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10/14/2017

For the week 10/9-10/13

[Posted 11:30 PM ET, Friday]

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Edition 966

What a horrible stretch for this country (and our neighbor to the south) in the last six weeks.  Three major, devastating hurricanes...a massive earthquake in Mexico City...the deadliest mass shooting in U.S. history in Las Vegas...and now the catastrophic fires in northern California, where the death toll is 34 as I write, 5,700 structures destroyed...entire neighborhoods wiped out forever (at least in many of our lifetimes).

What is so depressing about the fires is that while you barely bat an eye at wildfires in southern California, the scope of the devastation in the likes of Sonoma and Napa counties is beyond belief because this is not fire territory historically.  And it didn’t matter who you were, or how famous.

I was thinking today of who my five favorite celebrities are, from my lifetime, who I’ve never met, and they would be Arnold Palmer, Ronald Reagan, Paul Newman, Charles Schulz and Baseball Hall of Famer Tom Seaver.  [I stood next to Palmer on more than a few occasions, but can’t say I really met him.]

I couldn’t help but muse about this because this week, on the same day, Tom Seaver lost his beloved vineyard in Calistoga (he is safe, last I heard), while Charles Schulz’ home in Santa Rosa, that he and his widow, Jean, now 78, lived in since the 1970s, was reduced to rubble, with Jean barely escaping.  Schulz died in the home in 2000.  [Thankfully, his museum in town survived, but a ton of invaluable memorabilia in the sprawling home was lost.]

All you can do is pray for the victims and the residents who lost everything, and for those now battling the blazes, furiously trying to save lives and property.

What a blow to the region’s economy.

But there is another depressing fact of the calamity.  Much of both California and Nevada are now blanketed with a layer of smoke.  While more than 200,000 acres are burning in large fires throughout California, another near Reno is contributing to the smoky conditions in Nevada.

According to air-quality analyst Sean Raffuse, of the Crocker Nuclear Laboratory at University of California-Davis, in just two days (Tues. and Wed.), fires in the wine country are thought to have produced as much small particulate matter as all the vehicles in the state produce in a year.  “It’s a lot,” said Raffuse.

I mean think about all I’ve written on the topic of fine particulate matter in China, and now Californians are suffering as bad as anyone in Beijing in their rough stretches does.

But burning forests and grasslands is one thing.  All the homes and structures that have been consumed is another because the buildings contain toxic material when burned.  Just another aspect to this nightmare.

Trump World...Repeal and Replace....

Unable to achieve any success in Congress in keeping a campaign promise, President Trump signed an executive order prescribing a quick fix to undo ObamaCare, but most industry experts believe this is far from a done deal.

Trump’s plan rests on one main pillar, the creation of associations in which multiple employers can band together to buy health plans under the same law that large employers utilize.  That law rests outside the mandate of the Affordable Care Act.

But it is not clear just who would create these groups, though there are employer trade groups, like the National Restaurant Association, that have advocated this year to allow restaurants to band together to buy healthcare.

This is a deal for 2019, not 2018, however, seeing as how many Americans will be signing up for new plans through open enrollment beginning Nov. 1, and to be up and running for 2019, you need to have things in place by early summer, as the big insurers shop their plans for the following year.  And there will be many legal challenges.

This was Trump’s first step.  The White House then announced late Thursday it was planning on immediately cutting off key payments to insurers selling ObamaCare coverage.

Trump has repeatedly threatened to eliminate the disbursements to insurers, known as cost sharing reduction (CSR) payments, which are worth an estimated $7 billion in 2017.  The White House is claiming the administration “cannot lawfully” make the payments.

“Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under ObamaCare,” Sarah Sanders said in a statement.  “In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments.”

“The United States House of Representatives sued the previous administration in Federal court for making these payments without such an appropriation, and the court agreed that the payments were not lawful,” she continued.

“The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system.  Congress needs to repeal and replace the disastrous ObamaCare law and provide real relief to the American people.”  [The Hill]

The Congressional Budget Office said in August that about 1 million would be uninsured in 2018 and insurance companies would raise premium prices by about 20 percent for ObamaCare plans if the payments were cut off.

The payments help low-income people afford co-pays, deductibles and other out-of-pocket costs associated with health-insurance policies.  Insurers have called the payments critical, saying that without them, they would have to massively increase premiums or exit the individual market.

Many insurers have long priced their 2018 plans for the coming open enrollment period.

Congress has been looking towards a bipartisan deal to continue making the payments for two years in order to stabilize the markets in the short term.  That effort was halted amid the last-ditch effort for the ObamaCare repeal law from Senators Graham and Cassidy last month.

By Friday evening, nearly 20 states had filed a lawsuit against the president over the decision to stop the CSR payments.

Two opinions....

Editorial / Washington Post

“President Trump on Thursday signed an executive order directing his administration to ramp up its sabotage campaign against the Affordable Care Act, also known as ObamaCare, also known as the health-care law without which millions of needy people would lack coverage.

“The only good news is that the order merely instructs executive agencies to draw up some new, looser regulations, rather than immediately eroding ObamaCare’s protections.  The bad news is that those looser regulations may nevertheless come soon, and they could devastate the ACA’s carefully regulated marketplaces.  Much depends on how reckless the leaders of agencies such as the Labor Department decide to be.

“ObamaCare’s underlying logic is that covering people who get sick or are likely to become sick, because of their age or preexisting conditions, requires a big insurance pool with enough healthy people to spread risk evenly.  Republicans have argued that this system is unjust to the healthy and young, who pay more into the system than they get out of it, and that they can adjust the system to favor the fortunate without harming the unlucky. They are wrong, as analysis after analysis of their various health-care bills showed. That is one reason GOP lawmakers failed to pass the bills.  Not taking the hint, Mr. Trump is now trying to undercut ObamaCare’s insurance pool by executive fiat, sidestepping Congress.”

Editorial / Wall Street Journal

“Republicans are still trying to defuse the ticking ObamaCare bomb without blowing themselves up, and on Thursday the GOP cut the first wire: President Trump signed an executive order that could begin to revive private insurance markets.  More to the point, Americans may start to have more choices at a lower cost.

“One piece of this week’s order directs the Labor Department to ‘consider expanding access’ to Association Health Plans, which would allow small businesses to team up to offer insurance. The purpose is to let trade groups form insurance risk pools across state lines and enjoy economies of scale.  Many large companies are freed from state and some federal benefit mandates and operate under a law known as Erisa. Smaller businesses deserve similar flexibility.

“More association plans might start to reverse the decline in small business coverage, and a White House fact sheet notes that the share of workers at small firms with employer coverage has dropped to about one-third in 2017 from almost half in 2010.

“The order also seeks to expand the flexibility and use of health-reimbursement arrangements, which allow employers to pay back employees for health-care expenses with pretax dollars.  This could be a step toward equalizing the tax treatment for smaller businesses that don’t offer coverage and thus don’t qualify for the subsidy known as the employer tax exclusion.

“A third part of the order directs cabinet agencies to consider new rules on short-term insurance plans, which the Obama Administration restricted for the mortal sin of popularity. The plans traditionally could run for a year and often cover catastrophic events with relatively broad networks of doctors and hospitals.  This can be a lifeline for  folks between jobs....

“ObamaCare’s defenders are calling all of this ‘sabotage’ and warning about ‘adverse selection,’ in which a more robust individual market will siphon off the healthy customers that prop up ObamaCare’s exchanges. They predict a death spiral of higher premiums for the sick or elderly left on the exchanges.

“Yet the ObamaCare exchanges were deteriorating long before Trump arrived, as the young and healthy and insurers fled.  Enrollment is 60% lower than the Congressional Budget Office predicted, which is impressive even by CBO’s record of missing the mark.  Some 6.7 million people paid a tax in 2015 rather than buy coverage they don’t want or can’t afford....

“The downside of the executive order, and it’s considerable, is that these are all regulations that could be changed by, say, President Bernie Sanders. Reform by statute would be far more durable. So it was surprising to see Kentucky Senator Rand Paul all over cable-TV Thursday taking credit for the new rules after he did so much to scuttle ObamaCare repeal in Congress. He’ll need more than this for absolution.

“The association-health plans in particular will require what the White House calls a ‘broader interpretation’ of the Erisa law. Any legal judgment will await the fine print, but this is the kind of rule by regulation that will have to withstand inevitable court challenge.

“The order’s practical effect thus won’t be known for months, though the agencies ought to move quickly to mitigate as much damage as possible in next year’s markets. The executive order isn’t the sabotage Democrats claim but neither is it the political salvation some Republicans hope.  Republicans shouldn’t use these modest improvements as an excuse to avoid pushing more durable legislative reform.”

Tax Reform....

At a rally in Harrisburg, Pa., Trump said the corporate tax rate would be “no more than 20%” under his proposal. But earlier he had said changes may lie ahead.  “We’ll be adjusting a little bit over the next few weeks to make it even stronger,” he said.

White House economic adviser Kevin Hassett has said that if U.S. companies brought foreign-earned profits home, the median household would see their real income rise by $4,000 over the next eight years.  Richard Neal, the top Democrat on the House Ways and Means Committee, said of the calculation, “I have not seen any evidence that even comes remotely close to that.”

A Reuters / Ipsos poll shows that 3/4s of Americans either “somewhat agree” or “strongly agree” that the wealthiest should pay more in taxes (higher tax rates).

I am doubtful negotiators will come up with the changes necessary to secure 50 votes in the Senate and the necessary majority in the House, mainly because as the GOP plan stands today, most experts say it would add more than $1.5 trillion to the deficit over 10 years, totally unacceptable to deficit hawks.

Every percentage-point reduction in the corporate rate reduces federal tax revenue by about $100 billion over 10 years, the top rate being officially 35% today.

But we have a long, long ways to go, especially on the issue of the deductibility of state and local taxes, as I’ve been harping on, because 33 House Republican seats are at risk if the deduction is pulled, as currently planned, the 33 being in the high tax states of New York, New Jersey and California that are impacted most by this provision.

The House expects a vote on a tax bill by Thanksgiving, and under the ideal timeline the Senate would follow.  No way.

Trumpets....

--Trump on Puerto Rico, via Twitter:

“ ‘Puerto Rico survived the Hurricanes, now a financial crisis looms largely of their own making,’ says Sharyl Attkisson.  A total lack of accountability say the Governor. Electric and all infrastructure was disaster before hurricanes. Congress to decide how much to spend...

“We cannot keep FEMA, the Military & the First Responders, who have been amazing (under the most difficult circumstances) in P.R. forever!”

Needless to say, he hasn’t made a statement like this about Texas or Florida, and when he was in Puerto Rico himself, Trump said the U.S. would stand by our fellow citizens.

Thursday, the House voted 353-69 to approve $36.5 billion in emergency relief for Puerto Rico and other areas hit by recent disasters.  Senate approval is expected in coming weeks.  [The 69 ‘no’ votes were all Republicans.]  Congress had approved $15.25 billion to help with earlier storm damages.

Editorial / Washington Post

“It has been three weeks since Hurricane Maria made devastating landfall in Puerto Rico.  Three weeks – and 84 percent of the population is still without power [Ed. it is back up to 90 percent today].  Only 63 percent has access to clean water, and just 60 percent of wastewater treatment plants are working. Food supplies are spotty, the health-care system is in crisis and people are dying. The death toll has risen to 45. [Ed. now at least 48, four of the victims from water-borne bacterial infections, highly preventable.]

“If the Americans enduring these conditions lived in Connecticut or Montana or Arkansas, would we be counseling patience? Would we be blithely accepting predictions of another month – or more – to get power restored?  No. There would be unending media coverage, people would be furious – and the president of the United States certainly wouldn’t be threatening to abandon federal relief efforts....

“There is no minimizing (Maria’s) catastrophic effects, nor the logistical challenges of getting help to an island already suffering from poor infrastructure and long-standing financial problems. But none of that excuses the federal government’s sluggish response and poor planning. Why, for example, as the Times reported, were only 82 patients sent to the hospital ship USNS Comfort over six days when there were so many more sick people in peril?

“Yet, almost incredibly, President Trump on Thursday blasted out a trio of tweets seemingly trying to shame the U.S. territory for its current problems and putting its residents on notice that the federal government might pull out.  So much for his promise to ‘be there every day’ until the people of Puerto Rico are ‘safe and sound and secure.’...Congress should give Puerto Rico the resources it needs. It also should exercise its oversight over the administration to demand answers on why, three weeks after disaster struck, so many Americans are still living in misery with so little hope for the future.”

Friday, Trump tweeted: “The wonderful people of Puerto Rico, with their unmatched spirit, know how bad things were before the H’s. I will always be with them!”

He is so sincere.

--Trump went after the television networks over negative coverage in yet another tweetstorm.

“Network news has become so partisan, distorted and fake that licenses must be challenged and, if appropriate, revoked.”

“Fake @NBCNews made up a story that I wanted a ‘tenfold’ increase in our U.S. nuclear arsenal. Pure fiction, made up to demean. NBC = CNN!

“With all of the Fake News coming out of NBC and the Networks, at what point is it appropriate to challenge their license? Bad for country!”

Nebraska Republican Sen. Ben Sasse questioned whether Trump was upholding his presidential oath to protect the constitution by making threats on the media.

“Mr. President: Words spoken by the President of the United States matter,” Sasse said in a statement.  “Are you tonight recanting of the oath you took on January 20th to preserve, protect, and defend the First Amendment?”

Sitting alongside Canadian Prime Minister Justin Trudeau in the Oval Office on Wednesday, Trump said: “It is frankly disgusting the press is able to write whatever it wants to write,” in response to an NBC New report that claimed back in July he had called for a ten-fold increase in the U.S. nuclear arsenal.

Masha Gessen / The New Yorker

“Laws and institutions designed for liberal democracy can be deployed to restrict media freedom. That’s what modern-day autocrats do. Vladimir Putin has used economic instruments against the press, from hostile takeovers of media companies to libel suits that have bankrupted journalists and entire news outlets. Silvio Berlusconi proposed one restrictive bill after another – most didn’t pass, but they served to intimidate the media – and he also called for boycotts of media outlets that were critical of him.  Hungary’s Viktor Orban did all that while also weaponizing friendly tabloids to harass and discredit political opponents. And all autocrats maintain dominance in the media by limiting and strategically apportioning access.

“Trump is testing the potential of these strategies. He and his Cabinet members have transformed the rules of media access, shutting the press out of the State Department almost entirely and treating White House press briefings as daily battles...But does Trump have the power to take us, by tweet, into previously unimaginable territory of discussing whether the President can shut down a television network?  He just did.”

--White House chief of staff John Kelly was compelled to make a surprise appearance in the press briefing room to dismiss rumors he’s close to quitting or being fired by President Trump.

“I’m not quitting today,” he told reporters.  “I just talked to the president.  I don’t think I’m being fired today. And I’m not so frustrated in this job that I’m thinking of leaving.”

Trump had tweeted earlier in the week: “The Fake News is at it again, this time trying to hurt one of the finest people I know, General John Kelly, by saying he will soon be fired.

“This story is totally made up by the dishonest media. The Chief is doing a FANTASTIC job for me and, more importantly, for the USA!”

--And there was Trump’s feud with Sen. Bob Corker (R-Tenn.), Trump saying the GOP lawmaker was partially responsible for the Obama administration’s nuclear deal with Iran and refusing to say whether the retiring Corker should resign immediately.

Trump tweets:

“Senator Bob Corker ‘begged’ me to endorse him for re-election in Tennessee. I said ‘NO’ and he dropped out (said he could not win without...my endorsement).

“He also wanted to be Secretary of State, I said ‘NO THANKS.’ He is also largely responsible for the horrendous Iran Deal!...

“...Hence, I would fully expect Corker to be a negative voice and stand in the way of our great agenda. Didn’t have the guts to run!”

Corker fired back in his own tweet:

“It’s a shame the White House has become an adult day care center. Someone obviously missed their shift this morning.”

Corker then told the New York Times: “He concerns me. He would have to concern anyone who cares about our nation.”  Corker added, “I know for a fact that every single day at the White House, it’s a situation of [senior administration officials] trying to contain him.”

Earlier, Corker had said Secretary of State Rex Tillerson, Secretary of Defense Mattis and White House Chief of Staff John Kelly are keeping the U.S. from “chaos.”

“Senator Corker worked with Nancy Pelosi and the Obama administration to pave the way for...the Iran deal,” White House press secretary Sarah Sanders said at a briefing.

Steve Bannon has called on Corker to resign.

Trump then mocked Corker’s height, tweeting:

“The Failing @nytimes set Liddle’ Bob Corker up by recording his conversation. Was made to sound a fool, and that’s what I am dealing with!”

Editorial / Wall Street Journal

“Donald Trump’s weekend Twitter spat with Tennessee Senator Bob Corker is a familiar story: The President is a Party of One for whom personal loyalty is the only test. He isn’t going to change, so the meaningful question is how Republicans should navigate his periodic explosions to help the country and maintain their majorities in Congress.

“Mr. Trump unleashed his tirade because he is still sore that Mr. Corker said this summer that the President hadn’t shown the stability or competence to be successful. The two later had it out in the Oval Office, but Mr. Corker stood by his words.  And why shouldn’t he?

“Mr. Corker was expressing views that are widely held on Capitol Hill and even within the Trump Administration.  These men and women support the President’s policies, or at least most of them, and they remain in their jobs for the good of the cause and country.  What they fear, and want to contain, are the President’s lack of discipline, short fuse, narcissism and habit of treating even foreign heads of state as if they are Rosie O’Donnell....

“(But) the only plausible Republican strategy now is to keep pressing good policies, and in particular to pass a strong, pro-growth tax reform.  Some Members might think they can hurt Mr. Trump by blocking reform, but the President will merely blame Republicans and gladly work with Democrats if they take back the House and Senate in 2018.  Mr. Corker recently worked with Pat Toomey (Pennsylvania) to allow $1.5 trillion in budget room over 10 years for tax reform, and we hope he continues to play a constructive role even as he plans to leave the Senate at the end of his term.

“The more Congress and the Cabinet can accomplish on their own, the less hostage they will be to Mr. Trump’s impulsive turns.”

--I cover the Iran deal down below.

Wall Street

According to the minutes from the Federal Reserve’s September meeting, released Wednesday, there was still some debate over whether the Fed is raising short-term interest rates again this year, specifically at the December meeting.  Lingering questions over inflation remain.

