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Edition 1,427
Today marks six months in the U.S.-Israel-Iran War (which you can extend to Lebanon…let alone the impact on all the Gulf states).
The conflict has settled into a tense, albeit relatively quiet, stalemate, as the White House transitioned from a military campaign that we would learn expended tons of key weapons systems, including on air defense defending against cheap Iranian drones, much to the chagrin of Ukraine, Taiwan and other Asian allies, into a campaign of economic pressure on the regime in Tehran.
But for all the talk by President Trump that he has destroyed Iran’s ability to produce a nuclear weapon, it’s continually astounding to me that there is still zero talk of insisting that Iran let in inspectors from the International Atomic Energy Agency, and that Trump still has yet to meet in the Oval Office with IAEA Director General Rafael Grossi, who would only buttress the president’s case.
No, instead, Trump, who we’re told by his loyalists is a master at multi-tasking, has been focused on his many vanity projects, and then launched a trade war against Canada.
And now we’re told that Lake Ontario, by the stroke of Trump’s black Sharpie, is magically “Lake America.”
It will always be Lake Ontario here at StocksandNews, just as the Gulf of Mexico will never change, though I’m anxious to see how news and weather folks handle the lake’s name. Don’t give in, people.
But back to Iran, the situation remains volatile and can change at any moment. The plight of the Iranian people is of no concern to the evil regime. They, too, are focused on the midterms and they know the price Americans pay at the gas pump heading into November can influence the vote.
—
I get into the catastrophe in Nepal below, but for openers, the incredible, sickening videos of total destruction we all saw almost didn’t seem real. The wall of water easily clearing a seven-story building, the tragedy of seeing people unable to get out of harm’s way.
One man said he heard what sounded like a thunderclap before a wave of muddy water crashed into his home, carrying away his wife and two daughters. “They all died and I lived,” he said.
Amidst the horror and sorrow, however, you once again saw the triumph of the human spirit and the amazing rescue efforts still underway. We pray for the first responders’ safety as they work miracles.
—
Tale of the Tape
Oil / West Texas Intermediate (WTI)
Friday, Feb. 27…$67.30
Friday, Aug. 28…$83.34
Nationwide averages at the Gas Pump [Source: AAA]
Friday, Feb. 27…regular $2.98; diesel $3.75
Friday, Aug. 28…regular $4.08; diesel $5.61…this is awful….
As it went down, day by day, in the Iran War….
Iranian President Masoud Pezeshkian has called for an end to the months-long war, stating that Tehran holds a position of strength as diplomatic talks remain stalled.
“It is better that we bring the war to an end now as we are in a position of power and dignity,” Pezeshkian said in a meeting with doctors on Friday. “The whole world acknowledges our victory and emphasizes that America has attacked our schools, hospitals and infrastructure in violation of all regulations and is hated around the world.”
Pezeshkian – whose authority as president is ultimately subordinate to Iran’s Supreme Leader Mojtaba Khamenei – also defended the June memorandum of understanding agreed with Washington against hardline domestic critics in parliament, who accused his administration of giving concessions to the U.S.
“They cannot find even a single clause in this agreement that indicates capitulation. All the commitments concern the other side,” he said.
However, days after the MOU expired, Iran’s military leadership has warned that the country remains ready to strike back against any new threats.
“With preparedness across land, sea, air, air defense and cyberspace, Iran’s armed forces will respond to the enemy’s new threats with crushing, punishing and devastating responses,” Major-General Ali Abdollahi, chief of staff of Iran’s armed forces, was quoted as saying by Iranian media.
“If (Trump) wants to do something, we will retaliate in a seismic manner,” Mohsen Rezaei told the state broadcaster in an interview that aired late Saturday. He said Iran would target oil-shipping routes out of the Persian Gulf – alternatives to the Strait – if neighbors join in.
Rezaei, a former Revolutionary Guard commander and military adviser to the supreme leader, was part of senior appointments widely seen as hardening Tehran’s political and military stance.
Tehran continues to keep the Strait of Hormuz partially shut while Washington persists with a naval counterblockade. Reports indicate the U.S. has been organizing and protecting secret convoys of tankers through the southern sector of the Strait, enabling between five and 10 million barrels a day of oil to be exported.
There were no confirmed attacks in the Strait of Hormuz over the past 48 hours, a multinational coalition overseen by the U.S. Navy said Sunday, with shipping traffic still at reduced levels.
Iran’s Foreign Ministry spokesperson warned Tehran would respond harshly to expanded sanctions, including measures against countries it sees as cooperating with Washington.
“Any escalation of this situation will undoubtedly bring about consequences,” Esmail Baghaei said. “Our hands are not tied.”
Editorial / Wall Street Journal
“After six months of war with Iran, President Trump has a credibility problem. His blustering threats, alternating with claims of imminent peace and victory, are doubted by friends and foe. Will his new threat this week on Truth Social of the ‘MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST ANY COUNTRY!’ be different?
“By now the world will have to see it to believe it. No President has yet climbed the Iran sanctions ladder with China, moving from the isolated ‘teapot’ refineries that buy Iran’s oil to the Chinese state-owned enterprises that support them. Nor has any President given Dubai an ultimatum to shut down Iran’s illicit financial network and meant it.
“‘ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences,’ Mr. Trump wrote Wednesday. ‘Oil smuggling, swap lines, cash transfers, exchange houses, ship registries, front companies – It all needs to stop NOW. You know who you are.’
“They do, which may be why the United Arab Emirates pre-empted Mr. Trump with its announcement on Tuesday: ‘All trade, commercial exchanges, and financial transactions with Iran have been halted until further notice.’
“The question is whether all of this is a headline or a policy. Only the latter, which Treasury Secretary Scott Bessent says he’ll soon lay out, would give Tehran reason to fear. While Iran admits the U.S. blockade has driven its oil exports to near-zero, Dubai-Iran trade never leaves the Persian Gulf. The U.S. Navy doesn’t touch it….
“It is no small ask of the Emiratis to cut off their dangerous and much-larger neighbor, especially when the U.S. hasn’t been able to protect them fully from Iran or restore free passage in the Strait of Hormuz. The U.A.E., America’s best Gulf ally during the war, may also fear that a financial crackdown could spark capital flight from Russia and others.
“If Mr. Trump acts on his word, the Emiratis have far more to fear from secondary U.S. sanctions. The test will lie in what happens to Dubai’s Iran-linked exchange houses, money-service businesses, trade companies and beneficial-ownership networks, as well as the movement of cash and high-value goods. Will flights be scrutinized for bulk-cash and gold smuggling? A halt to gasoline and refined-product exports to Iran would be felt immediately….
“There’s more to be said about Iran’s networks in Turkey, Iraq, Qatar and Pakistan, as well as in crypto. But the key is that trade cutoffs, unlike sanctions, are felt immediately.
“Iran may lash out militarily in response, targeting Gulf energy again, and the U.S. will have to be ready with a firm response. ‘We are going to collapse this regime,’ Mr. Bessent said Thursday. Economic pressure can make survival more difficult for the regime, but it will take more resolve and consistency than Mr. Trump has shown in the past six months.”
Treasury Secretary Scott Bessent then rolled out the administration’s much-anticipated “Economic D-Day” offensive against Iran on Monday, but he signaled the plan entails more of a threat than immediately bringing the hammer down, at least for now.
Bessent warned all countries to cut off business and financial ties with Iran or else face significant sanctions. But he avoided naming specific countries that the U.S. is seeking to pressure and didn’t share many specific actions or a timeline that the federal government would take.
“Well, we are giving everyone the opportunity to remedy bad behavior, why would I want to blow up the global financial system?” he said, when asked at a press conference why sanctions wouldn’t take effect immediately.
Bessent said diplomacy was happening behind the scenes, as President Trump called world leaders to get them to cut off Iran.
But the announcement fell short of expectations, and Trump’s boisterous threats leading up to the move.
“Therefore, today, I am announcing the MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST ANY COUNTRY!” Trump said on Truth Social last Wednesday. “This will be Economic Warfare and Isolation on an unprecedented scale.”
But one complicating factor to Bessent’s “Operation Economic Outcast,” as the plan has been named, is the role of China, which is Iran’s largest trading partner. Bessent said “no country is above the reach of U.S. sanctions” when asked plans for China.
The bottom line is whether the likes of China, as well as India and Russia (other powerful trade partners of Iran), deem the U.S. threats credible.
