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12/09/2017

For the week 12/4-12/8

 [Posted 11:00 PM ET]

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Edition 974

Trump World...Michael Flynn...Tax Reform

My mantra of ‘wait 24 hours’ has never been more needed than today, in so many respects.  For starters, a look back.

Last Friday, the Dow Jones swooned 350 points after ABC News investigative reporter Brian Ross, citing a single anonymous source, told viewers during an ABC special report Friday morning that Michael Flynn was prepared to testify that Donald Trump, as a candidate for president, told him to contact Russians.  Later during the evening news, Ross walked it back, telling viewers that the source who had provided the initial information for his story later told him that it was as president-elect, not as a candidate, that Trump asked Flynn to contact Russians.

The market recovered Friday afternoon to finish down just 40 points.

ABC News then announced Saturday that Ross’ reporting “during the special report had not been fully vetted through our editorial standards process. As a result of our continued reporting over the next several hours ultimately we determined the information was wrong and we corrected the mistake on air and online.”

How I handled it last WIR:

The other big news of the day was the guilty plea from former national security adviser Michael Flynn, who admitted to lying to the FBI about his contacts with the Russian ambassador and agreed to help investigators as they focus on other presidential aides.

I’m the “wait 24 hours” guy.  I am not going off on any rants on the topic until we learn more.  We had a story earlier in the day from ABC News that Flynn had agreed to testify that President Trump himself had directed Flynn talk to the Russians, to cite one example, but ABC seemed to walk that back a bit and as of tonight we don’t know.

ABC News suspended Brian Ross without pay for four weeks and announced he would no longer cover stories involving President Trump.

Then last weekend, President Trump tweeted he “had to fire General Flynn because he lied to the Vice President and the FBI.”

Trump had previously blamed the Feb. 13 firing on the fact that Flynn misled Vice President Mike Pence about his conversations with ambassador Sergey Kislyak during the presidential transition.  Until this tweet, Trump had not acknowledged he also knew Flynn had lied to the FBI when agents interviewed him on Jan. 24.

So this heightens scrutiny on the private Oval Office meeting Trump later had with then-FBI Director James Comey, one in which Comey later testified Trump told him Flynn was “a good guy” and said, “I hope you can let this go.” Comey told Congress he “took it as a direction” to drop the probe into Flynn, but did not obey it.

We then learned that Trump’s personal lawyer, John Dowd, was the one who drafted the tweet for Trump about lying to both Pence and the FBI.

Trump himself later tweeted: “After years of Comey, with the phony and dishonest Clinton investigation (and more), running the FBI, its reputation is in Tatters – worst in History! But fear not, we will bring it back to greatness.”

And: “So General Flynn lies to the FBI and his life is destroyed, while Crooked Hillary Clinton, on that now famous FBI holiday ‘interrogation’ with no swearing in and no recording, lies many times...and nothing happens to her? Rigged system, or just a double standard?”

Monday Trump told reporters, “I feel badly for Gen. Flynn. I feel very badly. He’d led a very strong life.”

“I will say this.  Hillary Clinton lied many times to the FBI and nothing happened to her. Flynn lied and they destroyed his life. I think it’s a shame.”

On the general topic of the FBI investigation....

Four days after the Trump tweet, FBI Director Christopher Wray staunchly defended the agency Thursday, telling Congress “there is no finer institution.”

“We are determined to be the very best at protecting the American people and upholding the rule of law,” Wray told the House Judiciary Committee.

Asked about Trump’s tweet, Wray answered:

“There is no shortage of opinions out there.  The FBI I see is tens of thousands of brave men and women that are working hard. The FBI that I see is people, decent people, committed to the highest principles of dignity and professionalism and respect.” [Chris Megerian / Los Angeles Times]

In the hearing, Republicans pushed Wray to block any anti-Trump biases in the FBI while Democrats demanded he stand up to the White House. 

In light of the president’s tweet, Rep. Bob Goodlatte (R-Va.), the House committee chairman, said “It does appear to me that, at the very least, the FBI’s reputation as an impartial, nonpolitical agency has been called into question.”

Critics, including on Fox News 24/7, have called the FBI’s impartiality into question after Special Counsel Robert Mueller removed Peter Strzok, a senior agent, from the case in the summer for sending text messages that were anti-Trump. Strzok had previously worked on the investigation into Hillary Clinton’s private email server.

“We do not know the magnitude of this insider bias on Mr. Mueller’s team,” Goodlatte said, calling it “absolutely unacceptable for FBI employees to permit their own political predilections to contaminate any investigation.”

Kimberley A. Strassel / Wall Street Journal...a superb summary of events:

“The media echo chamber spent the week speculating about whether Special Counsel Robert Mueller can or will nab President Trump on obstruction-of-justice charges. All the while it continues to ignore Washington’s most obvious obstruction – the coordinated effort to thwart congressional probes of the role law enforcement played in the 2016 election.

“The news that senior FBI agent Peter Strzok exchanged anti-Trump, pro-Hillary text messages with another FBI official matters – though we’ve yet to see the content. The bigger scandal is that the Justice Department, the Federal Bureau of Investigation and Mr. Mueller have known about those texts for months and deliberately kept their existence from Congress. The House Intelligence Committee sent document subpoenas and demanded an interview with Mr. Strzok. The Justice Department dodged, and then leaked.

“The department also withheld from Congress that another top official, Associate Deputy Attorney General Bruce Ohr, was in contact with ex-spook Christopher Steele and the opposition-research firm Fusion GPS. It has refused to say what role the Steele dossier – Clinton-commissioned oppo research – played in its Trump investigation. It won’t turn over files about its wiretapping.

“And Mr. Mueller – who is well aware the House is probing all this, and considered the Strzok texts relevant enough to earn the agent a demotion – nonetheless did not inform Congress about the matter.  Why? Perhaps Mr. Mueller feels he’s above being bothered with any other investigation.  Or perhaps his team is covering for the FBI and the Justice Department.

“When Deputy Attorney General Rod Rosenstein appointed Mr. Mueller, he stressed that he wanted a probe with ‘independence from the normal chain of command.’ Yet the Mueller team is made up of the same commanders who were previously running the Trump show at the Justice Department and the FBI, and hardly distant from their old office.

“Andrew Weissmann, Mr. Mueller’s deputy, is chief of the Justice Department’s criminal fraud section and was once FBI general counsel. Until Mr. Strzok’s demotion, he was a top FBI counterintelligence officer, lead on the Trump probe.... Lisa Page – Mr. Strzok’s mistress, with whom he exchanged those texts – was on loan from the FBI general counsel’s office.

“Does anyone think this crowd intends to investigate Justice Department or FBI misdeeds?  [Does] anyone think they intend to investigate themselves?  Or that they’d investigate their longtime colleagues – Andrew McCabe, or Mr. Ohr or Mr. Strzok? Or could we instead just acknowledge the Mueller team has enormous personal and institutional interests in justifying the actions their agencies took in 2016 – and therefore in stonewalling Congress?....

“Judicial Watch this week released an email in which Mr. Weissmann gushed about how ‘proud and in awe’ he was of former acting Attorney General Sally Yates for staging a mutiny against the Trump travel ban.  Of 15 publicly identified Mueller lawyers, nine are Democratic donors – including several who gave money to Mrs. Clinton’s 2016 campaign....

“Some want Attorney General Jeff Sessions to clean house, although this would require firing a huge number of career Justice Department lawyers. Some want Mr. Trump to fire Mr. Mueller – which would be counterproductive. Some have called for a special counsel to investigate the special counsel, but that way lies infinite regress.

“There is a better, more transparent way.  Mr. Sessions (or maybe even Mr. Trump) is within rights to create a short-term position for an official whose only job is to ensure Justice Department and FBI compliance with congressional oversight. This person needs to be a straight shooter and versed in law enforcement, but with no history at or substantial ties to the Justice Department or FBI....

“Congress is the only body with an interest and ability to get the full story of 2016 to the public, thereby ending this drama quickly. But that requires putting an end to the obstruction.”

Meanwhile, Donald Trump Jr. appeared before the House Intelligence Committee for seven hours on Wednesday, refusing to discuss a father-son conversation earlier this year over how to handle fallout from revelations that he met with a Russian attorney during the 2016  campaign.

Don Jr. invoked attorney-client privilege when asked to provide details.  There are differing opinions on whether or not he can do so.

And regarding Michael Flynn, there were reports he told an American businessman that U.S. sanctions on Russia would be “ripped up” under the Trump administration, according to a whistleblower who went to Rep. Elijah Cummings (D-Md).

The text message concerned a nuclear-power project, with Flynn telling his former business associate, Alex Copson, that ripping up sanctions would allow “money to start flowing into the project,” according to Cummings’ account of the whistleblower’s claims, raising serious questions about Flynn’s intentions. The whistleblower’s identity has not been disclosed.

Lastly, there are conflicting reports on Deutsche Bank and whether it received a subpoena earlier in the fall from Robert Mueller’s office concerning people or entities affiliated with President Trump, including requests for documents and data about accounts and other dealings tied to relationships with Trump and those close to him, according to the Wall Street Journal and a German newspaper, Handelsblatt.

Ty Cobb, the chief lawyer for the White House, said bank records of the president and his family were not subpoenaed. 

A spokesman for Deutsche Bank told the Journal’s Jenny Strasburg that it “takes its legal obligations seriously.”

President Trump’s relationship with Deutsche Bank goes back decades, including a time when he missed loan payments in 2008, after which they sued each other, settling out of court in 2009, according to the Journal.

Tax Reform: The House on Thursday passed a two-week stopgap spending bill one day before a deadline to avoid a government shutdown.  The vote was 235-193, with 14 Democrats voting for the measure and 18 Republicans voting “no.”

The Senate then voted 81-14 on the legislation, President Trump signed it and we’re on to Dec. 22 to negotiate a bipartisan budget deal...or Congress can vote on a further continuing resolution (CR).

As for tax reform, this week I can be brief.  The House and Senate versions are now in conference but there are no hard and fast agreements on the final details and thus little to discuss, but hopefully we’ll know something soon, IF, the self-imposed deadline of an agreement on the president’s desk by Christmas (read Dec. 22) is to be achieved.

A huge issue for some states such as California, New York, New Jersey, Connecticut and one or two others is the plan to eliminate, or make changes to the deductibility of state and local taxes (SALT).

I fully recognize that most parts of the country couldn’t give a damn about this topic, but at least in my home state of New Jersey, the elimination or reduction in SALT is a major problem as folks begin to estimate the impact.  Start with the simple fact that the average property tax in my town of Summit is $14-$15,000.  If people aren’t tied to their jobs, or are in retirement, it’s now about moving the hell out, which in turn will add to a drop in housing values for the others (or at best, prolonged stagnation).
 
But the confusion is also in the lack of details from Congress in terms of calculating the impact of the other provisions that may help offset SALT, the positives. The fact that this is all coming at yearend adds to the stress since some folks are wondering if there are moves they can make today (like prepaying some 2018 property taxes) that make sense.

One New Jersey real estate broker told Bloomberg he lost a $1.4 million sale on a waterfront condo in Jersey City because the client hit the pause button, not knowing how much he’d end up paying, or could no longer deduct, and it’s nuts to act before you get some answers.

Billionaire Ray Dalio, who runs the world’s biggest hedge fund, Bridgewater Associates, said the expected elimination of state and local income-tax deductibility would lead to high-income earners moving out of state, which he notes adds to the polarity and conflict between the wealthy and lower-income U.S. taxpayers, who have “typically different values.”

Those left behind in high-tax states will see a hit in their property values, Dalio adds, while “the reduced population of higher income and higher spending folks leads to reduced spending in these locations,” further depressing their economies.

What I do know is that in the New York/New Jersey area, you sure aren’t hearing talk of a flood of new residents from elsewhere (unless from Puerto Rico...just stating a fact).

As for the corporate tax cuts being proposed, some of us wonder about the true ‘stimulative effect.’  I’m in the camp (with my friend Dr. W.) that it won’t be much, and those of our ilk are concerned the deficits will be far worse than thought.  The impact on interest rates, for starters, would at some point tank the stock market.  I can guarantee that.

At the same time, I do agree the corporate rate should come down considerably to line up with the rest of the world.

And you have other important items like the alternative minimum tax (AMT).  Hopefully we get some real answers soon.

Trumpets....

--The day after President Trump slurred his words in announcing the move of the U.S. embassy to Jerusalem from Tel Aviv, the White House said he would undergo a physical exam at Walter Reed early next year and the results would be made public.

Press Secretary Sarah Huckabee Sanders brushed off concerns about the President’s health as “frankly, pretty ridiculous.”

“The President’s throat was dry, nothing more than that,” she told reporters.

Wall Street

I’ve been touting that a big factor in the market’s advance this year is not just the state of the U.S. economy (yes, Donald, take a bow if you want), but also global, synchronized growth. The 25-26 largest countries in the world in terms of GDP are all growing at the same time and who does this benefit in particular?  U.S. multinationals, as basically represented by the Dow Jones Industrial Average.

The Wall Street Journal’s Mike Bird had a piece this week buttressing this development, citing bumper “earnings growth across global equity markets.”

“The earnings-per-share of a FactSet index of over 20,000 listed companies from around the world has now reached an average of $9.69, increasing nearly 19% in the last year.

“That’s the fastest year-over-year rise since 2011, surpassing the late-2014 high of $9.55. While the FactSet data only stretch back to 2001, increased earnings in emerging markets like China, among other factors, mean that the per-share level has likely never been higher.

“Such high earnings per share should boost investor confidence that the recent surge in stock markets is backed by a broad global economic recovery and the ability of companies to generate returns, not just ever-higher valuations....

“International trade growth is also expected to outstrip gains in global gross domestic product this year, with the International Monetary Fund expecting a 4% increase, up from 2.4% in 2016.”

On the data front in the U.S. this week, the November employment report was released by the Commerce Department on Friday and the number was 228,000, better than expected, with the unemployment rate at 4.1%.  The U6 underemployment figure was 8.0%.

The average monthly jobs gain in 2017 is now 174,000; 170,000 the last three months.  [It was 187,000 a month for all of 2016.]

But a key, average hourly earnings, was up just 0.2%, 2.5% the past 12 months, and this is still too low for a now lengthy recovery.

The Atlanta Fed’s GDPNow indicator is down to 2.9% growth for the fourth quarter from 3.5% last week.

One other item...the ISM non-manufacturing PMI for November was 59.4 (50 being the dividing line between growth and contraction), the 95th consecutive month of gains for this key indicator.

So now it’s on to the Federal Reserve’s Open Market Committee confab of Dec. 12-13, where the Fed is expected to raise its short-term benchmark funds rate again, despite its preferred inflation barometer, the personal consumption expenditures index, being at just 1.4%, well below its 2% target, and wages at 2.5%, below a normal 3.5% for a recovery of this kind.  The market has long factored this in, but at some point next year, continued hikes in the funds rate will help lead to a market swoon, as I’ll get into during my yearend outlook for 2018 in three weeks.

Chair Janet Yellen will also be holding her last press conference following the FOMC gathering and we’ll get a signal as to future Fed thinking, seeing as her replacement, Jerome Powell, is viewed as sharing similar viewpoints.

My only issue with the Fed hiking rates next week is we still have no clue on the details of any final tax ‘reform’ legislation, and thus the potential impact on both growth and deficits.

Europe and Asia

On the economic front in the eurozone, Markit released its non-manufacturing/services PMIs for the month of November and the EA19 reading came in at 56.2 vs. 55.0 in October.

Germany was at 54.3, France 60.4, Italy 54.7, Spain 54.4, and Ireland 56.0. The U.K came in at 53.8.

GDP in the third quarter for the euro area, as reported by Eurostat, was 0.6%, a tick down from 0.7% in the second quarter, but 2.6% year over year, vs. 2.4% yoy in Q2. 

Germany, year-over-year, is running at a 2.8% clip, France 2.2%, Italy 1.7%, Spain 3.1%, Netherlands 3.3%, Greece 1.3% and Ireland 5.8% (a/o Q2). The U.K. is at just 1.5%, but on the positive side for them, potentially, we had this....

Brexit:  After all-night negotiations and an early morning dash to Brussels, British Prime Minister Theresa May agreed with European Commission Jean-Claude Juncker to start talking about trade and a post-Brexit transition period, both sides agreeing “sufficient progress” had been made on the divorce bill and other terms of separation.

On the critical issue of Irish border, there will be no “hard border” in Ireland, while EU citizens in the U.K., and U.K. citizens in the EU, will see their rights preserved. 

Juncker said “the breakthrough we needed” had been achieved after months of negotiations.

Northern Ireland’s Democratic Unionist Party (DUP), whose support Mrs. May depends on in parliament, and whose opposition on Monday led to talks breaking down, said there was still “more work to be done” and how it votes on a final deal “will depend on its contents.”

Reuters reported that Britain estimates the ultimate cost of meeting its financial obligations to the EU at 40 to 45 billion euros, according to a British source.  [And potentially as high as 55-65bn euro down the road.]

Mrs. May won a temporary reprieve from rival factions within her own party by striking the agreement that supporters hope will increase prospects of an orderly exit.  Conservative lawmakers have been threatening to bring down May’s government, while business leaders have to be pleased at the progress after repeatedly warning of a post-Brexit exodus.

At the same time, business leaders need more clarity, quickly, to prevent the triggering of contingency plans to cope with a so-called ‘hard Brexit’ in which Britain leaves the EU without a negotiated settlement.

For now, what has been agreed to?

--A guarantee that there will be “no hard border” between Northern Ireland and the Republic, thus maintaining “constitutional and economic integrity of the United Kingdom.”

--The rights of citizens living in both the U.K. and in the EU will be preserved.

--The divorce bill, or exit settlement, is to be “fair to the British taxpayer.”

But it is true what really happened is that all the issues were put off until next year, including the really hard work on trade relationships.

On the border topic, Ireland’s Prime Minister (Taoiseach) Leo Varadkar said it was a “significant day” for his country.

“We have achieved all that we set out to achieve in phase one of these negotiations.  I am satisfied that sufficient progress has now been made on Irish issues, the parameters have been set and they are good.”

Varadkar insisted the agreement on no hard border for Ireland is “politically bulletproof.”