Here’s what seems clear. The economic data over the coming weeks is paramount, beginning with this past week’s inflation figures. The September producer price index came in as expected, 0.4%, ditto ex-food and energy, and is now up 2.6% the past 12 months, 2.2% on core. Today then saw the release of the consumer price data for last month and the CPI rose 0.5%, 0.1% ex-food and energy, with the 12-month number being 2.2%, but only 1.7% on core, both in line with expectations.

So there is nothing to worry the Fed on the inflation front, the 1.7% CPI on core being the fifth straight month below 2.0%, the magic number, though Chair Janet Yellen has said she doesn’t want to wait for inflation to hit 2% before acting further, worried inflation would surge and be more difficult to control otherwise.  Of course like 18 months ago, the Fed was talking about letting inflation “run hot,” over 2%, to ensure the economic recovery was sticking.  [The Fed’s preferred inflation barometer, the personal consumption expenditures index, is running at just 1.4%.]

Separately, September retail sales rose a strong 1.6%, in line, and 1.0% ex-autos, also very solid.

The Atlanta Fed’s GDPNow barometer has third-quarter GDP currently pegged at 2.7%.

Bottom line, it’s important to hold off for a while in making any broad pronouncements, re December, as we still have a slew of coming data to digest beforehand, such as the impact on the economy of the hurricanes (including recovery from same), all the while keeping an eye on the geopolitical scene.

But I can’t help but talk of President Trump and his own Fake News!

In an interview with Sean Hannity, the Fox anchor brought up the talk of “$5.2 trillion in wealth created” under Donald Trump, which Trump had tweeted no networks talked about (patently false). Trump responded thusly:

“That’s right. So...I am loving it.  I’m doing the job for the people. And people are seeing that. And I’m so proud of the $5.2 trillion of increase in the stock market.  Now if you look at the stock market, that’s one element but then we have many other elements.  The country, we took it over at $20 trillion [Ed. in debt].  As you know, the last eight years they borrowed more than it did in the whole history of our country.

“So they borrowed more than $10 trillion. Right? And yet, we picked up $5.2 trillion just in the stock market.  Possibly picked up the whole thing in terms of the first nine months.  In terms of value. So, you could say in one sense, we are really increasing values and may be in the sense, we are reducing debt.”

So our president is saying that a rising stock market equates to lower federal deficits, and that he has already wiped out half the $10 trillion debt added by Obama, which I hope you know is a bunch of merde.  That’s not how this works.

But no doubt some of his supporters will actually believe this.

Europe and Asia

Catalonia: Catalan leaders signed a declaration of independence on Tuesday night but halted implementation to allow for talks. Specifically, Catalan President Carles Puigdemont said:

“I ask Parliament to suspend the declaration of independence so that in the coming weeks we can undertake a dialogue.”

Puigdemont said Catalonia had won the right to independence as a republic free from Spain, through the referendum, Oct. 1, but he left the door open to negotiations and to mediation.

“We are here because on Sunday, Oct. 1, Catalonia held a referendum and did so in extreme conditions: violent police attacks against voters waiting to cast their ballots. The goal was to scare people and stay home. But despite everything, more than 2.2 million people did so because they overcame fear.”

Puigdemont added: “All we wanted was a Scottish-style referendum where both sides were able to put their views forward. We were denied, time and time again.”

And: “We are not criminals or coup plotters – just ordinary people who simply want to vote.  We have nothing against the Spaniards.”

Many Catalans had no idea what Puigdemont meant, offering he was just walking in circles.  A circular tightrope, in actuality, as he sought to placate several factions within his unwieldy alliance of separatists that includes the Communists.  The coalition controls a majority of the seats in the Catalan Parliament, but it’s fragile.

Hard-line separatists wanted Puigdemont to follow through on the results of the Oct. 1 vote (90% approving independence, but only 43% turnout, as those opposed stayed away...plus there were irregularities), plus the Constitutional Court in Madrid had deemed the vote illegal.

Other lawmakers in Puigdemont’s conservative party, however, didn’t want to upset Madrid further and escalate tensions, especially after some prominent companies announced plans to move their headquarters from the region because of legal uncertainties.  As I noted last time, banks, for example, want to operate under the European Central Bank umbrella and wouldn’t be able to do so otherwise.

Opposition leader Ines Arrimadas of the Ciudadanos (Citizens) party slammed the speech: “This is a coup. Nobody has recognized the result of the referendum.  Nobody in Europe supports what you have just done.”

Puigdemont’s request of international mediation is also a red line for Madrid.

In response, the Spanish government of Prime Minister Mariano Rajoy held an emergency cabinet meeting on Wednesday morning and opted to give Catalonia five days, until Monday, to say whether or not Puigdemont declared independence or not.  If he says he has, he will be given a further three days to withdraw the declaration.  Should he choose not to do that, Madrid would invoke Article 155 of the constitution.

This allows the central government to suspend a region’s autonomy and impose direct rule.

Rajoy accused Puigdemont of having created “deliberate confusion” and said he wanted to restore “certainty.”  Rajoy will not accept dialogue unless Catalonia abandons its plans for secession.

“This call – ahead of any of the measures that the government may adopt under Article 155 of our constitution – seeks to offer citizens the clarity and security that a question of such importance requires,” Rajoy said.

“There is an urgent need to put an end to the situation that Catalonia is going through – to return it to safety, tranquility and calm and to do that as quickly as possible....

“One thing is absolutely clear: Our democracy is experiencing one of the gravest moment in its history.”

Spain’s Interior Minister, Juan Ignacio Zoido, said Puigdemont had no other choice but to respect the Constitution.  “Outside the law,” Zoido said, “there is no possible dialogue and only confrontation.”

Zoido said his police force is prepared to intervene.

Puigdemont could be tried for sedition.

Catalan leaders said invoking Article 155 would be a big mistake.

We’ll see what happens in the coming days.

Brexit: After three more days of fruitless negotiations with Brussels this week, Prime Minister Theresa May, struggling to keep her coalition together, continues to walk her own tightrope over Brexit negotiations. While she seeks successful negotiations with the European Union, she is placating her party’s Brexit supporters by promising that the U.K. is also preparing the way for a “no-deal” should talks fail.

The two sides are going nowhere, as I’ve been writing for months. The EU is still demanding the issue of the ‘divorce bill,’ Britain’s financial tab, be addressed first before it would consider discussing a transition agreement, which would lead to the critical item, trade talks. But now the EU is even stepping back from concessions it said it was considering last month.

If the U.K. just walks away from a deal, it not only would be a disaster for Britain and cause all manner of chaos, but it would also mean the EU doesn’t get a dime from the U.K., the EU counting on a minimum of $35 billion dollars to help pay for items such as future pension obligations.  The latest polling in the U.K. shows 70 percent of the British electorate opposed to be paying such a high tab.

For the U.K., just picture the chaos of having to build extensive infrastructure at ports to cope with increased customs bureaucracy – in 17 months.  Yes, the EU would suffer economically, but no doubt Britain would fare far worse.

Imagine, without any legal framework between the two, how could you even allow flights between the two?

A new study published by Rabobank, the Dutch lender, estimates that even a non-chaotic no-deal Brexit would push the U.K. into immediate recession for two years.

Foreign Secretary Boris Johnson, Mrs. May’s chief rival inside the Conservative (Tory) Party, said Britain needs to prepare for a no agreement.  “The prime minister has made it very, very clear that we are going to get a deal, we are working for a great deal, but obviously we must make the right preparations as and when it is necessary for a no deal scenario.” 

Johnson led the Brexit campaign and still believes Britain shouldn’t pay the EU a dime.  He has also demanded the U.K. get out from under the European Court of Justice in March 2019, and not after a transition period, which Prime Minister May has rejected, saying Britain would have to accept new laws from Brussels during any transition period.

May said earlier in the week: “I voted Remain, for good reasons at the time but circumstances move on.  I’m being open and honest with you – what I did last time round was I looked at everything and came to a judgment and I’d do exactly the same this time round – but we’re not having another referendum and that’s absolutely crucial.”

But any suggestion Mrs. May’s heart isn’t in Brexit could be fatal to her remaining prime minister.  At the same time, many Brits, especially the business community, would love to stay in the single market.

Eurobits....

--Big election in Austria on Sunday.  The Freedom Party, one of Europe’s longest established right-win populist parties, is a threat to win the national vote, with its leader, Heinz-Christian Strache, hoping to win power on pledges to prevent the “Islamification” of Austria, deny migrants access to generous welfare payments and boost the incomes of ordinary families.

After the success of the rightwing nationalist Alternative for Germany in their recent elections – when they won 13 percent and took more than 90 seats in parliament – the Freedom party could make a strong showing Sunday.

But Strache and his party have largely been coopted by Sebastian Kurz, Austria’s foreign minister and leader of the center-right People’s party.  He has been outflanking the Freedom party on its main plank – Austria’s 2015 response to the migration crisis.

Like Strache, Kurz demands an end to all “illegal” immigration, and he was behind a “Burqa ban” that came into effect this month.  Plus Kurz is presenting himself as an anti-establishment candidate, looking to shake up the system in place the past 50-60 years.

The last poll had the People’s party at 33%, the Freedom party at 26%, and the current ruling Social Democrats at just 24%.

--German Chancellor Merkel settled a row with her governing allies, Bavaria’s Christian Social Union (CSU), reaching a deal on migrant policy, an obstacle to pursuing talks on a final coalition with other parties, namely the Free Democrats and the Greens.

Merkel agreed to put a number on how many people Germany would accept per year on humanitarian grounds, a net total of around 200,000.  But authorities would not turn people away at the border.

Merkel and her Christian Democrats (CDU) won a fourth term in a vote Sept. 24, but she was weakened by heavy losses to the far right.  Coalition talks could take months.  If no deal is reached, which is possible, though not probable, new elections could be called.

--Italian Prime Minister Paolo Gentiloni won a vote in parliament on reform of the electoral system, averting the risk of a government crisis and early elections.  It was a secret vote, to give individual lawmakers cover, and Gentiloni won with 375 lawmakers voting in favor and 215 against.  It goes to the Senate later this month.

The electoral reform effort has for years raised the specter of political crisis again, Italy having had 64 governments since World War II.  The changes proposed by Gentiloni’s government would penalize the populist Five Star Movement because they favor parties that form coalitions, whereas Five Star prefers to go it alone.

A Five Star lawmaker denounced the reform in a Facebook post as “an institutional coup d’etat” worthy of Mussolini. Gentiloni had the support of ex-premier Silvio Berlusconi and the anti-migrant Northern League.

The latest polls have Gentiloni’s Democrats, Five Star and any right-wing coalition containing the League in a virtual three-way tie, with elections slated to be held sometime next year.

Turning to Asia, just one economic item of note in China, with all eyes on the start of the Chinese Communist Party Congress next week in Beijing.  The Caixin private reading on the service sector in September came in at 50.6, well off August’s 52.7, but still growth (50 being the dividing line between growth and contraction).

In Japan, Prime Minister Shinzo Abe is handily ahead in the polls ahead of the Oct. 22 parliamentary elections. Five polls all forecast that Abe’s ruling Liberal Democratic Party will easily win more than half of the 465 seats in the lower house, the more powerful of Parliament’s two chambers.  Coupled with a smaller ally, the coalition could win as many as 2/3s of the seats, which is the level needed to propose revisions to the constitution.

Meanwhile, Tokyo’s Nikkei Stock Average hit a two-decade high on Wednesday and finished the week at 21155, the highest level since Dec. 1996, though it remains far away from its record peak of 38915 on Dec. 29, 1989.  Other surges above 20000 over this time had failed to hit the 1996 peak.

Street Bytes

--Stocks hit more all-time highs this week, with Nasdaq closing at its high today, while the Dow Jones and S&P 500 hit theirs on Wednesday.  On the week, the Dow rose 0.4% to 22871 (a point shy of its record), the S&P rose 0.1% to 2253 (2 points shy) and Nasdaq gained 0.2% to 6605.

Earnings reports will now begin coming in fast and furious, with investors focused on the big tech names.  This week four of the big banks reported and reaction was muted.

--U.S. Treasury Yields

6-mo. 1.24%  2-yr. 1.49%  10-yr. 2.27%  30-yr. 2.81%

The long end of the curve rallied (yields declined) on the fairly tame inflation data and the hope that maybe, just maybe, the Fed isn’t hiking again in December.

--OPEC is optimistic about 2018, saying it expects stronger demand while supply from outside the cartel will not be at levels currently forecast.

The cartel’s monthly outlook said it sees demand for OPEC’s oil reaching 33.1m barrels a day in 2018, up by 200,000 b/d from last month’s forecast.

OPEC is still expected to extend its existing production cuts beyond next March when they were due to expire, as it seeks to draw down excess stocks built-up globally since 2014.

The group’s production reached 32.7m b/d last month, an increase over prior month.

The price of crude zigged and zagged all week, before staging a rally late Friday on the decertification of the Iran deal news, West Texas Intermediate closing at $51.42.

--Mexico’s foreign minister said ending the North American Trade Agreement (NAFTA) would break relations between Mexico and the U.S.

The talks entered a new round this week and President Trump renewed threats to scrap the deal; pointing to the trade deficit with Mexico as unfair to the U.S.

This is a crock.  I agree with the head of the U.S. Chamber Commerce, Thomas Donahue, that scrapping the deal would endanger $1bn in annual trade.

But late Thursday, Reuters reported that two sources with direct knowledge of the talks told them the atmosphere at the table was “horrible” and “highly charged,” as it seems the administration is proposing that any new deal be limited to five years, a sunset clause, which is opposed by both Canada and Mexico.  The administration says this ensures the pact stays up to date.

Some trade observers say it is difficult to see how negotiators could reach an agreement given U.S. demands that the other two sides see as non-starters.  The head of Canada’s largest private sector labor union said it was clear the United States didn’t want a deal.

Thursday night Canadian Prime Minister Justin Trudeau said Canada would not walk away from the talks, despite talk of the sunset clause.

And then late word tonight is that the U.S. is pressing a demand that U.S.-made content account for half the value of the cars and trucks sold under the NAFTA, raising serious doubts about renewing the pact overall.  The U.S. proposal also seeks sharply higher North American automotive content, to 85 percent from 62.5 percent over a period of years.  That is in addition to the insistence half be U.S. made within the first year of a signed deal.

Mexican sources denounced it as “absurd” and unacceptable.  Canada rejected the idea as unworkable.

Trump aides say current rules are too lax and allowed auto companies to bring in too many cheap parts from China and other low-wage Asian countries.

--Japan’s Kobe Steel Ltd., one of the country’s biggest aluminum manufacturers, admitted to a huge scandal this week, announcing it had doctored product-quality paperwork.  Think about that.  The quality of the aluminum in auto vehicles may not be what you are being told it is.

For instance, Nissan Motor Co. singled out hoods using Kobe Steel aluminum as a concern, since it could impact how the vehicle absorbs a crash.  Toyota said it used materials from Kobe in rear doors and other auto parts.

Far scarier, though, is the quality of some of the products used in manufacturing airplanes (and to a lesser extent, Japan’s bullet trains).  Boeing said the company is inspecting its supply chain, but later said it found no safety issues.  [I think their response was way too quick.  Check again!]

At the center of the scandal are aluminum and copper products Kobe Steel said were below specifications set by its customers over a 12-month period ended Aug. 31.  Workers were doctoring inspection certificates, the company said.

In all, Kobe admitted potentially defective products were sold to about 200 firms, including 30 foreign companies.

The country’s trade ministry said Kobe must provide reasons for the data fabrication within a month.  “The credibility of Kobe Steel has plunged to zero,” said Trade Minister Hiroya Kawasaki.

--JPMorgan Chase delivered solid profits, showing increased car lease volume, credit card loan balances and margins, with net income from the consumer and community banking division up 16% from a year earlier.

But the corporate and investment banking division suffered a 13% drop in net income, with bond trading revenues falling 27%.

JPM reported revenues of $25.3bn, slightly better than expected, and ahead of last year’s $24.7bn. 

--Citigroup eked out a gain in quarterly profits, but mostly due to cost-cutting and its Latin America operations, namely Mexico.  Weakness in bond trading continued.

Net income improved to $4.13bn from $3.84bn a year ago, but this was aided by a $355m pre-tax gain on the sale of its fixed income analytics business to the London Stock Exchange.

Operating expenses were $233m lower than the same period last year. But fixed-income revenues dropped 16% from last year, which was enhanced by active trading following the U.K.’s Brexit vote.

Citigroup shares dropped 3.4% in response to the report.

--Friday, Bank of America reported a 13% rise in quarterly profits, thanks to growth in consumer banking and wealth management, which as in the case of the others, offset a sharp decline in bond trading revenues.

Third-quarter net profits were $5.6 billion, with a slight increase in revenues to $21.8bn, in line with expectations.

Fixed income trading revenues were down 22%.

--And Wells Fargo’s problems continued, as it reported its lowest quarterly return on equity in seven years as it continues to tack on costs associated with the sham account scandal. Also, Wells took a $1bn provision as it prepares for a settlement over alleged pre-crisis mortgage abuses.

Revenues declined 2% over last year, the fourth straight quarter of declines for the top line.

Net income was $4.6bn compared with $5.6bn a year ago.

Tim Sloan, CEO, said: “Over the past year we have made fundamental changes to transform Wells Fargo as part of our effort to rebuild trust and build a better bank.”

In the interests of full disclosure, I was at a large Wells regional gathering yesterday, accepting a grant for a charity group I represent, and I was impressed with the managers and regional directors I met.

I have always loved working with the bank.

--Delta Air Lines deliver third quarter sales and earnings ahead of expectations, despite the brutal hurricane season.  Revenue rose a solid 5.5% in the quarter over last year, while net income fell 6% due to Hurricane Irma, but it still came in ahead of the Street at $1.1bn, $1.57 per share.

CEO Ed Bastian said, “Having just completed the busiest summer travel season in our history, we have good momentum, a determined team and a solid pipeline of initiatives to grow earnings and margins.”

--Wal-Mart Stores Inc. said its fiscal 2019 online sales were going to rise about 40% and it expects to add 1,000 online grocery locations in the U.S.  Wal-Mart also announced a massive stock buyback, while guiding higher.  The stock is near an all-time high

--Richard Thaler of the University of Chicago won the Nobel Prize for economics this week, Thaler taking the $1.1 million prize for “understanding the psychology of economics.”

Thaler is considered the father of behavioral economics, a field that shows that far from being the rational decision-makers described in economic theory, people often make choices that don’t serve their best interests; such as making big bets at a casino when you are convinced a hot streak will continue.