China’s Xi Jinping is coming to the U.S. end of September, after all.
Following Sec. Bessent’s announcement, the Journal editorialized:
“Is the U.S. willing to climb the sanctions ladder, proceeding from those small refineries to target the Chinese state-owned banks and other institutions that sustain them? Treasury warned as much in April, but the Trump Administration hasn’t followed through.
“Now is its test. Asked Monday about breaking a trade truce with China, Mr. Bessent said, ‘If they facilitate transactions and are part of the ecosystem that turns Iranian oil into money into repression, they will be targeted.’
“Yet when asked why he hadn’t imposed major sanctions today, and merely warned of them, Mr. Bessent replied, ‘Why would I want to blow up the global financial system?’ If that’s what he thinks pressing China on Iranian oil purchases would do, Beijing may call his bluff.
“Mr. Trump has belatedly found a pressure strategy with Iran that may give him the upper hand. But the IRGC is unlikely to give up its financing networks without a fight. Will Mr. Trump stick to this strategy when Iran next fires on Gulf energy and whispers a soothing word to mediators from Pakistan and Qatar?”
Tuesday morning, Trump on Truth Social:
“The failing Islamic Republic of Iran is not paying large segments of their military, while at the same time killing protesters, even when they are not protesting, at levels not seen before. It is a humanitarian crisis of epic proportions, and must be stopped, NOW.”
Little happened the rest of the week. Iran claimed the meeting with Oman resulted in an agreement on the route through the Strait, but Oman hasn’t confirmed a deal, and Iranian officials have offered contradictory statements on what it entails.
On Wednesday, the IRGC said the Strait wouldn’t reopen until the U.S. resumes the implementation of June’s preliminary peace deal that included waivers for Iranian oil sales and end to the U.S. blockade.
“If the United States stops obstructing and returns to the memorandum of understanding, we can open the Strait of Hormuz within the framework of the agreement reached,” Revolutionary Guard spokesman Brig. Gen. Hossein Mohebbi told state television. “Our conditions must be accepted by the United States.”
But Thursday, President Trump said the U.S. is not going back to the MOU.
And there are still attacks on ships in the Strait, such as the Kuwaiti crude oil tanker that was hit late Tuesday off the coast of Oman, causing a fire on board. Another ship was hit Thursday, according to the UK.
At the same time there are growing reports that many Iranians are suffering amidst an economic crisis with inflation soaring, the currency collapsing, and families cutting back on food and medicine.
—
Wall Street and the Economy
Out of nowhere, late Friday night, trade talks between the U.S. and Canada broke down when during the day, it appeared they were on track to finish before the midnight deadline. The U.S. then imposed 50% tariffs on about $20 billion worth of Canadian goods early on Saturday, which risked escalation into an all-out trade war.
President Trump had extended negotiations three days indicating a deal could be close to final. Canadian Prime Minister Mark Carney congratulated negotiators from both countries for having made “significant progress” in the talks.
But U.S. Trade Representative Jamieson Greer told reporters that talks failed Friday night, despite what he said was the Trump’s willingness to offer Canada the “best treatment” of any major U.S. trading partner.
The new tariffs, which apply to about 5% of Canada’s U.S.-bound exports, went into effect at 12:01 a.m. on Saturday.
Carney said late Friday that last-minute changes from the U.S. side “were unfair, uneconomic, and called into question the reliability of any deal.” He said that he would impose dollar-for-dollar retaliatory tariffs on U.S. goods and introduce support for Canadian workers in the coming days.
“In recent weeks, we made important progress toward improving Canada’s position as having the best deal in the world with the U.S.,” Carney said in a statement. “However, that progress has not been enough to meet our objectives for Canadians.”
The U.S. had considered a plan that included cutting its steel and aluminum tariffs on Canada in half, as well as lowering automotive tariffs. In a meeting with Canada’s provincial premiers, Carney told them to be ready to put U.S. alcohol back on the shelves in the event of a deal.
The new U.S. tariffs come six months after the Supreme Court threw out many of Trump’s tariffs that relied on a novel interpretation of federal emergency law. The new levies on Canada similarly rely on a section of trade law that has never been used before and are likely to draw legal challenges in the coming days.
Trump’s move also casts further doubt over the future of the U.S.-Mexico-Canada Agreement, which was negotiated during Trump’s first term to replace the North American Free Trade Agreement. The president has repeatedly floated withdrawing from the USMCA pact altogether.
Throughout the talks, Canadian officials have sought a deal that would lower previous sectoral tariffs* and stave off the latest round of levies. In return, Canadian officials proposed making certain concessions, including pressing provincial leaders to reverse bans on U.S.-made alcohol products and widening U.S. access to the dairy market.
*In particular, a deal that would reduce U.S. tariffs on Canadian steel and aluminum from 50% to 25%, and on Canadian autos from 25% to 15%.
Carney, a former central banker, came to power last year by pitching himself as the experienced crisis manager who could stand up to Trump and navigate the rupture in bilateral ties. He has repeatedly said that he wouldn’t accept a “bad deal” with the U.S. and has sought to diversify Canada’s trade to non-U.S. markets.
Carney accused Washington of using “economic integration as a weapon” and said “its signature was written in pencil.” Resorting to the language of battle, he said his country had been “attacked” by the new American tariffs. “You’re at war when you get attacked,” he said, adding that Canada had the reserves, resilience and plan to respond.
But Jamieson Greer said the U.S. was compelled to act after a year of retaliation by its longtime ally.
“We’ve said enough, and so we’ve taken countermeasures. Our interest is in protecting American workers and protecting American supply chains,” Greer told “Fox & Friends Weekend.”
Carney said Canada had been willing to drop remaining retaliatory tariffs on steel, aluminum and autos if the U.S. substantially lowered its own, and to encourage provinces to restore U.S. alcohol sales. But he said Washington’s final demands went too far. “They asked too much and offered too little,” Carney said.
Greer said the administration was offering to cut tariffs on steel, autos and lumber, “things that are sensitive for them. And they’ve always had the best deal, and they still would have an even better deal, but they didn’t want that.”
Carney said the U.S. added last-minute terms that would have reduced tariff relief for Canadian-made vehicles, restricted Canada’s ability to strike trade deals with other countries and weakened protections for language, culture and sovereignty.
He said such demands were “unacceptable.”
Ontario Premier Doug Ford, who leads Canada’s most populous province, praised Carney for rejecting the deal, saying it would have hurt Ontario’s auto, steel and manufacturing sectors. Ford urged Canada to use “every tool in our toolbox” to fight the U.S. tariffs.
The Canadian public is fed up. A petition to expel U.S. Ambassador Pete Hoekstra, a Trump ally, has collected nearly 248,000 signatures since July 21. It accuses the former Republican congressman from Michigan of having “normalized” Trump’s talk of annexing Canada, among other things.
Nearly 72% of Canada’s goods exports last year went to the United States.
Three in four Canadians endorse Carney’s decision to walk away from talks, according to an online poll taken by the Angus Reid Institute since negotiations collapsed. But 38% of those in the workforce are also worried the fight will affect their job, and 89% worry it will worsen the cost of living.
The breakdown in talks reflects a permanent shift in American trade posture, Mary Ng, former Canadian trade minister, said in a Bloomberg television interview.
“We don’t see the United States valuing the integration of our markets that we have developed for decades,” she said, noting that Canada is the top export customer for at least 25 U.S. states and among the top three customers for more than 40 states.
President Trump on Truth Social, Monday AM:
“Canada has been ripping off the United States of America for years. Their ridiculously high tariffs on our Farmers and farm products has made life impossible for these great American Patriots, and has long created a 60 Billion Dollar Deficit between our two Countries. Not sustainable, and NOT ANYMORE! On January First, 2027, Tariffs on all Cars, Trucks, both large and small, Automotive Parts, and Steel, will be increased to 50%. Build in the U.S. and there are ZERO TARIFFS. Canada will be treated like a State no longer! On Trade, and in other ways, also, they are among the worst Nations in the World to deal with. They feel entitled, and yet, WE DON’T NEED CANADA, THEY NEED US! They do 95% of their business with the U.S., with us, the exact opposite!”
But Trump, in giving the nations over four months to come back to the table, was keeping the door open…and attempting to push the issue off until after the midterms.
Editorial / Wall Street Journal
“President Trump took exception last year when we called his tariffs against Canada and Mexico the dumbest trade war in history. It got dumber this weekend as Mr. Trump escalated with another round of border taxes on Canadian imports, a mere 10 weeks before midterm elections….