Irish Foreign Minister Simon Coveney said the deal was a “very good outcome for everyone on the island of Ireland.”

Back to the divorce bill, the U.K. will contribute to EU budgets for the years 2019 and 2020 as if it had remained in the Union (and beyond on certain future liabilities, including past loans to Ukraine, for example). And the Court of Justice of the European Union will continue to have an influence in that its case law will be part of the final Withdrawal Agreement (how rights issues are adjudicated).  U.K. courts have the final say, but the ECJ will influence decisions for eight years after Brexit.

Make no mistake, this is just phase one.  The border issue is far from formally resolved and there will be a final vote on any agreement in parliament.  European Union leaders meet next week in a summit to give the official go ahead on phase two.

But the U.K. can now start discussing trade relations, including a hoped for two-year transition period, with in essence a new deadline of October 2018, Brexit then March 2019.  You need the time between Oct. 2018 and March 2019 to finalize the language, which is never easy on such a massively important deal, and you need the approval of not just the British parliament, but also all 27 EU member states.

An actual trade deal could take far longer than just through October, which is why a transition period is required for businesses to prepare, whether that means relocation or continued capital investment.

For now, the EU is preparing to put a deal on the table along the lines of one it offered Canada.  That was a great deal for Canada, but for the U.K. short of what it enjoys today as a full EU member in the single market and customs union.

And back to the European Court of Justice, many Conservatives in Mrs. May’s party have long objected to its role in any post-Brexit U.K.

But at least for now, both sides should be able to enjoy a Christmas dinner with the family, though as Scrooge said, they’ll need to be in all the earlier the day after.  [Actually, Dec. 27 because the 26th is Boxing Day.]

Catalonia: A Spanish judge withdrew a European arrest warrant for ousted Catalan President Carles Puigdemont and four other ministers now in self-exile in Belgium after declaring unilateral independence in a referendum ruled illegal by Madrid.

But the individuals still face possible charges for sedition and rebellion, the latter carrying a jail term of up to 30 years.

Puigdemont and the others have said they want to return ahead of Dec. 21 regional elections, but they want guarantees they won’t be charged.

Monday, six Catalan ex-ministers that were being held in a prison near Madrid were released on bail. Two others, including the vice president, remained in custody.

As for the election, today the polls are showing it too close to call in terms of how the seats in the Catalan parliament would break down. It appears there are seven parties who would gain seats and they split down the middle between the separatists and pro-Madrid forces.

Germany: The Social Democrats (SPD) have agreed to start talks next week with Chancellor Angela Merkel’s conservatives on forming a coalition government; the SPD voting at its party congress to open discussions with the conservatives despite having pledged earlier to be in the opposition after suffering its worst election loss in the post-war era back in September.

But a “grand coalition” between the two is not a foregone conclusion. The SPD will demand concessions, and next week’s talks are just preliminary ones before full-blown negotiations in January.  Immigration is going to be the key issue, the SPD desiring a far more liberal policy than the conservatives in Merkel’s government want.

For now, a majority of Germans in a Forsa poll, 70%, expect a grand coalition to form, with 47% happy if there was one, 36% disapproving.

Overall, the SPD is at 23% in the poll, and Merkel’s conservatives at 32%.

One final note.  Merkel’s arch-conservative CSU allies in Bavaria on Monday named right-winger Markus Soeder to be their candidate for the state premiership in a regional election next fall, which could weaken Merkel’s hand in negotiations with the SPD. The CSU wants a far tougher immigration policy than in place today.

Current Bavarian premier Hors Seehofer agreed to step aside, but he will remain CSU party leader (chairman).

Eurobits....

--French President Emmanuel Macron’s popularity has been surging, now 50%, up six points since the last Ifop survey, which is a big deal.  The 39-year-old is seeking to become Europe’s de facto leader, displacing Angela Merkel, and while Merkel has been busy trying to maintain power amidst her coalition issues, Macron has been traveling the world, increasing his profile, while injecting himself in every regional issue he can find.

Good for him. I’ve warmed to the guy, and the French people have as well. We need leaders in the Free World to combat the likes of Xi and Putin and Donald Trump is not up to the task in this regard.

--Greece’s finance minister announced an agreement had been reached between the heavily indebted country and its creditors on its progress in implementing reforms, a very big deal, and the yield on the nation’s 10-year bond fell below 5% for the first time since 2009, pre-crisis.

The agreement will allow Greece to receive fresh bailout funds next year, after implementing workplace reforms, speeding up the settlement of bad loans, and selling off state-owned power plants, among other things.

Greece will have to vote on at least two major bills by Jan. 22 to implement the agreement, but this is expected.

Understand that at the height of the crisis, the yield on the 10-year was 33.7%, but the financial picture has been improving dramatically since.

Turning to Asia....China’s private Caixin reading on services in November was 51.0 vs. 51.6 in October, while it was 51.2 in Japan vs. 53.3 the prior month.

Street Bytes

--We had a divergence in the broad averages for a second straight week as both the Dow Jones and S&P 500 closed at new all-time highs today, but Nasdaq fell again, -0.1% to 6840, off its high of 6912. The Dow finished up 0.4% to 24329, while the S&P rose 0.3% to a record 2651.

--U.S. Treasury Yields

6-mo. 1.44%  2-yr. 1.79%  10-yr. 2.38%  30-yr. 2.77%

8 straight weeks the yield on the 10-yr. has closed Friday between 2.33% and 2.41%.  It was 2.44% on 12/31/16.

--Apple Inc. CEO Tim Cook defended his company’s move to pull hundreds of apps from its China store to comply with government demands.  China is Apple’s second-biggest market outside of the U.S.  Cook rejected criticism from rights groups about his participation in the China-run World Internet Conference earlier this week in Wuzhen; the event promoting the state’s version of how the internet is to run in the country.

“When you go into a country and participate in a market, you are subject to the laws and regulations of that country,” Cook said at a forum in Guangzhou on Wednesday.

“Your choice is, do you participate or do you stand on the sideline and yell at how things should be,” Mr. Cook said.  “My own view very strongly is you show up and you participate, you get in the arena, because nothing ever changes from the sideline.”

“From my American mind-set, I believe strongly in freedoms,” he said.  “I also know each country in the world decides their laws and regulations.”

Meanwhile, Alibaba Group Holding Ltd. founder and Executive Chairman Jack Ma, addressing the same Wuzhen conference, dismissed concerns about a looming trade war between the U.S. and China, saying “if trade stops, peace stops.”

Earlier, Ma drew a contrast between the U.S. political system and what he called a “system of stability” offered by the Communist Party government in China, saying “you don’t know who’s going to be the next president” in the U.S.

Vice Premier Wang Yang, who was recently elevated to the powerful seven-member Politburo Standing Committee, said: “China is ready to work with all countries in the world to formally promote further opening up, to enhance trade and investment liberalization and to unequivocally reject protectionism.”  [Dan Strumpf / Wall Street Journal]

Hardly.

And the above just gives me another opportunity to say what I have for years now.  Apple is going to be so screwed.

--In one of the most idiotic moves of all time, in terms of our society, Facebook announced it was rolling out Messenger Kids, a stand-alone mobile app that allows children age 6 to 13 to use the service.

The company said the new app aims to provide a more controlled environment for the types of activity that are already occurring across smartphones and tablets among families.

Kids will be able to use it for videos, photos and augmented reality educational experiences.

This is absolutely nuts.  What are we doing to our kids?

Here’s my solution.  Social media should be treated like getting a driver’s license.  You have to be, say, at least 16 before you can try it (though I’d prefer 18 to largely eliminate the high school years), he wrote, tongue firmly planted in cheek...sort of....

--UPS has already been experiencing delivery issues, reporting delays of up to two days after a surge in online orders over Thanksgiving.  Bloomberg reported that e-commerce orders “overwhelmed expectations.”

The thing is UPS has had these holiday issues before.  Did they learn anything? 

--General Electric announced plans to shed 12,000 jobs as part of a cost-cutting plan to cut $1bn in costs.  The move would affect both professional and production employees from its power division, which is facing headwinds from the rise of renewable power sources, excess capacity and early retirement of plants, like in coal. The cuts would amount to about 18% of the unit’s workforce.

The power business, which makes turbines for coal and gas-fired plants, produces a third of the world’s electricity and is the company’s largest in both revenue and employees.

--Homebuilder stocks were hit the other day after Toll Brothers reported a smaller-than-expected rise in fiscal fourth-quarter sales and profits.  Revenue still rose 9.3 percent, but this was shy of the Street, ditto net income.

Toll, the largest luxury homebuilder in the country, and others of its ilk, have to be watching the maneuverings in Congress re the tax bill and the treatment of property taxes. 

--Sunday, CVS Health, the nation’s biggest pharmacy chain, agreed to purchase Aetna, the No. 3 health insurance company, in a $69 billion deal that promises to reshape the health care market.

The combined company, in addition to gaining the power to drive lower prices from pharmaceutical companies, would likely spark others to find partners.

If the merger goes through, Aetna CEO Mart Bertolini stands to pocket roughly half a billion dollars, owing to the stock and rights he owns because of the premium CVS is paying for Aetna.

CVS CEO Larry Merlo is slated to run the combined company and Bertolini will have no operational role.

But it’s no sure thing the merger will pass regulatory muster.  The market sees less than a 50/50 chance of it, the Justice Department having just sued to stop the AT&T  buyout of Time Warner.  While the two mergers are different, CVS does already own  one of the country’s big three pharmacy benefit managers (who buy from drug wholesalers), and the antitrust folks may not be comfortable with CVS then owning one of the three biggest insurers.

The merger was spurred, however, by the impact of Amazon, which has been acquiring state pharmacy licenses as a probable prelude to it entering the retail pharmacy business.

--Anheuser-Busch has reserved 40 of Tesla Inc.’s all-electric Semi trucks, as the company looks to slash its fuel costs, which amounts to about $120 million a year.

Anheuser-Busch employs 750 trucks around the country and the Tesla vehicles would be used for short-range deliveries, or ones that are far less than the advertised 500-mile range for the trucks.

But as I’ve told you before, while Tesla says the new truck, which will list for $150,000 to $200,000, will be available in 2019, we know that with the company’s production issues it won’t be available until 2036. 

--About a year ago, under heavy criticism from President Trump, Ford canceled plans to build a $1.6 billion car plant in Mexico and instead it announced it would produce electric and hybrid vehicles at a Michigan factory.

But now Ford is shifting again, saying it intends to assemble electric vehicles in Mexico, not Michigan, though the latter will see a larger investment and focus on self-driving cars.

The thing is EVs have low profit margins, if one at all due to battery costs, and sales volumes are negligible at this time.  So it’s important to keep labor costs down.

--Early Thursday, the price of Bitcoin surged to more than $19,000 before finishing the day around $16,000.  At one point it was up 40% in 40 hours, up more than 1,600% for the year.  Last I saw tonight the price from Coindesk was $15,734.

The volatility is occurring as Bitcoin prepares to start trading futures contracts on two established U.S. exchanges; the Chicago Board Options Exchange on Sunday evening and on the Chicago Mercantile Exchange a week later.

Separately, more than $70 million worth of bitcoin was stolen from a cryptocurrency-mining service called NiceHash following a security breach.

Yes, this is nuts...this whole mania.  Between hackers and organized crime, no recourse.

--On Thursday, Morgan Stanley fired former congressman Harold Ford Jr. as a senior adviser (read rainmaker) to the firm after an investigation into a claim of inappropriate conduct.  Specifically Ford is alleged to have behaved inappropriately toward a woman, who it turns out is a journalist.

Ford said in a statement: “This simply did not happen. I have never forcibly grabbed any woman or man in my life.”

I know nothing about Ford, personally, but at some point in this “hyper-sensitive time,” as he described it, we risk crossing the line.  

I was struck by a comment on Fox News Thursday night by Emily Tisch Sussman, who said these days we should “err on the side of believing women.”

Just don’t do it blindly, I mused.

--The 500-year-old da Vinci painting that sold for $450 million recently at auction, “Salvator Mundi,” is heading to the Louvre Abu Dhabi, the museum announced.  The New York Times reported that the anonymous buyer was Saudi prince Bader bin Abdullah bin Mohammed bin Farhan al-Saud, or BBABMBFAS, as he goes by.

According to The Times, he has no history as a major art collector and no publicly known source of great wealth.  But he’s a friend of the country’s 32-year-old Mohammed bin Salman, MBS.

But I thought there was a crackdown on the Saudi elite, you might be asking yourself?  Well it would appear to be quite selective.  MBS, after all, just two years ago purchased a 440-foot yacht from a Russian oligarch for half a billion dollars.

And this just in....it is really MBS himself who purchased “Salvator Mundi,” MBS using BBABMBFAS as a surrogate.  So what does it say about the Crown Prince spending $450 million on a da Vinci (that could be fake) while seeking to claw back $billions from those he placed under house arrest at the Four Seasons in Riyadh?

--As the New York Post reports, NBC is really left high and dry in terms of Matt Lauer’s successor, after his own maneuverings ensured potential heirs like Josh Elliott and Billy Bush never got a shot at being groomed for the gig; owing to Lauer’s jealousy over rivals.  It’s also now known that Megyn Kelly doesn’t stand a chance after her dreadful start with her own show.  Kelly had “the worst November sweeps ratings of any in the history of the 9 a.m. hour of ‘Today’ – across all demos.” [New York Post]

In the interim, Hoda Kotb will continue to fill in.

There’s also no apparent successor at CBS for Charlie Rose.

Meanwhile, it’s a small sample size, but “Today” averaged 4.9 million viewers for the week, Nov. 27-Dec. 1, following Lauer’s firing, vs. “Good Morning America,” which had 4.4 million and “CBS This Morning” with 3.5 million.

Typically, while NBC leads in the 25 to 54 demographic, it has trailed GMA in overall viewers.

--Meanwhile, in the evening news race, CBS unveiled 42-year-old Jeff Glor for the “CBS Evening News,” Glor making $12,500 as opposed to the big contracts for ABC’s David Muir and NBC’s Lester Holt.

Actually, I guess Glor is being paid more than $12,500, but CBS was looking for a cheapo alternative to Scott Pelley, and before that, Katie Couric.

CBS’ “Evening News” has an average 6.4 million viewers according to Nielsen data, vs. 8.7 million for “ABC World News Tonight” and 8.3 million for “NBC Nightly News.”

Foreign Affairs

Israel: President Trump officially recognized Jerusalem as the capital of Israel Wednesday in a speech at the White House.

“Through all of these years, presidents representing the United States have declined to officially recognize Jerusalem as Israel’s capital. In fact, we have declined to acknowledge any Israeli capital at all,” he said.

“But today, we finally acknowledge the obvious: that Jerusalem is Israel’s capital.”

The timing of the move was puzzling. Trump characterized the decision as simply delivering on a campaign promise, which he implied other presidents “lacked courage” to do.

“While previous presidents have made this a major campaign promise, they failed to deliver. Today, I am delivering,” he said.

Trump said his decision reflected reality that Jerusalem is the seat of Israel’s government, its supreme court, parliament and home to its prime minister and ceremonial president. But he clarified the United States is not taking a stand on key issues to be resolved in peace negotiations.

“We are not taking a position on any final status issues, including the specific boundaries of the Israeli sovereignty in Jerusalem or the resolution of contested borders,” Trump said.  He also added the U.S. would support establishing a separate Palestinian state “if agreed to by both sides.”

One of Trump’s big supporters, Tony Perkins, president of the conservative Family Research Council, praised the move as “a major milestone in America’s historic relationship with Israel,” adding it was “bold and courageous.”

Israeli Prime Minister Benjamin Netanyahu issued his thanks:

“We are profoundly grateful for the president, for his courageous and just decision to recognize Jerusalem as the capital of Israel. This decision reflects the president’s commitment to an ancient but enduring truth.”

---

Hamas called the move an “act of war.”

Britain and France were among those disagreeing with the U.S. decision.

In a televised speech Thursday, Hizbullah leader Sayyed Hassan Nasrallah said he supported calls for a new Palestinian uprising.

Pope Francis called for Jerusalem’s “status quo” to be respected, saying new tension would further inflame world conflicts.

China and Russia expressed their concerns.

Turkish President Erdogan said Turkey will cut diplomatic ties with Israel, adding that Jerusalem is “a red line for Muslims.”  [Israel responded that “Jerusalem has been the Jewish capital for 3,000 years.”]

Jordan’s King Abdullah II warned the move “raised alarm and concern” and could “hamper all efforts to get the peace process moving.”

Iranian President Hassan Rouhani urged Muslims to disrupt what he called a plot by unnamed countries in the region to build ties with Israel.

The EU’s top diplomat, Federica Mogherini, the EU’s foreign affairs chief, said the ‘announcement has a very worrying potential impact’ for peace in the region.  ‘It could send us backwards into even darker times than the ones we are already living in.”

Mustafa Barghouti, a member of the Palestine Liberation Organization’s Central Council, said, “It’s over.”  President Trump “aborted his peace process before it was born.”

The Kingdom of Saudi Arabia’s Royal Court said in a statement:

“The Government...had previously warned of the serious consequences of such an irresponsible and unwanted step.  The Kingdom expresses its denunciation and deep regret that the administration has taken this step, as it represents a great bias against the historic and permanent rights of the Palestinian people in Jerusalem.”

The violence, the “rage,” has been limited across the region thus far.

Opinion....all sides...

Thomas L. Friedman / New York Times

“In nearly 30 years of covering United States foreign policy, I’ve never seen a president give up so much to so many for so little, starting with China and Israel. In both the Middle Kingdom and in the Land of Israel, Christmas came early this year. The Chinese and the Jews are both whispering to their kids: ‘There really is a Santa Claus.’

“And his name is Donald Trump.

“Who can blame them? Let’s start with Israel, every Israeli government since its founding has craved United States recognition of Jerusalem as its capital. And every United States government has refrained from doing that, arguing that such a recognition should come only in the wake of an agreed final status peace accord between Israelis and Palestinians – until now.

“Today, Trump just gave it away – for free.  Such a deal!  Why in the world would you just give this away for free and not even use it as a lever to advance the prospect of an Israeli-Palestinian deal?