The illogical behavior has economic consequences: People spend more than they should and don’t save enough for retirement.  Or paying too much for housing when prices are at bubble levels.

Asked how he would spend his $1.1 million in prize money, Thaler told the Chicago Tribune, “as irrationally as possible.”  [He did have a deeper response as a follow-up to the preceding, including, “The serious answer to the question is that I plan to spend some of it on having fun and give the rest away to the neediest causes I can find.”]

--In a story that was big on Wall Street but bored the hell out of me, activist hedge fund manager Nelson Peltz lost his fight for a seat on Procter & Gamble’s board, though because of the size of P&G, this was the biggest-ever proxy fight.  But the vote wasn’t certified and Peltz awaited that.  It was said to be within one percent.

Peltz has been calling on the company to reorganize into three business units: beauty, grooming and healthcare; fabric and home care; and baby, feminine and family care.

The two sides in the tussle spent more than $100 million on mailings, phone calls and advertisements to woo investors.

Whatever.  It gave CNBC something to talk about.

--BlackRock Inc., the world’s largest money manager, saw its assets increase almost $1 trillion in the year ended with the third quarter, with BlackRock’s total assets under management now $5.98 trillion at the end of September, as money continues to flow into its large lineup of exchange-traded funds.  Coupled with No. 2, Vanguard Group, the two now manage about $10.7 trillion, almost as much as the GDP of China, the world’s second-largest economy at $11.2 trillion in 2016.  [Sarah Krouse / Wall Street Journal]

--Sears Canada said it would shut down operations, leaving 12,000 out of work.  The company operates separately from Sears Holdings of Illinois, and has been under bankruptcy protection since June 22.

Sears Canada has  been selling its best leases to Nordstrom, in particular, but now it is closing its 166 remaining stores, a big blow to many landlords, most of whom are already dealing with dead space.

And, as happens in these situations, about 18,000 retirees of Sears Canada are facing cuts to their pension payments.

--Global airlines carried 3.8 billion passengers last year, up 7% over 2015, according to the International Air Transport Association.

The biggest airline in the world was Southwest Airlines, with 151.8 million, the U.S. accounting for 21% of all global air passengers in 2016.

But Asia-Pacific had the greatest number of passengers, 1.3 billion, or 35% of the total figure.

Europe accounted for 26%, the Middle East 5%.

All the busiest airports are in Asia, with the pair of Hong Kong-Taipei handling 5.2 million passengers.

The busiest route in Europe? Dublin-London.

IATA said low-cost carriers accounted for 28.3% of all global air passengers, with Ireland’s Ryanair the world’s fourth-biggest.

*As I noted the other week, I have now posted a story on my “Wall Street History” link on becoming an airline pilot, courtesy of the thoughtful commentary of a good friend of mine who is a commercial pilot.

--Sales of electric cars in China soared nearly 80% in September compared with last year, after a 76% increase in August, as the government accelerates efforts at advancing the country’s capabilities in new technologies.

--Amazon.com Inc. said it plans to add 120,000 seasonal employees to help fill holiday orders at its warehouses, which is the same total as last year.

--Shares in Domino’s Pizza slumped 4% after the company delivered third quarter results that beat expectations (and then dropped another 4% Friday), as the Street wanted more...like three medium pies for the discounted price of two.

For the three months to September, Domino’s reported a 13.5% jump in revenue to $643.6 million, handily beating forecasts of $628.4m, with same-store sales growing 8.4%, marking the 26th consecutive quarter of growth.

--We note the passing of Robert L. McKay, the former architect who designed the first Taco Bell restaurant and helped transform it into a fast-food powerhouse.  He was 86.

McKay was a Sherman Oaks, Calif., architect when in 1964, he was hired by Taco Bell founder Glen Bell to create a distinctive new look. Bell had opened his first Taco Bell in Downey, CA, in 1962, selling hard shell tacos and other Mexican-inspired foods.

So McKay took the concept and developed the California Spanish-style mission motif still largely used today.

Bell would then hire McKay to be president and so he closed up his architecture business and spent all his energy on Taco Bell.  McKay stayed on until 1981, through the company going public in 1969 and its acquisition by PepsiCo.  He then devoted his time to building up other businesses, while forming a foundation dedicated to social justice and community organizing work, particularly the rebuilding effort after the 1992 Los Angeles riots.

And McKay and his wife funded the creation of the Redeemer School in Jackson, Miss., for very low-income children...a venture they were most proud of.

But I’m now hungry as heck for a taco and the Taco Bell that had been in my area closed down a few years ago, inexplicably, and I haven’t been the same since.  You’ve probably noticed this in my personality.

--A Milwaukee Journal Sentinel investigation has found dozens of people have been getting violently ill and blacking out for hours after drinking small to moderate amounts of alcohol while staying at all-inclusive resorts in Mexico.  Some of the tourists were sexually assaulted and robbed, and the issue is the U.S. State Department is covering this up in its data on the number of U.S. citizens who have died in Mexico of unnatural causes.

Not included in the data was a 20-year-old, Abbey Conner, a UW-Whitewater student who was pulled lifeless out of a pool under mysterious circumstances just after arriving with her family at a Playa del Carmen resort in January.  An investigation found she had been given tainted alcohol.

But even with incomplete data, the State Department says 16 Americans drowned in Mexico between January and June, while homicides of American citizens in Mexico jumped 32%, to 49, compared to the same period in 2016.

--Time Inc. is cutting back on the circulation and frequency of some of its biggest titles, as it continues to seek to reduce costs and restructure to ensure the profitability of its core brands. 

First, the company is reducing the weekly circulation of TIME magazine by one-third to 2 million copies (to reduce waste at newsstands, for example).  And, kind of shockingly, Sports Illustrated is being reduced to 27 issues, including the Swimsuit edition, down from 38 this year.  Aside from these two, Entertainment Weekly and Fortune are also being reduced.

Advertising revenue fell 12% to $374 million for the most recent quarter ended June 30, mainly because of a falloff in print.

Time CEO Rich Battista said the company’s research shows readers are “okay with fewer issues as long as the issues have more inside.”

--How bad is “Megyn Kelly Today”?  Kelly’s hour of “Today” is down 32% compared to a year ago, while “Kathie Lee & Hoda” is down 26%.

Needless to say, folks at “Today” and NBC are rather concerned.

A source told the New York Post, “The format for Megyn’s show doesn’t make sense,” when compared to the “Today” franchise.

NBC claims the numbers are improving.

--Among the stores that have announced they will be closing on Thanksgiving Day are Cabela’s, Costco, Home Depot, IKEA, Lowe’s, Neiman Marcus, Office Depot and Staples.

All are to be commended.  Now this is patriotism.  President Trump should rail against those still open, not the flag issue.

--Finally, I get into the Harvey Weinstein story down below, but for this section, a slew of high-profile women said they would boycott Twitter on Friday after the site suspended actress Rose McGowan, a key figure in the Weinstein scandal.

McGowan was locked out of Twitter for about 12 hours late Wednesday into Thursday.  “There are powerful forces at work,” McGowan wrote on Instagram, alleging that she was being silenced for her activism.

Twitter insisted she was booted temporarily for publishing a private phone number among a large number of tweets criticizing Weinstein and anyone who was not critical of him.

McGowan’s supporters said the ban wasn’t right, especially as trolls are allowed to make abusive comments to women on the social media site without getting similar bans.

Twitter then issued an apology of sorts, explaining the ban, saying it supported the voices on its platform, “especially those that speak truth to power.”

The hypocrisy is inescapable.  Twitter didn’t ban Fox Business Network anchor Lou Dobbs, who once tweeted the address and phone number of Jessica Leeds, a woman who came forward last year to accuse Trump of groping her.

There was no reaction in Twitter stock today.

Foreign Affairs

North Korea: President Trump tweeted over the weekend:

“Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid...hasn’t worked, agreements violated before the ink was dry, making fools of U.S. negotiators. Sorry, but only one thing will work!”

Wednesday, North Korean Foreign Minister Ri Yong Ho was quoted as telling Russia’s TASS news agency that President Trump had “lit the wick of war” with Pyongyang.  “With his bellicose and insane statement at the United Nations, Trump, you can say, has lit the wick of a war against us.  We need to settle the final score, only with a hail of fire, not words.”

Kim Jong Un promoted his 28-year-old sister, Kim Yo Jong, to the ruling party’s political wing, bringing her closer to the center of power and tightening the family’s control on the regime.

Kim told a Workers’ Party convention last Saturday that the North needed to continue nuclear-arms development to defend against what he called “U.S. imperialists’ nuclear blackmail,” according to the official Korean Central News Agency.

Separately, Pyongyang’s hackers stole military plans developed by the U.S. and South Korea last year, including a highly classified “decapitation strike” against the North Korean leader, according to a South Korean lawmaker this week.  What else have Kim’s cyber warriors stolen and what would the impact be on the effectiveness of potential U.S.-South Korean military options?

Rhee Cheol-hee, the ruling party lawmaker, said: “How could we fight against an enemy and win a war if it’s already aware of our strategy?”

Iran: President Trump announced a new strategy on Iran today that shifts the focus from Tehran’s nuclear program to other actions the administration says are destabilizing.

Trump decertified the Iran nuclear deal of 2015, having repeatedly criticized it, dubbing it “the worst deal ever.”  Congress requires the president to certify every 90 days that Iran is upholding its part of the agreement.

Decertifying sets up a 60-day timeframe for Congress to impose new sanctions on Iran, which would effectively remove the U.S. from the deal.  This does not mean the U.S. is withdrawing from it, but we’ll see where we are in a few months.  [Trump is giving Congress 90 days.]

Trump said in addressing the nation:

“As president of the United States my highest obligation is to ensure the safety and security of the American people,” adding he is determined that “Iran will never get a nuclear weapon.”

But he wants lawmakers to change the Iran Nuclear Agreement Review Act that requires the president to certify every 90 days that Iran is in compliance with the 2015 pact.

Trump railed against Iran’s “destabilizing influence” in the Middle East, “particularly its support for terrorism and militants.”

The president’s three primary goals are:

--Rework the deal to make it harder for Iran to develop a nuclear weapon.

--Ensure that it addresses Tehran’s ballistic-missile program.

--Counter Iranian support for terrorists.

A fact sheet released by the White House prior to Trump’s speech states: “The full range of the Iranian regime’s malign activities extends well beyond the nuclear threat it poses,” citing its ballistic missile development and proliferation; material and financial support for terrorism; support of the Syrian regime’s atrocities against its own people; hostility to Israel; threats to navigation in the Persian Gulf; cyberattacks against the U.S., Israel and other allies; human rights abuses; and the detention of foreigners.

Trump also criticized U.S. policy stretching back to the administration under former President George W. Bush for “consistently” prioritizing “the immediate threat of Sunni extremist organizations over the longer-term threat of Iranian-backed militancy.”

Thus, the U.S. has ignored Iran’s expansion through proxy forces and terrorist networks aimed at “keeping its neighbors weak.”

“The Trump administration will not repeat these mistakes,” the fact sheet states, arguing it will instead “address the totality of these threats from and malign activities by the Government of Iran and will seek to bring about a change in the Iranian’s regime’s behavior.”

But the U.S. is remaining in the deal, though by refusing to certify it, he’s passed it on to Congress, asking for a major piece of legislation.

If Congress doesn’t come up with a bill that satisfies Trump, he said he’d formally pull out of the deal. The administration is hoping this will put pressure on the other parties to the pact – Britain, China, France, Germany and Russia – to open talks on a new deal, but this is never happening, plus Iran obviously is never agreeing to reopen it.

And there is no way U.S. allies in Europe will re-impose their own sanctions, so what will it all mean?

Trump has certified the deal twice in the past, and Defense Secretary James Mattis, Secretary of State Rex Tillerson, and Joint Chiefs of Staff Chairman Gen. Joseph Dunford have all said Iran is today in compliance.

Mattis told Congress just a week or so ago that staying in the deal was in the U.S.’s national interest.

The International Atomic Energy Agency, the UN body charged with monitoring the nuclear deal, has repeatedly said Iran is in compliance.

Republican Rep. Ed Royce (Calif.), chairman of the House Foreign Affairs Committee, said on Wednesday: “As flawed as the deal is, I believe we must now enforce the hell out of it.

“Let’s work with allies to make certain that international inspectors have better access to possible nuclear sites, and we should address the fundamental sunset shortcoming, as our allies have recognized.”

The aforementioned Sen. Corker and Republican hawk, Sen. Tom Cotton, have vowed to work together with the administration on a deal acceptable to all, Corker being chairman of the Senate Foreign Relations Committee.

Prior to Trump’s announcement today, British Prime Minister May and French President Emmanuel Macron have urged him to keep the deal.

German Foreign Minister Sigmar Gabriel said on Monday that Germany was ready to increase pressure on Iran, with diplomatic means, but that “we do not want to see this agreement damaged.”  He added: “Our big concern is with, regard to North Korea, that it is very unlikely the North Korean dictatorship is ready to agree to an international agreement to renounce the building of nuclear weapons if the only agreement in the world that has allowed such a renunciation is at the same time called into question.”

The Kremlin said on Friday that if the U.S. withdraws, this will have extremely negative consequences, and Iran is likely to quit the agreement as well. “Certainly, this will damage the atmosphere of predictability, security, stability and non-proliferation in the entire world,” said Vladimir Putin’s spokesman Dmitry Peskov.

Reacting to all this this week, Iran warned President Trump against threatening the Islamic Republic and a spokesman for the armed forces said Iran would teach the United States “new lessons.”  “It seems the Trump administration only understands swear words, and needs some shocks to understand the new meaning of power in the world.  It is time to teach Americans new lessons,” said Masoud Jazayeri, who is also a Revolutionary Guards commander, as reported by ISNA (different than IRNA).  [Reuters]

Regarding the designation of the elite Revolutionary Guards as a terrorist group, Iranian Foreign Ministry spokesman Bahram Qasemi was quoted by the state news agency IRNA: “If they do, Iran’s reaction would be firm, decisive and crushing and the United States should bear all its consequences.”  Individuals and entities associated with the IRGC (Revolutionary Guards) are already on the U.S. list of foreign terrorist organizations, but not the organization as a whole.

So after Trump’s announcement, French President Macron, German Chancellor Merkel, and British Prime Minister May issued a joint statement, saying Trump struck a blow against the 2015 accord in defiance of other world powers, stressing they backed the agreement.

But they also said they shared the United States’ concerns over Iran’s ballistic missile program and regional activities and were ready to work with Washington to address those concerns.

As for Iran, almost immediately after Trump spoke, President Hassan Rouhani said Tehran might walk away if the continuing agreement does not serve the country’s national interests.  Defying Trump, Rouhani said Tehran will double its efforts to expand the country’s defense capabilities, including the ballistic missile program.

“The Iranian nation has not and will never bow to any foreign pressure... Iran’s deal cannot be renegotiated,” Rouhani said.  He added the United States is “more isolated than ever.”

Rouhani also backed the Revolutionary Guards, saying the IRGC will continue its fight against “regional terrorists.” Trump said he would order the Treasury Department to designate the IRGC a supporter of terrorism, which falls short of the tougher designation of labeling it a terrorist organization.

Ilan Goldenberg, Mara Karlin / Defense News...prior to today’s announcement...

“(Even) if Congress shows restraint, this step may still mark a blow to the JCPOA [Ed. the nuke deal], shaking the confidence of the international community and giving Iran the high ground in arguing that the United States is not acting in good faith by taking the first step to dismantle the agreement.

“Issues with sunset clauses and ballistic missile programs are valid criticisms of the deal. And vitriol toward Iran’s regional behavior merits serious attention, albeit separate from the nuclear file. But none of them merit the risks the Trump administration is now inviting.

“Without the JCPOA, the United States would have, in the years between 2013 and 2016, likely faced much more profound questions of war and peace. As policymakers who work on the Middle East, we are used to choosing among terrible options, but these felt especially ugly.

“If President Trump chooses not to certify Iranian compliance with the nuclear agreement and in the weeks ahead takes risky steps that may eventually unravel it, we will not immediately face a crisis. But over time Iran is likely to restart its deliberate march to a nuclear bomb. This will not inevitably lead to war. But it will mean a significant increase in the risk that, whether it be tomorrow or 10 years down the road, a U.S. president will face the same difficult question we wrestled with years ago: risk a major war with Iran, or acquiesce to an Iranian nuclear weapon.”

David Ignatius / Washington Post

“Critics have complained about President Trump’s bombast on foreign policy, but some GOP insiders worry about a less visible problem – a hollowed-out bureaucracy that has been slow to develop and implement strategy.

“Skeptics say that on major issues – Afghanistan, Iran, Syria, Iraq, Russia – the Trump administration hasn’t explained clear, systematic plans for achieving results.  Even where there seems to be a coherent diplomatic strategy, as on North Korea, the president often undercuts it with Twitter storms or personal tirades.

“Because so many key political positions haven’t been filled at the State Department, the interagency process that’s supposed to decide and implement policy is something of an ‘empty suit,’ veteran officials say.  European diplomats say they have been frustrated by the difficulty in finding Trump officials with whom they can frame policies on shared concerns, such as Iranian misbehavior.

“Trump seems weirdly pleased at the many vacant policy positions – evidently not understanding that the vacancies prevent effective action.  ‘I’m generally not going to make a lot of the appointments that would normally be – because you don’t need them,’ Trump boasted in an interview with Forbes published Tuesday....

“The policy paralysis has been clearest with Syria, where a brutal civil war occasioned so much criticism of a ‘feckless’ Obama administration. After nearly nine months, Trump still hasn’t settled on a plan for Syria or Iraq – especially on the crucial question of whether to leave a small residual U.S. force there.  ‘On Syria and Iraq, strategy is in a holding pattern,’ says (a) senior Republican Senate staffer.

“A senior administration official rebutted many of the criticisms, arguing that the classified version of the Afghanistan strategy had all the details that critics were seeking and that a broad Iran strategy might be announced soon. But this official conceded that consensus on Syria ‘hasn’t been achieved.’

“Trump’s slurs and insults may be distracting us from a more basic foreign policy problem: On some key issues, when it comes to actual policy plans, the cupboard is bare.”

Syria / Iraq: The Iraqi government said on Thursday it would not hold talks with the Kurdish autonomous region on reopening its airports and providing dollars for its banks, unless the Kurds commit to Iraq’s unity.

Following a Sept. 25 referendum on independence that Baghdad called illegal, Iraq’s government imposed a ban on direct international flights to the Kurdish region.  Baghdad has called on its neighbors to close the borders with the Kurds, who say the referendum was simply meant to be the start of a negotiation that would see them gain independence after an agreement with the Iraqi government.

