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06/27/2015

For the week 6/22-6/26

[Posted 10:30 PM ET, Friday]

Edition 846

Washington and Wall Street

What an extraordinary week...what an extraordinary 48 hours for President Obama, with wins on his trade initiative and victories in the Supreme Court on ObamaCare and same-sex marriage.

But also on Friday, Islamic State (ISIS) carried out a suicide attack on a Shia mosque in Kuwait City that killed at least 25, with over 200 wounded. An ISIS attack on a U.S. company in Lyon, France, resulted in the decapitation of the attacker’s boss. An ISIS terror attack on a Tunisian seaside resort led to the deaths of at least 37, mostly foreign tourists.

And this coming week, if not a week after, we are to learn the fate of the Iranian nuclear talks, while that of Greece remains unknown.

President Obama can claim successes on the domestic front, but when you also add the likes of Russia and China to the foreign policy discussion, the global outlook has not been this depressing in a long time.

I address the Supreme Court’s same-sex marriage decision below, but on ObamaCare (the Affordable Care Act), a 6-3 decision upheld the broad reach of the law, ruling the government may continue to provide tax subsidies for low- and middle-income people who buy insurance nationwide, even in states that did not create an official exchange.

Chief Justice Roberts, writing for the court, said the “tax credits are available to individuals in states that have a federal exchange.” He also wrote: “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible we must interpret the Act in a way that is consistent with the former, and avoids the latter.”

If no tax credits were allowed in these states, it “could well push a state’s individual market into a death spiral,” Roberts added.

Justice Antonin Scalia wrote in dissent that Roberts, who wrote the decision in 2012 that saved the ACA from a previous challenge, has performed “somersaults of statutory interpretation” to preserve the law.

“We should start calling this law SCOTUScare,” Scalia said. The two cases “will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites.”

[Health-care stocks rose in the aftermath of the decision, and it’s good for hospitals who will see fewer uninsured patients in emergency rooms.]

By affirming subsidies, ObamaCare now has the legal footing the president and its proponents have long said it did. The president declared: “The Affordable Care Act is here to stay.”

George Will / Washington Post

“The most durable damage from Thursday’s decision is not the perpetuation of the ACA, which can be undone by what created it – legislative action. The paramount injury is the court’s embrace of a duty to ratify and even facilitate lawless discretion exercised by administrative agencies and the executive branch generally....

“What Roberts does by way of, to be polite, creative construing...is legislating, not judging.”

Editorial / Wall Street Journal

“Far from putting this debate behind us, the ruling has freed Washington to take it up. Now that the long months of waiting silently and expectantly for the court’s decision are over, debate on ObamaCare is about to explode in a way not witnessed since 2010.”

One bill at a time.

On the trade front, just 12 days after all seemed lost for President Obama’s pet project of his second term, the multi-nation Trans-Pacific Partnership, or TPP, Congress resurrected it, thanks to Republican leadership and the president’s willingness to work with same; namely Senate Majority Leader Mitch McConnell and House Speaker John Boehner.

On Wednesday, the Senate voted 60-38 to grant final approval for the “fast-track” trade authority, and then key House Democrats conceded defeat and supported related legislation [Trade Adjustment Assistance, TAA] – which they had blocked two weeks ago to stall the overall package – which provides assistance for displaced workers. The key vote in the House was 286 to 138.

But the acrimony within the Democratic Party will linger, with many warning the TPP will cost U.S. workers jobs in manufacturing industries and, indeed, the actual trade negotiations still have to settle on the details for such items as access to the Japanese auto and agriculture markets.

Once negotiations are complete, the administration then has to get a final deal through Congress again and the unions will try one last time to scuttle it.

China is not part of the TPP and while it can eventually join, it first needs to meet stringent labor and environmental standards being worked into the agreement.

However, this is exactly why TPP was such a huge deal for some of us, and, yes, I’m a supporter. A failure would have once again showed allies such as Japan and South Korea that the United States can’t be relied upon and that the shift to the Pacific was nothing more than rhetoric.

As a policy analyst, Michael Green, told the Washington Post, “Confidence [in the United States] was hemorrhaging in Asia.”

Meanwhile, in a new Wall Street Journal/NBC News survey, voters were asked if free trade between the U.S. and foreign countries has helped or hurt the U.S. and only 29% said it helped – down from 37% in April. The share who said trade has hurt rose to 34% from 31% over the same period.

Turning to the economic data of the week, May existing home sales rose 5.1% over April, with the median price up 7.9% year over year. May new home sales also came in better than expected, up 19.5% year over year, though the median price is down 1%, but this anomaly will rectify itself soon.

In both categories, the percentage of first-time buyers is increasing, a good sign and the difference between growth and stagnation.