“The countries were close to an agreement until, poof, the cease-fire blew up at the last minutes with each side blaming the other….
“Both sides could still walk back from the ledge, though Mr. Trump’s escalation could make this harder for Mr. Carney politically since Canadians don’t like being bullied by Washington.
“To justify his new tariffs, Mr. Trump said Canada discriminated against the U.S. by retaliating against his national-security tariffs on autos. He also claimed that Canadian provinces had restricted sales on U.S. alcoholic beverages in response to his ‘emergency’ tariffs last year. Yet U.S. distillers begged Mr. Trump to hold off on his Section 338 tariffs. They know the longer Canada locks out American booze, the tougher it will be to regain market share.
“The President also cited longstanding grievances over how Canada treats U.S. dairy. Press reports say the Trump team raised other issues during recent negotiations, including Canada’s treatment of U.S. tech companies and digital taxes. Most of these issues could have been addressed as part of a renegotiation of the U.S.-Mexico-Canada Agreement.
“But Mr. Trump doesn’t want to update the deal. He wants to rewrite it unilaterally. As Mr. Carney noted Saturday, the President has contrived an array of pretexts – from fentanyl trafficking to trade deficits – to bludgeon Canada with tariffs.
“Mr. Trump’s complaint about the U.S. trade deficit with Canada is particularly ironic since the latter owes entirely to imports of heavy crude oil that is especially well-suited for U.S. refineries. Exclude Canadian oil, and the U.S. would have a trade surplus. But U.S. refineries would also operate at lower capacity…
“Prices for steel and aluminum mill products have surged 22.5% and 40.5%, respectively, over the past year. General Motors last month projected a $2.5 billion to $3.5 billion hit this year from tariffs. U.S. auto makers have been lobbying the Administration to reach a truce with Canada.
“Mr. Carney said Saturday that a major reason the deal blew up is that the Trump team refused to ease tariffs on heavy and medium duty trucks, including those made at Ford’s plant in Ontario. Why is Mr. Trump punishing Ford, America’s largest auto producer?
“Mr. Trump’s latest round of border taxes will hit an array of consumer goods, construction materials and manufacturing components. Republicans are already getting pounded on the campaign trail over his tariffs and inflation. One reason for Mr. Trump’s frigid approval rating is that voters believe Mr. Trump is waging blunderbuss wars without a strategy, and on trade they’re right.”
Editorial / Wall Street Journal…Monday PM:
“There he goes again. President Trump on Monday raged against Canada on the social-media heath, threatening it with 50% tariffs on autos and auto parts. What does he have against U.S. car makers?
“Mr. Trump is angry that Canadian Prime Minister Mark Carney over the weekend vowed to retaliate dollar-for-dollar against his latest tariff barrage. ‘Canada has been ripping off the United States of America for years,’ Mr. Trump wrote. ‘On January First, 2027, Tariffs on all Cars, Trucks, both large and small, Automotive Parts, and Steel, will be increased to 50%.’
“The Jan. 1 date suggests that Mr. Trump probably isn’t serious. No doubt he understands that a 50% tariff would hurt U.S. auto makers more than it would Canada. Ford Motor CEO Jim Farley last year warned that Mr. Trump’s 25% emergency tariffs on Canada and Mexico would ‘blow a hole’ in the U.S. auto industry, and he was right.
“Thus the Administration exempted autos and other goods covered by the United States-Mexico-Canada trade agreement from his emergency tariffs. Mr. Trump’s 25% national-security tariffs on autos and parts also include carve-outs for U.S.-made parts and other emollients for U.S. auto makers with cross-border supply chains with Canada and Mexico.
“Canada exports about $50.4 billion in vehicles and parts to the U.S. each year, notably to Michigan ($22.1 billion) and Texas ($14.8 billion). Mr. Trump’s 50% tariff would amount to a $25 billion tax on U.S. auto makers, their suppliers and customers – namely, buyers of large pickups assembled in Canada.
“Mr. Trump claimed ‘WE DON’T NEED CANADA, THEY NEED US!’ Ontario Premier Doug Ford corrected him, noting that Canada sends electricity to the U.S. that keeps the lights on, as well as nickel for defense and uranium for nuclear-power plants. ‘What would they do without the high-grade nickel that we ship down to the U.S.?’ Mr. Ford mused.
“Regardless of whether the President walks back from his tariff cliff, his whipsawing threats add uncertainty that chills investment. ‘I’ve basically gotten a Ph.D. over the last year in tariffs because I feel like that’s my sole job,’ Mary Buchzeiger, CEO of the Michigan-based auto parts supplier Lucerne International, told a local radio station.
“She added: ‘Everybody is paralyzed with fear right now because of these changing regulatory tides, because of the changing tariffs, and it’s impossible to make good plans and solid plans and be able to move forward and make those investments comfortably.’
“As is so often the case, Mr. Trump on trade is his own worst enemy.”
President Trump on Truth Social, Tues. AM:
“The United States is giving serious consideration to changing the name of Lake Ontario to Lake America in that we don’t expect to [be] doing much business with Ontario any longer. Thank you for your attention to this matter!”
Canada then announced it intended to impose tariffs of up to 50% on roughly 700 products as the acrimony escalated between Ottawa and Washington.
Officials said that effective Sept. 8, or the day after Labor Day, Canada plans to place tariffs ranging from between 15% and 50% on about $20 billion of goods, or roughly 7% of total U.S. imports. Among the products targeted by Canada are U.S. steel, aluminum, motorcycles, washers and dryers, processed cheese and clams.
U.S. steel and aluminum were already subject to a 25% tariff, but that will now double to 50%, officials said.
Thursday, President Trump signed an executive order to change the name of Lake Ontario to “Lake America,” a further escalation of the dispute.
“Canada has been ripping us off for a time on trade, very sadly,” Trump said in the Oval Office.
Trump said that he had been thinking about changing the name of the lake “for a long time,” which is pathetic.
“We took something called the Gulf of Mexico, we changed it,” he said. “So, if you think about it, we have a gulf and we have a lake, now all we need is an ocean. So maybe we’ll have to change the name of the Atlantic and/or the Pacific.”
Prime Minister Carney responded in a social media post, noting that the name Lake Ontario was more than 400 years old. “We know that America is changing,” he wrote. “Their trading relationships, their foreign policies, their national monuments, their hydronyms. Canadians also know that naming reality means calling it Lake Ontario – then, now and always.”
The name change will only harden further public sentiment against the Trump administration in Canada, spurring more boycotts of U.S. travel and goods.
—
Leading up to Friday and Jackson Hole…Legendary investor Stanley Druckenmiller, a mentor to both Scott Bessent and Kevin Warsh, in an op-ed for the Wall Street Journal:
“The Treasury Department announced on Aug. 19 that it would double the size of its long-dated bond buybacks, from $2 billion to at least $4 billion per operation, aimed at the 10- to 30-year sector and running from Sept. 9 through Nov. 4. The announcement came after the 30-year yield touched a 19-year high. Yields fell within minutes. By the next afternoon they had round-tripped to levels above where they started. The market’s verdict was swift and correct: This wasn’t liquidity management, it was price management – and a mistake far larger than $4 billion suggests….
“Inflation is 3% to 4% and has been above the Fed’s target since 2021. Unemployment is 4.1%, full employment by any definition. The deficit is running near 6% of gross domestic product, a number America has never before produced in peacetime at full employment. The national debt crossed $40 trillion the same week Treasury intervened. Net interest will exceed $1.1 trillion this fiscal year, more than the defense budget. The 10-year yield, even after the summer selloff, sits at or below the economy’s nominal growth rate. That means a borrower (federal government) running 6% deficits at full employment, with above-target inflation, still funds itself at roughly the rate its economy grows….
“I have spent five decades trading on a simple premise: Markets aggregate information no committee possesses, and prices are how that information reaches decision makers. The long-term Treasury yield is the most important price in the world. It is also the only fiscal disciplinarian the U.S. has left. Neither part will run on entitlement reform. Both have spent the past decade expanding commitments while ignoring arithmetic. Democracies don’t repair their finances because a budget office publishes a table. They repair them only when the cost of inaction becomes visible and immediate, when mortgage rates bite, when auctions tail, when the political price of a rising long bond finally exceeds the political price of touching spending.