Russia claimed to have killed another 120 ISIS fighters and 60 foreign mercenaries in a series of airstrikes last weekend in Syria.  Again, none of this is ever verified.

Turkey: On Monday, Turkish authorities summoned a U.S. consulate worker to testify over his relatives’ alleged links to last year’s failed coup attempt, days after the arrest of another consulate employee.  On Sunday, the U.S. mission in Turkey and the Turkish mission in Washington cut back visa services after Metin Topuz, a U.S. consulate employee, was arrested in Turkey. Washington said the charges linking him to U.S.-based cleric Fethullah Gulen were baseless. Turkey then suspended all non-immigrant visa services at all Turkish diplomatic facilities in the United States.

On Tuesday, President Erdogan said the United States should dismiss its ambassador to Ankara if he took the decision to suspend visa services, adding he did not regard him as a representative of the U.S. government.  Erdogan blamed the United States for causing the dispute between the two countries and asked how “agents’ had infiltrated the U.S. consulate, referring to a consulate worker who was arrested last week and the involvement of a second individual at the mission.

Editorial / Washington Post

“Authoritarian governments around the world have increasingly embraced the disgraceful tactic of arresting U.S. citizens and holding them as de facto hostages in an attempt to gain leverage over Washington.  Iran and North Korea were pioneering practitioners – and both repeatedly extracted U.S. concessions. That probably encouraged other nations, including Egypt and Venezuela. Now comes Recep Tayip Erdogan’s Turkey, a NATO member that appears well on its way to becoming an outlaw state.

“In the past year the Erdogan government has seized a dozen Americans as well as two Turks working for U.S. consulates. With a brazenness that would make Tehran’s Revolutionary Guard Corps blush, Mr. Erdogan recently made clear that the prisoners are little more than pawns whom he wishes to trade for Turks in the United States – particularly the cleric Fethullah Gulen, an Erdogan rival who lives in Pennsylvania. ‘Give us that pastor,’ Mr. Erdogan recently said of Mr. Gulen, ‘and we will do what we can’ to release Andrew Brunson, an American minister.

“Following the latest arrest, of a consular employee in Istanbul, an understandably exasperated U.S. Embassy announced a freeze Sunday on the issuance of nonimmigrant visas to Turks – a drastic measure that was quickly reciprocated by the Turkish mission in Washington. Such a ban could hurt many innocent people, including Turkish journalists and civil society activists working to resist Mr. Erdogan’s repression....There’s no question, however, that the Trump administration, which has persisted in describing Mr. Erdogan as a close ally, must now stand up to his bullying. The Turkish ruler appears to believe he can persecute Americans with impunity; his arrogance was encapsulated when he watched as his security detail attacked peaceful protesters outside the Turkish ambassador’s residence in Washington in May.  His demands about Turks in the United States are equally lawless.  Ankara has offered scant evidence that Mr. Gulen is guilty of a crime, which means that U.S. courts could not approve extradition....

“The longstanding U.S. alliance with Turkey should be preserved, to the extent that is possible with Mr. Erdogan in power. But that cannot come at the expense of tolerating hostage-taking and assaults on the U.S. rule of law.  Mr. Erdogan should be made to understand that he is risking a rupture of relations that will do far more harm to his regime than to the United States.”

Editorial / Wall Street Journal

“Recep Tayyip Erdogan is right when he complains that Turkey is threatened by terrorists who kill innocent citizens and want to bring down his government. But when Turkish authorities tar innocent journalists for abetting terrorism, they confirm to the world that Turkey’s President has turned his country into an authoritarian state.

“On Tuesday, a Turkish court falsely convicted Wall Street Journal reporter Ayla Albayrak of propagandizing on behalf of an outlawed Kurdish terror group....(a Journal) news story about the bitter fighting in a remote, Kurdish-majority, Turkish city called Silopi that borders Syria and Iraq.  Turkish forces fought there with the outlawed PKK, or Kurdistan Workers’ Party.

“Ms. Albayrak quoted some members of the Patriotic Revolutionary Youth Group, which Turkish authorities say is affiliated with the PKK. But she also quoted government officials, local residents and the mayor – and explicitly identified the PKK as designated by both Ankara and Washington as a terrorist outfit.  Nowhere in her balanced dispatch did she praise either the PKK or the youth group, and everything she did to report this story as fairly and objectively as possible was within the bounds of good journalism and Turkish law.

“The indictment noted that some Turkish-language websites lifted parts of her story and an accompanying video for their own purposes.  But they used selective quotes, and none are affiliated with the Journal and none were authorized by either the Journal or Ms. Albayrak.

“There is no evidence that Mr. Erdogan initiated these charges against our reporter. Yet they are surely a consequence of the repressive atmosphere he has created in Turkey, especially after a failed military coup in 2016.”

Russia: Israeli intelligence officials spying on Russian government hackers found they were using Kaspersky Lab antivirus software that is also used by 400 million people globally, including U.S. government agencies.

As reported by Haaretz and other media outlets, such as the New York Times, “Israeli officials who had hacked into Kaspersky’s network over two years ago then warned their U.S. counterparts of the Russian intrusion.”

The Washington Post reported that the Israeli spies had also found Kaspersky’s network hacking tools that could only have come from the U.S. National Security Agency.

After an investigation, the NSA found that those tools were in possession of the Russian government, according to the Post.

The U.S. also shared with its NATO allies that Russia’s FSB intelligence service had “probable access” to Kaspersky customer databases and source code, which could be used in cyberattacks against the U.S. government, commercial and industrial control network.

The Times had reported that classified documents were stolen from a National Security Agency employee who had improperly stored them on his home computer, which had Kaspersky antivirus software installed on it.

Kaspersky Lab denied any knowledge of, or involvement in, the Russian hacking.

Venezuela: President Nicolas Maduro received at least $35 million in bribes from a Brazilian construction company in 2013, according to a video posted on a blog run by the country’s former attorney general, Luisa Ortega, who fled the country in August.

A man identified as the manager of Venezuelan operations for the company, Odebrecht, said he was “asked for a large sum” by a representative of Mr. Maduro when he was running for the presidency in 2013.

“He asked for 50, and I accepted to pay him 35 million,” said the manager.  The video is said to be authentic and was made by Brazilian prosecutors as part of that country’s wide-ranging corruption investigation.  [New York Times]

Random Musings

--Presidential tracking polls....

Gallup: 39% approve of President Trump’s performance, 54% disapprove
Rasmussen:  43% approve, 55% disapprove

--Robert Kagan / Washington Post

“Rarely has a political party more deserved the destruction the Republican Party may be about to suffer at the hands of President Trump’s former strategist, ideological guru and onetime puppeteer Steve Bannon.  It was obvious during the earliest days of the campaign that Trump never intended to be either the leader or the protector of the Republican Party. He had contempt for the party.  For one thing, it was a proven loser.  For another, it crumpled like stick figures under his steamroller. Who could respect people who fell so easily, and so willingly?

“Party leaders were especially contemptible in Trump’s eyes. They couldn’t even see what he was doing to them, or if they did, they were too cowardly to stop him.  He had contempt for them when they tried to distance themselves from his racist, sexist and all around antisocial behavior.  But he had even more contempt for them when they nevertheless came crawling back to him, again and again, pledging their fealty.  He knew they came back not because they approved of him but because they feared him and the political following he commanded.  He had stolen the hearts of their constituents, and therefore he owned them.  He would use them as needed, and dispose of them when he could, knowing they could do nothing about it.  ‘I saw them at Munich,’ Hitler said of his British and French counterparts, whom he dubbed ‘little worms.’

“Now the conquest is in full swing. Trump and Bannon put on a little Kabuki play for us this year. After a few months, it became clear that Bannon had become a lightning rod in the White House, the target of endless sniping from disgruntled Republicans and fellow staffers, unable to get anything done in the sludge of the Washington bureaucracy.  He was hamstrung.  And so they decided he could do more for Trump on the outside.  Trump would play the constrained madman, surrounded and controlled by the ‘adults,’ occasionally letting his true feelings be known to his throngs.  Meanwhile Bannon would play the gonzo political maestro on the outside, running Trumpists in primaries to knock off establishment types, even hardcore conservative ones.  Trump could even pretend to support the establishment’s choice, but his voters would know better.  The result would be a rout. Some establishment Republicans would lose, either in the primary or the general; others would be afraid to run for reelection; others would try to suck up to Bannon in the hopes of persuading him not to unleash the hounds; all would try to mimic Trump. And it didn’t matter which path they took: These would all be victories for Trump.

“This is what is happening now. It is the Trumpian Anschluss, the peaceful takeover of a party too craven to fight back. Republican leaders cry, ‘You’re helping the Democrats win!’  But that doesn’t matter to Bannon and Trump.  For one thing, it may not even be true, for who can be sure that a thoroughly Trumpist Republican Party won’t be able to defeat a Democratic Party apparently bent on nominating unelectable candidates on the left?  But either way, Bannon and Trump undoubtedly believe it is more important to turn the party into Trump’s personal vehicle, to drive out the resisters, the finger-waggers, the losers, the proud scions of the responsible establishment who could not stop Trump and apparently cannot legislate their way out of a paper bag.”

--Billionaire Thomas J. Barrack Jr. has been a close friend of President Trump for over three decades, but as he said in interviews with the Washington Post, he has been “shocked” and “stunned” by some of the president’s rhetoric and inflammatory tweets.  And he disagrees with some of Trump’s proposals, including his push for a border wall with Mexico.  He wonders why the president spends so much time trying to appeal to the fringes of his audience.

“He thinks he has to be loyal to his base,” Barrack said.   “I keep on saying, ‘But who is your base?  You don’t have a natural base. Your base now is the world and America, so you have all these constituencies; show them who you really are.”

--California Senator Dianne Feinstein (D) announced on Monday morning that she will run for reelection in 2018.  She’s already 84.

--Republican Senator Susan Collins of Maine said she will not run for governor of her state next year, as many thought she would, but rather serve out her tem in the Senate, which doesn’t expire until 2020.

--Indie film impresario Harvey Weinstein, a towering figure in Hollywood for decades, was fired from his company Sunday night after allegations that he sexually harassed women for decades.

Weinstein helped create the careers of people such as Quentin Tarantino and created the modern Oscar campaign.  But he was also known to have a volatile temper and often brought those who worked for him and filmmakers to tears.  The alleged sexual behavior that would be his undoing was the big “open secret” in Hollywood.

The New York Post reported that Harvey’s brother, Bob, may have orchestrated Harvey’s fall.  A source said, “Bob wanted Harvey to get what’s coming to him.”  Apparently there have been times when the brothers wouldn’t speak for months, and now Bob wants to take over.  Bob Weinstein denied the assertions in the story.

The duo founded Miramax – the entertainment company that revolutionized the indie film business – in 1979 in Buffalo, selling it to Disney in 1993 and exiting in 2005 to found The Weinstein Company.  While Harvey got the headlines, Bob was behind hits such as “Scream” and “Scary Movie.”

Comedian Seth MacFarlane admitted Wednesday that he ripped Harvey Weinstein at the 2013 Oscars after learning the movie mogul preyed on his pal Jessica Barth.

The “Family Guy” creator cracked back then in a now famous clip, “Congratulations, you five ladies no longer have to pretend to be attracted to Harvey Weinstein,” as he read off nominees for the Supporting Actress category.

So with the clip going viral, MacFarlane felt compelled to explain that in 2011, Barth – whom he worked with on the “Ted” movies – confided that Weinstein offered to cast her in a film in exchange for a naked massage in his hotel room.

“It was with this account in mind that, when I hosted the Oscars in 2013, I couldn’t resist the opportunity to take a hard swing in his direction,” said MacFarlane.  “Make no mistake, this came from a place of loathing and anger.”

Barth came forward with her allegations in Tuesday’s New Yorker expose, which detailed scathing allegations by other women Weinstein forced into oral sex and, in at least one case, rape.

Democrats scrambled to return their donations from the dirtball. Senators Kirsten Gillibrand, Chuck Schumer, Cory Booker, Richard Blumenthal.... New York Gov. Andrew Cuomo eventually coughed up $50,000 Weinstein had given him for the current election cycle.

But some of us were waiting to see what two titans of the party would say.  Between 1990-2016, Weinstein bundled more than $1.4 million for Hillary Clinton’s campaigns and political action committees, according to data compiled by the Center for Responsive Politics, including maximum allowable individual contributions, and a $33,000 donation to the Hillary Victory Fund in 2016.

Clinton took five days to break her silence.

“I was shocked and appalled by the revelations about Harvey Weinstein,” she posted to Twitter by her former campaign spokesman Nick Merrill, which her account retweeted.

“The behavior described by women coming forward cannot be tolerated.  Their courage and the support of others is critical in helping to stop this kind of behavior,” Clinton said.

Barack Obama said after Hillary’s statement that both he and former First Lady Michelle are disgusted.

“Michelle and I have been disgusted by the recent reports about Harvey Weinstein. Any man who demeans and degrades women in such fashion needs to be condemned and held accountable, regardless of wealth or status,” they said in a joint statement.

The Obamas added “We should celebrate the courage of women who have come forward to tell these painful stories. And we all need to build a culture – including by empowering our girls and teaching our boys decency and respect – so we can make such behavior less prevalent in the future.”

Separately, late Thursday, Amazon suspended its head of its studios, Roy Price, after “Man in  the High Castle” producer Isa Hackett told the Hollywood Reporter that Price had repeatedly propositioned her.

--President Trump has a victory, according to some.  He ordered Vice President Mike Pence to go to the Indianapolis Colts-San Francisco 49ers game Sunday and then leave when some 49ers players kneeled during the national anthem.

“I left today’s Colts game because President Trump and I will not dignify any event that disrespects our soldiers, our Flag, or our National Anthem,” said the vice president.

President Trump then tweeted that he had asked Pence and second lady Karen Pence to leave the stadium if any players kneeled, and said he was proud of them.

I am so tired of this. I understand the president is playing to his base, but this was a dead issue before he first said, “Wouldn’t you love to see one of these NFL owners, when somebody disrespects our flag, to say, ‘Get that son of a bitch off the field right now, out, he’s fired. He’s fired.’”

--This one really ticks me off. As reported by Ledyard King of USA TODAY:

“Internal memos show top Trump administration officials knew extending the recreational fishing season in the Gulf of Mexico from three to 42 days this summer would lead to significant overfishing.

“But they did it anyway.

“In memos released in response to a lawsuit, Commerce Department officials defended the move by saying that keeping the three-day season would be ‘devastating’ to the recreational marine industry and the communities whose economies are tied to it.

“And extending the time would also help solve a long-running dispute with states who have much longer seasons and want to wrest control of red snapper management from federal managers, they argued.

“ ‘It would result in overfishing of the stock by six million pounds (40%), which will draw criticism from environmental groups and commercial fishermen,’ Earl Comstock, director of Policy and Strategic Planning for Commerce, conceded in a June 1 memo to his boss, Secretary Wilbur Ross.  So Ross approved it.”

Understand that commercial fishing interests and charter boat captains didn’t like the extension either, fearing overfishing would eat into their quotas.

Recreational anglers argue there is an abundance of red snapper.

I just don’t like the way the administration handled this. 

--Baltimore’s murder count for 2017 hit 278 on Wednesday, with the record being 353 in 1993, when there were about 100,000 more residents in the city.

Baltimore has more homicides per-capita than Chicago, and this year, has more total homicides than New York City, which is staggering.

Homicides were up 16% over last year as of Oct. 7, according to city data and Kevin Rector of the Baltimore Sun.

--My overriding theme of “wait 24 hours” proved so true again this week when we learned the timeline in the Las Vegas massacre had changed dramatically, with Mandalay Bay security guard Jesus Campos getting shot in the leg as he investigated “sounds of drilling” coming from the 32nd-floor room of Stephen Paddock, at 9:59, six minutes before the rampage and not after it had commenced as initially reported for over a week after.

But then Friday, police presented a third version of the timeline. Clark County Sheriff Joseph Lombardo, who oversees the Las Vegas police department, told reporters that Paddock shot at Campos at about the same time he opened fire on the more than 20,000 concertgoers down below.

“Nobody is attempting to hide anything.  The dynamics and the size of the investigation require us to go through voluminous amounts of information in order to draw an accurate picture,” Lombardo said.

As to a motive, FBI special agent Aaron Rouse said there was no information that Paddock was a member of an extremist group.  Otherwise, no motive as yet.

--The Boy Scouts of America announced they would accept girls into their ranks, a move designed to address dwindling membership numbers, while at the same time, busy parents have been telling them they want to be able to have just one organization for their girls and boys.

The group says it has 2.3 million youth members today, down more than 11% from 2.6 million youth members in 2012.

So like all of you I’m thinking, yeah, but what about the Girl Scouts of the USA, a separate organization?  They have 1.8 million youth members...no response from them yet that I’ve seen.

Meanwhile, girls will be allowed to attain the highest level rank of Eagle Scout with the Boy Scouts.

For now, girls can sign up for Cub Scout – ages 6 to 10 – in 2018. A program for older girls will be announced next year, with sign up expected in 2019.

Yours truly never got above Second Class.

--We’ve known for a while that at some point in the next couple hundred years, a supervolcano under Yellowstone National Park could erupt, wiping out life on the planet.

But according to National Geographic, researchers at Arizona State University analyzed minerals in fossilized ash from the most recent mega-eruption (600,000 years ago, give or take five months) and found changes in temperature and composition that had only taken a few decades.  Until now, geologists had thought it would take centuries for the supervolcano to make the transition.

This discovery comes on top of a 2011 study that found that ground above the magma reservoir in Yellowstone had bulged by about 10 inches in seven years.  At the time, an expert told Nat Geo, “It’s an extraordinary uplift, because it covers such a large area and the rates are so high.”

We are so screwed.  Go Jets!

---

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

Pray for California.

God bless America.

---

Gold $1306...up $28 on the week
Oil $51.42

Returns for the week 10/9-10/13

Dow Jones  +0.4%  [22871]
S&P 500  +0.1%  [2553]
S&P MidCap  unch
Russell 2000  -0.5%
Nasdaq  +0.2%  [6605]

Returns for the period 1/1/17-10/13/17

Dow Jones  +15.7%
S&P 500  +14.0%
S&P MidCap  +9.5%
Russell 2000  +10.7%
Nasdaq  +22.7%

Bulls  60.4... ‘60’ normally a danger sign, but not yet today
Bears  15.1  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore



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Week in Review

10/14/2017

For the week 10/9-10/13

[Posted 11:30 PM ET, Friday]

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

Edition 966

What a horrible stretch for this country (and our neighbor to the south) in the last six weeks.  Three major, devastating hurricanes...a massive earthquake in Mexico City...the deadliest mass shooting in U.S. history in Las Vegas...and now the catastrophic fires in northern California, where the death toll is 34 as I write, 5,700 structures destroyed...entire neighborhoods wiped out forever (at least in many of our lifetimes).