May durable goods (big-ticket items), were worse than expected, down 1.8%, but ex-aircraft were up 0.5%.

Then you had personal income and consumption for May, up a solid 0.5% for a second consecutive month on the former, and up 0.9% from a month earlier on the latter. This increase was the biggest jump since Aug. 2009.

Gasoline prices are still 24% below year ago levels and consumers are beginning to spend the savings.

But the Fed’s preferred inflation indicator, the personal consumption expenditures index, is still up just 1.2% year over year on core. The Fed would prefer to see this at 2%.

Lastly, we had the final revision to first-quarter GDP, now -0.2% from -0.7%, which was as expected. Encouragingly, household spending in the quarter was revised to 2.1% from 1.8%, which is also in keeping with the consumption trends as noted above.

Many economists still peg second-quarter GDP at 2% to 3%. Interestingly, the Atlanta Fed’s GDPNow indicator is all the way up to 2.1%. Recall, it bottomed at 0.6% not too long ago.

Finally, Robert Samuelson / Washington Post

“A recent Congressional Budget Office report, ‘The 2015 Long-Term Budget Outlook,’ reminds us that the federal government is slowly becoming an agency for taking care of the elderly. Almost everything else is being crowded out. We ignored that during the Obama presidency, and now it seems that the fledgling presidential campaign may do likewise. Hillary Clinton and other Democrats plug fairer economic growth. Jeb Bush and other Republicans are more forthcoming (they talk about raising Social Security’s eligibility age) but concentrate their rhetoric on creating faster economic growth....

“In 1990, federal spending equaled about 21 percent of the economy, gross domestic product (GDP). Social Security and major health programs (mainly Medicare and Medicaid) represented a little less than one-third of all spending. The rest was defense, domestic ‘discretionary’ programs (homeland security, environment regulation, law enforcement and the like) and non-elderly ‘entitlements’ (unemployment insurance, welfare). In 2015, the federal government is still spending 21 percent of GDP, but now Social Security and major health programs consume about half the budget, according to the CBO report. Most health spending goes to the elderly.

“As the CBO makes clear, an aging population and high health costs will perpetuate this trend for years. Under current law, Social Security and health programs will account for two-thirds of today’s budget levels (measured by GDP) by 2040, estimates the CBO. What’s left for the rest? Not much. The remaining amounts are ‘the lowest...relative to the size of the economy since the 1930s,’ says the CBO. Either the rest of government will shrink dramatically, or Congress will expand government spending sharply. The latter, of course, would require higher taxes or bigger deficits.”

Europe and Asia

[Note: There was a late development Friday night regarding Greece but I’m not rewriting this section written prior to the news. It’s a good summary of the week’s events anyway.]

Yet another emergency meeting is being held Saturday between Greece and eurozone finance ministers, Greece facing a Tuesday deadline to pay the International Monetary Fund $1.7 billion. Nations that miss IMF payments are ineligible for further funds as long as they are in arrears and Managing Director Christine Lagarde has said Greece would be in default if it fails to repay its loans June 30.

Greece is trying to unlock the final 7.2bn euro in bailout aid as it seeks to get EU leaders to accept its latest reform plan. Four previous times in the past week the finance ministers and Greece failed to reach common ground.

The talks collapsed Thursday morning after the bailout monitors, the IMF, European Commission and European Central Bank, demanded Greek Prime Minister Alexis Tsipras accept their compromise proposal, at which time Greece’s finance minister, Yanis Varoufakis, presented a new Greek offering.

But multiple officials said there was no chance the Greece plan would be accepted as they prepared to “ring fence” the country so that any economic upheaval unleashed by a default would not spread.

German finance minister Wolfgang Schauble told colleagues, according to the Financial Times, “It is looking bleak.”

Tsipras also wants to negotiate with his fellow leaders, but German Chancellor Angela Merkel said it’s up to the finance ministers to reach an agreement. Merkel said late in the week, “In some areas, you have the impression that we have even gone backwards a bit.”

As I’ve been saying for months, since the Tsipras government took power, it’s all about the pension issue. For instance, the creditors’ plan calls for Athens to increase the retirement age to 67 by 2022, but the Greek government’s proposal is for this to occur by 2025. The creditor plan would allow for retirement at 62, but only for those who have paid into the system for 40 years.

Creditors such as the IMF are also concerned that Greece’s proposals just don’t add up. They are filled with far more tax hikes than spending cuts, and this from a government that has major trouble collecting taxes in the first place.

Plus all the tax hikes, especially on middle- and upper-income folks, will impede economic growth at a time when Greece needs it most. So an economy that is back in recession could fall into depression all over again.