“Trump could have said two things to Israeli Prime Minister Benjamin Netanyahu. First, he could have said: ‘Bibi, you keep asking me to declare Jerusalem as Israel’s capital.  O.K., I will do that.  But I want a deal.  Here’s what I want from you in return: You will declare an end to all Israeli settlement building in the West Bank, outside of the existing settlement block that everyone expects to be part of Israel in any two-state solution.’

“Such a trade-off is needed. It would produce a real advance for United States interests and for the peace process. As Dennis Ross, the veteran American Middle East peace negotiator and author of ‘Doomed to Succeed: The U.S.-Israeli Relationship From Truman to Obama,’ explained: ‘When you stop building outside the settlement blocs, you preserve, at a maximum, the possibility of a two-state outcome and, at a minimum, the ability for Israelis to separate from Palestinians.  Keep up the building in densely populated Palestinian areas and separation becomes impossible.’

“Trump also could have said, as the former United States ambassador to Israel Martin Indyk suggested, that he’d decided ‘to begin the process of moving the embassy to western Jerusalem, but at the same time was declaring his willingness to make a parallel announcement that he would establish an embassy to the state of Palestine in East Jerusalem’ – as part of any final status agreement. That would at least have insulated us from looking like making a one-sided gesture will only complicate peacemaking and kept the door open to Palestinians.

“In either case, Trump could then have boasted to Israelis and Palestinians that he got them each something that Barack Obama never did – something that advanced the peace process and United States credibility and did not embarrass our Arab allies. But Trump is a chump. And he is a chump because he is ignorant and thinks the world started the day he was elected, and so he is easily gamed.

“Just ask the Chinese. Basically, his first day in office, Trump tore up the 12-nation Trans-Pacific Partnership (TPP) free-trade deal – clearly without having read it or asked China for any trade concession in return. Trump simply threw out the window the single most valuable tool America had for shaping the geoeconomic future of the region our way and for pressuring China to open its markets to more United States goods.

“Trump is now trying to negotiate trade openings with China alone – bilaterally – and getting basically nowhere.  And yet he could have been negotiating with China as the head of a 12-nation TPP trading bloc that was based on United States values and interests and that controlled 40 percent of the global economy. Think of the leverage we lost.”

Editorial / Washington Post

“President Trump’s decision to recognize Jerusalem as Israel’s capital has a certain amount of common sense on its side.  As a practical matter, West Jerusalem has been the seat of Israeli government since 1949, and no conceivable formula for Palestinian statehood would change that.  Political leaders and diplomats from around the world already visit government offices there, even if their embassies remain in Tel Aviv. As Mr. Trump put it, for the United States finally to accept that the Jewish state has its capital in Jerusalem is ‘nothing more or less than a recognition of reality.’

“At the same time, Presidents Bill Clinton, George W. Bush and Barack Obama had good reasons for holding back on such a move, even though they, like Mr. Trump, had promised while on the campaign trail to move the U.S. Embassy to Jerusalem.  They calculated that what amounted to a mostly symbolic step could undermine U.S. policy across the Middle East as well as their hopes of brokering an Israeli-Palestinian settlement – and possibly trigger violence, including against Americans.

“Mr. Trump cast himself as setting aside failed conventional wisdom – he pointed out there has been no peace deal – and of offering a fresh approach.  That’s a stance that may play well with his domestic political base and with many Israelis.  But Mr. Trump is implicitly betting that previous presidents were wrong to worry about blowback in the Middle East and beyond. That’s a big risk to take for the scoring of political points.

“So far, the president’s decision has been rejected by every major U.S. ally in Europe and the Middle East, including Britain, France, Egypt and Saudi Arabia. It will put considerable pressure on Jordan, Israeli’s fragile neighbor, whose King Abdullah II sees himself as a protector of Jerusalem’s holy Muslim sites....If violence erupts in Jerusalem or elsewhere in the Middle East – and extremists will do their best to make that happen – Mr. Trump will be blamed.”

Editorial / Wall Street Journal

“President Trump honored a campaign pledge on Wednesday when he recognized Jerusalem as the capital of Israel. The decision is hardly the radical policy departure that critics claim, and Mr. Trump accompanied it with an embrace of the two-state solution for Palestine that Presidents of both parties have long supported.

“Congress recognized Jerusalem as Israel’s capital in 1995 in a bill President Clinton declined to veto. Other Presidents have agreed in principle, and even campaigned on it, but in office they used a waiver to put off any formal recognition or move the U.S. Embassy to Jerusalem from Tel Aviv. The difference is that Mr. Trump apparently meant what he said as a candidate....

“Mr. Trump combined his Embassy move with renewed intent to broker an Israeli-Palestinian peace deal, and he doesn’t rule out a Palestinian state as part of the solution. Administration officials reiterated that intention Wednesday, saying progress is being made behind the scenes. Color us skeptical given the long history of failure, but the U.S. is trying.

“One way the Palestinian Authority could signal a new seriousness would be to stop paying the families of Palestinians who kill innocent Israelis.  The House passed the Taylor Force Act Tuesday, which would reduce U.S. aid to the Palestinians until they renounce pay-for-slay payments. A Senate vote may follow this month.

“Arab leaders denounced the Embassy move, but we wonder how long the fury will last.  The Sunni Arabs also confront the threats of Islamic terrorism and Iranian imperialism, and the Palestinians are a third order concern. If the movement of an American Embassy that was signaled more than 20 years ago is enough to scuttle peace talks, then maybe the basis for peace doesn’t yet exist.”

Editorial / Financial Times

“(For) all his words about not taking a position on the city’s final status, Mr. Trump appears to have pre-empted his own plans to broker agreement between Israel and the Palestinians by resolving one of the most explosive issues in Israel’s favor. For someone who prides himself on being the consummate deal maker it is odd that he should surrender this card before negotiations have even begun.

“It is odd too because it complicates life for Saudi Arabia, Mr. Trump’s chosen interlocutors in the region. The Saudis, who have been playing a role in the evolution of the latest U.S. peace plans, are also strongly opposed. They have little choice. The ruling al-Saud family are not only royals. The Saudi king is the self-styled leader of Sunni Islam and al-Aqsa mosque in Jerusalem is considered the third holiest site in Islam, after the mosques at Mecca and Medina.

“This can only be a blow to the Saudis, especially Crown Prince Mohammed bin Salman, who has been acting as go between with the Palestinians and Jared Kushner, Mr. Trump’s son-in-law and envoy to the region.

“Most of all, by taking sides on an issue central to the Israel-Palestine conflict Mr. Trump has exploded any residual notion that Washington can act as honest broker. The status of Jerusalem has always been a ticking time bomb. The fear now is that the U.S. president has lit the fuse.”

John Podhoretz / New York Post

“(Trump) called the international community’s seven-decade bluff and ended a delusion about the future that has prevented Palestinians from seeing the world and their own geopolitical situation clearly. It is a bold shift....

“Nominally, the idea is that Palestinians need to be allowed to believe they’ll secure sovereignty over at least a part of Jerusalem for them to pursue a final peace deal with the Israelis. And so most of the world has chosen to act as though Israel has no legal dominion over any part of Jerusalem.

“That is, in a word, insane. Jerusalem is now home to 860,000 people  - 10 percent of Israel’s population, nearly double that of its second city, Tel Aviv. Every one of them, Jew and Arab, is a citizen of the state.  (The city is 60 percent Jewish and 35 percent Muslim.)  It is the locus of Israel’s government....

“The pretense has been allowed to continue for two reasons. The most rational reason is this: There has always been fear that any change in Jerusalem’s status might ignite a violent Palestinian response, retard peace efforts and inflame the ‘Arab street’ throughout the Middle East. So why create a crisis  when the status quo is at least stable?

“Then there are those who simply believe Israel is a bad actor deserving of international scorn and isolation and should not be allowed to get away with it – it, in this case, being Jerusalem.

“Trump rightly scorns the latter view and has an answer for the former: ‘This is a long overdue step to advance the peace process.  And to work towards a lasting agreement.”

“The Palestinians need to accept realty. They continue to act as though they will get what they want through rejection and resistance and rage.  ‘It is time,’ Trump said, ‘for the many who desire peace to expel the extremists from their midst. It is time for all civilized nations and people to respond to disagreement with reasoned debate, not violence.’

“The Palestinian refusal to accept Israel for what it is and what it has become has been the greatest bar to peace. And there are reasons to believe the so-called Arab street has bigger problems to concern itself with right now than Israel’s capital....

“(Two weeks) ago, Saudi Crown Prince Mohammed bin Salman reportedly urged Palestinian Authority President Mahmoud Abbas to sign on to a peace deal Israel actually likes. MBS isn’t happy about Trump’s move, but that doesn’t change the fact that the sands are shifting rapidly after decades of stagnation.

“In the end, as Trump said, ‘Israel is a sovereign nation with the right, like every other sovereign nation, to determine its own capital.’  Indeed it is.  Indeed it does.  Bravo.”

Zvi Bar’el / Haaretz

“How did Israelis live without a recognized capital city? How will our lives change now we finally have a capital that’s been granted American citizenship? All that’s left now is for the United States and the rest of the world to recognize Israel as the ‘state of the Jewish people’ and we can restart this country.

“You have to admit, no other country has ever been afforded such an opportunity. However, we must also ponder what is more important: recognizing Jerusalem as a capital, or the transferring of the U.S. Embassy to the city? Think about it – until Wednesday, neither Tel Aviv, Jerusalem nor Hadera were recognized as Israel’s capital, so nothing would have changed Jerusalem’s status if the embassy had been moved there first....

“Trump did not give Israeli citizens the legitimacy to choose Jerusalem as the rock of their existence. They don’t need it. All he did was give Prime Minister Benjamin Netanyahu a superfluous Christmas gift. Recognition of a city that has no agreed-upon borders – a city that has not been and will not be taken off the negotiation table, and whose future is subject to agreement by both sides – is tantamount to recognizing a lump of clay as the Israeli capital.

“We shouldn’t be overly impressed by warnings and threats emanating from Arab states, the Palestinians and Europe. The peace process never was and never will be dependent upon the status of Jerusalem.

“If the time comes when an Israeli government agrees to negotiate with the Palestinians, to withdraw from territories, to draw up borders and to divide Jerusalem, Trump’s recognition will not pose an obstacle. As Israel has already proven, it’s precisely in Jerusalem that it is most willing to concede territory filled with Arabs, building them a separate pale of settlement....

“The worry, as usual, is over the outbreak of another intifada. But this is a groundless concern, since the recognition of Jerusalem as Israel’s capital is not the central issue occupying Palestinians and Arab states, despite the protests.  Moreover – and this is the main point – Israel knows how to suppress intifadas.

“The significance of the recognition of Jerusalem as the capital lies in its formal shattering of the illusion that if only the core issues were resolved – including the Palestinians’ right of return, the demarcation of borders, the status of the settlements and the division of Jerusalem – the conflict would come to an end....

“When there is no way of changing governments and starting real negotiations, there is an escape into arguments over core issues. For decades, both the left and the right have been contending with this illusion, holding imaginary negotiations with themselves and the United States, but never with the Palestinians.

“The left’s fear that now there won’t be anything to talk about with the Palestinians and the right’s glee over Trump’s burial of the peace process derive from the very same illusion.

“Let’s be honest, Trump didn’t kill the peace process on Wednesday.  He stood over the grave of this process, puffing out his chest and bragging that only he dared declare it dead (namely in recognizing Jerusalem), whereas his predecessors only toyed with attempts at resuscitation.  Still, at least we now have a capital city and the Palestinians don’t.”

Yemen: Former president Ali Abdullah Saleh was killed by Houthi rebels, the Houthis then rounding up hundreds of fighters loyal to Saleh as they attempt to maintain control of the capital, San’a.

A senior Houthi officials called on the Saudi-led coalition to end the war against the Houthis and enter a dialogue with them.

The Iran-aligned Houthis and pro-Saleh forces had been allied in the war against a coalition led by the Saudis, who intervened in 2015 to try to restore power to the internationally-recognized president, Abed Mansour Hadi, who had been vice president under Saleh.

But friction between the Houthis and Saleh erupted last week, and the two sides clashed, 200 dying in the battles, and the alliance collapsed. Saleh then announced he was open to dialogue with the Saudis.

Two days later, as he tried to flee the area, he was killed outside San’a.

Saleh had dominated Yemeni politics for 33 years before quitting in the aftermath of the Arab Spring uprisings in 2011, as the Shiite Muslim Houthis then made common cause against Hadi loyalists.

Some 10,000 civilians have now died in the war, according to the UN, and the humanitarian crisis deepens.  Seven million are on the brink of starvation. The infrastructure is shattered.

Syria: Dennis Ross / Wall Street Journal

“President Trump has made reversing his predecessor’s legacy a guiding principle, except in one area: Syria. Much like President Obama, Mr. Trump’s policy has been exclusively anti-Islamic State, giving Iran and Russia a free hand to dictate outcomes in the country.  This won’t end well.

“Mr. Trump apparently sees cooperation with the Russians as the best solution. On July 7, in Germany, Mr. Trump and Vladimir Putin announced a ceasefire in southwest Syria. On Nov. 11, in Vietnam, they issued a joint statement confirming ‘the importance of de-escalation areas as an interim step to reduce violence in Syria, enforce ceasefire agreements, facilitate unhindered humanitarian access, and set the conditions for the ultimate political solution to the conflict.’ That ultimate political solution, they declared, should follow the guidelines set by United Nations Security Council Resolution 2254. This sounds great at first: The resolution, passed in December 2015, sets timelines for ceasefires, a new constitution and a transitional government.  Yet Bashar Assad, employing sieges and starvation, has prevented the delivery of humanitarian assistance to his own people. This – along with the barrel bombs and political obstructionism – has prevented any progress in achieving the resolution’s goals. The Russians and Iranians have only enabled him....

“Russia’s actions since (agreeing to Resolution 2254) have only proved it is not serious. The Trump administration might think it will be different this time, because the de-escalation zone in southwest Syria has been working....

“(But) only because it freed up the Assad regime and its Iranian allies to attack the other so-called de-escalation zones relentlessly.  [Ed. as I’ve been pointing out the past few months.]  In one such area, Syrian regime cluster bombs have been hitting Eastern Ghouta, near Damascus.  UN diplomat Jan Egeland has spoken of a ‘massive loss of civilian life’ and declared that ‘there is only escalation in this de-escalation zone.’....

“Also worrying: The day after the presidential joint statement last month, (Russian Foreign Minister Sergey) Lavrov declared that the departure of foreign forces called for in the recently concluded memorandum of principles between the U.S., Russia and Jordan did not apply to the ‘Iranian or pro-Iranian forces.’

“Iran is also developing a front in Syria against Israel, with no sign of Russian opposition – despite talk of a buffer. During a recent visit to the Golan Heights, the local Israeli commander showed me a Quds Force-Hizbullah command post on a hill less than 4 miles away. Here is a conflict waiting to erupt.

“There is little chance of the Russians implementing a peace agreement in good faith so long as they see no cost for noncompliance....

“(Putin) wants Russia, not the U.S., to be seen as the arbiter of Syria’s future. If there are any doubts about this, consider his active diplomacy with Assad and the leaders of Iran and Turkey over the past few weeks.

“John Kerry eventually realized that words alone would not get Mr. Putin to respond in Syria. Time will tell whether the Trump administration has learned that lesson.”

To be blunt...NFW.

North Korea: Russian Foreign Minister Lavrov told U.S. Secretary of State Rex Tillerson that U.S. military exercises and aggressive rhetoric were causing an unacceptable escalation in tensions on the Korean peninsula.

North Korea’s foreign ministry said in comments carried by the official Korean Central News Agency late Wednesday that the exercises made the outbreak of war an “established fact.”

“We do not wish for a war but shall not hide from it, and should the U.S. miscalculate our patience and light the fuse for a nuclear war, we will surely make the U.S. dearly pay the consequences with our mighty nuclear force which we have consistently strengthened,” the foreign ministry said.

Meanwhile, South Korea plans to create a combat unit of weaponized drones that would be capable of swarming the North in the event of a conflict. Army officials said the drones would primarily focus on reconnaissance operations against strategic North Korean military sites, but the unit could be mobilized to launch swarm attacks.

David Ignatius / Washington Post

“Pyongyang seemingly wants negotiations with the United States, but on its own terms. Analysts speculate that to justify keeping its existing stockpile of several dozen nuclear weapons, North Korea might promise not to share its nuclear technology with others and not to attack the United States. Washington would be wary of such assurances, given Pyongyang’s history of broken promises and proliferation.

“North Korea evidently wants to be like India and Pakistan, which became de facto members of the nuclear club after building weapons secretly. It doesn’t want to be like Libya or Iraq, whose leaders were deposed and killed after giving up their nuclear programs.

“The Trump administration has publicly dismissed the latest overtures. A State Department spokesman said Sunday: ‘We do not see any indications of North Korea being committed to or interested in credible talks for denuclearization.’  And on Monday, State again rejected, as it has for months, Chinese and Russian calls for a mutual ‘freeze for freeze’ on North Korea testing and U.S. military exercises: ‘It is not enough for [North Korea] to stop its program where it is today.’

“An interesting visitor to Pyongyang this week is Jeffrey Feltman, UN undersecretary-general and a former U.S. assistant secretary of state. He’s the highest-ranking UN envoy there in six years. What’s he up to? Diplomats aren’t talking....

“Has North Korea crossed the nuclear threshold?  Pyongyang’s recent statements suggest they have, but some analysts have doubts. North Korea hasn’t shown it can control an intercontinental ballistic missile’s reentry, and it hasn’t fitted an actual warhead atop a missile, sources say.

“Will the Trump administration try to block North Korea from crossing this final goal line, by military means if necessary? Or will it seek a diplomatic formula that could, over time, leave all sides better off than the cataclysm of war? At this holiday season, that conundrum is hidden in the dark box in the corner.”

Nancy A. Youssef / Wall Street Journal

“U.S. intelligence and military officials believe Kim Jong Un is a rational actor, a conclusion that for now is guiding Washington’s approach to the North Korea leader as he risks economic sanctions and military reprisals to build nuclear weapons and threaten rivals.