What is so depressing about the fires is that while you barely bat an eye at wildfires in southern California, the scope of the devastation in the likes of Sonoma and Napa counties is beyond belief because this is not fire territory historically.  And it didn’t matter who you were, or how famous.

I was thinking today of who my five favorite celebrities are, from my lifetime, who I’ve never met, and they would be Arnold Palmer, Ronald Reagan, Paul Newman, Charles Schulz and Baseball Hall of Famer Tom Seaver.  [I stood next to Palmer on more than a few occasions, but can’t say I really met him.]

I couldn’t help but muse about this because this week, on the same day, Tom Seaver lost his beloved vineyard in Calistoga (he is safe, last I heard), while Charles Schulz’ home in Santa Rosa, that he and his widow, Jean, now 78, lived in since the 1970s, was reduced to rubble, with Jean barely escaping.  Schulz died in the home in 2000.  [Thankfully, his museum in town survived, but a ton of invaluable memorabilia in the sprawling home was lost.]

All you can do is pray for the victims and the residents who lost everything, and for those now battling the blazes, furiously trying to save lives and property.

What a blow to the region’s economy.

But there is another depressing fact of the calamity.  Much of both California and Nevada are now blanketed with a layer of smoke.  While more than 200,000 acres are burning in large fires throughout California, another near Reno is contributing to the smoky conditions in Nevada.

According to air-quality analyst Sean Raffuse, of the Crocker Nuclear Laboratory at University of California-Davis, in just two days (Tues. and Wed.), fires in the wine country are thought to have produced as much small particulate matter as all the vehicles in the state produce in a year.  “It’s a lot,” said Raffuse.

I mean think about all I’ve written on the topic of fine particulate matter in China, and now Californians are suffering as bad as anyone in Beijing in their rough stretches does.

But burning forests and grasslands is one thing.  All the homes and structures that have been consumed is another because the buildings contain toxic material when burned.  Just another aspect to this nightmare.

Trump World...Repeal and Replace....

Unable to achieve any success in Congress in keeping a campaign promise, President Trump signed an executive order prescribing a quick fix to undo ObamaCare, but most industry experts believe this is far from a done deal.

Trump’s plan rests on one main pillar, the creation of associations in which multiple employers can band together to buy health plans under the same law that large employers utilize.  That law rests outside the mandate of the Affordable Care Act.

But it is not clear just who would create these groups, though there are employer trade groups, like the National Restaurant Association, that have advocated this year to allow restaurants to band together to buy healthcare.

This is a deal for 2019, not 2018, however, seeing as how many Americans will be signing up for new plans through open enrollment beginning Nov. 1, and to be up and running for 2019, you need to have things in place by early summer, as the big insurers shop their plans for the following year.  And there will be many legal challenges.

This was Trump’s first step.  The White House then announced late Thursday it was planning on immediately cutting off key payments to insurers selling ObamaCare coverage.

Trump has repeatedly threatened to eliminate the disbursements to insurers, known as cost sharing reduction (CSR) payments, which are worth an estimated $7 billion in 2017.  The White House is claiming the administration “cannot lawfully” make the payments.

“Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under ObamaCare,” Sarah Sanders said in a statement.  “In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments.”

“The United States House of Representatives sued the previous administration in Federal court for making these payments without such an appropriation, and the court agreed that the payments were not lawful,” she continued.

“The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system.  Congress needs to repeal and replace the disastrous ObamaCare law and provide real relief to the American people.”  [The Hill]

The Congressional Budget Office said in August that about 1 million would be uninsured in 2018 and insurance companies would raise premium prices by about 20 percent for ObamaCare plans if the payments were cut off.

The payments help low-income people afford co-pays, deductibles and other out-of-pocket costs associated with health-insurance policies.  Insurers have called the payments critical, saying that without them, they would have to massively increase premiums or exit the individual market.

Many insurers have long priced their 2018 plans for the coming open enrollment period.

Congress has been looking towards a bipartisan deal to continue making the payments for two years in order to stabilize the markets in the short term.  That effort was halted amid the last-ditch effort for the ObamaCare repeal law from Senators Graham and Cassidy last month.

By Friday evening, nearly 20 states had filed a lawsuit against the president over the decision to stop the CSR payments.

Two opinions....

Editorial / Washington Post

“President Trump on Thursday signed an executive order directing his administration to ramp up its sabotage campaign against the Affordable Care Act, also known as ObamaCare, also known as the health-care law without which millions of needy people would lack coverage.

“The only good news is that the order merely instructs executive agencies to draw up some new, looser regulations, rather than immediately eroding ObamaCare’s protections.  The bad news is that those looser regulations may nevertheless come soon, and they could devastate the ACA’s carefully regulated marketplaces.  Much depends on how reckless the leaders of agencies such as the Labor Department decide to be.

“ObamaCare’s underlying logic is that covering people who get sick or are likely to become sick, because of their age or preexisting conditions, requires a big insurance pool with enough healthy people to spread risk evenly.  Republicans have argued that this system is unjust to the healthy and young, who pay more into the system than they get out of it, and that they can adjust the system to favor the fortunate without harming the unlucky. They are wrong, as analysis after analysis of their various health-care bills showed. That is one reason GOP lawmakers failed to pass the bills.  Not taking the hint, Mr. Trump is now trying to undercut ObamaCare’s insurance pool by executive fiat, sidestepping Congress.”

Editorial / Wall Street Journal

“Republicans are still trying to defuse the ticking ObamaCare bomb without blowing themselves up, and on Thursday the GOP cut the first wire: President Trump signed an executive order that could begin to revive private insurance markets.  More to the point, Americans may start to have more choices at a lower cost.

“One piece of this week’s order directs the Labor Department to ‘consider expanding access’ to Association Health Plans, which would allow small businesses to team up to offer insurance. The purpose is to let trade groups form insurance risk pools across state lines and enjoy economies of scale.  Many large companies are freed from state and some federal benefit mandates and operate under a law known as Erisa. Smaller businesses deserve similar flexibility.

“More association plans might start to reverse the decline in small business coverage, and a White House fact sheet notes that the share of workers at small firms with employer coverage has dropped to about one-third in 2017 from almost half in 2010.

“The order also seeks to expand the flexibility and use of health-reimbursement arrangements, which allow employers to pay back employees for health-care expenses with pretax dollars.  This could be a step toward equalizing the tax treatment for smaller businesses that don’t offer coverage and thus don’t qualify for the subsidy known as the employer tax exclusion.

“A third part of the order directs cabinet agencies to consider new rules on short-term insurance plans, which the Obama Administration restricted for the mortal sin of popularity. The plans traditionally could run for a year and often cover catastrophic events with relatively broad networks of doctors and hospitals.  This can be a lifeline for  folks between jobs....

“ObamaCare’s defenders are calling all of this ‘sabotage’ and warning about ‘adverse selection,’ in which a more robust individual market will siphon off the healthy customers that prop up ObamaCare’s exchanges. They predict a death spiral of higher premiums for the sick or elderly left on the exchanges.

“Yet the ObamaCare exchanges were deteriorating long before Trump arrived, as the young and healthy and insurers fled.  Enrollment is 60% lower than the Congressional Budget Office predicted, which is impressive even by CBO’s record of missing the mark.  Some 6.7 million people paid a tax in 2015 rather than buy coverage they don’t want or can’t afford....

“The downside of the executive order, and it’s considerable, is that these are all regulations that could be changed by, say, President Bernie Sanders. Reform by statute would be far more durable. So it was surprising to see Kentucky Senator Rand Paul all over cable-TV Thursday taking credit for the new rules after he did so much to scuttle ObamaCare repeal in Congress. He’ll need more than this for absolution.

“The association-health plans in particular will require what the White House calls a ‘broader interpretation’ of the Erisa law. Any legal judgment will await the fine print, but this is the kind of rule by regulation that will have to withstand inevitable court challenge.

“The order’s practical effect thus won’t be known for months, though the agencies ought to move quickly to mitigate as much damage as possible in next year’s markets. The executive order isn’t the sabotage Democrats claim but neither is it the political salvation some Republicans hope.  Republicans shouldn’t use these modest improvements as an excuse to avoid pushing more durable legislative reform.”

Tax Reform....

At a rally in Harrisburg, Pa., Trump said the corporate tax rate would be “no more than 20%” under his proposal. But earlier he had said changes may lie ahead.  “We’ll be adjusting a little bit over the next few weeks to make it even stronger,” he said.

White House economic adviser Kevin Hassett has said that if U.S. companies brought foreign-earned profits home, the median household would see their real income rise by $4,000 over the next eight years.  Richard Neal, the top Democrat on the House Ways and Means Committee, said of the calculation, “I have not seen any evidence that even comes remotely close to that.”

A Reuters / Ipsos poll shows that 3/4s of Americans either “somewhat agree” or “strongly agree” that the wealthiest should pay more in taxes (higher tax rates).

I am doubtful negotiators will come up with the changes necessary to secure 50 votes in the Senate and the necessary majority in the House, mainly because as the GOP plan stands today, most experts say it would add more than $1.5 trillion to the deficit over 10 years, totally unacceptable to deficit hawks.

Every percentage-point reduction in the corporate rate reduces federal tax revenue by about $100 billion over 10 years, the top rate being officially 35% today.

But we have a long, long ways to go, especially on the issue of the deductibility of state and local taxes, as I’ve been harping on, because 33 House Republican seats are at risk if the deduction is pulled, as currently planned, the 33 being in the high tax states of New York, New Jersey and California that are impacted most by this provision.

The House expects a vote on a tax bill by Thanksgiving, and under the ideal timeline the Senate would follow.  No way.

Trumpets....

--Trump on Puerto Rico, via Twitter:

“ ‘Puerto Rico survived the Hurricanes, now a financial crisis looms largely of their own making,’ says Sharyl Attkisson.  A total lack of accountability say the Governor. Electric and all infrastructure was disaster before hurricanes. Congress to decide how much to spend...

“We cannot keep FEMA, the Military & the First Responders, who have been amazing (under the most difficult circumstances) in P.R. forever!”

Needless to say, he hasn’t made a statement like this about Texas or Florida, and when he was in Puerto Rico himself, Trump said the U.S. would stand by our fellow citizens.

Thursday, the House voted 353-69 to approve $36.5 billion in emergency relief for Puerto Rico and other areas hit by recent disasters.  Senate approval is expected in coming weeks.  [The 69 ‘no’ votes were all Republicans.]  Congress had approved $15.25 billion to help with earlier storm damages.

Editorial / Washington Post

“It has been three weeks since Hurricane Maria made devastating landfall in Puerto Rico.  Three weeks – and 84 percent of the population is still without power [Ed. it is back up to 90 percent today].  Only 63 percent has access to clean water, and just 60 percent of wastewater treatment plants are working. Food supplies are spotty, the health-care system is in crisis and people are dying. The death toll has risen to 45. [Ed. now at least 48, four of the victims from water-borne bacterial infections, highly preventable.]

“If the Americans enduring these conditions lived in Connecticut or Montana or Arkansas, would we be counseling patience? Would we be blithely accepting predictions of another month – or more – to get power restored?  No. There would be unending media coverage, people would be furious – and the president of the United States certainly wouldn’t be threatening to abandon federal relief efforts....

“There is no minimizing (Maria’s) catastrophic effects, nor the logistical challenges of getting help to an island already suffering from poor infrastructure and long-standing financial problems. But none of that excuses the federal government’s sluggish response and poor planning. Why, for example, as the Times reported, were only 82 patients sent to the hospital ship USNS Comfort over six days when there were so many more sick people in peril?

“Yet, almost incredibly, President Trump on Thursday blasted out a trio of tweets seemingly trying to shame the U.S. territory for its current problems and putting its residents on notice that the federal government might pull out.  So much for his promise to ‘be there every day’ until the people of Puerto Rico are ‘safe and sound and secure.’...Congress should give Puerto Rico the resources it needs. It also should exercise its oversight over the administration to demand answers on why, three weeks after disaster struck, so many Americans are still living in misery with so little hope for the future.”

Friday, Trump tweeted: “The wonderful people of Puerto Rico, with their unmatched spirit, know how bad things were before the H’s. I will always be with them!”

He is so sincere.

--Trump went after the television networks over negative coverage in yet another tweetstorm.

“Network news has become so partisan, distorted and fake that licenses must be challenged and, if appropriate, revoked.”

“Fake @NBCNews made up a story that I wanted a ‘tenfold’ increase in our U.S. nuclear arsenal. Pure fiction, made up to demean. NBC = CNN!

“With all of the Fake News coming out of NBC and the Networks, at what point is it appropriate to challenge their license? Bad for country!”

Nebraska Republican Sen. Ben Sasse questioned whether Trump was upholding his presidential oath to protect the constitution by making threats on the media.

“Mr. President: Words spoken by the President of the United States matter,” Sasse said in a statement.  “Are you tonight recanting of the oath you took on January 20th to preserve, protect, and defend the First Amendment?”

Sitting alongside Canadian Prime Minister Justin Trudeau in the Oval Office on Wednesday, Trump said: “It is frankly disgusting the press is able to write whatever it wants to write,” in response to an NBC New report that claimed back in July he had called for a ten-fold increase in the U.S. nuclear arsenal.

Masha Gessen / The New Yorker

“Laws and institutions designed for liberal democracy can be deployed to restrict media freedom. That’s what modern-day autocrats do. Vladimir Putin has used economic instruments against the press, from hostile takeovers of media companies to libel suits that have bankrupted journalists and entire news outlets. Silvio Berlusconi proposed one restrictive bill after another – most didn’t pass, but they served to intimidate the media – and he also called for boycotts of media outlets that were critical of him.  Hungary’s Viktor Orban did all that while also weaponizing friendly tabloids to harass and discredit political opponents. And all autocrats maintain dominance in the media by limiting and strategically apportioning access.

“Trump is testing the potential of these strategies. He and his Cabinet members have transformed the rules of media access, shutting the press out of the State Department almost entirely and treating White House press briefings as daily battles...But does Trump have the power to take us, by tweet, into previously unimaginable territory of discussing whether the President can shut down a television network?  He just did.”

--White House chief of staff John Kelly was compelled to make a surprise appearance in the press briefing room to dismiss rumors he’s close to quitting or being fired by President Trump.

“I’m not quitting today,” he told reporters.  “I just talked to the president.  I don’t think I’m being fired today. And I’m not so frustrated in this job that I’m thinking of leaving.”

Trump had tweeted earlier in the week: “The Fake News is at it again, this time trying to hurt one of the finest people I know, General John Kelly, by saying he will soon be fired.

“This story is totally made up by the dishonest media. The Chief is doing a FANTASTIC job for me and, more importantly, for the USA!”

--And there was Trump’s feud with Sen. Bob Corker (R-Tenn.), Trump saying the GOP lawmaker was partially responsible for the Obama administration’s nuclear deal with Iran and refusing to say whether the retiring Corker should resign immediately.

Trump tweets:

“Senator Bob Corker ‘begged’ me to endorse him for re-election in Tennessee. I said ‘NO’ and he dropped out (said he could not win without...my endorsement).

“He also wanted to be Secretary of State, I said ‘NO THANKS.’ He is also largely responsible for the horrendous Iran Deal!...

“...Hence, I would fully expect Corker to be a negative voice and stand in the way of our great agenda. Didn’t have the guts to run!”

Corker fired back in his own tweet:

“It’s a shame the White House has become an adult day care center. Someone obviously missed their shift this morning.”

Corker then told the New York Times: “He concerns me. He would have to concern anyone who cares about our nation.”  Corker added, “I know for a fact that every single day at the White House, it’s a situation of [senior administration officials] trying to contain him.”

Earlier, Corker had said Secretary of State Rex Tillerson, Secretary of Defense Mattis and White House Chief of Staff John Kelly are keeping the U.S. from “chaos.”

“Senator Corker worked with Nancy Pelosi and the Obama administration to pave the way for...the Iran deal,” White House press secretary Sarah Sanders said at a briefing.

Steve Bannon has called on Corker to resign.

Trump then mocked Corker’s height, tweeting:

“The Failing @nytimes set Liddle’ Bob Corker up by recording his conversation. Was made to sound a fool, and that’s what I am dealing with!”

Editorial / Wall Street Journal

“Donald Trump’s weekend Twitter spat with Tennessee Senator Bob Corker is a familiar story: The President is a Party of One for whom personal loyalty is the only test. He isn’t going to change, so the meaningful question is how Republicans should navigate his periodic explosions to help the country and maintain their majorities in Congress.

“Mr. Trump unleashed his tirade because he is still sore that Mr. Corker said this summer that the President hadn’t shown the stability or competence to be successful. The two later had it out in the Oval Office, but Mr. Corker stood by his words.  And why shouldn’t he?

“Mr. Corker was expressing views that are widely held on Capitol Hill and even within the Trump Administration.  These men and women support the President’s policies, or at least most of them, and they remain in their jobs for the good of the cause and country.  What they fear, and want to contain, are the President’s lack of discipline, short fuse, narcissism and habit of treating even foreign heads of state as if they are Rosie O’Donnell....

“(But) the only plausible Republican strategy now is to keep pressing good policies, and in particular to pass a strong, pro-growth tax reform.  Some Members might think they can hurt Mr. Trump by blocking reform, but the President will merely blame Republicans and gladly work with Democrats if they take back the House and Senate in 2018.  Mr. Corker recently worked with Pat Toomey (Pennsylvania) to allow $1.5 trillion in budget room over 10 years for tax reform, and we hope he continues to play a constructive role even as he plans to leave the Senate at the end of his term.

“The more Congress and the Cabinet can accomplish on their own, the less hostage they will be to Mr. Trump’s impulsive turns.”

--I cover the Iran deal down below.

Wall Street

According to the minutes from the Federal Reserve’s September meeting, released Wednesday, there was still some debate over whether the Fed is raising short-term interest rates again this year, specifically at the December meeting.  Lingering questions over inflation remain.