“Every basis point of artificial yield suppression is a subsidy to procrastination. Suppressed long rates sugarcoat the interest-cost projections, shrink the apparent urgency, and let incumbents assure voters the debt is someone else’s problem. If Congress and the administration are unlikely to touch entitlements even with the market’s signal, they are certain not to touch them without one. Whatever this operation saves in basis points, it will cost multiples in delay….
“What should happen instead is straightforward. Return buybacks to their stated purpose: small, scheduled, off-the-run liquidity operations announced at quarterly refundings, never off-cycle responses to yield levels. Term out the debt honestly and pay the price the market sets. If the 30-year must trade at 5.5% to clear, that isn’t a crisis. It is an invoice. Then do the only thing that durably lowers long-term yields: address the primary deficit. Reform entitlements gradually and honestly, through means testing, indexing changes, eligibility adjustments phased in over decades – so that the burden is shared across generations instead of dumped on the youngest.
“The reward is enormous: A credible fiscal package would do more for the long end of the curve than a buyback program 1,000 times this size.
“Governments defending prices against fundamentals always lose. The only variable is how much they spend before conceding. The U.S. shouldn’t put itself on the wrong side of that trade, not with the most important price in the world, and not when that price is trying to say the one thing Washington most needs to hear: Let the bond market speak.”
Druckenmiller admitted in response to queries that he used AI to help him with the op-ed.
Also prelude to Kevin Warsh’s big speech at Jackson Hole, there has been criticism of how tight-lipped in signaling future policy decisions he has been.
“A central bank does not need to tell markets what it will do months in advance, but it does need to explain what variables it is watching,” Professor emeritus of finance at The Wharton School, Jeremy Siegel, wrote this week.
“Jackson Hole gives Warsh an opportunity to clarify that reaction function. If he does not, it will be disappointing but not devastating,” Siegel said, noting the September Federal Open Market Committee (Sept. 15-16) “will provide a second and ultimately more important opportunity.”
And Warsh then delivered what I thought was a good speech, 25 minutes in length, covering a lot of key topics while reiterating the Fed’s stance that its inflation target is 2%.
“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” Warsh said.
He stopped short of giving any guidance, as we already now know he is loathe to do, but he described an economy showing few signs of restraint from the Fed’s current rate of around 3.6% on the funds rate.
“Credit and loan markets are showing few signs of policy restraint,” he said. While there are signs of strain in housing and agriculture, “on balance, I would be hard pressed to describe broad financial conditions as restrictive.”
Warsh did make clear that adjustments to the funds rate was the “predominant tool” to achieve both low, stable prices and a healthy labor market.
“Price stability is not self-executing,” he said.
So, will he guide his fellow members of the FOMC in less than three weeks to hike the funds rate, or will he just wait until December, after the midterm elections? That’s the question. We have one more jobs report before then, though Warsh said the labor market isn’t an issue, and another round of CPI/PPI reports, which could be decisive, especially in the eyes of the other voting members.
Warsh did seem to downplay recent progress in the inflation numbers. “They do not tell me that underlying trends have meaningfully improved,” he said of this summer’s data, and that “the Fed’s predominant focus right now should be on prices.”
Here’s the bottom line. Warsh talks like a hawk, and the inflation/Fed-sensitive 2-year Treasury yield went from 4.23% just prior to his speech to 4.31% by the time it was over…and higher still after.
But there has been a lot of talk of the chair’s credibility, and independence from Donald Trump. As noted below, this week the Fed’s preferred inflation barometer, core PCE, came in at 3.3%, remaining well above the Fed’s target.
If the Fed does not act in September, then Warsh’s credibility for good reason could be called into question, as many would believe he just didn’t want to hurt Trump’s attempt to maintain control of the House and Senate ahead of the midterms. That’s an inescapable conclusion.
—
So, on the aforementioned economic data front…we had the Fed’s preferred inflation barometer, the personal consumption expenditures index (PCE) on Wednesday and there were no big surprises. The figure for July was 0.2% on headline, 3.7% year-over-year, both a tick higher than expectations. On core, ex-food and energy, the figures were exactly as forecast, 0.3% and 3.3%…this last one the ‘money ball,’ as in 3.3% is not 2%.
Personal income was up 0.4%, consumption 0.2%.
We had a second-look at second-quarter GDP, unchanged at 1.5%. It was 2.1% in Q1.
July durable goods were stronger than consensus, 1.1%.
July new home sales rose at a weaker than expected 607,000 annualized pace.
The S&P Case-Shiller home price index for June was 2.1% year-over-year, better than estimates and up from 1.6% in May. The annual increase was the strongest since June 2025. However, after adjusting for inflation, home prices fell for a 13th consecutive month.
And today we had our first look at the manufacturing sector for August, with the Chicago PMI, and it was putrid, especially vs. expectations…47.1 when 58.3 was the consensus (50 the dividing line between growth and contraction), a massive miss. New orders declined sharply, 15.4 percent.
The Atlanta Fed’s GDPNow estimate for third-quarter growth is up to 4.6%.
Freddie Mac’s 30-year fixed-rate mortgage is 6.66%.
Next week we have the August jobs report, as well as key data on manufacturing and the service sector (which in light of the Chicago PMI could be interesting).
Europe and Asia
Literally, there was nothing of import from both Europe and Asia this week on the data front. In China, they were holding the annual National People’s Congress.
But next week, we’ll have a ton to chew on in both regions.
Street Bytes
—Stocks finished up on the week, volatility low, it being the last week in August, no doubt a factor, but September historically can be ugly.
The Dow Jones and S&P 500 both finished up 0.5%, Nasdaq 0.9%.
No market-moving earnings events next week.
—U.S. Treasury Yields
6-mo. 3.97% 2-yr. 4.35% 10-yr. 4.73% 30-yr. 5.21%
The short end of the curve rose at week’s end on Chair Warsh’s comments, the 2-year up 12 basis points on the week, for the reasons I gave above. The 10-year was unchanged on the week.
—Elevated diesel refining margins and low U.S. distillate inventories have highlighted persistent tightness in refined-product markets, with stocks around 12-13% below the five-year average ahead of fall maintenance and the winter heating season.
At a conference in Norway this week, TotalEnergies SE CEO Patrick Pouyanne discussed how the premium at which products such as diesel trade relative to crude is close to the highest level in more than 15 years.
It costs about $20 million to get a very large crude carrier capable of carrying 2 million barrels to make the journey through Hormuz, Pouyanne said. For smaller ships that carry refined products, the extra cost is too high “so you don’t have a single tanker of products moving out of Hormuz.”
—The U.S. in in talks with Venezuela to take a large stake in its oil fields, a dramatic move that would extend the Trump administration’s influence on the post-Maduro government and the nation’s vast energy reserves.
Negotiators from both countries are discussing the plan, and among the possible arrangements would be a 100-year-lease on several oilfields.
The terms of any deal could still change, and the White House has declined to comment.
Obtaining large Venezuelan reserves would boost U.S. oil supplies at a time of intense market volatility. Since Maduro’s capture, Washington has controlled Venezuelan oil sales while easing sanctions to allow U.S. companies and oilfield contractors to do business in the country.
But, in reality, the existing infrastructure is a mess and it will take lots of money, and time – we’re talking years and years – before some of the bets pay off.
—Wheat prices hit a three-year high as escalating Russia-Ukraine tensons in the Black Sea strangle exports from one of the globe’s most important grain-growing regions.
–Ahead of Nvidia’s earnings release after the close on Wednesday, the Wall Street Journal’s Asa Fitch had a widely read piece talking about while its “current financial position looks rock solid to say the least. But the financial engineering it is using to keep revenue growing introduces risks that could eventually cause real pain.
“Nearly four years into an artificial intelligence boom that has brought Nvidia hundreds of billions of dollars in profit, the company is increasingly tapping its financial strength to keep customers buying its chips. Those chips have become the ubiquitous computational workhorses of the AI boom, a status quo Nvidia has an interest in maintaining.”
To wit…Nvidia’s ‘backstops’ “put it on the hook for some $230 billion in lease obligations and residual-value deals, including a $105 billion backstop for an OpenAI lease in Ohio and potentially up to $125 billion in ‘residual-value support’ for financing deals with Wall Street heavyweights. That support would likely entail Nvidia’s assuring that the value of assets backing loans won’t fall below a predetermined level.”
Asa Fitch notes that history also provides examples of companies for whom courting less-creditworthy customers backfired spectacularly, specifically mentioning Lucent Technologies, which was spun out of AT&T in the mid-1990s, and whose headquarters was a mere few miles from where I grew up (and where our Dr. Bortrum worked for decades). Lucent is a bad word around here…as it was for investors.