“The assessment by the main components of the U.S. national security community has shaped their thinking toward North Korea in two major ways, U.S. officials said. It means they believe Mr. Kim understands that any attack on the U.S. or its allies threatens the security of his country and his grip on power.  And it means that they believe there is potential to alter his behavior through diplomacy to lower the threat of war.

“U.S. officials are also calculating that Mr. Kim’s ability to act rationally is compromised.

“ ‘We in the intelligence community...have said that Kim Jong Un is rational, but it is also the case today that we don’t think he has an understanding about how tenuous his position is – domestically and internationally,’ Central Intelligence Agency Director Mike Pompeo said in an address at a security forum in California on Saturday.”

White House national security adviser HR McMaster, speaking to the same forum as Pompeo, said:

“There are ways to address this problem short of armed conflict, but it is a race because he’s getting closer and closer, and there’s not much time left.”

China: President Xi Jinping said on Sunday the country will not close its door to the global internet, but that cyber sovereignty is key in its vision of internet development. Xi’s comments were read at the cyber policy forum in the town of Wuzhen where Tim Cook and Jack Ma were as well, as noted above.

“The development of China’s cyberspace is entering a fast lane...China’s doors will only become more and more open,” Xi said in his note.

Yet another crock, though Xi would say if questioned, ‘we are entering a fast lane...as China defines it.’

Google and Facebook, along with Twitter, continue to be banned here, as well as most major western news outlets.

One other item...Friday, China lodged a complaint with Australia after Prime Minister Malcolm Turnbull said he took reports very seriously that China’s Communist Party had sought to interfere in his country.  Turnbull said this week that foreign powers were making “unprecedented and increasingly sophisticated attempts to influence the political process” in Australia and the world, Turnbull then citing “disturbing reports about Chinese influence.”

Russia: President Putin said on Wednesday that a decision by the International Olympic Committee to ban the Russian team from competing at the upcoming Winter Olympics looked politically-motivated, the Interfax news agency reported.

“In response to our supposed interference in their elections, they want to cause problems in the Russian presidential election.”

Putin is not banning Russian athletes from participating as neutral competitors (under the Olympic flag).

This week Putin also announced what we’ve long known, that he is running for president in the spring elections, March 18, seeking a fourth term that would extend his rule into 2024.

Putin has approval ratings of nearly 80 percent and he’s guaranteed to win, with a recent independent Levada Pollster survey showing he would receive 60 percent of the vote.

It’s also believed the Olympics ban only helps Putin’s campaign as he’s able to unite voters around the message: The world is against us.

Somalia: The final death toll in October’s massive truck bombing in the capital of Mogadishu is 512, according to the committee tasked with looking into the country’s worst-ever attack.

512!  312 were wounded and 62 remain missing. Al-Qaeda linked al-Shabab has been blamed.

Random Musings

--Presidential tracking polls....

Gallup: 38% approve of President Trump’s job performance / 58% disapprove
Rasmussen: 42% approve / 56% disapprove

A Pew Research Center survey had Trump’s approval rating at 32%, disapproval 63%.

--The race for the Alabama Senate seat is down-to-the-wire, the election on Tuesday, and this week President Trump offered his full endorsement of Republican Roy Moore, and then the Republican National Committee restored its support of the candidate after it had ended joint fundraising agreements with the campaign last month when multiple allegations of sexual misconduct with minors when Moore was in his 30s emerged.

Trump tweeted his support Monday and then called Moore from Air Force One on Tuesday. He tweeted again today ahead of a speech in Pensacola, Florida, near the border with Alabama.  Last Sunday, Senate Majority Leader Mitch McConnell (R-Ky.) dialed back his opposition to Moore, saying the election would be decided by the people of Alabama.

Sen. Jeff Flake (R-AZ), a vocal critic of Moore’s and President Trump, wrote a $100 check to Democratic candidate Doug Jones.

Former White House adviser Steve Bannon appeared at a rally with Moore in Fairhope, Ala., and spent his time trashing the Republican establishment and casting the vote as a referendum on the Trump agenda.

Editorial / Wall Street Journal

“President Trump’s endorsement of Alabama Republican Senate candidate Roy Moore got us thinking about the game of chess.  A recent Wall Street Journal article described how a bright amateur taught himself chess so he could play the world’s number one player, Magnus Carlsen. The rookie got wiped out.

“On Wednesday Senate Democrats adroitly placed the Republicans, and Mr. Trump, in check.  Six female Democratic Senators – Kirsten Gillibrand, Kamala Harris, Claire McCaskill, Patty Murray, Mazie Hirono and Maggie Hassan – called on fellow Democrat Senator Al Franken to resign over multiplying allegations of sexual harassment. Minority Leader Chuck Schumer said the same hours later. Mr. Franken’s office said he will make an announcement Thursday.

“It is not hard to see what is going on here. The Democrats are creating a Frankenmoore nightmare for Donald Trump.  Monday brought Mr. Trump’s Moore endorsement, followed by a commitment of support from the Republican National Committee. The next day, Rep. John Conyers stepped down from his House seat, clearly under pressure from fellow Democrats.

“This is what the state of play looks like: The Democrats are eliminating their stains, while the Republicans are endorsing theirs.  You have to believe in magic to think this is going to end well for Republicans.

“In Wednesday’s Washington Post, Democratic operative Joshua Karp described the Moore strategy explicitly: ‘Whether he wins or loses, Republicans own him, and we are going to make sure the public knows that for the next year.’

“We see only one move for the Republicans now: Disown him.  Mr. Trump should withdraw his endorsement of Judge Moore and take the RNC with him. Embarrassing? Perhaps.  The alternative, where Mr. Trump stands now, is worse. If Mr. Moore wins, he will haunt the Trump Presidency. The Democrats took their sexual harassers off the table.  Mr. Trump may put his party’s in the Senate.  Every day, the Democrats and the Beltway media will run the narrative that Senator Roy Moore is Donald Trump’s doppelganger.

“Chess is a bloodless game, and high-stakes political chess is a brutal game. It’s time for the GOP to protect itself if Mr. Trump won’t.”

Alas, Trump will be Trump.

Rich Lowry / New York Post

“In his Alabama appearance for Roy Moore, Steve Bannon turned in an intellectually and morally putrid performance even by his standards.

“There is a partisan case for voting for Moore, which is simply that Republicans can’t afford to lose a Senate seat over the next three years and Moore’s failings must be ignored or rationalized away for the larger good of the party.

“This isn’t an elevated line of reasoning and is not obviously correct on its own terms.  With Democrats throwing John Conyers and Al Franken overboard, Senate Republicans would be welcoming into their ranks a potent symbol of sexual malfeasance to be used against them in the 2018 midterms.

“It’s a better argument, though, than the tawdry justifications offered up by Bannon, who parachuted into an already disreputable campaign and dragged it through the gutter.

“Bannon seems to misunderstand the nature of the deplorables he seeks to lead.  ‘Deplorable’ is supposed to be an unfair, disparaging term for people who believe reasonable but politically incorrect things (immigration should be restricted, NFL players should stand during the national anthem, all lives matter, etc.). It shouldn’t be a license for doing truly deplorable things....

“Bannon referred to a conspiracy against President Trump in the way the ‘Access Hollywood’ tape was brought to light, somewhat jocularly. But his mindset is deeply conspiratorial. Because there are so many forces arrayed against you – the globalists, the establishment, the media – you’re freed of any moral responsibility or standards.

“In fact, the mere mention of the words ‘honor’ or ‘integrity’ is a terrible provocation. Bannon launched his scurrilous attack on Mitt Romney because the former Republican presidential nominee used those terms in opposing Moore. Bannon shot back, in a truly perverse riff, that Moore has more honor in his ‘pinkie’ than the entire Romney clan; per Bannon, Moore served in Vietnam and Romney didn’t, and none of Romney’s sons joined the military.

“Obviously, if going to Vietnam and having kids who served in the military is the sole measure of honor, Trump fails the test, and John McCain passes it. This doesn’t stop Bannon from considering Trump the great savior of the republic and McCain a disgrace. But it’s not worth trying too hard to unpack Bannon’s spiel....

“Privately, Bannon can’t be thrilled he’s stuck with Moore, and he must know Moore is a kook, even if he can’t admit it in public.  Bannon likes to attack everyone else in the party for lacking courage, but in Alabama, he’s afraid to admit he backed a bum candidate and afraid to acknowledge the truth about Moore....

“Bannon may be thinking ahead to a time when the Trump sex allegations become a live issue again or when a true scandal emerges from the Robert Mueller investigation. In this scenario, will there be any one more naturally inclined to be dismissive of the accusers or other evidence than former Judge Roy Moore?

“Bannon may also believe that a GOP with a highly attuned ethical sense can’t truly be the party of the working class.  In which case, who is the one who has contempt for the ‘rubes’?”

Democratic challenger Doug Jones this week said he worked as a prosecutor “to ensure that men who hurt little girls should go to jail” and not to Congress.

A poll by CBS News and YouGov published Sunday revealed that 71 percent of Republican likely voters said they do not find the allegations against Moore credible, while only 17 percent believe them to be true.  [I’m in the latter camp.]

Moore has a 49-43 lead in this poll of registered voters in the state.

--The aforementioned Rep. Conyers (D-Mich.), the longest-serving current member of the House, resigned on Tuesday, after a series of allegations of inappropriate behavior toward female staff members proved to be too much for him to handle.

The 88-year-old made his announcement on a Detroit-area radio station, saying he was retiring while endorsing his son to replace him.  A special election will have to be called, though with the mid-terms coming up in a year that seems like a waste of money.  [Just appoint a guy to stand in for a year.]

--And on Thursday, Sen. Franken resigned, but he adopted a defiant tone.

“I know in my heart that nothing I have done as a senator, nothing, has brought dishonor on this institution, and I am confident that the Ethics Committee would agree.  Nevertheless, today I am announcing that in the coming weeks I will be resigning as a member of the United States Senate,” Franken said from the Senate floor.

Franken said some of the allegations are ‘simply not true’ and that he remembers others differently.

And he added: “I, of all people, am aware that there is some  irony in the fact that I am leaving while a man who has bragged on tape about his history of sexual assault sits in the Oval Office and a man who has repeatedly preyed on young girls campaigns for the Senate with the full support of his party.”

--And Arizona Republican Rep. Trent Franks is stepping down after House officials learned he had asked two female employees to bear his child as a surrogate.

Franks said in a statement that an ethics investigation concerns his “discussion of surrogacy with two previous female subordinates, making each feel uncomfortable.”

I feel uncomfortable just typing that.

--But wait, there’s more! The House Ethics Committee also announced it is launching an investigation into a third lawmaker, Texas Republican Rep. Blake Farenthold, who used taxpayer dollars to pay an $84,000 sexual harassment settlement to a former aide several years ago.

--Classic New York City stuff.  From Mara Gay / Wall Street Journal:

“New York City Housing Authority Chairwoman Shola Olatoye told the City Council that she regretted submitting documentation to federal officials showing the agency was in compliance for lead paint when it hadn’t conducted the required inspections in four years.”

So this woman then tried to tell us she didn’t intend to mislead federal officials or the general public about the four-year gap.

This is emblematic of the massive corruption in the administration of New York City Mayor Bill de Blasio. De Blasio and other city officials knew the inspections required under city law hadn’t taken place as early as April 2016 but didn’t tell residents until July of this year.

In a separate story by the Journal’s Ms. Gay, she writes that de Blasio has added more than 25,000 employees and spending has increased nearly 20%.  His free preschool for all children initiative costs the city about $300 million a year.  He did add nearly 1,300 police officers at an annual cost of $75 million, and spent more than $300 million to launch citywide ferry service which by most accounts has been a disaster in terms of low ridership on a majority of the routes.

De Blasio told the Journal, “Our economy is strong and we can afford to help New Yorkers who need it most.”

But homelessness is at its worst level in decades, even as spending for the homeless-services agency has doubled to $888 million in de Blasio’s first four years in office. How much of that total do you think is skimmed off?

--The Big Apple has continued its success on the crime front in 2017, however, with stats showing 263 homicides through last Sunday.  If Gotham finished the year under 300, that would be the lowest level since the 1950s.

--TIME’s “Person of the Year” is the “Silence Breakers” who have outed sexual predators.

--We note the passing of John B. Anderson, the former Illinois congressman who in 1980 ran as an independent for president, which helped propel Ronald Reagan to the White House. Anderson was 95.

Anderson was a 10-term congressman, running against Reagan and President Jimmy Carter and receiving just 7% of the vote, but enough, observers believed, to tilt the election as he drew more support from Carter than Reagan, helping Reagan to his Electoral College landslide.

Anderson had been a Republican nearly all of his elected political career, but he became more of a liberal as his party shifted rightward.

Carter refused to debate Anderson, but Reagan agreed to a television confrontation, making Anderson the first third-party presidential candidate to debate a major-party opponent on TV.

As I’ve noted a few times in the past, I was a senior at Wake Forest the spring of 1980 and worked for Anderson in preparation for his visit to our campus for a speech.  [Ah, the good old days, Ken S., frat Bro.]  I still remember how it was a detailed, albeit boring to most, presentation on one of the big issues of the day, the MX missile.  I loved a candidate who was into educating the people, though in fact he was described as being more of a “traveling scholar.”  Alas, his candidacy never caught fire, and, looking back he really was more of a liberal than I would describe myself as today.

But out of principle I cast my vote for Anderson that November, even as I was warming to Reagan.  My buddy and I worked the polls that day and then went to a Reagan party.

John Bayard Anderson was the son of Swedish immigrants who ran a grocery store in Rockford, Illinois, and he was a man of deep faith.  He earned a bachelor’s degree in political science from the University of Illinois in 1942 and later two law degrees, but in between in World War II, he was awarded four battle stars in the Army field artillery in Europe.

This was a good man.  A good American.  RIP, Mr. Anderson.

--Pope Francis has called for the wording of the Lord’s Prayer to be changed, because it implies God “induces temptation.”

The prayer, also known as Our Father, asks God to “lead us not into temptation.”

But the Pope told Italian broadcasters he believed the wording should be altered to better reflect that it is not God who leads humans to sin.

He told channel TV2000: “It is not a good translation because it speaks of a God who induces temptation.”

He added: “I am the one who falls. It’s not Him pushing me into temptation to then see how I have fallen.

“A father doesn’t do that; a father helps you to get up immediately. It’s Satan who leads us into temptation, that’s his department.”

Personally, I never thought of these words deeply, but the Pope is so right.

--Finally, back on Sept. 30, a good friend of mine, Phil W., who I first met at Wake Forest, lost his daughter, Stephanie, 32, in a tragic car crash in Greensboro, North Carolina, one that rocked the area.  Five died.  Phil was immediately thrown into the spotlight.

I learned of it hours later through a mutual friend and for weeks exchanged notes with Phil on just about any topic but this, not knowing when he was comfortable discussing it by phone (as unfortunately I couldn’t travel to the area to offer my support in person).

About four weeks ago, Phil and I finally chatted and he informed me of his crusade, as you’ll see below, and I have just been waiting for an appropriate time to bring up the topic, having been given permission by Phil to do so.

Over the years, Phil used to send me the writings of his rabbi and I’ll let Mr. Guttman describe the tragedy. [Emphasis mine.]

Fred Guttman / Rabbi Temple Emanuel in Greensboro (Greensboro News & Record):

“At approximately 11:30 p.m., a deputy from the Guilford County Sheriff’s Office noticed suspicious behavior among three people in a car. Running the plate, the deputy ascertained that the car was stolen. After he tried to stop the car, a high-speed chase on busy Battleground Avenue, a major thoroughfare, ensued. The suspicious car was traveling at around 130 mph as it ran a red light and plowed into Stephanie’s car.  (Her friend) Allie and Stephanie died instantly. The police car was traveling at 120 mph. The chase lasted 70 seconds.

“It has been reported that the value of the stolen car was less than $10,000. The value of Stephanie’s and Allie’s lives was priceless.

“Five people died, including those in the fleeing car, and the ultimate responsibility for these deaths lay with the people who stole the car.

“The officer who engaged in the chase was both young and inexperienced.  He was only following what he believed to be the policy of his department.  One can only imagine how his life has also been impacted by this tragedy.

“In our congregation, we are heartbroken. We are also asking many questions.

“We believe that the outcome of this chase was not worth the risk. We could understand better if those being pursued were intending to harm others when the deputy tried to stop them.

“However, we feel that a stolen automobile discovered by a license plate check hardly warrants putting innocent lives in jeopardy....

“National estimates are that one in every three people who are injured or killed in a high-speed chase is an innocent victim.

“Locally, the Greensboro Police Department undertook a study of high-speed police chases and in 2014 issued a new policy restricting them.”

But this was Guilford County police, not Greensboro.

Rabbi Guttman:

“Stephanie’s death leaves us sad at the thought of her unfinished years. And yet, we must find consolation in the memories we have of a very special human being, who touched many, many lives.

“May a part of her legacy be the prevention of similar tragedies in the future.”

Well, a few weeks ago, Guilford County announced changes to its pursuit policy, with Sheriff BJ Barnes saying it “strongly and further emphasizes the public safety factors” that a deputy has to consider during a pursuit.

Phil and his family, and that of Stephanie’s friend, Allie, expressed their gratitude to Sheriff Barnes and the department for “implementing positive, real change” in the chase policy, as stated by their attorney.

As Rabbi Guttman prayed for, part of Stephanie’s legacy is secure.  God love her.  And, Phil, in so many ways, good work.

---

Pray for the men and women of our armed forces...and all the fallen.  We remember Pearl Harbor.

And we pray for those struggling with the latest round of wildfires in California...and the first responders.

God bless America.

---

Gold $1250
Oil $57.34

Returns for the week 12/4-12/8

Dow Jones  +0.4%  [24329]
S&P 500  +0.3%  [2651]
S&P MidCap  -0.2%
Russell 2000  -1.0%
Nasdaq  -0.1% [6840]

Returns for the period 1/1/17-12/8/17

Dow Jones  +23.1%
S&P 500  +18.4%
S&P MidCap  +13.9%
Russell 2000  +12.1%
Nasdaq   +27.1%

Bulls 64.2 ...9 straight weeks above 60+ danger level
Bears 15.1 [Source: Investors Intelligence...reminder for newbies, a contrarian indicator]

Have a great week.

Happy Hanukkah.