Here’s what seems clear. The economic data over the coming weeks is paramount, beginning with this past week’s inflation figures. The September producer price index came in as expected, 0.4%, ditto ex-food and energy, and is now up 2.6% the past 12 months, 2.2% on core. Today then saw the release of the consumer price data for last month and the CPI rose 0.5%, 0.1% ex-food and energy, with the 12-month number being 2.2%, but only 1.7% on core, both in line with expectations.

So there is nothing to worry the Fed on the inflation front, the 1.7% CPI on core being the fifth straight month below 2.0%, the magic number, though Chair Janet Yellen has said she doesn’t want to wait for inflation to hit 2% before acting further, worried inflation would surge and be more difficult to control otherwise.  Of course like 18 months ago, the Fed was talking about letting inflation “run hot,” over 2%, to ensure the economic recovery was sticking.  [The Fed’s preferred inflation barometer, the personal consumption expenditures index, is running at just 1.4%.]

Separately, September retail sales rose a strong 1.6%, in line, and 1.0% ex-autos, also very solid.

The Atlanta Fed’s GDPNow barometer has third-quarter GDP currently pegged at 2.7%.

Bottom line, it’s important to hold off for a while in making any broad pronouncements, re December, as we still have a slew of coming data to digest beforehand, such as the impact on the economy of the hurricanes (including recovery from same), all the while keeping an eye on the geopolitical scene.

But I can’t help but talk of President Trump and his own Fake News!

In an interview with Sean Hannity, the Fox anchor brought up the talk of “$5.2 trillion in wealth created” under Donald Trump, which Trump had tweeted no networks talked about (patently false). Trump responded thusly:

“That’s right. So...I am loving it.  I’m doing the job for the people. And people are seeing that. And I’m so proud of the $5.2 trillion of increase in the stock market.  Now if you look at the stock market, that’s one element but then we have many other elements.  The country, we took it over at $20 trillion [Ed. in debt].  As you know, the last eight years they borrowed more than it did in the whole history of our country.

“So they borrowed more than $10 trillion. Right? And yet, we picked up $5.2 trillion just in the stock market.  Possibly picked up the whole thing in terms of the first nine months.  In terms of value. So, you could say in one sense, we are really increasing values and may be in the sense, we are reducing debt.”

So our president is saying that a rising stock market equates to lower federal deficits, and that he has already wiped out half the $10 trillion debt added by Obama, which I hope you know is a bunch of merde.  That’s not how this works.

But no doubt some of his supporters will actually believe this.

Europe and Asia

Catalonia: Catalan leaders signed a declaration of independence on Tuesday night but halted implementation to allow for talks. Specifically, Catalan President Carles Puigdemont said:

“I ask Parliament to suspend the declaration of independence so that in the coming weeks we can undertake a dialogue.”

Puigdemont said Catalonia had won the right to independence as a republic free from Spain, through the referendum, Oct. 1, but he left the door open to negotiations and to mediation.

“We are here because on Sunday, Oct. 1, Catalonia held a referendum and did so in extreme conditions: violent police attacks against voters waiting to cast their ballots. The goal was to scare people and stay home. But despite everything, more than 2.2 million people did so because they overcame fear.”

Puigdemont added: “All we wanted was a Scottish-style referendum where both sides were able to put their views forward. We were denied, time and time again.”

And: “We are not criminals or coup plotters – just ordinary people who simply want to vote.  We have nothing against the Spaniards.”

Many Catalans had no idea what Puigdemont meant, offering he was just walking in circles.  A circular tightrope, in actuality, as he sought to placate several factions within his unwieldy alliance of separatists that includes the Communists.  The coalition controls a majority of the seats in the Catalan Parliament, but it’s fragile.

Hard-line separatists wanted Puigdemont to follow through on the results of the Oct. 1 vote (90% approving independence, but only 43% turnout, as those opposed stayed away...plus there were irregularities), plus the Constitutional Court in Madrid had deemed the vote illegal.

Other lawmakers in Puigdemont’s conservative party, however, didn’t want to upset Madrid further and escalate tensions, especially after some prominent companies announced plans to move their headquarters from the region because of legal uncertainties.  As I noted last time, banks, for example, want to operate under the European Central Bank umbrella and wouldn’t be able to do so otherwise.

Opposition leader Ines Arrimadas of the Ciudadanos (Citizens) party slammed the speech: “This is a coup. Nobody has recognized the result of the referendum.  Nobody in Europe supports what you have just done.”

Puigdemont’s request of international mediation is also a red line for Madrid.

In response, the Spanish government of Prime Minister Mariano Rajoy held an emergency cabinet meeting on Wednesday morning and opted to give Catalonia five days, until Monday, to say whether or not Puigdemont declared independence or not.  If he says he has, he will be given a further three days to withdraw the declaration.  Should he choose not to do that, Madrid would invoke Article 155 of the constitution.

This allows the central government to suspend a region’s autonomy and impose direct rule.

Rajoy accused Puigdemont of having created “deliberate confusion” and said he wanted to restore “certainty.”  Rajoy will not accept dialogue unless Catalonia abandons its plans for secession.

“This call – ahead of any of the measures that the government may adopt under Article 155 of our constitution – seeks to offer citizens the clarity and security that a question of such importance requires,” Rajoy said.

“There is an urgent need to put an end to the situation that Catalonia is going through – to return it to safety, tranquility and calm and to do that as quickly as possible....

“One thing is absolutely clear: Our democracy is experiencing one of the gravest moment in its history.”

Spain’s Interior Minister, Juan Ignacio Zoido, said Puigdemont had no other choice but to respect the Constitution.  “Outside the law,” Zoido said, “there is no possible dialogue and only confrontation.”

Zoido said his police force is prepared to intervene.

Puigdemont could be tried for sedition.

Catalan leaders said invoking Article 155 would be a big mistake.

We’ll see what happens in the coming days.

Brexit: After three more days of fruitless negotiations with Brussels this week, Prime Minister Theresa May, struggling to keep her coalition together, continues to walk her own tightrope over Brexit negotiations. While she seeks successful negotiations with the European Union, she is placating her party’s Brexit supporters by promising that the U.K. is also preparing the way for a “no-deal” should talks fail.

The two sides are going nowhere, as I’ve been writing for months. The EU is still demanding the issue of the ‘divorce bill,’ Britain’s financial tab, be addressed first before it would consider discussing a transition agreement, which would lead to the critical item, trade talks. But now the EU is even stepping back from concessions it said it was considering last month.

If the U.K. just walks away from a deal, it not only would be a disaster for Britain and cause all manner of chaos, but it would also mean the EU doesn’t get a dime from the U.K., the EU counting on a minimum of $35 billion dollars to help pay for items such as future pension obligations.  The latest polling in the U.K. shows 70 percent of the British electorate opposed to be paying such a high tab.

For the U.K., just picture the chaos of having to build extensive infrastructure at ports to cope with increased customs bureaucracy – in 17 months.  Yes, the EU would suffer economically, but no doubt Britain would fare far worse.

Imagine, without any legal framework between the two, how could you even allow flights between the two?

A new study published by Rabobank, the Dutch lender, estimates that even a non-chaotic no-deal Brexit would push the U.K. into immediate recession for two years.

Foreign Secretary Boris Johnson, Mrs. May’s chief rival inside the Conservative (Tory) Party, said Britain needs to prepare for a no agreement.  “The prime minister has made it very, very clear that we are going to get a deal, we are working for a great deal, but obviously we must make the right preparations as and when it is necessary for a no deal scenario.” 

Johnson led the Brexit campaign and still believes Britain shouldn’t pay the EU a dime.  He has also demanded the U.K. get out from under the European Court of Justice in March 2019, and not after a transition period, which Prime Minister May has rejected, saying Britain would have to accept new laws from Brussels during any transition period.

May said earlier in the week: “I voted Remain, for good reasons at the time but circumstances move on.  I’m being open and honest with you – what I did last time round was I looked at everything and came to a judgment and I’d do exactly the same this time round – but we’re not having another referendum and that’s absolutely crucial.”

But any suggestion Mrs. May’s heart isn’t in Brexit could be fatal to her remaining prime minister.  At the same time, many Brits, especially the business community, would love to stay in the single market.

Eurobits....

--Big election in Austria on Sunday.  The Freedom Party, one of Europe’s longest established right-win populist parties, is a threat to win the national vote, with its leader, Heinz-Christian Strache, hoping to win power on pledges to prevent the “Islamification” of Austria, deny migrants access to generous welfare payments and boost the incomes of ordinary families.

After the success of the rightwing nationalist Alternative for Germany in their recent elections – when they won 13 percent and took more than 90 seats in parliament – the Freedom party could make a strong showing Sunday.

But Strache and his party have largely been coopted by Sebastian Kurz, Austria’s foreign minister and leader of the center-right People’s party.  He has been outflanking the Freedom party on its main plank – Austria’s 2015 response to the migration crisis.

Like Strache, Kurz demands an end to all “illegal” immigration, and he was behind a “Burqa ban” that came into effect this month.  Plus Kurz is presenting himself as an anti-establishment candidate, looking to shake up the system in place the past 50-60 years.

The last poll had the People’s party at 33%, the Freedom party at 26%, and the current ruling Social Democrats at just 24%.

--German Chancellor Merkel settled a row with her governing allies, Bavaria’s Christian Social Union (CSU), reaching a deal on migrant policy, an obstacle to pursuing talks on a final coalition with other parties, namely the Free Democrats and the Greens.

Merkel agreed to put a number on how many people Germany would accept per year on humanitarian grounds, a net total of around 200,000.  But authorities would not turn people away at the border.

Merkel and her Christian Democrats (CDU) won a fourth term in a vote Sept. 24, but she was weakened by heavy losses to the far right.  Coalition talks could take months.  If no deal is reached, which is possible, though not probable, new elections could be called.

--Italian Prime Minister Paolo Gentiloni won a vote in parliament on reform of the electoral system, averting the risk of a government crisis and early elections.  It was a secret vote, to give individual lawmakers cover, and Gentiloni won with 375 lawmakers voting in favor and 215 against.  It goes to the Senate later this month.

The electoral reform effort has for years raised the specter of political crisis again, Italy having had 64 governments since World War II.  The changes proposed by Gentiloni’s government would penalize the populist Five Star Movement because they favor parties that form coalitions, whereas Five Star prefers to go it alone.

A Five Star lawmaker denounced the reform in a Facebook post as “an institutional coup d’etat” worthy of Mussolini. Gentiloni had the support of ex-premier Silvio Berlusconi and the anti-migrant Northern League.

The latest polls have Gentiloni’s Democrats, Five Star and any right-wing coalition containing the League in a virtual three-way tie, with elections slated to be held sometime next year.

Turning to Asia, just one economic item of note in China, with all eyes on the start of the Chinese Communist Party Congress next week in Beijing.  The Caixin private reading on the service sector in September came in at 50.6, well off August’s 52.7, but still growth (50 being the dividing line between growth and contraction).

In Japan, Prime Minister Shinzo Abe is handily ahead in the polls ahead of the Oct. 22 parliamentary elections. Five polls all forecast that Abe’s ruling Liberal Democratic Party will easily win more than half of the 465 seats in the lower house, the more powerful of Parliament’s two chambers.  Coupled with a smaller ally, the coalition could win as many as 2/3s of the seats, which is the level needed to propose revisions to the constitution.

Meanwhile, Tokyo’s Nikkei Stock Average hit a two-decade high on Wednesday and finished the week at 21155, the highest level since Dec. 1996, though it remains far away from its record peak of 38915 on Dec. 29, 1989.  Other surges above 20000 over this time had failed to hit the 1996 peak.

Street Bytes

--Stocks hit more all-time highs this week, with Nasdaq closing at its high today, while the Dow Jones and S&P 500 hit theirs on Wednesday.  On the week, the Dow rose 0.4% to 22871 (a point shy of its record), the S&P rose 0.1% to 2253 (2 points shy) and Nasdaq gained 0.2% to 6605.

Earnings reports will now begin coming in fast and furious, with investors focused on the big tech names.  This week four of the big banks reported and reaction was muted.

--U.S. Treasury Yields

6-mo. 1.24%  2-yr. 1.49%  10-yr. 2.27%  30-yr. 2.81%

The long end of the curve rallied (yields declined) on the fairly tame inflation data and the hope that maybe, just maybe, the Fed isn’t hiking again in December.

--OPEC is optimistic about 2018, saying it expects stronger demand while supply from outside the cartel will not be at levels currently forecast.

The cartel’s monthly outlook said it sees demand for OPEC’s oil reaching 33.1m barrels a day in 2018, up by 200,000 b/d from last month’s forecast.

OPEC is still expected to extend its existing production cuts beyond next March when they were due to expire, as it seeks to draw down excess stocks built-up globally since 2014.

The group’s production reached 32.7m b/d last month, an increase over prior month.

The price of crude zigged and zagged all week, before staging a rally late Friday on the decertification of the Iran deal news, West Texas Intermediate closing at $51.42.

--Mexico’s foreign minister said ending the North American Trade Agreement (NAFTA) would break relations between Mexico and the U.S.

The talks entered a new round this week and President Trump renewed threats to scrap the deal; pointing to the trade deficit with Mexico as unfair to the U.S.

This is a crock.  I agree with the head of the U.S. Chamber Commerce, Thomas Donahue, that scrapping the deal would endanger $1bn in annual trade.

But late Thursday, Reuters reported that two sources with direct knowledge of the talks told them the atmosphere at the table was “horrible” and “highly charged,” as it seems the administration is proposing that any new deal be limited to five years, a sunset clause, which is opposed by both Canada and Mexico.  The administration says this ensures the pact stays up to date.

Some trade observers say it is difficult to see how negotiators could reach an agreement given U.S. demands that the other two sides see as non-starters.  The head of Canada’s largest private sector labor union said it was clear the United States didn’t want a deal.

Thursday night Canadian Prime Minister Justin Trudeau said Canada would not walk away from the talks, despite talk of the sunset clause.

And then late word tonight is that the U.S. is pressing a demand that U.S.-made content account for half the value of the cars and trucks sold under the NAFTA, raising serious doubts about renewing the pact overall.  The U.S. proposal also seeks sharply higher North American automotive content, to 85 percent from 62.5 percent over a period of years.  That is in addition to the insistence half be U.S. made within the first year of a signed deal.

Mexican sources denounced it as “absurd” and unacceptable.  Canada rejected the idea as unworkable.

Trump aides say current rules are too lax and allowed auto companies to bring in too many cheap parts from China and other low-wage Asian countries.

--Japan’s Kobe Steel Ltd., one of the country’s biggest aluminum manufacturers, admitted to a huge scandal this week, announcing it had doctored product-quality paperwork.  Think about that.  The quality of the aluminum in auto vehicles may not be what you are being told it is.

For instance, Nissan Motor Co. singled out hoods using Kobe Steel aluminum as a concern, since it could impact how the vehicle absorbs a crash.  Toyota said it used materials from Kobe in rear doors and other auto parts.

Far scarier, though, is the quality of some of the products used in manufacturing airplanes (and to a lesser extent, Japan’s bullet trains).  Boeing said the company is inspecting its supply chain, but later said it found no safety issues.  [I think their response was way too quick.  Check again!]

At the center of the scandal are aluminum and copper products Kobe Steel said were below specifications set by its customers over a 12-month period ended Aug. 31.  Workers were doctoring inspection certificates, the company said.

In all, Kobe admitted potentially defective products were sold to about 200 firms, including 30 foreign companies.

The country’s trade ministry said Kobe must provide reasons for the data fabrication within a month.  “The credibility of Kobe Steel has plunged to zero,” said Trade Minister Hiroya Kawasaki.

--JPMorgan Chase delivered solid profits, showing increased car lease volume, credit card loan balances and margins, with net income from the consumer and community banking division up 16% from a year earlier.

But the corporate and investment banking division suffered a 13% drop in net income, with bond trading revenues falling 27%.

JPM reported revenues of $25.3bn, slightly better than expected, and ahead of last year’s $24.7bn. 

--Citigroup eked out a gain in quarterly profits, but mostly due to cost-cutting and its Latin America operations, namely Mexico.  Weakness in bond trading continued.

Net income improved to $4.13bn from $3.84bn a year ago, but this was aided by a $355m pre-tax gain on the sale of its fixed income analytics business to the London Stock Exchange.

Operating expenses were $233m lower than the same period last year. But fixed-income revenues dropped 16% from last year, which was enhanced by active trading following the U.K.’s Brexit vote.

Citigroup shares dropped 3.4% in response to the report.

--Friday, Bank of America reported a 13% rise in quarterly profits, thanks to growth in consumer banking and wealth management, which as in the case of the others, offset a sharp decline in bond trading revenues.

Third-quarter net profits were $5.6 billion, with a slight increase in revenues to $21.8bn, in line with expectations.

Fixed income trading revenues were down 22%.

--And Wells Fargo’s problems continued, as it reported its lowest quarterly return on equity in seven years as it continues to tack on costs associated with the sham account scandal. Also, Wells took a $1bn provision as it prepares for a settlement over alleged pre-crisis mortgage abuses.

Revenues declined 2% over last year, the fourth straight quarter of declines for the top line.

Net income was $4.6bn compared with $5.6bn a year ago.

Tim Sloan, CEO, said: “Over the past year we have made fundamental changes to transform Wells Fargo as part of our effort to rebuild trust and build a better bank.”

In the interests of full disclosure, I was at a large Wells regional gathering yesterday, accepting a grant for a charity group I represent, and I was impressed with the managers and regional directors I met.

I have always loved working with the bank.

--Delta Air Lines deliver third quarter sales and earnings ahead of expectations, despite the brutal hurricane season.  Revenue rose a solid 5.5% in the quarter over last year, while net income fell 6% due to Hurricane Irma, but it still came in ahead of the Street at $1.1bn, $1.57 per share.

CEO Ed Bastian said, “Having just completed the busiest summer travel season in our history, we have good momentum, a determined team and a solid pipeline of initiatives to grow earnings and margins.”

--Wal-Mart Stores Inc. said its fiscal 2019 online sales were going to rise about 40% and it expects to add 1,000 online grocery locations in the U.S.  Wal-Mart also announced a massive stock buyback, while guiding higher.  The stock is near an all-time high

--Richard Thaler of the University of Chicago won the Nobel Prize for economics this week, Thaler taking the $1.1 million prize for “understanding the psychology of economics.”

Thaler is considered the father of behavioral economics, a field that shows that far from being the rational decision-makers described in economic theory, people often make choices that don’t serve their best interests; such as making big bets at a casino when you are convinced a hot streak will continue.