Yes, Nvidia is no Lucent, but as Fitch points out, the company hasn’t said whether it is setting aside cash reserves as a buffer for specific financing or leasing backstops.
And then came the earnings report…and Nvidia knocked it out of the park.
The company forecasts a 70% jump in revenue next fiscal year, underscoring unabated demand for AI computing, while warning that shortages of memory components would continue to curb how quickly it can expand.
“AI has reached its inflection point. It’s doing useful work. Its tokens are productive and profitable. Now, compute is revenue,” said Nvidia CEO Jensen Huang.
The outlook is likely to reassure investors who have questioned how long the AI spending surge can last after years of explosive growth. By forecasting revenue growth well above Wall Street expectations and outlining demand from the biggest tech companies as well as AI labs, Nvidia is arguing that the market for AI computing is expanding rather than peaking, even as supply constraints limit how much business it can capture.
Nvidia’s outlook for 70% growth in its next fiscal year, ending Jan. 2028, is a rare disclosure for the chip company, which typically does not issue such projections.
“We’ve never forecast or never guided to a year in advance,” Huang said. Ahead of Wednesday’s results, the consensus was at 44% projected revenue growth in the same period.
The company said its Vera Rubin platform, which has now started shipping to customers, will account for about a fifth of its overall data center revenue in the current quarter, which ends in October.
In its fiscal second quarter ended July, data center revenue more than doubled to $89 billion, beating estimates of $85.08 billion.
Nvidia said it expects demand from AI labs to contribute roughly a quarter of its overall business next year, indicating a diversified customer base.
Nvidia also announced an expansion of its partnership with Amazon’s cloud computing unit, Amazon Web Services. The pair will deploy an additional 2 million Nvidia graphics processors across Amazon’s global infrastructure in 2027 and 2028.
Nvidia conceded soaring memory prices and higher component costs will continue to pressure its margins, with CFO Colette Kress saying margins would bottom in the fourth quarter at roughly 71% to 72%, down from about 74% in the third quarter. Analysts were expecting 74.77% for the third quarter.
The company forecasts third-quarter revenue of $108 billion, plus or minus 2%, compared with the Street’s estimate of $104.19 billion, according to data compiled by LSEG.
Nvidia’s second-quarter revenue more than doubled to $96.22 billion, beating estimates of $92.17 billion. Adjusted profit was $2.22 per share for the three months ended July 26, compared with estimates of $2.10.
—Meta Platforms agreed to an $18 billion settlement with 48 state attorneys general, bringing an end to a massive federal trial over social media’s harm to teenagers and ushering in a new era of tech companies having legal responsibility for their platforms.
As part of the settlement agreement, Meta will also make sweeping changes to its services, Facebook and Instagram, including implementing a default two-hour time limit on its apps for users under 18.
In a unique setup, Meta will pay out only 70% of the settlement unless TikTok and YouTube, which is owned by Alphabet, also agree to set default one-hour time limits a day on their apps for underage users and each pay the states roughly $5.3 billion. Meta will only pay the remaining 30% of its settlement, also $5.3 billion, if the two other companies agree to the terms.
The settlement will be distributed to the signing states in annual installments over a 10-year period based on their populations.
Other agreed platform changes include launching “night mode,” a default block on its apps between midnight and 6 a.m. and a “school mode” disabling push notifications during school hours of 8 a.m. to 3 p.m. for underage users. The settings can only be changed with a parent’s permission.
No comment from YouTube or TikTok.
The settlement, which needs to be approved by a federal judge, halts a trial that was ongoing as recently as Tuesday. That case, brought by the states of California, Kentucky, New Jersey and Colorado, alleged that Meta violated their states’ consumer-protection laws and also the federal Children’s Online Privacy Protection Act of 1998, commonly known as COPPA, by knowingly making its platforms addictive and going after young users.
Editorial / Washington Post
“The plaintiffs’ bar thanks you for scrolling. At least it should. Trial lawyers will be the biggest beneficiaries of Meta’s agreeing on Wednesday to pay as much as $18 billion to settle claims brought by 48 states and D.C. that Instagram and Facebook hurt children’s mental health.
“But don’t expect the lawyers’ payday to protect teens any more than banning social media for minors has in Australia. Either young people will find a way to get around the new limits Meta agreed to impose on its products or they’ll gravitate toward new apps that are less restrictive. (Rember Myspace?) Ultimately, responsibility rests with parents to control how their children use technology.”
—Anthropic, maker of the Claude chatbot, is likely to tell investors its potential revenue opportunities are above $30 trillion, topping SpaceX’s $28.5 trillion estimate, according to reporting in the Wall Street Journal and sources inside the company.
Anthropic, like other tech startups, estimate their “total addressable markets,” or TAMs, to show investors they have ample room to grow. But such estimates involve a lot of guesswork.
Anthropic, preparing for its IPO, reported revenue more than doubled to $11.6 billion in the second quarter. To put its more than $30 trillion vision in context, the 191 tech companies in the S&P 1500 brought in $2.4 trillion in revenue last year, according to FactSet.
It is projecting 2028 revenue of roughly $190 billion to $200 billion, with its IPO valuation hinging on those forecasts.
Anthropic could aim to raise as much as $100 billion in the offering, compared with SpaceX’s $86 billion.
—Billionaire philanthropist Bill Gates, in a lengthy essay on his web site, and in an interview with the New York Times issued a stark warning about AI’s risks to employment and the human condition, saying that companies were barreling ahead with the technology with no larger plan for the massive upheaval it would cause.
“Even under the best circumstances, the transition to this new AI era will be one of the most turbulent times in human history,” he wrote in his essay. “Right now, we are not preparing for it. I don’t see evidence that leaders, experts and communities are confronting the challenges adequately.”
The message is more somber than his 2023 essay on AI, when he wrote he was as excited about this revolution as the internet and PC rollouts. Though his new essay highlighted AI’s immense potential for good – citing developments in energy, medical care and agriculture – he stressed how badly things could go if the transition is mismanaged.
“There is no plan to ease the entry into the AI era,” he wrote, calling for more regulation of the technology.
In his Times interview, he said the tech industry was knowingly downplaying the danger because there was too much money on the line.
“In private, people who understand how good this stuff is, and how much better it’s getting, they’re very worried,” he said. But few tech executives, Gates said, are willing to publicly admit that. “They’re now saying to each other: ‘Hey, man, don’t say that. It’s bad for us – the next trillion dollars we’re trying to raise.’”
In his essay, Gates said he was motivated to speak now because recent improvements in AI had far surpassed his expectations and because the industry had ignored technology milestones – like AI’s escaping the control of its creators or making recipes for bioweapons – that it once said would warrant more caution.
“They’re just full speed ahead and hoping that the good outweighs the bad,” he said.
TSA checkpoint numbers vs. 2025
8/27…112 percent of 2025 levels
8/26…107
8/25…77
8/24…88
8/23…122
8/22…81
8/21…94
8/20…113
—Dubai International Airport said passenger traffic in the first half dropped almost a third as the Iran war disrupted travel, though the world’s biggest international aviation hub said demand is set to pick up in the latter part of the year.
Major regional carriers Emirates, Qatar Airways and Etihad Airways have cut back operations and reworked their international networks to adjust to wartime demand. Meanwhile multiple European airlines have suspended services to large parts of the region, including Bahrain and Israel, and are avoiding airspace over a number of Gulf countries due to ongoing security concerns.
–Shares in Dick’s Sporting Goods fell a whopping 30% Tuesday, as the company cut its full-year sales and profit forecasts on Tuesday, as pressured discretionary spending amid a cautious consumer environment weighed on demand for sporting goods and athletic apparel.
The company now expects annual sales of $21.9 billion to $22.2 billion, compared with its earlier forecast of $22.1 billion to $22.4 billion.
Annual earnings per share are expected to be $10.94 to $11.94, compared to its earlier forecast of $13.27 to $14.27.
The company maintained its same-store sales guidance for its Dick’s business at 2.5% to 4.0% growth, but slightly lowered expectations for Foot Locker’s same-store sales growth to negative 2.0% to 0.0%.
In the most recent quarter, Dick’s reported comparable sales growth of 2.1%, down from 2.5% in the same quarter a year ago, with the Foot Locker business dragging down growth.
Second quarter adjusted earnings per share came in at $3.53 on revenue of $5.58 billion, which missed the Street’s expectations of earnings of $3.76 on revenue of $5.64 billion.
“Not only were there fewer launches in the second quarter, but those launches performed below both industry and our expectations,” said Ed Stack, the company’s executive chairman. “As a result, we are taking a more cautious view of the balance of the year.”
Consumers remain selective with discretionary spending amid inflationary pressures and economic uncertainty, posing risks to demand for sporting goods and athletic apparel. A slowdown in consumer spending and a weakening job market have been weighing on demand for higher-priced athletic gear and outdoor equipment.
—Kohl’s shares fell after the chief executive insisted the retailer is powering through its turnaround even as sales continued to decline in its latest quarter.
Kohl’s posted adjusted earnings of $1.28 a share for the three months ended Aug. 1, easily topping Wall Street’s estimate of 58 cents. However, net sales fell 0.9% to $3.3 billion, in line with the consensus estimate. Comparable sales fell just as much, though this was less severe than the 1.1% drop in the previous quarter.
Net income slipped to $151 million from $153 million in the same period last year.
The sales slump continues a yearslong downward trend that sparked the company’s turnaround plan under CEO Michael Bender, who assumed the role on an interim capacity in May 2025 before permanently taking the reins later that year.
Bender said the latest results “reflect the ongoing progress against our initiatives,” including “another improvement” in comparable sales. “While we are encouraged with the momentum we have made thus far, we know there is critical work ahead of us,” Bender added.
Management now expects net and comparable sales to be flat to down 1.5%, with adjusted earnings forecast to land between $1.80 to $2.40 a share, up from a prior range of $1 to $1.60. but the improved outlook reflects the impact of roughly $150 million in tariff refunds received in the second quarter.
—Dollar Tree shares declined as disappointing quarterly guidance overshadowed the discount retailer’s big win from tariff refunds that boosted earnings.
The company posted adjusted earnings of $2.70 a share* in its fiscal second quarter ended Aug. 1, up from 77 cents a year ago and well above the Street’s expectations for $1.15. Net sales grew 7% year over year to $4.89 billion, narrowly beating the analyst consensus call for $4.86 billion.
Comp sales advanced 3.7%, driven by a 3.3% increase in average ticket size and 0.4% traffic growth.
*Dollar Tree said quarterly earnings included a benefit of $1.31 a share from tariff refunds.
While the quarterly earnings were impressive, guidance for the fiscal third quarter wasn’t. DLTR expects earnings between 80 cents and 95 cents a share, including about a 50 cents a share benefit from tariff refunds, with the Street at $1.40.
—Best Buy logged stronger-than-expected fiscal second-quarter earnings and hiked its fiscal year outlook.
The electronics retailer posted adjusted earnings of $1.47 a share for its second quarter, ahead of forecasts for $1.39. Revenue climbed to nearly $9.8 billion from $9.4 billion a year earlier while comparable sales rose 4.1%, doubling the growth rate from last year.
The company now sees $42.3 billion to $42.8 billion in revenue, up from $41.2 billion to $42.1 billion previously. Comparable sales are expected to rise 1.9% to 3%, compared with an earlier forecast calling for a 1% drop to 1% increase.
—California’s attorney general canceled a meeting with representatives of Paramount that was scheduled for Monday to begin discussing a settlement of the state’s lawsuit seeking to block Paramount’s proposed acquisition of Warner Bros. Discovery.
Rob Bonta, the attorney general, called off the meeting late Sunday, accusing Paramount of acting in bad faith.
Paramount’s proposed $111 billion purchase of Warner Bros. would create a media giant, combining two major movie studios, multiple streaming services and the news outlets CNN and CBS News. The company, headquartered in Hollywood, would also be a major employer in Los Angeles.
Last month, California led a group of 12 state attorneys general in suing to block the deal, arguing it would create a company with outsize market power in cable television and movie studios.
Political pressure has been building for the two sides to reach a resolution. Mayor Karen Bass of Los Angeles last week said disputes over the merger had stalled productions and led to job losses in Hollywood. She called for “swift and urgent resolution” to the lawsuit.
Xavier Becerra, the Democratic candidate for governor of California, also said he would like to see the lawsuit settled.
And Gov. Gavin Newsom, in his final months in the job and considering a run for president in 2028, said he is taking Paramount’s threats to leave the state seriously.
“I’m concerned about the state, our reputation,” he said. “I want to see Hollywood thrive.”
Foreign Affairs
Russia/Ukraine: The last two weeks have seen some of the worst attacks of the war by Russia on Ukraine, including going back to last Friday, when, just two days after a massive strike on Kyiv killed at least 17 people, Russia targeted a shopping center in Kryvyi Rih that President Volodymyr Zelensky called “absolutely cynical and despicable.” At least 16 were killed, with a number of others missing in the rubble.
The attack was a “double tap” operation, with the second strike targeting emergency workers. Another 130 were injured in the attack on the city’s biggest mall. Twenty-nine of the injured were in serious condition.
For its part, Ukraine is intensifying its attacks on Russian energy facilities, as well as on warehouses of the country’s largest online retailer Wildberries.
In a defiant speech Monday in Kyiv as foreign leaders gathered to mark Ukraine’s Independence Day celebrations, Zelensky said his country wants peace but will not just give in to Russia at any price.
“Ukraine absolutely wants peace, but it is not ready to simply surrender,” Zelensky said in his video address posted on Telegram, which showed him standing in front of the golden-domed St. Michael’s monastery.
Zelensky said that Russia’s demand – repeatedly rejected by Ukraine – that Kyiv cede the remaining part of the eastern Donbas area that is not in Russia hands after 4 ½ years of war would not be enough to stop Russian aggression.
“Ukraine is different, and it does not give away what is its own,” he said.
Zelensky also urged Ukrainian arms manufacturer Fire Point to accelerate the production of its Flamingo cruise missile to take the fight to Russia this winter. He also warned Russia could look to mobilize some 300,000 additional troops after parliamentary elections in September.
Moscow increasingly views the Ukrainian strikes as attacks by NATO states because alliance members supply Kyiv with weapons and intelligence, according to Kremlin insiders, as Russia prepared to escalate attacks on Ukraine.
President Vladimir Putin signaled his intentions last weekend in comments to a state TV reporter, as he shrugged off the impact of the attacks on Russia’s economy. Ukraine “opened this Pandora’s box,” he said. “Well, be ready to get a blowback on your most sensitive sectors of the economy.”
The Kremlin has abandoned reliance on what it believed was an understanding reached between Putin and Trump at their summit in Alaska last August.
That would have required the U.S. to pressure Ukraine to surrender its eastern Donetsk region as part of a deal to end the war. Ukraine has consistently rejected Putin’s demand to hand over a fortress belt of cities in Donetsk region that Russia’s forces have failed to capture in fighting since 2014.
Russia launched waves of drones at Kyiv and the surrounding region Thursday and Friday, damaging scores of warehouses, shopping centers and homes. At least one person was killed outside the capital.
Ukraine’s state emergency service said Russia had attacked the Kyiv region 38 times during the past 24 hours, warning residents not to approach areas where firefighters were still battling blazes.
Another major book retailer that shipped thousands of titles per day was hit in the Kyiv region, part of a wicked and evil plan by Moscow.
—CIA Director John Ratcliffe made a rare visit to Moscow on Tuesday for talks with Russian counterparts, and the Wall Street Journal reported that Ratcliffe had a warning for Russia not to attack NATO. U.S. intelligence is expressing growing concerns Putin will launch a limited strike in the Baltics to see how NATO responds.
The New York Times said Ratcliffe also shared his bleak assessment of the state of the war, and to urge the Russians to cut a deal before their military and economic situation gets worse.
President Trump on Thursday told reporters he does not believe Putin will attack NATO members.
Trump said he had “good talks” with Putin, adding that “he’s not going to be attacking a NATO territory.” I just have to laugh.
The BBC had an interesting analysis of Ratcliffe’s trip and apparent warnings to the Kremlin.
“Lithuania is of special interest to the Kremlin as it has a common border with Poland known as the ‘Suwalki Gap.’ Just 60 miles long, this strip of land is all that separates Russia’s client state Belarus from its nuclear-armed exclave of Kaliningrad, which is separated from mainland Russia.
“If Russia were to seize that it would effectively cut off those three Baltic states by land from their NATO neighbors.”