Brian Trumbore

 



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Week in Review

12/09/2017

For the week 12/4-12/8

 [Posted 11:00 PM ET]

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 974

Trump World...Michael Flynn...Tax Reform

My mantra of ‘wait 24 hours’ has never been more needed than today, in so many respects.  For starters, a look back.

Last Friday, the Dow Jones swooned 350 points after ABC News investigative reporter Brian Ross, citing a single anonymous source, told viewers during an ABC special report Friday morning that Michael Flynn was prepared to testify that Donald Trump, as a candidate for president, told him to contact Russians.  Later during the evening news, Ross walked it back, telling viewers that the source who had provided the initial information for his story later told him that it was as president-elect, not as a candidate, that Trump asked Flynn to contact Russians.

The market recovered Friday afternoon to finish down just 40 points.

ABC News then announced Saturday that Ross’ reporting “during the special report had not been fully vetted through our editorial standards process. As a result of our continued reporting over the next several hours ultimately we determined the information was wrong and we corrected the mistake on air and online.”

How I handled it last WIR:

The other big news of the day was the guilty plea from former national security adviser Michael Flynn, who admitted to lying to the FBI about his contacts with the Russian ambassador and agreed to help investigators as they focus on other presidential aides.

I’m the “wait 24 hours” guy.  I am not going off on any rants on the topic until we learn more.  We had a story earlier in the day from ABC News that Flynn had agreed to testify that President Trump himself had directed Flynn talk to the Russians, to cite one example, but ABC seemed to walk that back a bit and as of tonight we don’t know.

ABC News suspended Brian Ross without pay for four weeks and announced he would no longer cover stories involving President Trump.

Then last weekend, President Trump tweeted he “had to fire General Flynn because he lied to the Vice President and the FBI.”

Trump had previously blamed the Feb. 13 firing on the fact that Flynn misled Vice President Mike Pence about his conversations with ambassador Sergey Kislyak during the presidential transition.  Until this tweet, Trump had not acknowledged he also knew Flynn had lied to the FBI when agents interviewed him on Jan. 24.

So this heightens scrutiny on the private Oval Office meeting Trump later had with then-FBI Director James Comey, one in which Comey later testified Trump told him Flynn was “a good guy” and said, “I hope you can let this go.” Comey told Congress he “took it as a direction” to drop the probe into Flynn, but did not obey it.

We then learned that Trump’s personal lawyer, John Dowd, was the one who drafted the tweet for Trump about lying to both Pence and the FBI.

Trump himself later tweeted: “After years of Comey, with the phony and dishonest Clinton investigation (and more), running the FBI, its reputation is in Tatters – worst in History! But fear not, we will bring it back to greatness.”

And: “So General Flynn lies to the FBI and his life is destroyed, while Crooked Hillary Clinton, on that now famous FBI holiday ‘interrogation’ with no swearing in and no recording, lies many times...and nothing happens to her? Rigged system, or just a double standard?”

Monday Trump told reporters, “I feel badly for Gen. Flynn. I feel very badly. He’d led a very strong life.”

“I will say this.  Hillary Clinton lied many times to the FBI and nothing happened to her. Flynn lied and they destroyed his life. I think it’s a shame.”

On the general topic of the FBI investigation....

Four days after the Trump tweet, FBI Director Christopher Wray staunchly defended the agency Thursday, telling Congress “there is no finer institution.”

“We are determined to be the very best at protecting the American people and upholding the rule of law,” Wray told the House Judiciary Committee.

Asked about Trump’s tweet, Wray answered:

“There is no shortage of opinions out there.  The FBI I see is tens of thousands of brave men and women that are working hard. The FBI that I see is people, decent people, committed to the highest principles of dignity and professionalism and respect.” [Chris Megerian / Los Angeles Times]

In the hearing, Republicans pushed Wray to block any anti-Trump biases in the FBI while Democrats demanded he stand up to the White House. 

In light of the president’s tweet, Rep. Bob Goodlatte (R-Va.), the House committee chairman, said “It does appear to me that, at the very least, the FBI’s reputation as an impartial, nonpolitical agency has been called into question.”

Critics, including on Fox News 24/7, have called the FBI’s impartiality into question after Special Counsel Robert Mueller removed Peter Strzok, a senior agent, from the case in the summer for sending text messages that were anti-Trump. Strzok had previously worked on the investigation into Hillary Clinton’s private email server.

“We do not know the magnitude of this insider bias on Mr. Mueller’s team,” Goodlatte said, calling it “absolutely unacceptable for FBI employees to permit their own political predilections to contaminate any investigation.”

Kimberley A. Strassel / Wall Street Journal...a superb summary of events:

“The media echo chamber spent the week speculating about whether Special Counsel Robert Mueller can or will nab President Trump on obstruction-of-justice charges. All the while it continues to ignore Washington’s most obvious obstruction – the coordinated effort to thwart congressional probes of the role law enforcement played in the 2016 election.

“The news that senior FBI agent Peter Strzok exchanged anti-Trump, pro-Hillary text messages with another FBI official matters – though we’ve yet to see the content. The bigger scandal is that the Justice Department, the Federal Bureau of Investigation and Mr. Mueller have known about those texts for months and deliberately kept their existence from Congress. The House Intelligence Committee sent document subpoenas and demanded an interview with Mr. Strzok. The Justice Department dodged, and then leaked.

“The department also withheld from Congress that another top official, Associate Deputy Attorney General Bruce Ohr, was in contact with ex-spook Christopher Steele and the opposition-research firm Fusion GPS. It has refused to say what role the Steele dossier – Clinton-commissioned oppo research – played in its Trump investigation. It won’t turn over files about its wiretapping.

“And Mr. Mueller – who is well aware the House is probing all this, and considered the Strzok texts relevant enough to earn the agent a demotion – nonetheless did not inform Congress about the matter.  Why? Perhaps Mr. Mueller feels he’s above being bothered with any other investigation.  Or perhaps his team is covering for the FBI and the Justice Department.

“When Deputy Attorney General Rod Rosenstein appointed Mr. Mueller, he stressed that he wanted a probe with ‘independence from the normal chain of command.’ Yet the Mueller team is made up of the same commanders who were previously running the Trump show at the Justice Department and the FBI, and hardly distant from their old office.

“Andrew Weissmann, Mr. Mueller’s deputy, is chief of the Justice Department’s criminal fraud section and was once FBI general counsel. Until Mr. Strzok’s demotion, he was a top FBI counterintelligence officer, lead on the Trump probe.... Lisa Page – Mr. Strzok’s mistress, with whom he exchanged those texts – was on loan from the FBI general counsel’s office.

“Does anyone think this crowd intends to investigate Justice Department or FBI misdeeds?  [Does] anyone think they intend to investigate themselves?  Or that they’d investigate their longtime colleagues – Andrew McCabe, or Mr. Ohr or Mr. Strzok? Or could we instead just acknowledge the Mueller team has enormous personal and institutional interests in justifying the actions their agencies took in 2016 – and therefore in stonewalling Congress?....

“Judicial Watch this week released an email in which Mr. Weissmann gushed about how ‘proud and in awe’ he was of former acting Attorney General Sally Yates for staging a mutiny against the Trump travel ban.  Of 15 publicly identified Mueller lawyers, nine are Democratic donors – including several who gave money to Mrs. Clinton’s 2016 campaign....

“Some want Attorney General Jeff Sessions to clean house, although this would require firing a huge number of career Justice Department lawyers. Some want Mr. Trump to fire Mr. Mueller – which would be counterproductive. Some have called for a special counsel to investigate the special counsel, but that way lies infinite regress.

“There is a better, more transparent way.  Mr. Sessions (or maybe even Mr. Trump) is within rights to create a short-term position for an official whose only job is to ensure Justice Department and FBI compliance with congressional oversight. This person needs to be a straight shooter and versed in law enforcement, but with no history at or substantial ties to the Justice Department or FBI....

“Congress is the only body with an interest and ability to get the full story of 2016 to the public, thereby ending this drama quickly. But that requires putting an end to the obstruction.”

Meanwhile, Donald Trump Jr. appeared before the House Intelligence Committee for seven hours on Wednesday, refusing to discuss a father-son conversation earlier this year over how to handle fallout from revelations that he met with a Russian attorney during the 2016  campaign.

Don Jr. invoked attorney-client privilege when asked to provide details.  There are differing opinions on whether or not he can do so.

And regarding Michael Flynn, there were reports he told an American businessman that U.S. sanctions on Russia would be “ripped up” under the Trump administration, according to a whistleblower who went to Rep. Elijah Cummings (D-Md).

The text message concerned a nuclear-power project, with Flynn telling his former business associate, Alex Copson, that ripping up sanctions would allow “money to start flowing into the project,” according to Cummings’ account of the whistleblower’s claims, raising serious questions about Flynn’s intentions. The whistleblower’s identity has not been disclosed.

Lastly, there are conflicting reports on Deutsche Bank and whether it received a subpoena earlier in the fall from Robert Mueller’s office concerning people or entities affiliated with President Trump, including requests for documents and data about accounts and other dealings tied to relationships with Trump and those close to him, according to the Wall Street Journal and a German newspaper, Handelsblatt.

Ty Cobb, the chief lawyer for the White House, said bank records of the president and his family were not subpoenaed. 

A spokesman for Deutsche Bank told the Journal’s Jenny Strasburg that it “takes its legal obligations seriously.”

President Trump’s relationship with Deutsche Bank goes back decades, including a time when he missed loan payments in 2008, after which they sued each other, settling out of court in 2009, according to the Journal.

Tax Reform: The House on Thursday passed a two-week stopgap spending bill one day before a deadline to avoid a government shutdown.  The vote was 235-193, with 14 Democrats voting for the measure and 18 Republicans voting “no.”

The Senate then voted 81-14 on the legislation, President Trump signed it and we’re on to Dec. 22 to negotiate a bipartisan budget deal...or Congress can vote on a further continuing resolution (CR).

As for tax reform, this week I can be brief.  The House and Senate versions are now in conference but there are no hard and fast agreements on the final details and thus little to discuss, but hopefully we’ll know something soon, IF, the self-imposed deadline of an agreement on the president’s desk by Christmas (read Dec. 22) is to be achieved.

A huge issue for some states such as California, New York, New Jersey, Connecticut and one or two others is the plan to eliminate, or make changes to the deductibility of state and local taxes (SALT).

I fully recognize that most parts of the country couldn’t give a damn about this topic, but at least in my home state of New Jersey, the elimination or reduction in SALT is a major problem as folks begin to estimate the impact.  Start with the simple fact that the average property tax in my town of Summit is $14-$15,000.  If people aren’t tied to their jobs, or are in retirement, it’s now about moving the hell out, which in turn will add to a drop in housing values for the others (or at best, prolonged stagnation).
 
But the confusion is also in the lack of details from Congress in terms of calculating the impact of the other provisions that may help offset SALT, the positives. The fact that this is all coming at yearend adds to the stress since some folks are wondering if there are moves they can make today (like prepaying some 2018 property taxes) that make sense.

One New Jersey real estate broker told Bloomberg he lost a $1.4 million sale on a waterfront condo in Jersey City because the client hit the pause button, not knowing how much he’d end up paying, or could no longer deduct, and it’s nuts to act before you get some answers.

Billionaire Ray Dalio, who runs the world’s biggest hedge fund, Bridgewater Associates, said the expected elimination of state and local income-tax deductibility would lead to high-income earners moving out of state, which he notes adds to the polarity and conflict between the wealthy and lower-income U.S. taxpayers, who have “typically different values.”

Those left behind in high-tax states will see a hit in their property values, Dalio adds, while “the reduced population of higher income and higher spending folks leads to reduced spending in these locations,” further depressing their economies.

What I do know is that in the New York/New Jersey area, you sure aren’t hearing talk of a flood of new residents from elsewhere (unless from Puerto Rico...just stating a fact).

As for the corporate tax cuts being proposed, some of us wonder about the true ‘stimulative effect.’  I’m in the camp (with my friend Dr. W.) that it won’t be much, and those of our ilk are concerned the deficits will be far worse than thought.  The impact on interest rates, for starters, would at some point tank the stock market.  I can guarantee that.

At the same time, I do agree the corporate rate should come down considerably to line up with the rest of the world.

And you have other important items like the alternative minimum tax (AMT).  Hopefully we get some real answers soon.

Trumpets....

--The day after President Trump slurred his words in announcing the move of the U.S. embassy to Jerusalem from Tel Aviv, the White House said he would undergo a physical exam at Walter Reed early next year and the results would be made public.

Press Secretary Sarah Huckabee Sanders brushed off concerns about the President’s health as “frankly, pretty ridiculous.”

“The President’s throat was dry, nothing more than that,” she told reporters.

Wall Street

I’ve been touting that a big factor in the market’s advance this year is not just the state of the U.S. economy (yes, Donald, take a bow if you want), but also global, synchronized growth. The 25-26 largest countries in the world in terms of GDP are all growing at the same time and who does this benefit in particular?  U.S. multinationals, as basically represented by the Dow Jones Industrial Average.

The Wall Street Journal’s Mike Bird had a piece this week buttressing this development, citing bumper “earnings growth across global equity markets.”

“The earnings-per-share of a FactSet index of over 20,000 listed companies from around the world has now reached an average of $9.69, increasing nearly 19% in the last year.

“That’s the fastest year-over-year rise since 2011, surpassing the late-2014 high of $9.55. While the FactSet data only stretch back to 2001, increased earnings in emerging markets like China, among other factors, mean that the per-share level has likely never been higher.

“Such high earnings per share should boost investor confidence that the recent surge in stock markets is backed by a broad global economic recovery and the ability of companies to generate returns, not just ever-higher valuations....

“International trade growth is also expected to outstrip gains in global gross domestic product this year, with the International Monetary Fund expecting a 4% increase, up from 2.4% in 2016.”

On the data front in the U.S. this week, the November employment report was released by the Commerce Department on Friday and the number was 228,000, better than expected, with the unemployment rate at 4.1%.  The U6 underemployment figure was 8.0%.

The average monthly jobs gain in 2017 is now 174,000; 170,000 the last three months.  [It was 187,000 a month for all of 2016.]

But a key, average hourly earnings, was up just 0.2%, 2.5% the past 12 months, and this is still too low for a now lengthy recovery.

The Atlanta Fed’s GDPNow indicator is down to 2.9% growth for the fourth quarter from 3.5% last week.

One other item...the ISM non-manufacturing PMI for November was 59.4 (50 being the dividing line between growth and contraction), the 95th consecutive month of gains for this key indicator.

So now it’s on to the Federal Reserve’s Open Market Committee confab of Dec. 12-13, where the Fed is expected to raise its short-term benchmark funds rate again, despite its preferred inflation barometer, the personal consumption expenditures index, being at just 1.4%, well below its 2% target, and wages at 2.5%, below a normal 3.5% for a recovery of this kind.  The market has long factored this in, but at some point next year, continued hikes in the funds rate will help lead to a market swoon, as I’ll get into during my yearend outlook for 2018 in three weeks.

Chair Janet Yellen will also be holding her last press conference following the FOMC gathering and we’ll get a signal as to future Fed thinking, seeing as her replacement, Jerome Powell, is viewed as sharing similar viewpoints.

My only issue with the Fed hiking rates next week is we still have no clue on the details of any final tax ‘reform’ legislation, and thus the potential impact on both growth and deficits.

Europe and Asia

On the economic front in the eurozone, Markit released its non-manufacturing/services PMIs for the month of November and the EA19 reading came in at 56.2 vs. 55.0 in October.

Germany was at 54.3, France 60.4, Italy 54.7, Spain 54.4, and Ireland 56.0. The U.K came in at 53.8.

GDP in the third quarter for the euro area, as reported by Eurostat, was 0.6%, a tick down from 0.7% in the second quarter, but 2.6% year over year, vs. 2.4% yoy in Q2. 

Germany, year-over-year, is running at a 2.8% clip, France 2.2%, Italy 1.7%, Spain 3.1%, Netherlands 3.3%, Greece 1.3% and Ireland 5.8% (a/o Q2). The U.K. is at just 1.5%, but on the positive side for them, potentially, we had this....

Brexit:  After all-night negotiations and an early morning dash to Brussels, British Prime Minister Theresa May agreed with European Commission Jean-Claude Juncker to start talking about trade and a post-Brexit transition period, both sides agreeing “sufficient progress” had been made on the divorce bill and other terms of separation.

On the critical issue of Irish border, there will be no “hard border” in Ireland, while EU citizens in the U.K., and U.K. citizens in the EU, will see their rights preserved. 

Juncker said “the breakthrough we needed” had been achieved after months of negotiations.

Northern Ireland’s Democratic Unionist Party (DUP), whose support Mrs. May depends on in parliament, and whose opposition on Monday led to talks breaking down, said there was still “more work to be done” and how it votes on a final deal “will depend on its contents.”

Reuters reported that Britain estimates the ultimate cost of meeting its financial obligations to the EU at 40 to 45 billion euros, according to a British source.  [And potentially as high as 55-65bn euro down the road.]

Mrs. May won a temporary reprieve from rival factions within her own party by striking the agreement that supporters hope will increase prospects of an orderly exit.  Conservative lawmakers have been threatening to bring down May’s government, while business leaders have to be pleased at the progress after repeatedly warning of a post-Brexit exodus.

At the same time, business leaders need more clarity, quickly, to prevent the triggering of contingency plans to cope with a so-called ‘hard Brexit’ in which Britain leaves the EU without a negotiated settlement.

For now, what has been agreed to?

--A guarantee that there will be “no hard border” between Northern Ireland and the Republic, thus maintaining “constitutional and economic integrity of the United Kingdom.”

--The rights of citizens living in both the U.K. and in the EU will be preserved.

--The divorce bill, or exit settlement, is to be “fair to the British taxpayer.”

But it is true what really happened is that all the issues were put off until next year, including the really hard work on trade relationships.

On the border topic, Ireland’s Prime Minister (Taoiseach) Leo Varadkar said it was a “significant day” for his country.

“We have achieved all that we set out to achieve in phase one of these negotiations.  I am satisfied that sufficient progress has now been made on Irish issues, the parameters have been set and they are good.”

Varadkar insisted the agreement on no hard border for Ireland is “politically bulletproof.”