The illogical behavior has economic consequences: People spend more than they should and don’t save enough for retirement.  Or paying too much for housing when prices are at bubble levels.

Asked how he would spend his $1.1 million in prize money, Thaler told the Chicago Tribune, “as irrationally as possible.”  [He did have a deeper response as a follow-up to the preceding, including, “The serious answer to the question is that I plan to spend some of it on having fun and give the rest away to the neediest causes I can find.”]

--In a story that was big on Wall Street but bored the hell out of me, activist hedge fund manager Nelson Peltz lost his fight for a seat on Procter & Gamble’s board, though because of the size of P&G, this was the biggest-ever proxy fight.  But the vote wasn’t certified and Peltz awaited that.  It was said to be within one percent.

Peltz has been calling on the company to reorganize into three business units: beauty, grooming and healthcare; fabric and home care; and baby, feminine and family care.

The two sides in the tussle spent more than $100 million on mailings, phone calls and advertisements to woo investors.

Whatever.  It gave CNBC something to talk about.

--BlackRock Inc., the world’s largest money manager, saw its assets increase almost $1 trillion in the year ended with the third quarter, with BlackRock’s total assets under management now $5.98 trillion at the end of September, as money continues to flow into its large lineup of exchange-traded funds.  Coupled with No. 2, Vanguard Group, the two now manage about $10.7 trillion, almost as much as the GDP of China, the world’s second-largest economy at $11.2 trillion in 2016.  [Sarah Krouse / Wall Street Journal]

--Sears Canada said it would shut down operations, leaving 12,000 out of work.  The company operates separately from Sears Holdings of Illinois, and has been under bankruptcy protection since June 22.

Sears Canada has  been selling its best leases to Nordstrom, in particular, but now it is closing its 166 remaining stores, a big blow to many landlords, most of whom are already dealing with dead space.

And, as happens in these situations, about 18,000 retirees of Sears Canada are facing cuts to their pension payments.

--Global airlines carried 3.8 billion passengers last year, up 7% over 2015, according to the International Air Transport Association.

The biggest airline in the world was Southwest Airlines, with 151.8 million, the U.S. accounting for 21% of all global air passengers in 2016.

But Asia-Pacific had the greatest number of passengers, 1.3 billion, or 35% of the total figure.

Europe accounted for 26%, the Middle East 5%.

All the busiest airports are in Asia, with the pair of Hong Kong-Taipei handling 5.2 million passengers.

The busiest route in Europe? Dublin-London.

IATA said low-cost carriers accounted for 28.3% of all global air passengers, with Ireland’s Ryanair the world’s fourth-biggest.

*As I noted the other week, I have now posted a story on my “Wall Street History” link on becoming an airline pilot, courtesy of the thoughtful commentary of a good friend of mine who is a commercial pilot.

--Sales of electric cars in China soared nearly 80% in September compared with last year, after a 76% increase in August, as the government accelerates efforts at advancing the country’s capabilities in new technologies.

--Amazon.com Inc. said it plans to add 120,000 seasonal employees to help fill holiday orders at its warehouses, which is the same total as last year.

--Shares in Domino’s Pizza slumped 4% after the company delivered third quarter results that beat expectations (and then dropped another 4% Friday), as the Street wanted more...like three medium pies for the discounted price of two.

For the three months to September, Domino’s reported a 13.5% jump in revenue to $643.6 million, handily beating forecasts of $628.4m, with same-store sales growing 8.4%, marking the 26th consecutive quarter of growth.

--We note the passing of Robert L. McKay, the former architect who designed the first Taco Bell restaurant and helped transform it into a fast-food powerhouse.  He was 86.

McKay was a Sherman Oaks, Calif., architect when in 1964, he was hired by Taco Bell founder Glen Bell to create a distinctive new look. Bell had opened his first Taco Bell in Downey, CA, in 1962, selling hard shell tacos and other Mexican-inspired foods.

So McKay took the concept and developed the California Spanish-style mission motif still largely used today.

Bell would then hire McKay to be president and so he closed up his architecture business and spent all his energy on Taco Bell.  McKay stayed on until 1981, through the company going public in 1969 and its acquisition by PepsiCo.  He then devoted his time to building up other businesses, while forming a foundation dedicated to social justice and community organizing work, particularly the rebuilding effort after the 1992 Los Angeles riots.

And McKay and his wife funded the creation of the Redeemer School in Jackson, Miss., for very low-income children...a venture they were most proud of.

But I’m now hungry as heck for a taco and the Taco Bell that had been in my area closed down a few years ago, inexplicably, and I haven’t been the same since.  You’ve probably noticed this in my personality.

--A Milwaukee Journal Sentinel investigation has found dozens of people have been getting violently ill and blacking out for hours after drinking small to moderate amounts of alcohol while staying at all-inclusive resorts in Mexico.  Some of the tourists were sexually assaulted and robbed, and the issue is the U.S. State Department is covering this up in its data on the number of U.S. citizens who have died in Mexico of unnatural causes.

Not included in the data was a 20-year-old, Abbey Conner, a UW-Whitewater student who was pulled lifeless out of a pool under mysterious circumstances just after arriving with her family at a Playa del Carmen resort in January.  An investigation found she had been given tainted alcohol.

But even with incomplete data, the State Department says 16 Americans drowned in Mexico between January and June, while homicides of American citizens in Mexico jumped 32%, to 49, compared to the same period in 2016.

--Time Inc. is cutting back on the circulation and frequency of some of its biggest titles, as it continues to seek to reduce costs and restructure to ensure the profitability of its core brands. 

First, the company is reducing the weekly circulation of TIME magazine by one-third to 2 million copies (to reduce waste at newsstands, for example).  And, kind of shockingly, Sports Illustrated is being reduced to 27 issues, including the Swimsuit edition, down from 38 this year.  Aside from these two, Entertainment Weekly and Fortune are also being reduced.

Advertising revenue fell 12% to $374 million for the most recent quarter ended June 30, mainly because of a falloff in print.

Time CEO Rich Battista said the company’s research shows readers are “okay with fewer issues as long as the issues have more inside.”

--How bad is “Megyn Kelly Today”?  Kelly’s hour of “Today” is down 32% compared to a year ago, while “Kathie Lee & Hoda” is down 26%.

Needless to say, folks at “Today” and NBC are rather concerned.

A source told the New York Post, “The format for Megyn’s show doesn’t make sense,” when compared to the “Today” franchise.

NBC claims the numbers are improving.

--Among the stores that have announced they will be closing on Thanksgiving Day are Cabela’s, Costco, Home Depot, IKEA, Lowe’s, Neiman Marcus, Office Depot and Staples.

All are to be commended.  Now this is patriotism.  President Trump should rail against those still open, not the flag issue.

--Finally, I get into the Harvey Weinstein story down below, but for this section, a slew of high-profile women said they would boycott Twitter on Friday after the site suspended actress Rose McGowan, a key figure in the Weinstein scandal.

McGowan was locked out of Twitter for about 12 hours late Wednesday into Thursday.  “There are powerful forces at work,” McGowan wrote on Instagram, alleging that she was being silenced for her activism.

Twitter insisted she was booted temporarily for publishing a private phone number among a large number of tweets criticizing Weinstein and anyone who was not critical of him.

McGowan’s supporters said the ban wasn’t right, especially as trolls are allowed to make abusive comments to women on the social media site without getting similar bans.

Twitter then issued an apology of sorts, explaining the ban, saying it supported the voices on its platform, “especially those that speak truth to power.”

The hypocrisy is inescapable.  Twitter didn’t ban Fox Business Network anchor Lou Dobbs, who once tweeted the address and phone number of Jessica Leeds, a woman who came forward last year to accuse Trump of groping her.

There was no reaction in Twitter stock today.

Foreign Affairs

North Korea: President Trump tweeted over the weekend:

“Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid...hasn’t worked, agreements violated before the ink was dry, making fools of U.S. negotiators. Sorry, but only one thing will work!”

Wednesday, North Korean Foreign Minister Ri Yong Ho was quoted as telling Russia’s TASS news agency that President Trump had “lit the wick of war” with Pyongyang.  “With his bellicose and insane statement at the United Nations, Trump, you can say, has lit the wick of a war against us.  We need to settle the final score, only with a hail of fire, not words.”

Kim Jong Un promoted his 28-year-old sister, Kim Yo Jong, to the ruling party’s political wing, bringing her closer to the center of power and tightening the family’s control on the regime.

Kim told a Workers’ Party convention last Saturday that the North needed to continue nuclear-arms development to defend against what he called “U.S. imperialists’ nuclear blackmail,” according to the official Korean Central News Agency.

Separately, Pyongyang’s hackers stole military plans developed by the U.S. and South Korea last year, including a highly classified “decapitation strike” against the North Korean leader, according to a South Korean lawmaker this week.  What else have Kim’s cyber warriors stolen and what would the impact be on the effectiveness of potential U.S.-South Korean military options?

Rhee Cheol-hee, the ruling party lawmaker, said: “How could we fight against an enemy and win a war if it’s already aware of our strategy?”

Iran: President Trump announced a new strategy on Iran today that shifts the focus from Tehran’s nuclear program to other actions the administration says are destabilizing.

Trump decertified the Iran nuclear deal of 2015, having repeatedly criticized it, dubbing it “the worst deal ever.”  Congress requires the president to certify every 90 days that Iran is upholding its part of the agreement.

Decertifying sets up a 60-day timeframe for Congress to impose new sanctions on Iran, which would effectively remove the U.S. from the deal.  This does not mean the U.S. is withdrawing from it, but we’ll see where we are in a few months.  [Trump is giving Congress 90 days.]

Trump said in addressing the nation:

“As president of the United States my highest obligation is to ensure the safety and security of the American people,” adding he is determined that “Iran will never get a nuclear weapon.”

But he wants lawmakers to change the Iran Nuclear Agreement Review Act that requires the president to certify every 90 days that Iran is in compliance with the 2015 pact.

Trump railed against Iran’s “destabilizing influence” in the Middle East, “particularly its support for terrorism and militants.”

The president’s three primary goals are:

--Rework the deal to make it harder for Iran to develop a nuclear weapon.

--Ensure that it addresses Tehran’s ballistic-missile program.

--Counter Iranian support for terrorists.

A fact sheet released by the White House prior to Trump’s speech states: “The full range of the Iranian regime’s malign activities extends well beyond the nuclear threat it poses,” citing its ballistic missile development and proliferation; material and financial support for terrorism; support of the Syrian regime’s atrocities against its own people; hostility to Israel; threats to navigation in the Persian Gulf; cyberattacks against the U.S., Israel and other allies; human rights abuses; and the detention of foreigners.

Trump also criticized U.S. policy stretching back to the administration under former President George W. Bush for “consistently” prioritizing “the immediate threat of Sunni extremist organizations over the longer-term threat of Iranian-backed militancy.”

Thus, the U.S. has ignored Iran’s expansion through proxy forces and terrorist networks aimed at “keeping its neighbors weak.”

“The Trump administration will not repeat these mistakes,” the fact sheet states, arguing it will instead “address the totality of these threats from and malign activities by the Government of Iran and will seek to bring about a change in the Iranian’s regime’s behavior.”

But the U.S. is remaining in the deal, though by refusing to certify it, he’s passed it on to Congress, asking for a major piece of legislation.

If Congress doesn’t come up with a bill that satisfies Trump, he said he’d formally pull out of the deal. The administration is hoping this will put pressure on the other parties to the pact – Britain, China, France, Germany and Russia – to open talks on a new deal, but this is never happening, plus Iran obviously is never agreeing to reopen it.

And there is no way U.S. allies in Europe will re-impose their own sanctions, so what will it all mean?

Trump has certified the deal twice in the past, and Defense Secretary James Mattis, Secretary of State Rex Tillerson, and Joint Chiefs of Staff Chairman Gen. Joseph Dunford have all said Iran is today in compliance.

Mattis told Congress just a week or so ago that staying in the deal was in the U.S.’s national interest.

The International Atomic Energy Agency, the UN body charged with monitoring the nuclear deal, has repeatedly said Iran is in compliance.

Republican Rep. Ed Royce (Calif.), chairman of the House Foreign Affairs Committee, said on Wednesday: “As flawed as the deal is, I believe we must now enforce the hell out of it.

“Let’s work with allies to make certain that international inspectors have better access to possible nuclear sites, and we should address the fundamental sunset shortcoming, as our allies have recognized.”

The aforementioned Sen. Corker and Republican hawk, Sen. Tom Cotton, have vowed to work together with the administration on a deal acceptable to all, Corker being chairman of the Senate Foreign Relations Committee.

Prior to Trump’s announcement today, British Prime Minister May and French President Emmanuel Macron have urged him to keep the deal.

German Foreign Minister Sigmar Gabriel said on Monday that Germany was ready to increase pressure on Iran, with diplomatic means, but that “we do not want to see this agreement damaged.”  He added: “Our big concern is with, regard to North Korea, that it is very unlikely the North Korean dictatorship is ready to agree to an international agreement to renounce the building of nuclear weapons if the only agreement in the world that has allowed such a renunciation is at the same time called into question.”

The Kremlin said on Friday that if the U.S. withdraws, this will have extremely negative consequences, and Iran is likely to quit the agreement as well. “Certainly, this will damage the atmosphere of predictability, security, stability and non-proliferation in the entire world,” said Vladimir Putin’s spokesman Dmitry Peskov.

Reacting to all this this week, Iran warned President Trump against threatening the Islamic Republic and a spokesman for the armed forces said Iran would teach the United States “new lessons.”  “It seems the Trump administration only understands swear words, and needs some shocks to understand the new meaning of power in the world.  It is time to teach Americans new lessons,” said Masoud Jazayeri, who is also a Revolutionary Guards commander, as reported by ISNA (different than IRNA).  [Reuters]

Regarding the designation of the elite Revolutionary Guards as a terrorist group, Iranian Foreign Ministry spokesman Bahram Qasemi was quoted by the state news agency IRNA: “If they do, Iran’s reaction would be firm, decisive and crushing and the United States should bear all its consequences.”  Individuals and entities associated with the IRGC (Revolutionary Guards) are already on the U.S. list of foreign terrorist organizations, but not the organization as a whole.

So after Trump’s announcement, French President Macron, German Chancellor Merkel, and British Prime Minister May issued a joint statement, saying Trump struck a blow against the 2015 accord in defiance of other world powers, stressing they backed the agreement.

But they also said they shared the United States’ concerns over Iran’s ballistic missile program and regional activities and were ready to work with Washington to address those concerns.

As for Iran, almost immediately after Trump spoke, President Hassan Rouhani said Tehran might walk away if the continuing agreement does not serve the country’s national interests.  Defying Trump, Rouhani said Tehran will double its efforts to expand the country’s defense capabilities, including the ballistic missile program.

“The Iranian nation has not and will never bow to any foreign pressure... Iran’s deal cannot be renegotiated,” Rouhani said.  He added the United States is “more isolated than ever.”

Rouhani also backed the Revolutionary Guards, saying the IRGC will continue its fight against “regional terrorists.” Trump said he would order the Treasury Department to designate the IRGC a supporter of terrorism, which falls short of the tougher designation of labeling it a terrorist organization.

Ilan Goldenberg, Mara Karlin / Defense News...prior to today’s announcement...

“(Even) if Congress shows restraint, this step may still mark a blow to the JCPOA [Ed. the nuke deal], shaking the confidence of the international community and giving Iran the high ground in arguing that the United States is not acting in good faith by taking the first step to dismantle the agreement.

“Issues with sunset clauses and ballistic missile programs are valid criticisms of the deal. And vitriol toward Iran’s regional behavior merits serious attention, albeit separate from the nuclear file. But none of them merit the risks the Trump administration is now inviting.

“Without the JCPOA, the United States would have, in the years between 2013 and 2016, likely faced much more profound questions of war and peace. As policymakers who work on the Middle East, we are used to choosing among terrible options, but these felt especially ugly.

“If President Trump chooses not to certify Iranian compliance with the nuclear agreement and in the weeks ahead takes risky steps that may eventually unravel it, we will not immediately face a crisis. But over time Iran is likely to restart its deliberate march to a nuclear bomb. This will not inevitably lead to war. But it will mean a significant increase in the risk that, whether it be tomorrow or 10 years down the road, a U.S. president will face the same difficult question we wrestled with years ago: risk a major war with Iran, or acquiesce to an Iranian nuclear weapon.”

David Ignatius / Washington Post

“Critics have complained about President Trump’s bombast on foreign policy, but some GOP insiders worry about a less visible problem – a hollowed-out bureaucracy that has been slow to develop and implement strategy.

“Skeptics say that on major issues – Afghanistan, Iran, Syria, Iraq, Russia – the Trump administration hasn’t explained clear, systematic plans for achieving results.  Even where there seems to be a coherent diplomatic strategy, as on North Korea, the president often undercuts it with Twitter storms or personal tirades.

“Because so many key political positions haven’t been filled at the State Department, the interagency process that’s supposed to decide and implement policy is something of an ‘empty suit,’ veteran officials say.  European diplomats say they have been frustrated by the difficulty in finding Trump officials with whom they can frame policies on shared concerns, such as Iranian misbehavior.

“Trump seems weirdly pleased at the many vacant policy positions – evidently not understanding that the vacancies prevent effective action.  ‘I’m generally not going to make a lot of the appointments that would normally be – because you don’t need them,’ Trump boasted in an interview with Forbes published Tuesday....

“The policy paralysis has been clearest with Syria, where a brutal civil war occasioned so much criticism of a ‘feckless’ Obama administration. After nearly nine months, Trump still hasn’t settled on a plan for Syria or Iraq – especially on the crucial question of whether to leave a small residual U.S. force there.  ‘On Syria and Iraq, strategy is in a holding pattern,’ says (a) senior Republican Senate staffer.

“A senior administration official rebutted many of the criticisms, arguing that the classified version of the Afghanistan strategy had all the details that critics were seeking and that a broad Iran strategy might be announced soon. But this official conceded that consensus on Syria ‘hasn’t been achieved.’

“Trump’s slurs and insults may be distracting us from a more basic foreign policy problem: On some key issues, when it comes to actual policy plans, the cupboard is bare.”

Syria / Iraq: The Iraqi government said on Thursday it would not hold talks with the Kurdish autonomous region on reopening its airports and providing dollars for its banks, unless the Kurds commit to Iraq’s unity.

Following a Sept. 25 referendum on independence that Baghdad called illegal, Iraq’s government imposed a ban on direct international flights to the Kurdish region.  Baghdad has called on its neighbors to close the borders with the Kurds, who say the referendum was simply meant to be the start of a negotiation that would see them gain independence after an agreement with the Iraqi government.