Editorial / Wall Street Journal
“Mr. Trump boasts that Mr. Putin would never have invaded Ukraine on his watch, and he was right in the first term. But Mr. Putin may see Mr. Trump’s courtship of the Russian and his reluctance to help Ukraine as signs of weakness. Mr. Putin could also be deploying threats to get Mr. Trump and NATO to jam Ukraine into a bad peace, though Kyiv is unlikely to go along.
“Mr. Trump’s struggles in Iran may have put U.S. deterrence back in doubt. Mr. Putin is watching the United States ration munitions after mere weeks of battle with its third-largest adversary. The midterm elections are coming, and Mr. Trump doesn’t want the chaos a European crisis would bring.
“No one should underestimate that China, Russia, Iran and North Korea may also be working together to expose Western vulnerability at the current moment. Mr. Ratcliffe appears to have told Moscow to stop aiding Iran, which is welcome but won’t happen. Chinese President Xi Jinping probably doesn’t want a crisis on the eve of his September trip to Washington, but you never know.
“The U.S. clearly sees a Russian incursion as a serious enough possibility to send Mr. Ratcliffe, and let’s hope a strong message was delivered. But the last known CIA chief to visit, William Burns in 2021, warned Mr. Putin not to invade Ukraine. The conventional wisdom then was that Mr. Putin would limit himself to hybrid warfare. Instead he gambled on an invasion to capture Kyiv.
“The question of the moment is whether Mr Trump’s ability to deter adversaries is as formidable as he suggests. If Mr. Putin is toying with provoking NATO, Mr. Trump could show resolve by loudly canceling troop withdrawals from Europe and signaling more support for Ukraine and NATO’s front lines.
“If U.S. deterrence fails again against Russia, Mr. Trump won’t have Joe Biden to blame, and his Presidency will be at risk.”
—The UK and France are sending classified technology to Kyiv to allow it to manufacture an Anglo-French cruise missile, part of a growing trend of Western countries helping Ukraine to build the weapons it needs to fight Russia’s invasion.
The UK said it will allow defense firm MBDA to share with Ukraine proprietary information on the British-made parts for the long-range Anglo-French cruise missile that Downing Street said Kyiv is looking to manufacture domestically.
The French call the weapon Scalp, while in the UK it is known as the Storm Shadow. French President Emmanuel Macron in July gave permission for Ukraine to manufacture a package of French weapons, including the Scalp and Aster interceptor missiles that are used in Europe’s equivalent of the Patriot.
China/Asia…from the Washington Post:
“The massive expenditure of U.S. munitions in the Middle East is increasingly worrying Asian allies and frustrating Pentagon officials overseeing the Indo-Pacific, who fear that the prolonged war with Iran could undermine the U.S. readiness for a conflict with China as it continues to step up military pressure across the region.
“Concerns about the depleted stockpile come as the United States canceled an amphibious landing exercise with South Korea scheduled for September, citing demands on U.S. forces from the war in Iran, a week after President Donald Trump announced that he was scaling back joint military exercises with the key ally.
“South Korea and other U.S. partners in Asia, including Japan and Taiwan, rely on Washington as the dominant supplier of major conventional weapons and are reckoning with years-long backlogs. The Middle East conflict has intensified those strains, consuming and reallocating munitions that could be critical in a war with China.
“One Taiwanese official said they expect ‘significant delays’ of Pac-3 Patriot missiles due to the drain on supplies as the Pentagon has depleted most of its interceptor stockpile in the Middle East, describing the shift in focus from the Indo-Pacific as ‘troubling.’”
Separately, nearly two-thirds of South Koreans want the country to have its own nuclear weapons, a poll showed, underscoring concerns about the reliability of U.S. security guarantees after President Trump unilaterally curtailed joint military exercises with Seoul.
According to a Gallup Korea poll released Friday, 65% of respondents support South Korea having its own nuclear weapons, while 30% oppose the idea. The poll was conducted Aug. 25-27.
Random Musings
–Presidential approval ratings….
Rasmussen: 43% approve of President Trump’s job performance, 56% disapprove (Aug. 28).
—Sen. Darlene Graham won the Republican nomination to replace her late brother Lindsey Graham on South Carolina’s general election ballot.
Riding President Trump’s endorsement, Graham narrowly beat Rep. Ralph Norman, 52-48, Tuesday and will now face Democratic nominee, and pediatrician, Annie Andrews in November. Trump was the difference maker.
No Democrat has won a U.S. Senate seat in the state in decades. When Lindsey Graham last ran in 2020, he defeated his Democratic opponent by 10 points.
—House Democratic leader Hakeem Jeffries and President Trump’s son-in-law Jared Kushner met privately recently in New York, a signal that the White House is seeking ways to work with Democrats if they wrest control from Republicans in the midterms.
The meeting, first reported by the New York Times, touched on issues ranging from housing and immigration to the high costs of living.
Kushner suggested that Jeffries, who is in line to become House speaker should Democrats regain power, meet with White House chief of staff Susie Wiles as a follow-up.
Jeffries, in a statement Sunday, did not mention the private conversation but said the Republican administration needed to drop the GOP’s “my-way-or-the-highway” approach that “has failed the American people.”
House Speaker Mike Johnson told Fox News: “I’m telling you what, you better not bet against the House Republicans. I don’t know what that’s about. I know Jared has interests in lots of other things going on. He’s not really directly involved in the administration, at least in the day-to-day in the White House.”
—The Supreme Court on Monday removed a legal obstacle that had stopped President Trump from imposing new restrictions on mail-in voting ahead of the midterm elections.
The court, over the dissent of three liberal justices, ruled that a trial judge was wrong to block a March executive order from Trump on mail ballots. Trump’s order called for the federal government to draw up lists of eligible voters and suggested that the U.S. Postal Service should refuse to deliver mail ballots in states that don’t comply with the new rules.
In an unsigned 10-page opinion, the court’s conservative majority said there were procedural problems with a lawsuit brought by a group of roughly two dozen Democratic-run states.
But the Supreme Court’s decision was not the final word on the matter. Just days earlier, the Postal Service issued final regulations implementing key parts of the executive order, and additional proceedings are already under way in the lower courts over the legality of those rules. It is possible the case could return to the justices again before the midterm elections.
Trump, who has often tried to discredit mail-in voting, says his executive order is necessary to safeguard election integrity.
Trump issued the executive order on March 31. It calls for broad intervention by the executive branch in elections, which are typically administered by states with oversight from Congress.
But some states are sending out the mail-in ballots within the next two weeks, including to overseas servicemembers.
A federal judge on Thursday halted – at least for now – attempts to implement Trump’s order. U.S. District Court Judge Indira Talwani placed a 14-day hold on the government implementing the order in a case that could be headed back to the Supreme Court.
Talwani wrote in her ruling, “Plaintiff states have neither time nor funds to design new mail ballots, seek approval of the new designs, order production of mail ballots, update their own election management systems, train election officials to use the USPS portal and upload citizen data to the portal, all before the midterms.”
—The Supreme Court on Friday temporarily allowed President Trump to continue construction of a luxury White House ballroom to replace the East Wing he demolished last fall.
In a one-sentence order, Chief Justice John G. Roberts Jr., acting on his own, issued a placeholder that gives all nine justices additional time to more fully consider whether construction of the planned 90,000-square-foot ballroom can proceed.
The chief justice’s order did not provide a timeline for when the court would act next, stating only that a lower-court ruling against the Trump administration was paused “pending further order of the undersigned or of the court.”
—Army Secretary Dan Driscoll is expected to step down from his role by the end of the year, if not sooner, after months of tension with Defense Secretary Pete Hegseth, according to people familiar with the discussions.
Driscoll’s departure would leave the Army without a Senate-confirmed leader. Hegseth fired Gen. Randy George as the Army’s chief of staff in April without explanation, and President Trump hasn’t nominated a replacement. Gen. Christopher LaNeve, the Army vice chief who was formerly Hegseth’s senior military aide, is serving as acting Army chief of staff.
Driscoll and his family this summer moved out of the large family house reserved for the Army secretary at Joint Base Myer-Henderson Hall, a military post adjacent to Arlington Cemetery where several top defense officials live, the people said. His family relocated to North Carolina.
During his 18 months as Army secretary, Driscoll formed a close partnership with George. Together, the two pushed the Army to adopt new technology, seeing it as the future of warfare.
Driscoll encouraged the service to act more like the Ukrainian military in finding ways to use commercial technology on the battlefield.
Pete Hegseth, Secretary of Unfinished Wars, needs to depart.
—Ratko Mladic, the Bosnian Serb general who oversaw atrocities in Bosnia in the 1990s, died in prison at age 84, Serbian state television reported. He died at a UN prison hospital in The Hauge, Netherlands.
The UN tribunal for war crimes committed during the wars in Yugoslavia in the 1990s sentenced Mladic to life in prison in 2017 in what was considered a key step toward bringing justice to the victims. He had been in custody since 2011 after many years on the run.
Called the “Butcher of Bosnia,” Mladic was responsible for the slaughter of more than 8,000 Muslim men and boys in Srebrenica – the only post-World War II case of genocide in Europe.
Mladic never repented and acted bullishly during his trial, yelling at the judges when sentenced to life in prison.
—More than 300 people died of Ebola in eastern Congo in the past week, bringing the total number of deaths to 2,642. But Congolese experts have said the outbreak that started weeks before it was confirmed could be three times the known size.
—At least two people have died of measles in Pennsylvania, the state’s health department said Tuesday, adding that both individuals were unvaccinated.
The measles deaths were the first in the Commonwealth of Pennsylvania in 35 years, and the first such deaths in the U.S. this year, according to the CDC.
“As a physician, I want to make sure that people understand that the MMR vaccine is safe and provides the best protection we have against measles,” said Pennsylvania Secretary of Health Dr. Debra Bogen said in a statement.
President Trump signed an executive order, Aug. 10, calling for more vaccine “flexibility,” fewer childhood vaccinations and splitting the combined childhood measles, mumps and rubella vaccine into three shots at different times.
Announcing the order, Trump said that the MMR vaccine could be “quite lethal.” Experts, however, say the vaccine is safe and effective, and research indicates that dividing it into multiple shots has no health benefit.
Dr. Mehmet Oz, head of the Centers for Medicare and Medicaid Services, contradicted Trump’s statement about the MMR shot during an interview Aug. 23 on CBS’ “Face the Nation,” saying it is “not a lethal vaccine.”
—The world’s oceans are hotter than ever recorded, new data suggest, as they suffer from human-caused climate change and the growing El Nino weather phenomenon.
The average surface temperature of the planet’s seas outside the polar regions hit 21.1 C (70F) on Saturday, according to figures from the European Copernicus climate change service.
Jane Lubchenco, an oceanographer and former chief of the U.S. National Oceanic and Atmospheric Administration, called the record “very troubling.”
“An ocean this warm destabilizes weather patterns and threatens food security, economic prosperity and marine life,” Lubchenco said in an email. “A warmer ocean is not our friend.”
–Speaking of heat, between last Friday and Thursday, these were the highs in Phoenix Arizona (air temp) …114, 116, 114, 110, 117, 118, 114…some of these record highs for the day.
But what makes it even worse is that the evening low never went below 85…that is ‘stress city’ on the body.
—The official death toll from the above-mentioned flash flood in Nepal and Tibet is 579 as I go to post, with the number of missing put at 1,900+, according to Nepalese disaster relief agency officials, with 3,700 having been rescued.
Of the missing, over 500 are foreign nationals.
Nepali and Chinese authorities warned of further flooding from a lake formed upstream after Wednesday’s disaster and was already overflowing.
Scientists were still trying to determine the exact cause of the flash floods, but early indications are that they were caused by a high-altitude landslide colliding with a glacial collapse.
Glaciologists and geologists had already determined that an enormous chunk of a glacier had snapped on Wednesday morning, and images show that an enormous chunk of the mountainous bedrock beneath that glacier had also given way.
“The rock that the glacier was sitting on collapsed,” said Kristen Cook, a geomorphologist at the University of Grenoble Alpes in France. [Our Dr. Bortrum was a guest lecturer there a couple times.] The combined force of the collapse sent millions of metric tons of rock and ice into the valley below, she added.
The deluge of rock and ice, which pulverized into mud and water as it surged down the mountainside, was so powerful that the U.S. Geological Survey registered the landslide as a magnitude 5.2 seismic event.
The landslide and glacial collapse took place on the north face of Langtang Lirung, a Nepalese mountain near the border with Tibet, at an elevation of around 17,000 feet, according to the scientists.
The Himalaya’s are warming at a faster rate than the region as a whole, which doesn’t augur well for the potential for similar disasters in the future.
—George F. Will / Washington Post
“The doctor who ushered the infant Dolly Rebecca Parton into the world in 1946 was paid with a sack of cornmeal. Such was the transactional nature of health care for some around the Great Smoky Mountains in East Tennessee. Her father and mother had been 17 and 15, respectively, when they married, and could not have imagined how the world would be their daughter’s oyster.
“But not immediately. In ‘Ain’t Nobody’s Fool: The Life and Times of Dolly Parton,” Martha Ackmann writes that once a year, Parton’s father would measure his children’s feet with sticks that he took to town to buy shoes that did not fit. And Ackmann says that for country kids running barefoot most of the time, calamities were inescapable:
“ ‘Once Dolly climbed over a fence and came down hard on something poking through the dirt: the sharp cutting blade of a plow. She nearly severed her toes.’ Was she taken to a nearby hospital? No there wasn’t one. ‘As Dolly’s older brothers and father held her down, he mother poured kerosene into the wound, packed it in cornmeal, and sewed up the wound with a quilting needle.’
“Her family knew the old story of a cheerful preacher saying to a hardscrabble farmer, ‘This is a right nice place you and Lord have here,’ and the farmer replying, ‘You should have seen the som’bitch when the Lord had it hisself.’ Young Dolly was steeped in the ethic of self-reliance.
“She was a savvy businesswoman even when getting started in Nashville’s music industry, which was not a lagoon of advanced thinking about the emancipation of women. In 1974, she was 28 and starstruck when Elvis Presley expressed interest in meeting her and recording ‘I Will Always Love You,’ which she had written. But when Presley’s management insisted on at least half the rights to the song, she refused, the meeting was off, and she never met – never again wanted to meet – Elvis. But Ackmann reports that Parton said keeping the copyright to that one song made her enough money – perhaps $10 million – she could have bought Graceland, Elvis’ Memphis home.
“Cinched into tight sequined gowns, wearing mountainous wigs and makeup seemingly applied with a trowel, she said people had no idea how expensive it was to make her look so cheap. A born aphorist, she also said: ‘The way I see it, if you want the rainbow, you got to put up with the rain.’ And: ‘I’m not offended by all of the dumb blond jokes because I know I’m not dumb…and I also know that I’m not blond.’ What she became was a genre-blending storyteller….
“Parton’s stories of humble origins and hard times disguised – usually – her steely pride. In 1977, she was interviewed by Barbara Walters, who asked her if ‘people like me’ – meaning Manhattan sophisticates – would call Parton a hillbilly. Parton replied, ‘We were very proud people. People with a lot of class. It was country class, but it was a great deal of class.’….
“In 1995, this daughter of an illiterate father started Imagination Library, which in participating states mails free books – more than 318 million so far – to children when they are born. And every month thereafter, until they are 5, when they receive ‘Look Out Kindergarten, Here I Come!’ The word ‘Here I come!’ could have been the overture for the well-lived life that began 80 years ago.”
As Parton wrote in her book, “Dream More: Celebrate the Dreamer in You”:
“I make a point to appreciate all the little things in my life. I go out and smell the air after a good, hard rain. I re-read passages from my favorite books. I hold the little treasures that somebody special gave me. These small actions help remind me that there are so many great, glorious pieces of good in the world.”
As one Tennessean put it, when asked to describe his feelings after learning of Parton’s passing, “She was the best person in the world, are you kidding me?!”
—
Pray for the men and women of our armed forces…and all the fallen.
Slava Ukraini.
God bless America.
—
Gold $4455…Silver $66.30
Oil (WTI) $83.34…Brent $88.19
Regular Gas: $4.08; Diesel: $5.61 [$3.21 – $3.71 yr. ago]
Bitcoin: $77,555 [4:00 PM ET, Friday]
Returns for the week 8/24-8/28
Dow Jones +0.5% [53559]
S&P 500 +0.5% [7711]
S&P MidCap -1.3%
Russell 2000 -1.4%
Nasdaq +0.9% [26402]
Returns for the period 1/1/26-8/28/26
Dow Jones +11.4%
S&P 500 +12.7%
S&P MidCap +14.4%
Russell 2000 +19.9%
Nasdaq +13.6%
Hang in there.
Brian Trumbore