Irish Foreign Minister Simon Coveney said the deal was a “very good outcome for everyone on the island of Ireland.”

Back to the divorce bill, the U.K. will contribute to EU budgets for the years 2019 and 2020 as if it had remained in the Union (and beyond on certain future liabilities, including past loans to Ukraine, for example). And the Court of Justice of the European Union will continue to have an influence in that its case law will be part of the final Withdrawal Agreement (how rights issues are adjudicated).  U.K. courts have the final say, but the ECJ will influence decisions for eight years after Brexit.

Make no mistake, this is just phase one.  The border issue is far from formally resolved and there will be a final vote on any agreement in parliament.  European Union leaders meet next week in a summit to give the official go ahead on phase two.

But the U.K. can now start discussing trade relations, including a hoped for two-year transition period, with in essence a new deadline of October 2018, Brexit then March 2019.  You need the time between Oct. 2018 and March 2019 to finalize the language, which is never easy on such a massively important deal, and you need the approval of not just the British parliament, but also all 27 EU member states.

An actual trade deal could take far longer than just through October, which is why a transition period is required for businesses to prepare, whether that means relocation or continued capital investment.

For now, the EU is preparing to put a deal on the table along the lines of one it offered Canada.  That was a great deal for Canada, but for the U.K. short of what it enjoys today as a full EU member in the single market and customs union.

And back to the European Court of Justice, many Conservatives in Mrs. May’s party have long objected to its role in any post-Brexit U.K.

But at least for now, both sides should be able to enjoy a Christmas dinner with the family, though as Scrooge said, they’ll need to be in all the earlier the day after.  [Actually, Dec. 27 because the 26th is Boxing Day.]

Catalonia: A Spanish judge withdrew a European arrest warrant for ousted Catalan President Carles Puigdemont and four other ministers now in self-exile in Belgium after declaring unilateral independence in a referendum ruled illegal by Madrid.

But the individuals still face possible charges for sedition and rebellion, the latter carrying a jail term of up to 30 years.

Puigdemont and the others have said they want to return ahead of Dec. 21 regional elections, but they want guarantees they won’t be charged.

Monday, six Catalan ex-ministers that were being held in a prison near Madrid were released on bail. Two others, including the vice president, remained in custody.

As for the election, today the polls are showing it too close to call in terms of how the seats in the Catalan parliament would break down. It appears there are seven parties who would gain seats and they split down the middle between the separatists and pro-Madrid forces.

Germany: The Social Democrats (SPD) have agreed to start talks next week with Chancellor Angela Merkel’s conservatives on forming a coalition government; the SPD voting at its party congress to open discussions with the conservatives despite having pledged earlier to be in the opposition after suffering its worst election loss in the post-war era back in September.

But a “grand coalition” between the two is not a foregone conclusion. The SPD will demand concessions, and next week’s talks are just preliminary ones before full-blown negotiations in January.  Immigration is going to be the key issue, the SPD desiring a far more liberal policy than the conservatives in Merkel’s government want.

For now, a majority of Germans in a Forsa poll, 70%, expect a grand coalition to form, with 47% happy if there was one, 36% disapproving.

Overall, the SPD is at 23% in the poll, and Merkel’s conservatives at 32%.

One final note.  Merkel’s arch-conservative CSU allies in Bavaria on Monday named right-winger Markus Soeder to be their candidate for the state premiership in a regional election next fall, which could weaken Merkel’s hand in negotiations with the SPD. The CSU wants a far tougher immigration policy than in place today.

Current Bavarian premier Hors Seehofer agreed to step aside, but he will remain CSU party leader (chairman).

Eurobits....

--French President Emmanuel Macron’s popularity has been surging, now 50%, up six points since the last Ifop survey, which is a big deal.  The 39-year-old is seeking to become Europe’s de facto leader, displacing Angela Merkel, and while Merkel has been busy trying to maintain power amidst her coalition issues, Macron has been traveling the world, increasing his profile, while injecting himself in every regional issue he can find.

Good for him. I’ve warmed to the guy, and the French people have as well. We need leaders in the Free World to combat the likes of Xi and Putin and Donald Trump is not up to the task in this regard.

--Greece’s finance minister announced an agreement had been reached between the heavily indebted country and its creditors on its progress in implementing reforms, a very big deal, and the yield on the nation’s 10-year bond fell below 5% for the first time since 2009, pre-crisis.

The agreement will allow Greece to receive fresh bailout funds next year, after implementing workplace reforms, speeding up the settlement of bad loans, and selling off state-owned power plants, among other things.

Greece will have to vote on at least two major bills by Jan. 22 to implement the agreement, but this is expected.

Understand that at the height of the crisis, the yield on the 10-year was 33.7%, but the financial picture has been improving dramatically since.

Turning to Asia....China’s private Caixin reading on services in November was 51.0 vs. 51.6 in October, while it was 51.2 in Japan vs. 53.3 the prior month.

Street Bytes

--We had a divergence in the broad averages for a second straight week as both the Dow Jones and S&P 500 closed at new all-time highs today, but Nasdaq fell again, -0.1% to 6840, off its high of 6912. The Dow finished up 0.4% to 24329, while the S&P rose 0.3% to a record 2651.

--U.S. Treasury Yields

6-mo. 1.44%  2-yr. 1.79%  10-yr. 2.38%  30-yr. 2.77%

8 straight weeks the yield on the 10-yr. has closed Friday between 2.33% and 2.41%.  It was 2.44% on 12/31/16.

--Apple Inc. CEO Tim Cook defended his company’s move to pull hundreds of apps from its China store to comply with government demands.  China is Apple’s second-biggest market outside of the U.S.  Cook rejected criticism from rights groups about his participation in the China-run World Internet Conference earlier this week in Wuzhen; the event promoting the state’s version of how the internet is to run in the country.

“When you go into a country and participate in a market, you are subject to the laws and regulations of that country,” Cook said at a forum in Guangzhou on Wednesday.

“Your choice is, do you participate or do you stand on the sideline and yell at how things should be,” Mr. Cook said.  “My own view very strongly is you show up and you participate, you get in the arena, because nothing ever changes from the sideline.”

“From my American mind-set, I believe strongly in freedoms,” he said.  “I also know each country in the world decides their laws and regulations.”

Meanwhile, Alibaba Group Holding Ltd. founder and Executive Chairman Jack Ma, addressing the same Wuzhen conference, dismissed concerns about a looming trade war between the U.S. and China, saying “if trade stops, peace stops.”

Earlier, Ma drew a contrast between the U.S. political system and what he called a “system of stability” offered by the Communist Party government in China, saying “you don’t know who’s going to be the next president” in the U.S.

Vice Premier Wang Yang, who was recently elevated to the powerful seven-member Politburo Standing Committee, said: “China is ready to work with all countries in the world to formally promote further opening up, to enhance trade and investment liberalization and to unequivocally reject protectionism.”  [Dan Strumpf / Wall Street Journal]

Hardly.

And the above just gives me another opportunity to say what I have for years now.  Apple is going to be so screwed.

--In one of the most idiotic moves of all time, in terms of our society, Facebook announced it was rolling out Messenger Kids, a stand-alone mobile app that allows children age 6 to 13 to use the service.

The company said the new app aims to provide a more controlled environment for the types of activity that are already occurring across smartphones and tablets among families.

Kids will be able to use it for videos, photos and augmented reality educational experiences.

This is absolutely nuts.  What are we doing to our kids?

Here’s my solution.  Social media should be treated like getting a driver’s license.  You have to be, say, at least 16 before you can try it (though I’d prefer 18 to largely eliminate the high school years), he wrote, tongue firmly planted in cheek...sort of....

--UPS has already been experiencing delivery issues, reporting delays of up to two days after a surge in online orders over Thanksgiving.  Bloomberg reported that e-commerce orders “overwhelmed expectations.”

The thing is UPS has had these holiday issues before.  Did they learn anything? 

--General Electric announced plans to shed 12,000 jobs as part of a cost-cutting plan to cut $1bn in costs.  The move would affect both professional and production employees from its power division, which is facing headwinds from the rise of renewable power sources, excess capacity and early retirement of plants, like in coal. The cuts would amount to about 18% of the unit’s workforce.

The power business, which makes turbines for coal and gas-fired plants, produces a third of the world’s electricity and is the company’s largest in both revenue and employees.

--Homebuilder stocks were hit the other day after Toll Brothers reported a smaller-than-expected rise in fiscal fourth-quarter sales and profits.  Revenue still rose 9.3 percent, but this was shy of the Street, ditto net income.

Toll, the largest luxury homebuilder in the country, and others of its ilk, have to be watching the maneuverings in Congress re the tax bill and the treatment of property taxes. 

--Sunday, CVS Health, the nation’s biggest pharmacy chain, agreed to purchase Aetna, the No. 3 health insurance company, in a $69 billion deal that promises to reshape the health care market.

The combined company, in addition to gaining the power to drive lower prices from pharmaceutical companies, would likely spark others to find partners.

If the merger goes through, Aetna CEO Mart Bertolini stands to pocket roughly half a billion dollars, owing to the stock and rights he owns because of the premium CVS is paying for Aetna.

CVS CEO Larry Merlo is slated to run the combined company and Bertolini will have no operational role.

But it’s no sure thing the merger will pass regulatory muster.  The market sees less than a 50/50 chance of it, the Justice Department having just sued to stop the AT&T  buyout of Time Warner.  While the two mergers are different, CVS does already own  one of the country’s big three pharmacy benefit managers (who buy from drug wholesalers), and the antitrust folks may not be comfortable with CVS then owning one of the three biggest insurers.

The merger was spurred, however, by the impact of Amazon, which has been acquiring state pharmacy licenses as a probable prelude to it entering the retail pharmacy business.

--Anheuser-Busch has reserved 40 of Tesla Inc.’s all-electric Semi trucks, as the company looks to slash its fuel costs, which amounts to about $120 million a year.

Anheuser-Busch employs 750 trucks around the country and the Tesla vehicles would be used for short-range deliveries, or ones that are far less than the advertised 500-mile range for the trucks.

But as I’ve told you before, while Tesla says the new truck, which will list for $150,000 to $200,000, will be available in 2019, we know that with the company’s production issues it won’t be available until 2036. 

--About a year ago, under heavy criticism from President Trump, Ford canceled plans to build a $1.6 billion car plant in Mexico and instead it announced it would produce electric and hybrid vehicles at a Michigan factory.

But now Ford is shifting again, saying it intends to assemble electric vehicles in Mexico, not Michigan, though the latter will see a larger investment and focus on self-driving cars.

The thing is EVs have low profit margins, if one at all due to battery costs, and sales volumes are negligible at this time.  So it’s important to keep labor costs down.

--Early Thursday, the price of Bitcoin surged to more than $19,000 before finishing the day around $16,000.  At one point it was up 40% in 40 hours, up more than 1,600% for the year.  Last I saw tonight the price from Coindesk was $15,734.

The volatility is occurring as Bitcoin prepares to start trading futures contracts on two established U.S. exchanges; the Chicago Board Options Exchange on Sunday evening and on the Chicago Mercantile Exchange a week later.

Separately, more than $70 million worth of bitcoin was stolen from a cryptocurrency-mining service called NiceHash following a security breach.

Yes, this is nuts...this whole mania.  Between hackers and organized crime, no recourse.

--On Thursday, Morgan Stanley fired former congressman Harold Ford Jr. as a senior adviser (read rainmaker) to the firm after an investigation into a claim of inappropriate conduct.  Specifically Ford is alleged to have behaved inappropriately toward a woman, who it turns out is a journalist.

Ford said in a statement: “This simply did not happen. I have never forcibly grabbed any woman or man in my life.”

I know nothing about Ford, personally, but at some point in this “hyper-sensitive time,” as he described it, we risk crossing the line.  

I was struck by a comment on Fox News Thursday night by Emily Tisch Sussman, who said these days we should “err on the side of believing women.”

Just don’t do it blindly, I mused.

--The 500-year-old da Vinci painting that sold for $450 million recently at auction, “Salvator Mundi,” is heading to the Louvre Abu Dhabi, the museum announced.  The New York Times reported that the anonymous buyer was Saudi prince Bader bin Abdullah bin Mohammed bin Farhan al-Saud, or BBABMBFAS, as he goes by.

According to The Times, he has no history as a major art collector and no publicly known source of great wealth.  But he’s a friend of the country’s 32-year-old Mohammed bin Salman, MBS.

But I thought there was a crackdown on the Saudi elite, you might be asking yourself?  Well it would appear to be quite selective.  MBS, after all, just two years ago purchased a 440-foot yacht from a Russian oligarch for half a billion dollars.

And this just in....it is really MBS himself who purchased “Salvator Mundi,” MBS using BBABMBFAS as a surrogate.  So what does it say about the Crown Prince spending $450 million on a da Vinci (that could be fake) while seeking to claw back $billions from those he placed under house arrest at the Four Seasons in Riyadh?

--As the New York Post reports, NBC is really left high and dry in terms of Matt Lauer’s successor, after his own maneuverings ensured potential heirs like Josh Elliott and Billy Bush never got a shot at being groomed for the gig; owing to Lauer’s jealousy over rivals.  It’s also now known that Megyn Kelly doesn’t stand a chance after her dreadful start with her own show.  Kelly had “the worst November sweeps ratings of any in the history of the 9 a.m. hour of ‘Today’ – across all demos.” [New York Post]

In the interim, Hoda Kotb will continue to fill in.

There’s also no apparent successor at CBS for Charlie Rose.

Meanwhile, it’s a small sample size, but “Today” averaged 4.9 million viewers for the week, Nov. 27-Dec. 1, following Lauer’s firing, vs. “Good Morning America,” which had 4.4 million and “CBS This Morning” with 3.5 million.

Typically, while NBC leads in the 25 to 54 demographic, it has trailed GMA in overall viewers.

--Meanwhile, in the evening news race, CBS unveiled 42-year-old Jeff Glor for the “CBS Evening News,” Glor making $12,500 as opposed to the big contracts for ABC’s David Muir and NBC’s Lester Holt.

Actually, I guess Glor is being paid more than $12,500, but CBS was looking for a cheapo alternative to Scott Pelley, and before that, Katie Couric.

CBS’ “Evening News” has an average 6.4 million viewers according to Nielsen data, vs. 8.7 million for “ABC World News Tonight” and 8.3 million for “NBC Nightly News.”

Foreign Affairs

Israel: President Trump officially recognized Jerusalem as the capital of Israel Wednesday in a speech at the White House.

“Through all of these years, presidents representing the United States have declined to officially recognize Jerusalem as Israel’s capital. In fact, we have declined to acknowledge any Israeli capital at all,” he said.

“But today, we finally acknowledge the obvious: that Jerusalem is Israel’s capital.”

The timing of the move was puzzling. Trump characterized the decision as simply delivering on a campaign promise, which he implied other presidents “lacked courage” to do.

“While previous presidents have made this a major campaign promise, they failed to deliver. Today, I am delivering,” he said.

Trump said his decision reflected reality that Jerusalem is the seat of Israel’s government, its supreme court, parliament and home to its prime minister and ceremonial president. But he clarified the United States is not taking a stand on key issues to be resolved in peace negotiations.

“We are not taking a position on any final status issues, including the specific boundaries of the Israeli sovereignty in Jerusalem or the resolution of contested borders,” Trump said.  He also added the U.S. would support establishing a separate Palestinian state “if agreed to by both sides.”

One of Trump’s big supporters, Tony Perkins, president of the conservative Family Research Council, praised the move as “a major milestone in America’s historic relationship with Israel,” adding it was “bold and courageous.”

Israeli Prime Minister Benjamin Netanyahu issued his thanks:

“We are profoundly grateful for the president, for his courageous and just decision to recognize Jerusalem as the capital of Israel. This decision reflects the president’s commitment to an ancient but enduring truth.”

---

Hamas called the move an “act of war.”

Britain and France were among those disagreeing with the U.S. decision.

In a televised speech Thursday, Hizbullah leader Sayyed Hassan Nasrallah said he supported calls for a new Palestinian uprising.

Pope Francis called for Jerusalem’s “status quo” to be respected, saying new tension would further inflame world conflicts.

China and Russia expressed their concerns.

Turkish President Erdogan said Turkey will cut diplomatic ties with Israel, adding that Jerusalem is “a red line for Muslims.”  [Israel responded that “Jerusalem has been the Jewish capital for 3,000 years.”]

Jordan’s King Abdullah II warned the move “raised alarm and concern” and could “hamper all efforts to get the peace process moving.”

Iranian President Hassan Rouhani urged Muslims to disrupt what he called a plot by unnamed countries in the region to build ties with Israel.

The EU’s top diplomat, Federica Mogherini, the EU’s foreign affairs chief, said the ‘announcement has a very worrying potential impact’ for peace in the region.  ‘It could send us backwards into even darker times than the ones we are already living in.”

Mustafa Barghouti, a member of the Palestine Liberation Organization’s Central Council, said, “It’s over.”  President Trump “aborted his peace process before it was born.”

The Kingdom of Saudi Arabia’s Royal Court said in a statement:

“The Government...had previously warned of the serious consequences of such an irresponsible and unwanted step.  The Kingdom expresses its denunciation and deep regret that the administration has taken this step, as it represents a great bias against the historic and permanent rights of the Palestinian people in Jerusalem.”

The violence, the “rage,” has been limited across the region thus far.

Opinion....all sides...

Thomas L. Friedman / New York Times

“In nearly 30 years of covering United States foreign policy, I’ve never seen a president give up so much to so many for so little, starting with China and Israel. In both the Middle Kingdom and in the Land of Israel, Christmas came early this year. The Chinese and the Jews are both whispering to their kids: ‘There really is a Santa Claus.’

“And his name is Donald Trump.

“Who can blame them? Let’s start with Israel, every Israeli government since its founding has craved United States recognition of Jerusalem as its capital. And every United States government has refrained from doing that, arguing that such a recognition should come only in the wake of an agreed final status peace accord between Israelis and Palestinians – until now.

“Today, Trump just gave it away – for free.  Such a deal!  Why in the world would you just give this away for free and not even use it as a lever to advance the prospect of an Israeli-Palestinian deal?