Russia claimed to have killed another 120 ISIS fighters and 60 foreign mercenaries in a series of airstrikes last weekend in Syria.  Again, none of this is ever verified.

Turkey: On Monday, Turkish authorities summoned a U.S. consulate worker to testify over his relatives’ alleged links to last year’s failed coup attempt, days after the arrest of another consulate employee.  On Sunday, the U.S. mission in Turkey and the Turkish mission in Washington cut back visa services after Metin Topuz, a U.S. consulate employee, was arrested in Turkey. Washington said the charges linking him to U.S.-based cleric Fethullah Gulen were baseless. Turkey then suspended all non-immigrant visa services at all Turkish diplomatic facilities in the United States.

On Tuesday, President Erdogan said the United States should dismiss its ambassador to Ankara if he took the decision to suspend visa services, adding he did not regard him as a representative of the U.S. government.  Erdogan blamed the United States for causing the dispute between the two countries and asked how “agents’ had infiltrated the U.S. consulate, referring to a consulate worker who was arrested last week and the involvement of a second individual at the mission.

Editorial / Washington Post

“Authoritarian governments around the world have increasingly embraced the disgraceful tactic of arresting U.S. citizens and holding them as de facto hostages in an attempt to gain leverage over Washington.  Iran and North Korea were pioneering practitioners – and both repeatedly extracted U.S. concessions. That probably encouraged other nations, including Egypt and Venezuela. Now comes Recep Tayip Erdogan’s Turkey, a NATO member that appears well on its way to becoming an outlaw state.

“In the past year the Erdogan government has seized a dozen Americans as well as two Turks working for U.S. consulates. With a brazenness that would make Tehran’s Revolutionary Guard Corps blush, Mr. Erdogan recently made clear that the prisoners are little more than pawns whom he wishes to trade for Turks in the United States – particularly the cleric Fethullah Gulen, an Erdogan rival who lives in Pennsylvania. ‘Give us that pastor,’ Mr. Erdogan recently said of Mr. Gulen, ‘and we will do what we can’ to release Andrew Brunson, an American minister.

“Following the latest arrest, of a consular employee in Istanbul, an understandably exasperated U.S. Embassy announced a freeze Sunday on the issuance of nonimmigrant visas to Turks – a drastic measure that was quickly reciprocated by the Turkish mission in Washington. Such a ban could hurt many innocent people, including Turkish journalists and civil society activists working to resist Mr. Erdogan’s repression....There’s no question, however, that the Trump administration, which has persisted in describing Mr. Erdogan as a close ally, must now stand up to his bullying. The Turkish ruler appears to believe he can persecute Americans with impunity; his arrogance was encapsulated when he watched as his security detail attacked peaceful protesters outside the Turkish ambassador’s residence in Washington in May.  His demands about Turks in the United States are equally lawless.  Ankara has offered scant evidence that Mr. Gulen is guilty of a crime, which means that U.S. courts could not approve extradition....

“The longstanding U.S. alliance with Turkey should be preserved, to the extent that is possible with Mr. Erdogan in power. But that cannot come at the expense of tolerating hostage-taking and assaults on the U.S. rule of law.  Mr. Erdogan should be made to understand that he is risking a rupture of relations that will do far more harm to his regime than to the United States.”

Editorial / Wall Street Journal

“Recep Tayyip Erdogan is right when he complains that Turkey is threatened by terrorists who kill innocent citizens and want to bring down his government. But when Turkish authorities tar innocent journalists for abetting terrorism, they confirm to the world that Turkey’s President has turned his country into an authoritarian state.

“On Tuesday, a Turkish court falsely convicted Wall Street Journal reporter Ayla Albayrak of propagandizing on behalf of an outlawed Kurdish terror group....(a Journal) news story about the bitter fighting in a remote, Kurdish-majority, Turkish city called Silopi that borders Syria and Iraq.  Turkish forces fought there with the outlawed PKK, or Kurdistan Workers’ Party.

“Ms. Albayrak quoted some members of the Patriotic Revolutionary Youth Group, which Turkish authorities say is affiliated with the PKK. But she also quoted government officials, local residents and the mayor – and explicitly identified the PKK as designated by both Ankara and Washington as a terrorist outfit.  Nowhere in her balanced dispatch did she praise either the PKK or the youth group, and everything she did to report this story as fairly and objectively as possible was within the bounds of good journalism and Turkish law.

“The indictment noted that some Turkish-language websites lifted parts of her story and an accompanying video for their own purposes.  But they used selective quotes, and none are affiliated with the Journal and none were authorized by either the Journal or Ms. Albayrak.

“There is no evidence that Mr. Erdogan initiated these charges against our reporter. Yet they are surely a consequence of the repressive atmosphere he has created in Turkey, especially after a failed military coup in 2016.”

Russia: Israeli intelligence officials spying on Russian government hackers found they were using Kaspersky Lab antivirus software that is also used by 400 million people globally, including U.S. government agencies.

As reported by Haaretz and other media outlets, such as the New York Times, “Israeli officials who had hacked into Kaspersky’s network over two years ago then warned their U.S. counterparts of the Russian intrusion.”

The Washington Post reported that the Israeli spies had also found Kaspersky’s network hacking tools that could only have come from the U.S. National Security Agency.

After an investigation, the NSA found that those tools were in possession of the Russian government, according to the Post.

The U.S. also shared with its NATO allies that Russia’s FSB intelligence service had “probable access” to Kaspersky customer databases and source code, which could be used in cyberattacks against the U.S. government, commercial and industrial control network.

The Times had reported that classified documents were stolen from a National Security Agency employee who had improperly stored them on his home computer, which had Kaspersky antivirus software installed on it.

Kaspersky Lab denied any knowledge of, or involvement in, the Russian hacking.

Venezuela: President Nicolas Maduro received at least $35 million in bribes from a Brazilian construction company in 2013, according to a video posted on a blog run by the country’s former attorney general, Luisa Ortega, who fled the country in August.

A man identified as the manager of Venezuelan operations for the company, Odebrecht, said he was “asked for a large sum” by a representative of Mr. Maduro when he was running for the presidency in 2013.

“He asked for 50, and I accepted to pay him 35 million,” said the manager.  The video is said to be authentic and was made by Brazilian prosecutors as part of that country’s wide-ranging corruption investigation.  [New York Times]

Random Musings

--Presidential tracking polls....

Gallup: 39% approve of President Trump’s performance, 54% disapprove
Rasmussen:  43% approve, 55% disapprove

--Robert Kagan / Washington Post

“Rarely has a political party more deserved the destruction the Republican Party may be about to suffer at the hands of President Trump’s former strategist, ideological guru and onetime puppeteer Steve Bannon.  It was obvious during the earliest days of the campaign that Trump never intended to be either the leader or the protector of the Republican Party. He had contempt for the party.  For one thing, it was a proven loser.  For another, it crumpled like stick figures under his steamroller. Who could respect people who fell so easily, and so willingly?

“Party leaders were especially contemptible in Trump’s eyes. They couldn’t even see what he was doing to them, or if they did, they were too cowardly to stop him.  He had contempt for them when they tried to distance themselves from his racist, sexist and all around antisocial behavior.  But he had even more contempt for them when they nevertheless came crawling back to him, again and again, pledging their fealty.  He knew they came back not because they approved of him but because they feared him and the political following he commanded.  He had stolen the hearts of their constituents, and therefore he owned them.  He would use them as needed, and dispose of them when he could, knowing they could do nothing about it.  ‘I saw them at Munich,’ Hitler said of his British and French counterparts, whom he dubbed ‘little worms.’

“Now the conquest is in full swing. Trump and Bannon put on a little Kabuki play for us this year. After a few months, it became clear that Bannon had become a lightning rod in the White House, the target of endless sniping from disgruntled Republicans and fellow staffers, unable to get anything done in the sludge of the Washington bureaucracy.  He was hamstrung.  And so they decided he could do more for Trump on the outside.  Trump would play the constrained madman, surrounded and controlled by the ‘adults,’ occasionally letting his true feelings be known to his throngs.  Meanwhile Bannon would play the gonzo political maestro on the outside, running Trumpists in primaries to knock off establishment types, even hardcore conservative ones.  Trump could even pretend to support the establishment’s choice, but his voters would know better.  The result would be a rout. Some establishment Republicans would lose, either in the primary or the general; others would be afraid to run for reelection; others would try to suck up to Bannon in the hopes of persuading him not to unleash the hounds; all would try to mimic Trump. And it didn’t matter which path they took: These would all be victories for Trump.

“This is what is happening now. It is the Trumpian Anschluss, the peaceful takeover of a party too craven to fight back. Republican leaders cry, ‘You’re helping the Democrats win!’  But that doesn’t matter to Bannon and Trump.  For one thing, it may not even be true, for who can be sure that a thoroughly Trumpist Republican Party won’t be able to defeat a Democratic Party apparently bent on nominating unelectable candidates on the left?  But either way, Bannon and Trump undoubtedly believe it is more important to turn the party into Trump’s personal vehicle, to drive out the resisters, the finger-waggers, the losers, the proud scions of the responsible establishment who could not stop Trump and apparently cannot legislate their way out of a paper bag.”

--Billionaire Thomas J. Barrack Jr. has been a close friend of President Trump for over three decades, but as he said in interviews with the Washington Post, he has been “shocked” and “stunned” by some of the president’s rhetoric and inflammatory tweets.  And he disagrees with some of Trump’s proposals, including his push for a border wall with Mexico.  He wonders why the president spends so much time trying to appeal to the fringes of his audience.

“He thinks he has to be loyal to his base,” Barrack said.   “I keep on saying, ‘But who is your base?  You don’t have a natural base. Your base now is the world and America, so you have all these constituencies; show them who you really are.”

--California Senator Dianne Feinstein (D) announced on Monday morning that she will run for reelection in 2018.  She’s already 84.

--Republican Senator Susan Collins of Maine said she will not run for governor of her state next year, as many thought she would, but rather serve out her tem in the Senate, which doesn’t expire until 2020.

--Indie film impresario Harvey Weinstein, a towering figure in Hollywood for decades, was fired from his company Sunday night after allegations that he sexually harassed women for decades.

Weinstein helped create the careers of people such as Quentin Tarantino and created the modern Oscar campaign.  But he was also known to have a volatile temper and often brought those who worked for him and filmmakers to tears.  The alleged sexual behavior that would be his undoing was the big “open secret” in Hollywood.

The New York Post reported that Harvey’s brother, Bob, may have orchestrated Harvey’s fall.  A source said, “Bob wanted Harvey to get what’s coming to him.”  Apparently there have been times when the brothers wouldn’t speak for months, and now Bob wants to take over.  Bob Weinstein denied the assertions in the story.

The duo founded Miramax – the entertainment company that revolutionized the indie film business – in 1979 in Buffalo, selling it to Disney in 1993 and exiting in 2005 to found The Weinstein Company.  While Harvey got the headlines, Bob was behind hits such as “Scream” and “Scary Movie.”

Comedian Seth MacFarlane admitted Wednesday that he ripped Harvey Weinstein at the 2013 Oscars after learning the movie mogul preyed on his pal Jessica Barth.

The “Family Guy” creator cracked back then in a now famous clip, “Congratulations, you five ladies no longer have to pretend to be attracted to Harvey Weinstein,” as he read off nominees for the Supporting Actress category.

So with the clip going viral, MacFarlane felt compelled to explain that in 2011, Barth – whom he worked with on the “Ted” movies – confided that Weinstein offered to cast her in a film in exchange for a naked massage in his hotel room.

“It was with this account in mind that, when I hosted the Oscars in 2013, I couldn’t resist the opportunity to take a hard swing in his direction,” said MacFarlane.  “Make no mistake, this came from a place of loathing and anger.”

Barth came forward with her allegations in Tuesday’s New Yorker expose, which detailed scathing allegations by other women Weinstein forced into oral sex and, in at least one case, rape.

Democrats scrambled to return their donations from the dirtball. Senators Kirsten Gillibrand, Chuck Schumer, Cory Booker, Richard Blumenthal.... New York Gov. Andrew Cuomo eventually coughed up $50,000 Weinstein had given him for the current election cycle.

But some of us were waiting to see what two titans of the party would say.  Between 1990-2016, Weinstein bundled more than $1.4 million for Hillary Clinton’s campaigns and political action committees, according to data compiled by the Center for Responsive Politics, including maximum allowable individual contributions, and a $33,000 donation to the Hillary Victory Fund in 2016.

Clinton took five days to break her silence.

“I was shocked and appalled by the revelations about Harvey Weinstein,” she posted to Twitter by her former campaign spokesman Nick Merrill, which her account retweeted.

“The behavior described by women coming forward cannot be tolerated.  Their courage and the support of others is critical in helping to stop this kind of behavior,” Clinton said.

Barack Obama said after Hillary’s statement that both he and former First Lady Michelle are disgusted.

“Michelle and I have been disgusted by the recent reports about Harvey Weinstein. Any man who demeans and degrades women in such fashion needs to be condemned and held accountable, regardless of wealth or status,” they said in a joint statement.

The Obamas added “We should celebrate the courage of women who have come forward to tell these painful stories. And we all need to build a culture – including by empowering our girls and teaching our boys decency and respect – so we can make such behavior less prevalent in the future.”

Separately, late Thursday, Amazon suspended its head of its studios, Roy Price, after “Man in  the High Castle” producer Isa Hackett told the Hollywood Reporter that Price had repeatedly propositioned her.

--President Trump has a victory, according to some.  He ordered Vice President Mike Pence to go to the Indianapolis Colts-San Francisco 49ers game Sunday and then leave when some 49ers players kneeled during the national anthem.

“I left today’s Colts game because President Trump and I will not dignify any event that disrespects our soldiers, our Flag, or our National Anthem,” said the vice president.

President Trump then tweeted that he had asked Pence and second lady Karen Pence to leave the stadium if any players kneeled, and said he was proud of them.

I am so tired of this. I understand the president is playing to his base, but this was a dead issue before he first said, “Wouldn’t you love to see one of these NFL owners, when somebody disrespects our flag, to say, ‘Get that son of a bitch off the field right now, out, he’s fired. He’s fired.’”

--This one really ticks me off. As reported by Ledyard King of USA TODAY:

“Internal memos show top Trump administration officials knew extending the recreational fishing season in the Gulf of Mexico from three to 42 days this summer would lead to significant overfishing.

“But they did it anyway.

“In memos released in response to a lawsuit, Commerce Department officials defended the move by saying that keeping the three-day season would be ‘devastating’ to the recreational marine industry and the communities whose economies are tied to it.

“And extending the time would also help solve a long-running dispute with states who have much longer seasons and want to wrest control of red snapper management from federal managers, they argued.

“ ‘It would result in overfishing of the stock by six million pounds (40%), which will draw criticism from environmental groups and commercial fishermen,’ Earl Comstock, director of Policy and Strategic Planning for Commerce, conceded in a June 1 memo to his boss, Secretary Wilbur Ross.  So Ross approved it.”

Understand that commercial fishing interests and charter boat captains didn’t like the extension either, fearing overfishing would eat into their quotas.

Recreational anglers argue there is an abundance of red snapper.

I just don’t like the way the administration handled this. 

--Baltimore’s murder count for 2017 hit 278 on Wednesday, with the record being 353 in 1993, when there were about 100,000 more residents in the city.

Baltimore has more homicides per-capita than Chicago, and this year, has more total homicides than New York City, which is staggering.

Homicides were up 16% over last year as of Oct. 7, according to city data and Kevin Rector of the Baltimore Sun.

--My overriding theme of “wait 24 hours” proved so true again this week when we learned the timeline in the Las Vegas massacre had changed dramatically, with Mandalay Bay security guard Jesus Campos getting shot in the leg as he investigated “sounds of drilling” coming from the 32nd-floor room of Stephen Paddock, at 9:59, six minutes before the rampage and not after it had commenced as initially reported for over a week after.

But then Friday, police presented a third version of the timeline. Clark County Sheriff Joseph Lombardo, who oversees the Las Vegas police department, told reporters that Paddock shot at Campos at about the same time he opened fire on the more than 20,000 concertgoers down below.

“Nobody is attempting to hide anything.  The dynamics and the size of the investigation require us to go through voluminous amounts of information in order to draw an accurate picture,” Lombardo said.

As to a motive, FBI special agent Aaron Rouse said there was no information that Paddock was a member of an extremist group.  Otherwise, no motive as yet.

--The Boy Scouts of America announced they would accept girls into their ranks, a move designed to address dwindling membership numbers, while at the same time, busy parents have been telling them they want to be able to have just one organization for their girls and boys.

The group says it has 2.3 million youth members today, down more than 11% from 2.6 million youth members in 2012.

So like all of you I’m thinking, yeah, but what about the Girl Scouts of the USA, a separate organization?  They have 1.8 million youth members...no response from them yet that I’ve seen.

Meanwhile, girls will be allowed to attain the highest level rank of Eagle Scout with the Boy Scouts.

For now, girls can sign up for Cub Scout – ages 6 to 10 – in 2018. A program for older girls will be announced next year, with sign up expected in 2019.

Yours truly never got above Second Class.

--We’ve known for a while that at some point in the next couple hundred years, a supervolcano under Yellowstone National Park could erupt, wiping out life on the planet.

But according to National Geographic, researchers at Arizona State University analyzed minerals in fossilized ash from the most recent mega-eruption (600,000 years ago, give or take five months) and found changes in temperature and composition that had only taken a few decades.  Until now, geologists had thought it would take centuries for the supervolcano to make the transition.

This discovery comes on top of a 2011 study that found that ground above the magma reservoir in Yellowstone had bulged by about 10 inches in seven years.  At the time, an expert told Nat Geo, “It’s an extraordinary uplift, because it covers such a large area and the rates are so high.”

We are so screwed.  Go Jets!

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

Pray for California.

God bless America.

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Gold $1306...up $28 on the week
Oil $51.42

Returns for the week 10/9-10/13

Dow Jones  +0.4%  [22871]
S&P 500  +0.1%  [2553]
S&P MidCap  unch
Russell 2000  -0.5%
Nasdaq  +0.2%  [6605]

Returns for the period 1/1/17-10/13/17

Dow Jones  +15.7%
S&P 500  +14.0%
S&P MidCap  +9.5%
Russell 2000  +10.7%
Nasdaq  +22.7%

Bulls  60.4... ‘60’ normally a danger sign, but not yet today
Bears  15.1  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore