 10 months of the year, combined profits at Chinese industrial enterprises decreased 2.9 percent year-on-year, the NBS said.

But this just in...factory activity in China unexpectedly returned to growth in November for the first time in seven months, but the gains were meager with more U.S. tariffs looming within weeks unless there is a trade agreement.

The manufacturing PMI rose to 50.2, versus 49.3 in October, according to the National Bureau of Statistics.

In Japan, October retail sales cratered 7.1% from a year earlier, more than expected, and owing to the sales tax hike the first of the month from 8% to 10%.  In April 2014, when the sales tax went from 5% to 8%, the fall in retail sales that month was 4.3%, which is kind of an interesting comparison.  Remember, September saw a surge in retail sales ahead of the tax hike.

Separately, South Korea and Japan have agreed to hold senior-level trade talks in December to discuss Tokyo’s export restrictions at the center of a bitter dispute between the two countries.

The talks would include Japan’s tighter rules since July on the export of three high-tech materials to South Korea and its removal of Seoul from its so-called “white list” of countries with fast-track trade status, the South Korean trade ministry said.

In a further sign of an easing of tensions over the bitterness concerning their wartime past, South Korea has also agreed to stick to an intelligence-sharing deal with Japan.

Street Bytes

--As alluded to above, stocks surged to new highs before a slight pullback today, the Dow Jones gaining 0.6% to 28051, while the S&P 500 rose 1.0% to 3140 and Nasdaq added another 1.7%, now up 30.6% for the year.

The S&P gained 3.4% in the month of November, its best month since June.

Earnings season is essentially over and EPS for the S&P 500 companies is expected to have declined 0.4% from a year ago, according to Refinitiv.  Earnings in the fourth quarter, though, are currently expected to fall 0.1% from Q4 2018, so a second straight quarterly profit drop, or an earnings recession.  The last time this occurred was from July 2015 through June 2016, which dovetailed with a broad run of stock market underperformance.

However, as companies like to err on the conservative side when it comes to profit guidance, the fourth-quarter is likely to end up positive.

--U.S. Treasury Yields

6-mo. 1.60%  2-yr. 1.61%  10-yr. 1.78%  30-yr. 2.21%

The treasury market was flat on the week.

--For the 49 million Americans hitting the road for the Thanksgiving holiday, they will find gas prices mostly similar, if not cheaper, than last year’s holiday. Today’s national average is $2.59, compared with $2.57 for 2018’s holiday weekend.

Today, 61% of all gas stations in the country are selling regular unleaded for $2.50 or less, according to AAA.

Louisiana has the least expensive market at $2.21, followed by Mississippi ($2.22) and Texas ($2.25).

--Boeing Co. is facing another hurdle in its bid to get its grounded 737 MAX fleet back in the air, federal regulators now intending to inspect and sign off on every jet individually before delivery to airlines.

The move was spelled out Tuesday by the Federal Aviation Administration in a letter to Boeing, signaling the resumption of MAX flights is going to be more complicated and perhaps time-consuming than previously thought.

In the past, Boeing had the authority to perform such routine, pre-delivery safety checks and signoffs on its own.

The FAA’s move ads to further questions on whether initial MAX deliveries are still possible before year end, which has been Boeing’s goal.  Even if Boeing receives the FAA’s signoff on software fixes to flight-control computers and begins delivering in December, it is going to take additional weeks for the FAA and foreign regulators to complete associated changes in pilot training.

The FAA is revising delivery procedures because the agency is looking at the current backlog of some 600 MAX jets in storage around the globe, which pose challenges that “significantly exceed any that the Boeing system has previously experienced,” per the letter.

In addition, the letter said that, going forward, the FAA will have sole authority “to issue airworthiness certificates and export certificates” for all 737 MAX models.

“At a minimum,” the letter indicates, the agency won’t return authority for such pre-delivery approvals to Boeing until the company’s “737 MAX compliance, design and production processes meet all regulatory standards” to ensure public safety.

Southwest, American, and United Airlines have cleared the MAX from their schedules through early March.

Meanwhile, regulators from the U.S., Canada and other countries are moving closer to eventual training requirements for MAX pilots.  The FAA seems headed toward allowing U.S. carriers to put their jets back into service using only computer-based training for crews – without mandating any time in ground-based simulators, but it may require simulator time for MAX pilots as part of their normal recurring training.

But a manager at Canada’s aviation regulator sent a letter to the FAA saying, “The only way I see moving forward (on the MAX) at this point, is that MCAS has to go,” meaning the flight-control software that played a role in the two deadly crashes.

--Since Russia annexed Crimea five years ago, Russia has failed in getting the United States or the European Union to recognize the peninsula as Russian, but now, pathetically, Apple apps, when viewed from inside Russia, will show Crimea as part of the Russian Federation and separated from Ukraine by an international border.  Viewed on devices outside Russia, Crimea remains part of Ukraine.

Ex-world chess champion Garry Kasparov joined the growing condemnation of Apple’s decision, calling it a “huge scandal” and “unacceptable appeasement.”

Kasparov added: “Software is soft power. American tech companies should stand up for the values of innovation that made their success possible, not bow down to dictators for a little extra cash they don’t even need.”

Ukrainian Foreign Minister Vadym Prystaiko tweeted: “Apple, please stick to hi-tech and entertainment.  Global politics is not your strong side.”

The changes to the app were announced by the Russian parliament’s lower house, the State Duma.

When Google Maps is viewed from Ukraine, the maps show no clear border between Crimea and Ukraine but also no border between Crimea and Russia.  Its app does show Crimea as belonging to Russia when viewed from that country.

There are talks of a boycott of Apple products in Ukraine.

--Deere & Co. on Wednesday warned of lower construction and agriculture sales in its new fiscal year as its slightly better-than-expected fourth-quarter revenue was weighed down by ongoing trade concerns. 

The heavy-equipment maker said net income for fiscal 2020 is expected to come in between $2.7 billion and $3.1 billion, below the current consensus and down from 2019.

Deere said its worldwide sales of agricultural and turf equipment is expected to fall 5% to 10% while construction and forestry sales are seen falling 10% to 15%.

For the quarter ended Nov. 3, total net sales rose to $8.7 billion from $8.34 billion in the prior-year quarter, above the street. 

CEO John May said: “John Deere’s performance reflected continued uncertainties in the agricultural sector.  Lingering trade tensions coupled with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment.”

The company’s shares fell more than 4%.

--Federal prosecutors have opened a criminal investigation into whether pharmaceutical companies intentionally allowed opioid painkillers to flood communities, employing laws normally used to go after drug dealers, according to people familiar with the matter.

Prosecutors are examining whether the companies violated the federal Controlled Substances Act, a statute that federal prosecutors have begun using against opioid makers and distributors this year.

At least six companies have said in regulatory filings that they received grand-jury subpoenas from the U.S. attorney’s office in the Eastern District of New York: drugmakers Teva Pharmaceutical Industries, Mallinckrodt, Johnson & Johnson and Amneal Pharmaceuticals, along with distributors AmerisourceBergen Corp. and McKesson.

A spokesman for J&J said the company understood the subpoena was part of a broader industrywide investigation.

The probe is in its early stages and more subpoenas are expected to be issued.

Executives and companies can face civil charges under the Controlled Substances Act for not reporting items such as suspicious orders, that could indicate drugs are being used for nonmedical purposes.  [Corine Ramey / Wall Street Journal]

--The Federal Communications Commission voted to ban Huawei Technologies Co. and ZTE Corp., two large Chinese telecommunications firms, from a federal subsidy program, targeting one of the firms’ success stories in the U.S. market: Sales of telecommunications equipment to small wireless and broadband providers.  Many of these companies rely on subsides, and the FCC is banning federal funds from being spent on buying – or even maintaining – Huawei and ZTE products.

The FCC also began an action whereby U.S. firms would have to replace Huawei and ZTE equipment they have already bought and installed, the two labeled a “national security threat.”

What’s highly confusing about the FCC action is that days earlier, the Commerce Department said it was permitting some U.S. suppliers to resume shipping to Huawei despite an export restriction.  The FCC said its decision is unrelated to broader U.S.-China trade talks.

Huawei said it would fight the FCC ruling – part of a broad recent effort by the company to more forcefully challenge U.S. efforts to restrict its business.

Recall, a long time ago I wrote of how Huawei equipment was being used by rural carriers in areas adjacent to U.S. nuclear missile bases, which clearly posed a serious risk.

--Amazon.com plans to double the number of people it hired from last year to 200,000 for the holiday shopping season.

The hiring spree is due to the increasing demand in the company’s logistics operations, including stowing, packing and sorting products.

Meanwhile, Target plans to recruit 130,000 people and Kohl’s about 90,000, according to reports.

--But 2,000 salaried Cummins employees will be laid off in the first quarter of 2000, the Columbus-Ind.-based engine manufacturer announced Nov. 25.

Cummins, which has a global workforce of 62,600, attributed the decision to softening demand in the trucking industry.

“As we communicated with our employees last week, demand has deteriorated even faster than expected, and we need to adjust our cost structure,” a company spokesman said in a statement to Transport Topics.

According to data from FTR Transportation Intelligence, heavy-duty truck orders plunged by 51% in October compared with 2018.

--And today Daimler said it would cut 10,000 more jobs worldwide in the next two years as it struggles to pay for the enormous costs of investing in electric vehicles.

The Mercedes-Benz owner had already announced that a tenth of managers would be axed.

Days earlier, Audi announced it too was cutting almost 10,000 jobs, and reducing the production capacity at two of its main factories.  BMW has previously talked of 6,000 layoffs in Germany by 2022.

--As reported earlier, Charles Schwab confirmed it plans to buy its rival TD Ameritrade for about $26 billion in a deal that will create a colossal discount brokerage.

The combined company will boast 24 million brokerage accounts with more than $5 trillion in client assets after the all-stock acquisition closes in the second half of next year.

Both companies’ boards of directors have unanimously approved the purchase.

The combined company will eventually be headquartered at Schwab’s new campus in Westlake, Texas, northwest of Dallas.

The integration of the two firms is expected to take 18 to 36 months after the deal closes.  Needless to say, you can expect a lot of job losses over time as the two back offices merge their systems.

As for the antitrust angle, I haven’t seen anything.

--Best Buy Co. signaled it expected a strong holiday shopping season, by forecasting fourth-quarter profit above Wall Street’s estimates on Tuesday, sending the shares up sharply.  So add Best Buy to the list including Walmart and Target of those predicting a strong Christmas season, which can account for about 40% of annual sales for retailers.

Best Buy said it was well prepared for the holidays with new products, deals and online ordering options.  The company seems to be focusing on the mobile, smart home and wearables categories, while its repair and tech support services have helped lure more shoppers into its stores.  I had my computer issue solved (not entirely satisfactorily) by Best Buy’s Geek Squad folks.  I did see it’s a huge moneymaker.

In the third quarter, overall same-store sales rose 1.7%, while the company expects this key metric to rise 0.5% to 3% in the current quarter.   Revenue rose 1.8% to $9.76 billion.

--Dick’s Sporting Goods blew away its third-quarter earnings forecast, sending shares over 20% higher, beating the Street’s estimates on both the top and bottom lines, and raising its earnings guidance for the full year as well.

Total revenue in the quarter reached $1.96 billion, up 5.6%, and above analysts’ forecast of 3.1% growth.  Same-store sales jumped 6% from the same period in 2018, the fastest rate of same-store sales growth for the company since the quarter that ended in January 2014 and included the 2013 holiday shopping season.  Pretty impressive, especially since the prior quarter’s comp growth was 3.2%, and this was after eight quarters of negative same-store sales.  New efforts to improve the selection of merchandise and add in-store experiences like batting cages seem to be gaining traction.

The company opened six new Dick’s Sporting Goods stores in its third quarter, bringing its total to 733 locations.  It also closed eight Field & Stream stores, with 27 locations remaining.  [Dick’s also owns Golf Galaxy, of which there are 95 of them.]

Dick’s now expects fiscal 2019 same-store sales growth of 2.5% to 3%, compared with a 3.1% decrease last year.

--Shares in Dollar Tree tumbled after the discount retailer reported mixed fiscal third-quarter results and issued disappointing guidance.  Sales of $5.75 billion topped analyst expectations but earnings came up short.  The company then lowered its forecast for fourth-quarter earnings to a level well below consensus.

Same-store sales rose 2.8% at Dollar Tree and 2.3% at Family Dollar (acquired in 2015) stores, which isn’t bad.  But Dollar Tree’s forecast assumes a new round of tariffs on Chinese goods goes into effect on Dec. 15, as scheduled, which would hurt profits.  Rising distribution and freight costs are impacting margins as well.

Dollar Tree opened 165 new stores in the quarter and closed just 42.

So last week I wrote of the investigation into the manufacturing of Dollar Tree’s over-the-counter medicines, some of which are made in China, and when I went to my local store the other day, virtually all of the “Assured” brand products had been removed.  But I checked the label of some of the ones remaining and they were made in India, which to me is just as bad.

I also told you last time of how if you are a pet owner, never buy Dollar Tree items, or at least check the label, since many of these are manufactured in China.  Well virtually all of the pet food products had been removed as well. 

--HP Inc. posted lower fiscal fourth-quarter earnings as its printing business remained weak, helping to spur an increasingly acrimonious takeover approach from rival Xerox Holdings Corp.

For the quarter ended Oct. 31, HP reported per-share earnings of 26 cents, down from 91 cents and way short of the 51 cents analysts were expecting.

But adjusted earnings were actually ahead of the Street at 60 cents, so the shares rose a little.

The company that is focused on selling computers and printers since Hewlett-Packard Co. split in 2015 said revenue for the quarter edged higher to $15.41 billion compared with $15.37 billion a year ago.

HP has announced the company would be eliminating around 7,000 to 9,000 jobs, or 16% of its workforce, over a three-year period, which the company hopes will generate $1 billion in annual savings.

Xerox, which announced its own cost-cutting plan in February, formally approached HP about a possible takeover earlier this month, which HP has rejected, though it said Zerox’s original offer undervalued the company, though added it was open to talks.

Xerox then said it would directly engage with HP shareholders to convince them of the merits of a deal.

Activist investor Carl Icahn, who has a 10.6% stake in Xerox, is backing the combination and has taken a 4.24% stake in HP, as reported by the Wall Street Journal.

--Uber suffered a big blow when it was announced it would not be granted a new license to operate in London after repeated safety failures, Transport for London (TfL) said.

The regulator said the taxi app was not “fit and proper” as a license holder, despite having made a number of positive changes to its operations.

Uber can appeal and will continue to operate during that process.

About 45,000 drivers work for Uber in London, which is one of its top five markets globally.

Among the items cited by the TfL were a change to Uber’s system that allowed unauthorized drivers to upload their photos to other Uber driver accounts, which meant at least 14,000 fraudulent trips were carried out in the city in late 2018 and early 2019, TfL said.  The regulator also found dismissed or suspended drivers had been able to create Uber accounts and carry passengers, “compromising passenger safety and security.”

Uber said the decision was “extraordinary and wrong,” and that it had fundamentally changed its business over the last two years.

--Days after hosting a bumpy reveal event, Tesla CEO Elon Musk said he had secured 250,000 preorders for its new electric pickup truck.  In order to preorder one, customers had to drop a $100 refundable deposit.

It was last week that Musk took the stage in Los Angeles to showcase the car’s so-called bulletproof windows and during a demonstration, the company’s design head hurled a metal ball at the armored windows and they cracked – twice.

--LVMH Moet Hennessy Louis Vuitton, the world’s largest luxury goods company, said on Monday that it would buy the jeweler Tiffany & Company for $16.2 billion; the largest ever in the sector, giving LVMH a bigger presence in the U.S.  LVMH raised its original offer from $120 to $135/TIF share.

“We are delighted to have the opportunity to welcome Tiffany, a company with an unparalleled heritage and unique position in the global jewelry world, to the LVMH family,” chairman and CEO Bernard Arnault said in a statement.

The LVMH stable of brands already included Dior, Givenchy, Fendi, Dom Perignon and Bulgari.

--New Jersey-based arts and crafts chain A.C. Moore will close its 145 stores, its parent company Nicole Crafts announced Monday, with up to 40 becoming Michaels. 

I get all of my artificial trees at Michaels.

--Walt Disney’s “Frozen 2” prevailed last weekend at the box office with a domestic $127 million debut, considered as the best opening for an animated film.  This is the second installment of the 2013 film.  “Frozen 2” also raked in $223.2 million overseas, led by a $53 million debut in China, for a global cumulative of $350 million.

But it will be interesting seeing this weekend’s numbers with all manner of pictures opening up.

--As reported by the Los Angeles Times’ Stephen Battaglio, “More than 70 million viewers watched some portion of the House Intelligence Committee’s Impeachment inquiry...according to Nielsen data.”

Both Fox News Channel and MSNBC saw significant year-over-year increases in audience levels for November, with MSNBC’s daytime viewing levels for the month the highest in its 23-year history.

The peak for Fox, CNN, MSNBC and the three major broadcast networks was on the opening day, Nov. 13, when it reached an average of 13.1 million viewers.  By the fifth session on Nov. 21, that figure had leveled off to 11.3 million, comparable to what a top-rated non-sports entertainment program draws in prime time.  Fox News was the most-watched network each day.

The daytime impeachment hearings also gave a boost to cable news opinion shows in prime time.  Fox News’ “Tucker Carlson Tonight” averaged 3.4 million viewers in November, a record high for the program.  “Hannity” also reached an all-time high with 3.6 million viewers.  Fox News averaged 2.7 million viewers in prime time, up 15% from November 2018, a high-rated month that included coverage of the midterm elections.  MSNBC was up 12% to 2.06 million.  But CNN was down 11% to 999,000 viewers.

As for online coverage of the hearings, NBC News counted 9.6 million video “starts” for impeachment coverage across its streaming platforms, which include Twitter and Facebook.  CNN said its digital viewing increased 3.4%.

--Finally, Fox Corp. said commercial time during Super Bowl LIV is sold out, as a strong economy and marketers’ appetite for live sports fueled better-than-expected demand.

Advertisers are paying up to $5.6 million for 30 seconds of airtime during the game, although companies that buy multiple spots do get a discount.  Prices for ad time during the last Super Bowl reached as high as $5.3 million.

Last year, it took CBS until literally hours before the event to sell out all its spots.

Fox said it saw strong demand from technology, beverage and automotive companies.

Foreign Affairs

Iran / Iraq: Iraqi security forces killed at least 60 protesters on Thursday after demonstrators stormed and torched an Iranian consulate overnight, in what some are saying marks a turning point in the uprising against the Tehran-backed authorities.  At least 46 people died in the southern city of Nassiriya when troops opened fire on demonstrators who blocked a bridge before dawn on Thursday and later gathered outside a police station.  Others were killed in Baghdad and Najaf (where 18 died), bringing the total death toll to about 420.

In Nassiriya, video of protesters cheering in the night as flames billowed from the consulate were a stunning image after years in which Tehran’s influence among Shiite Muslims in Arab states has been a defining factor in Middle East politics.  The bloodshed that then followed represented one of the most violent days since the start of the uprising at the start of October, with anti-corruption demonstrations that then swelled into a revolt against authorities seen by young people as stooges of the Iranian government.

The protesters, overwhelmingly Shiite, have accused Iraqi authorities of turning against their own people to defend Iran.

Iraqi Prime Minister Adel Abdul Mahdi had rejected calls to resign*, after meetings with senior politicians that were attended by the commander of Iran’s Revolutionary Guards’ Quds Force, the elite unit that directs its militia allies abroad.

The military commander of the Popular Mobilization Forces (PMF), an umbrella group of paramilitary groups whose most powerful factions are close to Iran, suggested the overnight unrest in Najaf was a threat to Shiite clergy based in the city.  The paramilitary fighters said they would use full force against anyone who threatened Iraq’s most senior Shiite cleric, Grand Ayatollah Ali al-Sistani.

Influential populist cleric Moqtada al-Sadr issued a fresh call for the government to resign, while warning those who torched the embassy that they risked provoking a violent backlash from the authorities.  “Do not give them cover to end your revolution, and stay clear of religious sites,” he said in a statement on Twitter.  If the government does not resign, “this is the beginning of the end of Iraq,” he said.

*And stunningly, Friday afternoon Prime Minister Mahdi did step down after Ayatollah al-Sistani called for lawmakers to reconsider their support for the government.

“In response to this call, and in order to facilitate it as quickly as possible, I will present to parliament a demand (to accept) my resignation from the leadership of the current government,” a statement signed by Adbul Mahdi said.  There was no indication when the resignation would be effective.

Meanwhile, in Iran itself, continued violence in the country included the torching of over 700 banks and 140 government sites, which Supreme Leader Ayatollah Ali Khamenei denounced as a “very dangerous conspiracy,” though he said the protests amounted to a plot that Iranians had defeated, referring to the worst anti-government unrest in Iran since authorities put down demonstrations against election fraud in 2009.

The disturbances began on Nov. 15 after the announcement of gasoline price hikes, but quickly turned political, with protesters demanding top leaders step down.

In response, the government has blamed “thugs” linked to exiles and the United States, Israel and Saudi Arabia for stirring up the street unrest.

More than 50 bases used by security forces were attacked and approximately 70 gas stations were also burned, Iran’s interior minister said.

London-based Amnesty International said on Monday it had recorded at least 143 protesters had been killed.  The Center for Human Rights in Iran, a New York-based advocacy group, said the number of arrests was probably close to 4,000.

Combined with rising inflation, growing unemployment, a slump in the currency and state corruption, Washington’s “maximum pressure” and the reimposition of sanctions on the country has caused Iran’s economy to deteriorate.

The government said the gasoline price rises of as much as 50% aim to raise around $2.55 billion a year for extra subsidies to 18 million families struggling on low incomes.  The monthly cash payments are set at just $4.44 per person, at last report.

Turkey / Syria: Foreign Minister Mevlut Cavusoglu accused French President Emmanuel Macron of being a “sponsor of terrorism,” dismissing the French leader’s criticism of Turkey’s Syria offensive.

Last month Macron angered Turkey by hosting an official from the Kurdish-led Syrian Democratic Forces (SDF).  The spat between Turkey and France comes ahead of the NATO summit.

Earlier on Thursday, Macron said he stood by comments made three weeks ago when he described NATO as “brain dead.”  He said members of the alliance needed a “wake-up call” as they were no longer cooperating on a range of key issues.  He also criticized NATO’s failure to respond to the military offensive by Turkey in northern Syria.

Macron said his meeting Oct. 8 with the SDF was to express France’s solidarity with it in its fight against the Islamic State group, and also to reiterate concerns about the prospect of a Turkish military operation in Syria.

Macron has repeatedly criticized both Washington’s abrupt withdrawal of support for the Kurds and Turkey’s related offensive into Syria, two strategic decisions that were taken without consulting other NATO allies.

Turkey, for its part, sees France as far too friendly towards the Kurds. It wants NATO as a whole to back its position in Syria.  But this whole episode underscores Turkey’s drift away from NATO and the West.  Its purchase of a sophisticated Russian air defense system was an extraordinary step for a NATO ally.

And it didn’t help when today, Turkish President Erdogan said Macron’s comments on NATO reflect a “sick and shallow” understanding, telling the French president “you should check whether you are brain dead.”

France’s Foreign Ministry office then summoned Turkey’s ambassador for an explanation of the insults.

Separately, a car bomb killed 17 people near a Syrian border town seized by Turkish-backed forces last month, Turkey’s defense ministry blaming it on Kurdish YPG fighters.

And then we learned this week that U.S. troops have resumed large-scale counterterrorism missions against ISIS in northern Syria, two months after President Trump’s abrupt order to withdraw American troops opened the way for Turkey’s bloody cross-border offensive.

“Over the next days and weeks, the pace will pick back up against the remnants of ISIS,” Gen. Kenneth F. McKenzie Jr., the commander of the military’s Central Command, told reporters on the sidelines of the Manama Dialogue security conference in Bahrain last weekend.

Afghanistan: President Trump paid an unannounced visit to U.S. troops in Afghanistan on Thanksgiving, saying he had restarted peace negotiations with the Taliban less than three months after he scuttled them.

Trump said during a meeting with Afghan President Ashraf Ghani, “The Taliban wants to make a deal, and we’re meeting with them.”

“We’re going to stay until such time as we have a deal, or we have total victory, and they want to make a deal very badly,” said Trump, who reaffirmed his desire to reduce America’s troop presence here to 8,600, down from about 12,000 to 13,000.

Trump suggested that the Taliban is eager to make a peace deal, but that he himself is indifferent to that outcome.

“The Taliban wants to make a deal – we'll see if they make a deal.  If they do, they do, and if they don’t, they don’t. That’s fine,” the president said.

The key is whether the Taliban agrees to a legitimate cease-fire, which President Ghani’s government insists on.

The day before Trump’s arrival, at least 13 people were killed when their car struck a roadside bomb on the way to a wedding party in Taliban-controlled territory in northern Afghanistan.

Retired Gen. David Petraeus, a former commander of American forces in Afghanistan, suggested recently that the Trump administration should only strike a deal with the Taliban that demands more than the United States was asking for before talks fell apart in September, and the whole Camp David fiasco.

For its part, today, the Taliban said it was ready to restart peace talks with Washington.

Mali: France reported the loss of 13 of its soldiers in a midair collision between two helicopters during a nighttime counterterrorism operation in Mali, the biggest loss of French troops in a single day since an attack in Beirut, Lebanon, in 1983 that killed 58 soldiers (part of the bombing of the U.S. barracks there that killed 241 Americans).

The crash brings the death toll in France’s campaign against insurgent groups in northern Mali since 2013 to 41.  The terrorist groups range from al Qaeda-linked and Islamic State militants to tribes opposed to the central government in Bamako.

Mali is becoming a test of whether France and its European allies can step into the role of global cop as the Trump administration shifts its emphasis from counterterrorism toward strategic competition with China and Russia.

In addition to the 4,500 French soldiers stationed in Mali, the UN maintains a large peacekeeping force in the region.

International forces are struggling with a surge in terror attacks across the Sahel, a swath of north-central Africa from Senegal in the West to Eritrea in the East.

China: On Sunday, Hongkongers went to the polls to vote in local district elections, turning out in record numbers, and pro-democracy candidates captured 389 of 452 seats (86%).  Pro-Beijing hopefuls won 58 seats, down from 300, a stunning result.  Of the 18 district councils overall, before the vote, Beijing’s establishment allies controlled all of them. After the vote, they control just one.

The election was clearly a referendum on China’s rule of the territory of 7.4 million people.

Hong Kong’s chief executive, Carrie Lam, signaled post-election she will not accede to any of the protesters’ “Five Demands,” save for her earlier withdrawal of her proposal to extend extradition to mainland China.  There has been no talk of compromise in the wake of Beijing’s defeat.

Beijing warned the United States on Thursday that it would take “firm counter measures” in response to U.S. legislation backing anti-government protesters in Hong Kong, and said attempts to interfere in the Chinese-ruled city were doomed to fail.  President Trump on Wednesday signed the legislation which supported the protesters (the votes in the House and Senate nearly unanimous), despite angry objections from Beijing.

“I signed these bills out of respect for President Xi, China, and the people of Hong Kong,” Trump wrote in a statement.  “They are being enacted in the hope that leaders and representatives of China and Hong Kong will be able to amicably settle their differences leading to long-term peace and prosperity for all.”

Well this was rather wishy-washy.  As one professor of politics in Hong Kong, Wong Yiu-chung, told the Los Angeles Times, Trump probably signed the bill for his own benefit, not wanting to offend Xi, “But sometimes interests coincide. This act gives us a lot of hope.”

The law requires the State Department to certify, at least annually, that Hong Kong is autonomous enough to justify favorable U.S. trading terms that have helped it become a world financial center.  It also threatens sanctions for human rights violations, though the president still has the authority to determine who qualifies as an offender.

Nevertheless, the near-unanimous passage through both houses of Congress, coupled with last weekend’s elections, are vindication for the protesters, who responded by staging a “Thanksgiving” rally, with thousands, some draped in U.S. flags, gathering in the heart of the city.

“The rationale for us having this rally is to show our gratitude and thank the U.S. Congress and also President Trump for passing the bill,” one leader of a student group told Reuters.  “We are really grateful about that and we really appreciate the effort made by Americans who support Hong Kong, who stand with Hong Kong, who do not choose to side with Beijing,” the student said.

The Chinese foreign ministry said the United States should shoulder the consequences of China’s countermeasures if it continued to “act arbitrarily” in regards to Hong Kong.

Chinese Vice Foreign Minister Le Yucheng summoned U.S. Ambassador Terry Branstad and demanded that Washington immediately stop interfering in China’s domestic affairs.

Hong Kong’s Beijing-backed government said the legislation sent the wrong signal to demonstrators and “clearly interfered” with the city’s internal affairs.

The Hong Kong and Macau Affairs Office – China's top office overseeing Hong Kong policy – soon followed with its own criticism, saying the act was “full of prejudice and arrogance” and underscored the “sinister intention” of the U.S.

China is considering barring the drafters of the legislation, whose U.S. Senate sponsor is Florida Republican Marco Rubio, from entering mainland China as well as Hong Kong and Macau, per a tweet from the editor of China’s Global Times, a communist party mouthpiece.

But China’s options are limited, in part because it badly wants and needs a trade deal.

Gordon G. Chang / New York Daily News

“Today, thanks to Chinese hardheadedness, people are developing their own identity as ‘Hongkongers,’ and ditching the sense they are ‘Chinese.’ They are, for instance, taking lunch breaks to congregate in shopping malls to sing the anthem they have adopted this year, ‘Glory to Hong Kong.’  The oft-heard slogan - ‘Liberate Hong Kong, revolution of our time’ - hints at separation from China.

“Chinese leaders failed to understand Hong Kong. Various sources report they had expected voters to reject opposition candidates because they were tired of the months-long protests and disturbances.  Now, only Beijing believes its unyielding posture is popular. It is unlikely to compromise because Xi Jingping is identified with the tough line and any show of flexibility would be seen as his admission of mistake.

“As protesters have been saying since June, (Carrie) Lam has taught them that only violence works.  She now has an opportunity to prove them wrong. So far, she is not doing that.”

Editorial / Wall Street Journal...prior to Trump signing the bill...

“The vote is (a) message, or perhaps a plea, to President Donald Trump to support Hong Kong’s call for freedom. Mr. Trump hasn’t exactly been a voice of Reaganite moral clarity on Hong Kong, and he hasn’t decided whether to sign the Hong Kong Human Rights and Democracy Act that passed the House and Senate in nearly unanimous votes this month.

“ ‘We have to stand with Hong Kong, but I’m also standing with President Xi,’ Mr. Trump said (last) Friday.  ‘He’s a friend of mine.  He’s an incredible guy...But I’d like to see them work it out.  Okay?... I stand with freedom.  I stand with all of the things that we want to do, but we also are in the process of making the largest trade deal in history. And if we could do that, that would be great.’

“We understand Mr. Trump’s pragmatic desire not to insult Mr. Xi amid the trade talks, but his rhetorical indulgence of dictators is often cringe-worthy. The best you can say about Mr. Xi is that he hasn’t sent in Chinese troops to crush dissent in Hong Kong.

“Mr. Xi isn’t a sentimental man and he’ll make a decision on trade talks in China’s cold-blooded national interest.  If he thinks he needs the deal for the sake of China’s economy, he’ll agree to U.S. terms whether or not Mr. Trump signs the new Hong Kong bill.  After Sunday’s demonstration of courage by Hong Kong voters, a veto by Mr. Trump would betray America’s values and be a show of weakness to China.”

Last weekend, at a G20 meeting in Japan, China’s top diplomat, Wang Yi, did not hold back in his criticism of the United States.

“The United States is broadly engaged in unilateralism and protectionism, and is damaging multilateralism and the multilateral trading system.  It has already become the world’s biggest destabilizing factor....

“Certain U.S. politicians have smeared China everywhere in the world, but have not produced any evidence....(and the U.S.) has also used its domestic law to “crudely interfere” in China’s internal affairs,” referring to Hong Kong and “one country, two systems.”

One final note.  The protests and demonstrations across Hong Kong since June have led to the sharpest plunge in tourist arrivals in a single month since the Sars outbreak in May 2003.  October saw 3.31 million arrivals, a decline of 43.7 percent from the same period last year.

Visitor numbers from the mainland plummeted to 2.5 million arrivals last month, down 45.9 percent from the previous month, as Chinese tourists shunned what was usually their top destination to spend the seven-day holiday at the beginning of the month.

North Korea: Kim Jong Un expressed “great satisfaction” over the latest test of a large multiple-rocket launcher, state media said on Friday, a launch that experts said showcased improving performance by the system and its crews.

North Korea fired two short-range projectiles into the sea off its east coast on Thursday in a fourth test of its new “super-large multiple-rocket launcher,” South Korea’s Joint Chiefs of Staff said at a briefing.

The latest test of the so-called KN-25 missile came as a Thanksgiving Day reminder to the United States of a year-end deadline Kim has set for Washington to show flexibility in their stalled denuclearization talks.

The rockets traveled up to 236 miles and reached an altitude of 60 miles.

The series of tests of the KN-25, first unveiled in August, show the North is steadily improving its ability to quickly fire multiple rockets from their mobile launch vehicles.  This is important because in the event of war, North Korean rocket crews could speedily deploy, fire and move before being targeted by South Korean or American forces, the experts are saying.

Jeffrey Lewis, one of said experts at the Center for Nonproliferation Studies (CNS), said, “The faster it fires, the quicker it can (get) out of dodge before counter-fire arrives.”

Russia: Gerald F. Seib / Wall Street Journal

“Vladimir Putin has had a good year, and it just keeps getting better.  He now is collecting his winnings on multiple fronts.

“Even Mr. Putin must be amazed at how well he is achieving his goal of sowing discord within the U.S. political system.  First, his agents interfered in the 2016 election.  Now they can sit back and watch as their efforts to deflect blame away from Moscow and toward Ukraine are bearing fruit, in the form of a bitter American debate that is driving pro-Trump and anti-Trump forces further apart.

“Fiona Hill, until recently the top Russia expert on the staff of President Trump’s National Security Council, summarized the Russian success on this front succinctly in her testimony before a House impeachment hearing last week: ‘The impact of the successful 2016 Russian campaign remains evident today.  Our nation is being torn apart.  Truth is questioned.  Our highly professional and expert career foreign service is being undermined.’

“Mr. Putin appears so confident in his success on this front that he actually is publicly gloating about it.  ‘Thank God no one is accusing us of interfering in the U.S. elections anymore; now they’re accusing Ukraine,’ he said at a conference in Moscow last week.

“Ukraine’s new president, Volodymyr Zelensky, heads early next month into his first meeting with Mr. Putin – whose forces have invaded his country and lopped off part of it – knowing that American support for Ukraine can be, and was, caught up in domestic U.S. political fights.  Ukraine’s leader thereby enters talks with Mr. Putin less certain of support from Washington in his country’s confrontation with Russia.

“But these successes on the American front are only the top of the list of trends moving Mr. Putin’s way.

“The British political system is being torn in similar fashion by a debate over how much Russian disinformation was unleashed in an attempt to convince citizens to vote in 2016 to leave the European Union.

“British Prime Minister Boris Johnson, a Brexit advocate, is declining to release a sensitive report by the Parliament’s intelligence committee on Brexit interference, setting off a partisan argument just as Britain heads toward a new national election.

“Regardless of whether Russia actually influenced the Brexit vote, the reality, three years later, is that Britain appears to be on the road toward exiting the EU in the messiest, most damaging way possible. What’s bad for European economic and political unity is good for Russia, so Mr. Putin can put the continuing Brexit mess as a big entry on the positive side of his 2019 ledger.

“Meanwhile, the most important members of the North Atlantic Treaty Organization are descending into an argument about the functioning and future of the 70-year alliance, originally formed to deter expansionist moves by Moscow....

“At the same time, (the) American retreat in Syria has helped further a trend in which Mr. Putin is becoming the man to see about Middle Eastern affairs....

“In fact, Syria has worked out smashingly well for Mr. Putin: American troops and their Kurdish allies did the lion’s share of the work to extinguish Islamic State and its caliphate there, which Russia actually opposed, too.  Now, having finished the dirty work, Washington has essentially ceded oversight of Syria to Moscow and allowed its Kurdish allies to be obliterated or pushed aside.

“Russia’s most reliable regional proxy, Syrian leader Bashar al-Assad, now appears secure in his position and certain to survive his country’s civil war....

“Mr. Putin is a former KGB operative, and it shows.  He learned during the Cold War how to use disinformation and propaganda to exploit weak spots in Western democracies, and the dark space of the internet has opened a whole new playing field for him.  He is a master of his craft.”

Separately, last week I had a piece on the U.S. military and climate change, specifically the huge needs for bottled water in many of the theaters it operates in, and Part II is about climate change and how it is opening up new trade routes and opportunities to exploit resources in the Arctic.

“(An) Army War College study notes Russia’s rapid build-up in the Arctic as concerning, which includes the opening of 16 deep water ports, 13 airfields and 10 air defense sites.  Russia’s development of KH-101/102 air-launched cruise missiles and SSC-8 ground-launched cruise missiles potentially put much of the U.S. mainland at risk from low altitude, radar evading, nuclear capable missiles, the study says.

“The Army should ‘immediately’ expand the Arctic training available to units, and start to focus on developing a doctrine to operate in the region, the study said.”  [Kyle Rempfer / militarytimes.com]

Random Musings

--Presidential Tracking Polls....

Gallup: 43% approve of President Trump’s job performance, 54% disapprove; 90% of Republicans approve, 38% of independents (Nov. 1-14).
Rasmussen: 46% approve, 53% disapprove (Nov. 26...the Rasmussen folks taking a little break).

In a Quinnipiac University poll, Trump receives a 40% approval rating among all registered voters, 54% disapprove.  This compares to a 38-58 split on October 23, and is essentially where it’s been for the last two years.

A CNN/SSRS poll found President Trump’s approval rating at 42%, 54% disapprove.

--According to a separate CNN/SSRS Poll, former Vice President Joe Biden continues to lead in a national poll among registered Democrats and Democratic-leaning independents with 28% support, followed by Sen. Bernie Sanders at 17%, Sen. Elizabeth Warren at 14% and South Bend mayor Pete Buttigieg at 11%.

No other candidate reaches 4%, meaning the poll does not result in any changes to the lineup for the Democratic National Committee’s December debate.

Four candidates stood at 3%, including former New York City Mayor Michael Bloomberg.  He is joined by Sen. Kamala Harris and businessmen Tom Steyer and Andrew Yang.  Sens. Amy Klobuchar and Cory Booker are at 2% each.

Just 42% say they have definitely decided on their candidates, about the same as in October, and Biden continues to have an edge among that group of committed voters.

In a new Quinnipiac University national poll among Democrats and independents leaning Democratic, Biden receives 24%, with Buttigieg at 16%, Warren 14% and Sanders 13%.

Bloomberg, Harris and Klobuchar are at 3%, Booker, Yang, Julian Castro and Sen. Michael Bennet 2% apiece.

In October, Quinnipiac had it Warren 28%, Biden 21%, Sanders 15% and Buttigieg 10%.

In terms of the issues, 26% say health care is the most important issue to their vote, while 21% say climate change, and 14% say the economy.

--Billionaire businessman Michael Bloomberg formally entered the race for the Democratic nomination with a huge ad buy; the eighth-richest American with an estimated worth of $53.4 billion, as ranked by Forbes, targeting the moderate / centrist wing of the party, and more specifically, those who would favor Joe Biden and Pete Buttigieg.

Bloomberg has been critical of anti-Wall Street crusader Elizabeth Warren and her plan to tax the super wealthy to pay for programs ranging from universal healthcare to free college tuition.

Because of the late start to his campaign, Bloomberg is skipping the four states with early nominating contests in February, and focusing on the states that hold primaries and caucuses starting on Super Tuesday, March 3.  No winning presidential contender has ever pursued a similar strategy.

And, Bloomberg’s apology the other day for his “stop and frisk” policy as New York’s mayor didn’t go over well with the black community...it was too little, too late for them.  I thought he was a great mayor, but he was no doubt controversial, so the record will be picked over.

The reason why I like the guy is because he is a realist on foreign policy, and a liberal/moderate on social policy.

But then there is his company, Bloomberg LP, and how they plan on treating their boss in the press.

Editorial / Wall Street Journal

“Mr. Bloomberg joined the Democratic race for President on Sunday, creating a conundrum for his journalists at Bloomberg LP.   Do they quit covering 2020?  Do they stand on the principle of editorial independence, while promising to treat their billionaire proprietor like any other Joe, Pete or Elizabeth?

“Neither, per a memo Sunday from John Micklethwait, Bloomberg’s editor in chief.  ‘We will write about virtually all aspects of this presidential contest,’ he said, adding that a Bloomberg reporter has already been assigned to Mr. Bloomberg’s campaign.  But ‘we will continue our tradition of not investigating Mike (and his family and foundation) and we will extend the same policy to his rivals in the Democratic primaries.’

“That same courtesy won’t be given to President Trump, at least for now.  Bloomberg’s reporters will ‘continue to investigate the Trump administration, as the government of the day.’  This question will be reassessed, the memo said, if Mr. Bloomberg eventually wins the Democratic Party’s nomination.

“What an awkward kludge.  Start with the ban on investigating Democrats, but not Mr. Trump.  There’s a name for folks who dig through only one political party’s trash: opposition researchers. Bloomberg has about 2,700 journalists and analysts, according to the Journal’s news story.

“Now Bloomberg is telling readers that its investigative reporters will sit on their hands for 2020 Democrats:  No digging into Joe Biden’s conflict of interest in Ukraine, or Elizabeth Warren’s biographical fibs, or Pete Buttigieg’s record as mayor of South Bend.

“Yet the GOP President, Mr. Micklethwait said, is fair game for muckraking....

“It hardly matters that Mr. Bloomberg may not win the Democratic nomination.  His campaign is premised on the idea that, as his launch video says, Mr. Trump is a ‘menace.’  If Bloomberg can’t pledge to cover both parties equally, it would be better not to cover the election at all.”

--According to the second annual national defense survey conducted by the Ronald Reagan Presidential foundation and Institute, three out of four Americans believe that U.S. troops should intervene overseas when freedom is threatened or human rights abuses are apparent in other countries.

A majority of Americans disapprove of the way President Donald Trump is handling U.S. foreign policy and about half think the country’s global standing will deteriorate during the next year.

76 percent support of respondents supported the use of American military force abroad, whether or not there is a direct threat to the U.S., to include defending freedom and preventing human rights violations.  Additionally, 65 percent were in favor of maintaining America’s network of military bases overseas, while 28 percent believe that presence should be reduced.

“These are not the views of a country that would eschew global leadership but rather a nation where President Reagan’s vision of peace through strength is alive and well,” Roger Zakheim, the Reagan Institute’s Washington director, said in a press release.

The survey also found that 86 percent of Americans report confidence in the military, down from 93 percent in the inaugural 2018 survey.  Support for increasing military spending, however, is up one point to 76 percent in 2019, according to the survey.

The numbers are interesting in light of President Trump’s isolationist stance in some foreign policy matters, including advocating for withdrawals from Afghanistan and Syria, despite long-held partnerships with local allies fighting insurgencies there.

“We’re not a police force,” Trump said in October, after a backlash over his decision to pull troops out of Syria in the face of a Turkish offensive, leaving our Kurdish allies vulnerable.

Overall, the president receives low marks from the public for his job handling foreign policy – 35 percent approve, while 63 percent disapprove.  But the partisan divide remains.  76 percent of Republicans approve, just 8 percent of Democrats say the same.

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

God bless America.

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Gold $1470
Oil $55.42

Returns for the week 11/25-11/29

Dow Jones  +0.6%  [28051]
S&P 500  +1.0%  [3140]
S&P MidCap N/A
Russell 2000 N/A
Nasdaq  +1.7%  [8665]

Returns for the period 1/1/19-11/29/19

Dow Jones  +20.3%
S&P 500  +25.3%
S&P MidCap  +20.9%
Russell 2000  +20.5%
Nasdaq  +30.6%

Bulls 57.2
Bears 17.1...updated numbers next time post-holiday

Have a great week.

Brian Trumbore

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