“Trump could have said two things to Israeli Prime Minister Benjamin Netanyahu. First, he could have said: ‘Bibi, you keep asking me to declare Jerusalem as Israel’s capital.  O.K., I will do that.  But I want a deal.  Here’s what I want from you in return: You will declare an end to all Israeli settlement building in the West Bank, outside of the existing settlement block that everyone expects to be part of Israel in any two-state solution.’

“Such a trade-off is needed. It would produce a real advance for United States interests and for the peace process. As Dennis Ross, the veteran American Middle East peace negotiator and author of ‘Doomed to Succeed: The U.S.-Israeli Relationship From Truman to Obama,’ explained: ‘When you stop building outside the settlement blocs, you preserve, at a maximum, the possibility of a two-state outcome and, at a minimum, the ability for Israelis to separate from Palestinians.  Keep up the building in densely populated Palestinian areas and separation becomes impossible.’

“Trump also could have said, as the former United States ambassador to Israel Martin Indyk suggested, that he’d decided ‘to begin the process of moving the embassy to western Jerusalem, but at the same time was declaring his willingness to make a parallel announcement that he would establish an embassy to the state of Palestine in East Jerusalem’ – as part of any final status agreement. That would at least have insulated us from looking like making a one-sided gesture will only complicate peacemaking and kept the door open to Palestinians.

“In either case, Trump could then have boasted to Israelis and Palestinians that he got them each something that Barack Obama never did – something that advanced the peace process and United States credibility and did not embarrass our Arab allies. But Trump is a chump. And he is a chump because he is ignorant and thinks the world started the day he was elected, and so he is easily gamed.

“Just ask the Chinese. Basically, his first day in office, Trump tore up the 12-nation Trans-Pacific Partnership (TPP) free-trade deal – clearly without having read it or asked China for any trade concession in return. Trump simply threw out the window the single most valuable tool America had for shaping the geoeconomic future of the region our way and for pressuring China to open its markets to more United States goods.

“Trump is now trying to negotiate trade openings with China alone – bilaterally – and getting basically nowhere.  And yet he could have been negotiating with China as the head of a 12-nation TPP trading bloc that was based on United States values and interests and that controlled 40 percent of the global economy. Think of the leverage we lost.”

Editorial / Washington Post

“President Trump’s decision to recognize Jerusalem as Israel’s capital has a certain amount of common sense on its side.  As a practical matter, West Jerusalem has been the seat of Israeli government since 1949, and no conceivable formula for Palestinian statehood would change that.  Political leaders and diplomats from around the world already visit government offices there, even if their embassies remain in Tel Aviv. As Mr. Trump put it, for the United States finally to accept that the Jewish state has its capital in Jerusalem is ‘nothing more or less than a recognition of reality.’

“At the same time, Presidents Bill Clinton, George W. Bush and Barack Obama had good reasons for holding back on such a move, even though they, like Mr. Trump, had promised while on the campaign trail to move the U.S. Embassy to Jerusalem.  They calculated that what amounted to a mostly symbolic step could undermine U.S. policy across the Middle East as well as their hopes of brokering an Israeli-Palestinian settlement – and possibly trigger violence, including against Americans.

“Mr. Trump cast himself as setting aside failed conventional wisdom – he pointed out there has been no peace deal – and of offering a fresh approach.  That’s a stance that may play well with his domestic political base and with many Israelis.  But Mr. Trump is implicitly betting that previous presidents were wrong to worry about blowback in the Middle East and beyond. That’s a big risk to take for the scoring of political points.

“So far, the president’s decision has been rejected by every major U.S. ally in Europe and the Middle East, including Britain, France, Egypt and Saudi Arabia. It will put considerable pressure on Jordan, Israeli’s fragile neighbor, whose King Abdullah II sees himself as a protector of Jerusalem’s holy Muslim sites....If violence erupts in Jerusalem or elsewhere in the Middle East – and extremists will do their best to make that happen – Mr. Trump will be blamed.”

Editorial / Wall Street Journal

“President Trump honored a campaign pledge on Wednesday when he recognized Jerusalem as the capital of Israel. The decision is hardly the radical policy departure that critics claim, and Mr. Trump accompanied it with an embrace of the two-state solution for Palestine that Presidents of both parties have long supported.

“Congress recognized Jerusalem as Israel’s capital in 1995 in a bill President Clinton declined to veto. Other Presidents have agreed in principle, and even campaigned on it, but in office they used a waiver to put off any formal recognition or move the U.S. Embassy to Jerusalem from Tel Aviv. The difference is that Mr. Trump apparently meant what he said as a candidate....

“Mr. Trump combined his Embassy move with renewed intent to broker an Israeli-Palestinian peace deal, and he doesn’t rule out a Palestinian state as part of the solution. Administration officials reiterated that intention Wednesday, saying progress is being made behind the scenes. Color us skeptical given the long history of failure, but the U.S. is trying.

“One way the Palestinian Authority could signal a new seriousness would be to stop paying the families of Palestinians who kill innocent Israelis.  The House passed the Taylor Force Act Tuesday, which would reduce U.S. aid to the Palestinians until they renounce pay-for-slay payments. A Senate vote may follow this month.

“Arab leaders denounced the Embassy move, but we wonder how long the fury will last.  The Sunni Arabs also confront the threats of Islamic terrorism and Iranian imperialism, and the Palestinians are a third order concern. If the movement of an American Embassy that was signaled more than 20 years ago is enough to scuttle peace talks, then maybe the basis for peace doesn’t yet exist.”

Editorial / Financial Times

“(For) all his words about not taking a position on the city’s final status, Mr. Trump appears to have pre-empted his own plans to broker agreement between Israel and the Palestinians by resolving one of the most explosive issues in Israel’s favor. For someone who prides himself on being the consummate deal maker it is odd that he should surrender this card before negotiations have even begun.

“It is odd too because it complicates life for Saudi Arabia, Mr. Trump’s chosen interlocutors in the region. The Saudis, who have been playing a role in the evolution of the latest U.S. peace plans, are also strongly opposed. They have little choice. The ruling al-Saud family are not only royals. The Saudi king is the self-styled leader of Sunni Islam and al-Aqsa mosque in Jerusalem is considered the third holiest site in Islam, after the mosques at Mecca and Medina.

“This can only be a blow to the Saudis, especially Crown Prince Mohammed bin Salman, who has been acting as go between with the Palestinians and Jared Kushner, Mr. Trump’s son-in-law and envoy to the region.

“Most of all, by taking sides on an issue central to the Israel-Palestine conflict Mr. Trump has exploded any residual notion that Washington can act as honest broker. The status of Jerusalem has always been a ticking time bomb. The fear now is that the U.S. president has lit the fuse.”

John Podhoretz / New York Post

“(Trump) called the international community’s seven-decade bluff and ended a delusion about the future that has prevented Palestinians from seeing the world and their own geopolitical situation clearly. It is a bold shift....

“Nominally, the idea is that Palestinians need to be allowed to believe they’ll secure sovereignty over at least a part of Jerusalem for them to pursue a final peace deal with the Israelis. And so most of the world has chosen to act as though Israel has no legal dominion over any part of Jerusalem.

“That is, in a word, insane. Jerusalem is now home to 860,000 people  - 10 percent of Israel’s population, nearly double that of its second city, Tel Aviv. Every one of them, Jew and Arab, is a citizen of the state.  (The city is 60 percent Jewish and 35 percent Muslim.)  It is the locus of Israel’s government....

“The pretense has been allowed to continue for two reasons. The most rational reason is this: There has always been fear that any change in Jerusalem’s status might ignite a violent Palestinian response, retard peace efforts and inflame the ‘Arab street’ throughout the Middle East. So why create a crisis  when the status quo is at least stable?

“Then there are those who simply believe Israel is a bad actor deserving of international scorn and isolation and should not be allowed to get away with it – it, in this case, being Jerusalem.

“Trump rightly scorns the latter view and has an answer for the former: ‘This is a long overdue step to advance the peace process.  And to work towards a lasting agreement.”

“The Palestinians need to accept realty. They continue to act as though they will get what they want through rejection and resistance and rage.  ‘It is time,’ Trump said, ‘for the many who desire peace to expel the extremists from their midst. It is time for all civilized nations and people to respond to disagreement with reasoned debate, not violence.’

“The Palestinian refusal to accept Israel for what it is and what it has become has been the greatest bar to peace. And there are reasons to believe the so-called Arab street has bigger problems to concern itself with right now than Israel’s capital....

“(Two weeks) ago, Saudi Crown Prince Mohammed bin Salman reportedly urged Palestinian Authority President Mahmoud Abbas to sign on to a peace deal Israel actually likes. MBS isn’t happy about Trump’s move, but that doesn’t change the fact that the sands are shifting rapidly after decades of stagnation.

“In the end, as Trump said, ‘Israel is a sovereign nation with the right, like every other sovereign nation, to determine its own capital.’  Indeed it is.  Indeed it does.  Bravo.”

Zvi Bar’el / Haaretz

“How did Israelis live without a recognized capital city? How will our lives change now we finally have a capital that’s been granted American citizenship? All that’s left now is for the United States and the rest of the world to recognize Israel as the ‘state of the Jewish people’ and we can restart this country.

“You have to admit, no other country has ever been afforded such an opportunity. However, we must also ponder what is more important: recognizing Jerusalem as a capital, or the transferring of the U.S. Embassy to the city? Think about it – until Wednesday, neither Tel Aviv, Jerusalem nor Hadera were recognized as Israel’s capital, so nothing would have changed Jerusalem’s status if the embassy had been moved there first....

“Trump did not give Israeli citizens the legitimacy to choose Jerusalem as the rock of their existence. They don’t need it. All he did was give Prime Minister Benjamin Netanyahu a superfluous Christmas gift. Recognition of a city that has no agreed-upon borders – a city that has not been and will not be taken off the negotiation table, and whose future is subject to agreement by both sides – is tantamount to recognizing a lump of clay as the Israeli capital.

“We shouldn’t be overly impressed by warnings and threats emanating from Arab states, the Palestinians and Europe. The peace process never was and never will be dependent upon the status of Jerusalem.

“If the time comes when an Israeli government agrees to negotiate with the Palestinians, to withdraw from territories, to draw up borders and to divide Jerusalem, Trump’s recognition will not pose an obstacle. As Israel has already proven, it’s precisely in Jerusalem that it is most willing to concede territory filled with Arabs, building them a separate pale of settlement....

“The worry, as usual, is over the outbreak of another intifada. But this is a groundless concern, since the recognition of Jerusalem as Israel’s capital is not the central issue occupying Palestinians and Arab states, despite the protests.  Moreover – and this is the main point – Israel knows how to suppress intifadas.

“The significance of the recognition of Jerusalem as the capital lies in its formal shattering of the illusion that if only the core issues were resolved – including the Palestinians’ right of return, the demarcation of borders, the status of the settlements and the division of Jerusalem – the conflict would come to an end....

“When there is no way of changing governments and starting real negotiations, there is an escape into arguments over core issues. For decades, both the left and the right have been contending with this illusion, holding imaginary negotiations with themselves and the United States, but never with the Palestinians.

“The left’s fear that now there won’t be anything to talk about with the Palestinians and the right’s glee over Trump’s burial of the peace process derive from the very same illusion.

“Let’s be honest, Trump didn’t kill the peace process on Wednesday.  He stood over the grave of this process, puffing out his chest and bragging that only he dared declare it dead (namely in recognizing Jerusalem), whereas his predecessors only toyed with attempts at resuscitation.  Still, at least we now have a capital city and the Palestinians don’t.”

Yemen: Former president Ali Abdullah Saleh was killed by Houthi rebels, the Houthis then rounding up hundreds of fighters loyal to Saleh as they attempt to maintain control of the capital, San’a.

A senior Houthi officials called on the Saudi-led coalition to end the war against the Houthis and enter a dialogue with them.

The Iran-aligned Houthis and pro-Saleh forces had been allied in the war against a coalition led by the Saudis, who intervened in 2015 to try to restore power to the internationally-recognized president, Abed Mansour Hadi, who had been vice president under Saleh.

But friction between the Houthis and Saleh erupted last week, and the two sides clashed, 200 dying in the battles, and the alliance collapsed. Saleh then announced he was open to dialogue with the Saudis.

Two days later, as he tried to flee the area, he was killed outside San’a.

Saleh had dominated Yemeni politics for 33 years before quitting in the aftermath of the Arab Spring uprisings in 2011, as the Shiite Muslim Houthis then made common cause against Hadi loyalists.

Some 10,000 civilians have now died in the war, according to the UN, and the humanitarian crisis deepens.  Seven million are on the brink of starvation. The infrastructure is shattered.

Syria: Dennis Ross / Wall Street Journal

“President Trump has made reversing his predecessor’s legacy a guiding principle, except in one area: Syria. Much like President Obama, Mr. Trump’s policy has been exclusively anti-Islamic State, giving Iran and Russia a free hand to dictate outcomes in the country.  This won’t end well.

“Mr. Trump apparently sees cooperation with the Russians as the best solution. On July 7, in Germany, Mr. Trump and Vladimir Putin announced a ceasefire in southwest Syria. On Nov. 11, in Vietnam, they issued a joint statement confirming ‘the importance of de-escalation areas as an interim step to reduce violence in Syria, enforce ceasefire agreements, facilitate unhindered humanitarian access, and set the conditions for the ultimate political solution to the conflict.’ That ultimate political solution, they declared, should follow the guidelines set by United Nations Security Council Resolution 2254. This sounds great at first: The resolution, passed in December 2015, sets timelines for ceasefires, a new constitution and a transitional government.  Yet Bashar Assad, employing sieges and starvation, has prevented the delivery of humanitarian assistance to his own people. This – along with the barrel bombs and political obstructionism – has prevented any progress in achieving the resolution’s goals. The Russians and Iranians have only enabled him....

“Russia’s actions since (agreeing to Resolution 2254) have only proved it is not serious. The Trump administration might think it will be different this time, because the de-escalation zone in southwest Syria has been working....

“(But) only because it freed up the Assad regime and its Iranian allies to attack the other so-called de-escalation zones relentlessly.  [Ed. as I’ve been pointing out the past few months.]  In one such area, Syrian regime cluster bombs have been hitting Eastern Ghouta, near Damascus.  UN diplomat Jan Egeland has spoken of a ‘massive loss of civilian life’ and declared that ‘there is only escalation in this de-escalation zone.’....

“Also worrying: The day after the presidential joint statement last month, (Russian Foreign Minister Sergey) Lavrov declared that the departure of foreign forces called for in the recently concluded memorandum of principles between the U.S., Russia and Jordan did not apply to the ‘Iranian or pro-Iranian forces.’

“Iran is also developing a front in Syria against Israel, with no sign of Russian opposition – despite talk of a buffer. During a recent visit to the Golan Heights, the local Israeli commander showed me a Quds Force-Hizbullah command post on a hill less than 4 miles away. Here is a conflict waiting to erupt.

“There is little chance of the Russians implementing a peace agreement in good faith so long as they see no cost for noncompliance....

“(Putin) wants Russia, not the U.S., to be seen as the arbiter of Syria’s future. If there are any doubts about this, consider his active diplomacy with Assad and the leaders of Iran and Turkey over the past few weeks.

“John Kerry eventually realized that words alone would not get Mr. Putin to respond in Syria. Time will tell whether the Trump administration has learned that lesson.”

To be blunt...NFW.

North Korea: Russian Foreign Minister Lavrov told U.S. Secretary of State Rex Tillerson that U.S. military exercises and aggressive rhetoric were causing an unacceptable escalation in tensions on the Korean peninsula.

North Korea’s foreign ministry said in comments carried by the official Korean Central News Agency late Wednesday that the exercises made the outbreak of war an “established fact.”

“We do not wish for a war but shall not hide from it, and should the U.S. miscalculate our patience and light the fuse for a nuclear war, we will surely make the U.S. dearly pay the consequences with our mighty nuclear force which we have consistently strengthened,” the foreign ministry said.

Meanwhile, South Korea plans to create a combat unit of weaponized drones that would be capable of swarming the North in the event of a conflict. Army officials said the drones would primarily focus on reconnaissance operations against strategic North Korean military sites, but the unit could be mobilized to launch swarm attacks.

David Ignatius / Washington Post

“Pyongyang seemingly wants negotiations with the United States, but on its own terms. Analysts speculate that to justify keeping its existing stockpile of several dozen nuclear weapons, North Korea might promise not to share its nuclear technology with others and not to attack the United States. Washington would be wary of such assurances, given Pyongyang’s history of broken promises and proliferation.

“North Korea evidently wants to be like India and Pakistan, which became de facto members of the nuclear club after building weapons secretly. It doesn’t want to be like Libya or Iraq, whose leaders were deposed and killed after giving up their nuclear programs.

“The Trump administration has publicly dismissed the latest overtures. A State Department spokesman said Sunday: ‘We do not see any indications of North Korea being committed to or interested in credible talks for denuclearization.’  And on Monday, State again rejected, as it has for months, Chinese and Russian calls for a mutual ‘freeze for freeze’ on North Korea testing and U.S. military exercises: ‘It is not enough for [North Korea] to stop its program where it is today.’

“An interesting visitor to Pyongyang this week is Jeffrey Feltman, UN undersecretary-general and a former U.S. assistant secretary of state. He’s the highest-ranking UN envoy there in six years. What’s he up to? Diplomats aren’t talking....

“Has North Korea crossed the nuclear threshold?  Pyongyang’s recent statements suggest they have, but some analysts have doubts. North Korea hasn’t shown it can control an intercontinental ballistic missile’s reentry, and it hasn’t fitted an actual warhead atop a missile, sources say.

“Will the Trump administration try to block North Korea from crossing this final goal line, by military means if necessary? Or will it seek a diplomatic formula that could, over time, leave all sides better off than the cataclysm of war? At this holiday season, that conundrum is hidden in the dark box in the corner.”

Nancy A. Youssef / Wall Street Journal

“U.S. intelligence and military officials believe Kim Jong Un is a rational actor, a conclusion that for now is guiding Washington’s approach to the North Korea leader as he risks economic sanctions and military reprisals to build nuclear weapons and threaten rivals.

“The assessment by the main components of the U.S. national security community has shaped their thinking toward North Korea in two major ways, U.S. officials said. It means they believe Mr. Kim understands that any attack on the U.S. or its allies threatens the security of his country and his grip on power.  And it means that they believe there is potential to alter his behavior through diplomacy to lower the threat of war.

“U.S. officials are also calculating that Mr. Kim’s ability to act rationally is compromised.

“ ‘We in the intelligence community...have said that Kim Jong Un is rational, but it is also the case today that we don’t think he has an understanding about how tenuous his position is – domestically and internationally,’ Central Intelligence Agency Director Mike Pompeo said in an address at a security forum in California on Saturday.”

White House national security adviser HR McMaster, speaking to the same forum as Pompeo, said:

“There are ways to address this problem short of armed conflict, but it is a race because he’s getting closer and closer, and there’s not much time left.”

China: President Xi Jinping said on Sunday the country will not close its door to the global internet, but that cyber sovereignty is key in its vision of internet development. Xi’s comments were read at the cyber policy forum in the town of Wuzhen where Tim Cook and Jack Ma were as well, as noted above.

“The development of China’s cyberspace is entering a fast lane...China’s doors will only become more and more open,” Xi said in his note.

Yet another crock, though Xi would say if questioned, ‘we are entering a fast lane...as China defines it.’

Google and Facebook, along with Twitter, continue to be banned here, as well as most major western news outlets.

One other item...Friday, China lodged a complaint with Australia after Prime Minister Malcolm Turnbull said he took reports very seriously that China’s Communist Party had sought to interfere in his country.  Turnbull said this week that foreign powers were making “unprecedented and increasingly sophisticated attempts to influence the political process” in Australia and the world, Turnbull then citing “disturbing reports about Chinese influence.”

Russia: President Putin said on Wednesday that a decision by the International Olympic Committee to ban the Russian team from competing at the upcoming Winter Olympics looked politically-motivated, the Interfax news agency reported.

“In response to our supposed interference in their elections, they want to cause problems in the Russian presidential election.”

Putin is not banning Russian athletes from participating as neutral competitors (under the Olympic flag).

This week Putin also announced what we’ve long known, that he is running for president in the spring elections, March 18, seeking a fourth term that would extend his rule into 2024.

Putin has approval ratings of nearly 80 percent and he’s guaranteed to win, with a recent independent Levada Pollster survey showing he would receive 60 percent of the vote.

It’s also believed the Olympics ban only helps Putin’s campaign as he’s able to unite voters around the message: The world is against us.

Somalia: The final death toll in October’s massive truck bombing in the capital of Mogadishu is 512, according to the committee tasked with looking into the country’s worst-ever attack.

512!  312 were wounded and 62 remain missing. Al-Qaeda linked al-Shabab has been blamed.

Random Musings

--Presidential tracking polls....

Gallup: 38% approve of President Trump’s job performance / 58% disapprove
Rasmussen: 42% approve / 56% disapprove

A Pew Research Center survey had Trump’s approval rating at 32%, disapproval 63%.

--The race for the Alabama Senate seat is down-to-the-wire, the election on Tuesday, and this week President Trump offered his full endorsement of Republican Roy Moore, and then the Republican National Committee restored its support of the candidate after it had ended joint fundraising agreements with the campaign last month when multiple allegations of sexual misconduct with minors when Moore was in his 30s emerged.

Trump tweeted his support Monday and then called Moore from Air Force One on Tuesday. He tweeted again today ahead of a speech in Pensacola, Florida, near the border with Alabama.  Last Sunday, Senate Majority Leader Mitch McConnell (R-Ky.) dialed back his opposition to Moore, saying the election would be decided by the people of Alabama.

Sen. Jeff Flake (R-AZ), a vocal critic of Moore’s and President Trump, wrote a $100 check to Democratic candidate Doug Jones.

Former White House adviser Steve Bannon appeared at a rally with Moore in Fairhope, Ala., and spent his time trashing the Republican establishment and casting the vote as a referendum on the Trump agenda.

Editorial / Wall Street Journal

“President Trump’s endorsement of Alabama Republican Senate candidate Roy Moore got us thinking about the game of chess.  A recent Wall Street Journal article described how a bright amateur taught himself chess so he could play the world’s number one player, Magnus Carlsen. The rookie got wiped out.

“On Wednesday Senate Democrats adroitly placed the Republicans, and Mr. Trump, in check.  Six female Democratic Senators – Kirsten Gillibrand, Kamala Harris, Claire McCaskill, Patty Murray, Mazie Hirono and Maggie Hassan – called on fellow Democrat Senator Al Franken to resign over multiplying allegations of sexual harassment. Minority Leader Chuck Schumer said the same hours later. Mr. Franken’s office said he will make an announcement Thursday.

“It is not hard to see what is going on here. The Democrats are creating a Frankenmoore nightmare for Donald Trump.  Monday brought Mr. Trump’s Moore endorsement, followed by a commitment of support from the Republican National Committee. The next day, Rep. John Conyers stepped down from his House seat, clearly under pressure from fellow Democrats.

“This is what the state of play looks like: The Democrats are eliminating their stains, while the Republicans are endorsing theirs.  You have to believe in magic to think this is going to end well for Republicans.

“In Wednesday’s Washington Post, Democratic operative Joshua Karp described the Moore strategy explicitly: ‘Whether he wins or loses, Republicans own him, and we are going to make sure the public knows that for the next year.’

“We see only one move for the Republicans now: Disown him.  Mr. Trump should withdraw his endorsement of Judge Moore and take the RNC with him. Embarrassing? Perhaps.  The alternative, where Mr. Trump stands now, is worse. If Mr. Moore wins, he will haunt the Trump Presidency. The Democrats took their sexual harassers off the table.  Mr. Trump may put his party’s in the Senate.  Every day, the Democrats and the Beltway media will run the narrative that Senator Roy Moore is Donald Trump’s doppelganger.

“Chess is a bloodless game, and high-stakes political chess is a brutal game. It’s time for the GOP to protect itself if Mr. Trump won’t.”

Alas, Trump will be Trump.

Rich Lowry / New York Post

“In his Alabama appearance for Roy Moore, Steve Bannon turned in an intellectually and morally putrid performance even by his standards.

“There is a partisan case for voting for Moore, which is simply that Republicans can’t afford to lose a Senate seat over the next three years and Moore’s failings must be ignored or rationalized away for the larger good of the party.

“This isn’t an elevated line of reasoning and is not obviously correct on its own terms.  With Democrats throwing John Conyers and Al Franken overboard, Senate Republicans would be welcoming into their ranks a potent symbol of sexual malfeasance to be used against them in the 2018 midterms.

“It’s a better argument, though, than the tawdry justifications offered up by Bannon, who parachuted into an already disreputable campaign and dragged it through the gutter.

“Bannon seems to misunderstand the nature of the deplorables he seeks to lead.  ‘Deplorable’ is supposed to be an unfair, disparaging term for people who believe reasonable but politically incorrect things (immigration should be restricted, NFL players should stand during the national anthem, all lives matter, etc.). It shouldn’t be a license for doing truly deplorable things....

“Bannon referred to a conspiracy against President Trump in the way the ‘Access Hollywood’ tape was brought to light, somewhat jocularly. But his mindset is deeply conspiratorial. Because there are so many forces arrayed against you – the globalists, the establishment, the media – you’re freed of any moral responsibility or standards.

“In fact, the mere mention of the words ‘honor’ or ‘integrity’ is a terrible provocation. Bannon launched his scurrilous attack on Mitt Romney because the former Republican presidential nominee used those terms in opposing Moore. Bannon shot back, in a truly perverse riff, that Moore has more honor in his ‘pinkie’ than the entire Romney clan; per Bannon, Moore served in Vietnam and Romney didn’t, and none of Romney’s sons joined the military.

“Obviously, if going to Vietnam and having kids who served in the military is the sole measure of honor, Trump fails the test, and John McCain passes it. This doesn’t stop Bannon from considering Trump the great savior of the republic and McCain a disgrace. But it’s not worth trying too hard to unpack Bannon’s spiel....

“Privately, Bannon can’t be thrilled he’s stuck with Moore, and he must know Moore is a kook, even if he can’t admit it in public.  Bannon likes to attack everyone else in the party for lacking courage, but in Alabama, he’s afraid to admit he backed a bum candidate and afraid to acknowledge the truth about Moore....

“Bannon may be thinking ahead to a time when the Trump sex allegations become a live issue again or when a true scandal emerges from the Robert Mueller investigation. In this scenario, will there be any one more naturally inclined to be dismissive of the accusers or other evidence than former Judge Roy Moore?

“Bannon may also believe that a GOP with a highly attuned ethical sense can’t truly be the party of the working class.  In which case, who is the one who has contempt for the ‘rubes’?”

Democratic challenger Doug Jones this week said he worked as a prosecutor “to ensure that men who hurt little girls should go to jail” and not to Congress.

A poll by CBS News and YouGov published Sunday revealed that 71 percent of Republican likely voters said they do not find the allegations against Moore credible, while only 17 percent believe them to be true.  [I’m in the latter camp.]

Moore has a 49-43 lead in this poll of registered voters in the state.

--The aforementioned Rep. Conyers (D-Mich.), the longest-serving current member of the House, resigned on Tuesday, after a series of allegations of inappropriate behavior toward female staff members proved to be too much for him to handle.

The 88-year-old made his announcement on a Detroit-area radio station, saying he was retiring while endorsing his son to replace him.  A special election will have to be called, though with the mid-terms coming up in a year that seems like a waste of money.  [Just appoint a guy to stand in for a year.]

--And on Thursday, Sen. Franken resigned, but he adopted a defiant tone.

“I know in my heart that nothing I have done as a senator, nothing, has brought dishonor on this institution, and I am confident that the Ethics Committee would agree.  Nevertheless, today I am announcing that in the coming weeks I will be resigning as a member of the United States Senate,” Franken said from the Senate floor.

Franken said some of the allegations are ‘simply not true’ and that he remembers others differently.

And he added: “I, of all people, am aware that there is some  irony in the fact that I am leaving while a man who has bragged on tape about his history of sexual assault sits in the Oval Office and a man who has repeatedly preyed on young girls campaigns for the Senate with the full support of his party.”

--And Arizona Republican Rep. Trent Franks is stepping down after House officials learned he had asked two female employees to bear his child as a surrogate.

Franks said in a statement that an ethics investigation concerns his “discussion of surrogacy with two previous female subordinates, making each feel uncomfortable.”

I feel uncomfortable just typing that.

--But wait, there’s more! The House Ethics Committee also announced it is launching an investigation into a third lawmaker, Texas Republican Rep. Blake Farenthold, who used taxpayer dollars to pay an $84,000 sexual harassment settlement to a former aide several years ago.

--Classic New York City stuff.  From Mara Gay / Wall Street Journal:

“New York City Housing Authority Chairwoman Shola Olatoye told the City Council that she regretted submitting documentation to federal officials showing the agency was in compliance for lead paint when it hadn’t conducted the required inspections in four years.”

So this woman then tried to tell us she didn’t intend to mislead federal officials or the general public about the four-year gap.

This is emblematic of the massive corruption in the administration of New York City Mayor Bill de Blasio. De Blasio and other city officials knew the inspections required under city law hadn’t taken place as early as April 2016 but didn’t tell residents until July of this year.

In a separate story by the Journal’s Ms. Gay, she writes that de Blasio has added more than 25,000 employees and spending has increased nearly 20%.  His free preschool for all children initiative costs the city about $300 million a year.  He did add nearly 1,300 police officers at an annual cost of $75 million, and spent more than $300 million to launch citywide ferry service which by most accounts has been a disaster in terms of low ridership on a majority of the routes.

De Blasio told the Journal, “Our economy is strong and we can afford to help New Yorkers who need it most.”

But homelessness is at its worst level in decades, even as spending for the homeless-services agency has doubled to $888 million in de Blasio’s first four years in office. How much of that total do you think is skimmed off?

--The Big Apple has continued its success on the crime front in 2017, however, with stats showing 263 homicides through last Sunday.  If Gotham finished the year under 300, that would be the lowest level since the 1950s.

--TIME’s “Person of the Year” is the “Silence Breakers” who have outed sexual predators.

--We note the passing of John B. Anderson, the former Illinois congressman who in 1980 ran as an independent for president, which helped propel Ronald Reagan to the White House. Anderson was 95.

Anderson was a 10-term congressman, running against Reagan and President Jimmy Carter and receiving just 7% of the vote, but enough, observers believed, to tilt the election as he drew more support from Carter than Reagan, helping Reagan to his Electoral College landslide.

Anderson had been a Republican nearly all of his elected political career, but he became more of a liberal as his party shifted rightward.

Carter refused to debate Anderson, but Reagan agreed to a television confrontation, making Anderson the first third-party presidential candidate to debate a major-party opponent on TV.

As I’ve noted a few times in the past, I was a senior at Wake Forest the spring of 1980 and worked for Anderson in preparation for his visit to our campus for a speech.  [Ah, the good old days, Ken S., frat Bro.]  I still remember how it was a detailed, albeit boring to most, presentation on one of the big issues of the day, the MX missile.  I loved a candidate who was into educating the people, though in fact he was described as being more of a “traveling scholar.”  Alas, his candidacy never caught fire, and, looking back he really was more of a liberal than I would describe myself as today.

But out of principle I cast my vote for Anderson that November, even as I was warming to Reagan.  My buddy and I worked the polls that day and then went to a Reagan party.

John Bayard Anderson was the son of Swedish immigrants who ran a grocery store in Rockford, Illinois, and he was a man of deep faith.  He earned a bachelor’s degree in political science from the University of Illinois in 1942 and later two law degrees, but in between in World War II, he was awarded four battle stars in the Army field artillery in Europe.

This was a good man.  A good American.  RIP, Mr. Anderson.

--Pope Francis has called for the wording of the Lord’s Prayer to be changed, because it implies God “induces temptation.”

The prayer, also known as Our Father, asks God to “lead us not into temptation.”

But the Pope told Italian broadcasters he believed the wording should be altered to better reflect that it is not God who leads humans to sin.

He told channel TV2000: “It is not a good translation because it speaks of a God who induces temptation.”

He added: “I am the one who falls. It’s not Him pushing me into temptation to then see how I have fallen.

“A father doesn’t do that; a father helps you to get up immediately. It’s Satan who leads us into temptation, that’s his department.”

Personally, I never thought of these words deeply, but the Pope is so right.

--Finally, back on Sept. 30, a good friend of mine, Phil W., who I first met at Wake Forest, lost his daughter, Stephanie, 32, in a tragic car crash in Greensboro, North Carolina, one that rocked the area.  Five died.  Phil was immediately thrown into the spotlight.

I learned of it hours later through a mutual friend and for weeks exchanged notes with Phil on just about any topic but this, not knowing when he was comfortable discussing it by phone (as unfortunately I couldn’t travel to the area to offer my support in person).

About four weeks ago, Phil and I finally chatted and he informed me of his crusade, as you’ll see below, and I have just been waiting for an appropriate time to bring up the topic, having been given permission by Phil to do so.

Over the years, Phil used to send me the writings of his rabbi and I’ll let Mr. Guttman describe the tragedy. [Emphasis mine.]

Fred Guttman / Rabbi Temple Emanuel in Greensboro (Greensboro News & Record):

“At approximately 11:30 p.m., a deputy from the Guilford County Sheriff’s Office noticed suspicious behavior among three people in a car. Running the plate, the deputy ascertained that the car was stolen. After he tried to stop the car, a high-speed chase on busy Battleground Avenue, a major thoroughfare, ensued. The suspicious car was traveling at around 130 mph as it ran a red light and plowed into Stephanie’s car.  (Her friend) Allie and Stephanie died instantly. The police car was traveling at 120 mph. The chase lasted 70 seconds.

“It has been reported that the value of the stolen car was less than $10,000. The value of Stephanie’s and Allie’s lives was priceless.

“Five people died, including those in the fleeing car, and the ultimate responsibility for these deaths lay with the people who stole the car.

“The officer who engaged in the chase was both young and inexperienced.  He was only following what he believed to be the policy of his department.  One can only imagine how his life has also been impacted by this tragedy.

“In our congregation, we are heartbroken. We are also asking many questions.

“We believe that the outcome of this chase was not worth the risk. We could understand better if those being pursued were intending to harm others when the deputy tried to stop them.

“However, we feel that a stolen automobile discovered by a license plate check hardly warrants putting innocent lives in jeopardy....

“National estimates are that one in every three people who are injured or killed in a high-speed chase is an innocent victim.

“Locally, the Greensboro Police Department undertook a study of high-speed police chases and in 2014 issued a new policy restricting them.”

But this was Guilford County police, not Greensboro.

Rabbi Guttman:

“Stephanie’s death leaves us sad at the thought of her unfinished years. And yet, we must find consolation in the memories we have of a very special human being, who touched many, many lives.

“May a part of her legacy be the prevention of similar tragedies in the future.”

Well, a few weeks ago, Guilford County announced changes to its pursuit policy, with Sheriff BJ Barnes saying it “strongly and further emphasizes the public safety factors” that a deputy has to consider during a pursuit.

Phil and his family, and that of Stephanie’s friend, Allie, expressed their gratitude to Sheriff Barnes and the department for “implementing positive, real change” in the chase policy, as stated by their attorney.

As Rabbi Guttman prayed for, part of Stephanie’s legacy is secure.  God love her.  And, Phil, in so many ways, good work.

---

Pray for the men and women of our armed forces...and all the fallen.  We remember Pearl Harbor.

And we pray for those struggling with the latest round of wildfires in California...and the first responders.

God bless America.

---

Gold $1250
Oil $57.34

Returns for the week 12/4-12/8

Dow Jones  +0.4%  [24329]
S&P 500  +0.3%  [2651]
S&P MidCap  -0.2%
Russell 2000  -1.0%
Nasdaq  -0.1% [6840]

Returns for the period 1/1/17-12/8/17

Dow Jones  +23.1%
S&P 500  +18.4%
S&P MidCap  +13.9%
Russell 2000  +12.1%
Nasdaq   +27.1%

Bulls 64.2 ...9 straight weeks above 60+ danger level
Bears 15.1 [Source: Investors Intelligence...reminder for newbies, a contrarian indicator]

Have a great week.

Happy Hanukkah.

Brian Trumbore