With no agreement this weekend, there is simply not enough time for the reform measures to be voted on by the Greek parliament, as well as the German Bundestag, which must approve any bailout extension, before the bailout agreement ends on Tuesday, which, again, is the IMF deadline as well.

If Greece goes into default, you will be looking at capital controls and bank runs. Many in the eurozone are also seriously calling into question all the liquidity the ECB has been supplying Greece to keep its banks afloat. Deposits at Greek banks fell to their lowest level in almost 11 years in May.

There are some saying it should be no problem for the rest of the eurozone and EU if Greece were to leave the currency union.

But the unrest in the streets, particularly remembering this is the Balkans, could be explosive and contagious. The bad blood between Greece and its counterparts in the EU is palpable.

And while some say the peripheral eurozone countries are less vulnerable today than, say, in 2012, Moody’s warned, “Banks in the periphery markets have strengthened their financial positions in recent years. But legacy issues from the previous crisis still weigh on their ability to return to full financial health, while they are also more susceptible to restricted market access and higher cost of wholesale funding in the event of an adverse shock, given their more limited balance sheet of flexibility.”

In a report this week, Moody’s added a Greek exit would have “severe direct consequences” for Greek banks, and “material consequences” for the entire euro area.

“The exit of a member state from the single currency bloc, which was built to be irreversible, would damage confidence in the region in the immediate aftermath and raise concerns of other countries following suit over the longer term.” [Irish Independent]

One other thing is for sure, it’s not just the likes of Ireland, Portugal, Italy and Spain that could suffer some from a Grexit, but the economies of central and eastern Europe would get hammered. Bank lending would freeze up, for starters, while the likes of Czech Republic, Hungary and Poland would be hit hard on the export front.

So that’s what I wrote up Friday afternoon, New York time.

But late Friday night/early Saturday morning in Athens, Prime Minister Tsipras called a referendum for July 5 on the terms offered by creditors for the aid package, saying they’re seeking to humiliate the Greek people.

A Greek government official said the country’s banks will open as normal on Monday and that no capital controls are planned.

Tsipras said Merkel and ECB chief Mario Draghi have been informed and that he’ll request an extension of Greece’s existing bailout by a few days to permit the vote.

Euro finance ministers will still meet Saturday to discuss details of their proposal, which would unlock 15.5bn euro in aid and extend the program through November, in return for a commitment to pension cuts and higher taxes.

Merkel touted the extension’s terms as “very generous.” Tsipras compared them to an “ultimatum” and “blackmail.” He continues to talk of debt relief which as I’ve noted before is a total non-starter.

So now we wait another week.   The biggest immediate issue on Monday is what will the people do at the banks?

Also, what will the IMF do when Greece doesn’t make its payment on Tuesday?

And there are major issues as to the legality of the referendum. The Greek constitution doesn’t allow them on fiscal issues, supposedly.

Lawrence Summers / Financial Times

“When Greece fails as a state, Europe will collect far less debt than it would with an orderly debt restructuring. And a massive northern out-migration of Greeks will strain national budgets throughout Europe – not to mention the challenges that will come as Russia achieves a presence in Greece....

“The IMF needs to recognize that this is now not about the numbers. It is about the high politics of Europe. Its job is to stand behind any deal that avoids breakdown.”

Anne Applebaum / Washington Post

“The crisis in Greece is not, at base, an economic story: It is a political story, a story about the promises that governments make to their citizens and about the ability of any state to guarantee a particular standard of living to its citizens, not only in Greece but also all over Europe.

“The current Greek government was elected on a completely false premise: that Greece could continue to run one of the most expensive pension systems and one of the largest bureaucracies in Europe, relatively speaking – and that other countries would pay for it. Not all Greeks believe this fairy tale, but there were enough of them to elect a governing coalition of the far left and far right, both of which have publicly stated that they will not abide by the rules set by financial institutions, that they don’t like the European Union, which has been bailing them out for years, and that they might just prefer an alliance with Russia instead....

“Meanwhile, all across the continent – in Spain, France, the Netherlands – populist parties of both the right and the left, some very similar to Greece’s ruling party Syriza, threaten governments that are trying to maintain fiscal balance, stay inside the European Union and play by existing rules. If Greece is allowed to change those rules, many European politicians will have a much tougher time winning their next elections. For some of those politicians, the wrong Greek scenario could mean their own political demise.”

There was some economic news on the continent this week. The ‘flash’ composite PMI for the eurozone in June hit 54.1 vs. 53.6 in May, a 49-month high. The manufacturing PMI was 52.5 vs. 52.2 last month (50 being the dividing line between growth and contraction).

The flash readings from Markit look at just France and Germany, individually, and France’s comp was 53.4 vs. 52.0, a 13-month high, while the manufacturing PMI was 50.5 vs. 49.4.

In Germany, the comp was 54.0 vs. 52.6, and the manufacturing PMI was 51.9 vs. 51.1 in May.

Chris Williamson, chief economist at Markit:

“Despite the cloud of the Greek debt crisis hanging over the region, the eurozone saw economic growth accelerate to a four-year high in June.

“The PMI is signaling GDP growth of 0.4% for the region as a whole in the second quarter. The upturn is also looking encouragingly broad-based.”

Back to France, the official government figure for first-quarter GDP was up 0.6%, with officials still pegging 1% for the full year.

Finally, the EU made an effort to find a solution to the migrant issue, Italy having received about 50,000 thus far in 2015, and it ended up being one of the more contentious European Councils in recent memory.

The goal was to divvy up 40,000 migrants – but on a voluntary basis, and the EU’s eastern members opposed having to take any on, at which point Italian Prime Minister Matteo Renzi said, “If this is Europe, you can keep it!”

So in the end they have a target of 40,000 but no way of enforcing it. As noted in some of the commentary above, many of today’s Euro governments are under threat from anti-immigration, populist parties.

The leader of Italy’s populist Northern League said, “It is another embarrassment in Europe for Renzi. Ninety percent of those who land will stay.”

Turning to Asia, China’s Shanghai Composite index fell 7.4% on Friday, with the benchmark now at its lowest level in 7 weeks. 

It seems Chinese authorities are willing to accept greater market volatility, with the state media playing a role. In a front-page commentary on Tuesday, the China Securities Journal said the nation’s “liquidity bull market” was “taking a break.” Future gains would be “slow” and driven by government efforts to reform state-owned companies, it said.

Authorities also seem to be trying to steer investors from placing speculative bets on small-cap stocks towards large, state-run companies, which tend to carry lower valuations.

And the government is set to scrap its loan-to-deposit ratio requirement for commercial banks in a bid to bolster lending as the economy slows. The State Council said the sector’s regulator would keep monitoring loan activity and risk in real time after the ratio was scrapped.

As reported by the South China Morning Post, “Under real-time monitoring, the China Banking Regulatory Commission will use administrative powers to stop or suspend lending by specific banks when risks arise.”

Separately, a flash reading from HSBC on the manufacturing sector in June came in at 49.6 vs. 49.2 in May

In Japan, Markit’s flash manufacturing PMI for June was 49.9 vs. 50.8 last month. The Tokyo Nikkei stock index hit an 18-year high on Wednesday, 20868, before backing off to 20706 by week’s end.

Street Bytes

--Stocks finished down on the week, with the Dow Jones losing 0.4% to 17946, while the S&P 500 fell a like amount, and Nasdaq declined 0.7%. Nasdaq did, however, set a new closing high on Tuesday of 5160.

As we approach the end of the quarter, FactSet estimates second-quarter earnings per share on the S&P 500 will fall 4.7%, but if you take out what will be miserable earnings comparisons in the energy sector, eps will rise 2%, which is still putrid.

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.71% 10-yr. 2.47% 30-yr. 3.24%

Yields rose across the curve on the better economic news and the feeling the Federal Reserve will indeed be acting soon. Fed Gov. Jerome Powell predicted the first rate rise will come as soon as September and then another increase in December.

The 10-year Treasury yield of 2.47% is back to its highest level since last September.

But I have to comment on the euro bond market in this space because it was interesting. The German 10-year bund saw its yield rise from 0.75% to 0.92% this week as the ‘safe haven’ play came off because it was felt there would be a solution to the Greek debt crisis.

At the same time, the yield on the Italian 10-year fell from 2.28% to 2.14% because contagion was supposedly off the table.

But with Greece’s late announcement today, now what?

--June was the busiest month of the year on the IPO front, with twenty companies going public, the most since November, according to S&P Capital IQ. June is also the top month for money raised, $4.74 billion.

But, overall, there have been just 89 IPOs thus far in 2015, raising $16.1bn, vs. 144 companies that went public in the first six months of 2014 (with $30.7bn in proceeds).

--The news on the California drought just gets worse and worse. The Los Angeles Times had a story Thursday on Mono Lake, which “is within two feet of the level that state officials say threatens the alpine ecosystem at the base of the eastern Sierra Nevada.”

On the ecological side, if the water level drops another two feet, coyotes could then cross to access the second-largest California gull colony in the state; the coyotes known to feast on the eggs.

But as for the water supply, the Los Angeles Department of Water and Power has been forced to reduce its take from Mono’s tributaries by more than two-thirds, while in a separate move to conserve meager eastern Sierra snow runoff, “The DWP damned the Los Angeles Aqueduct this year, with the aqueduct supplying L.A. with a third of its water. [It’s complicated, but the DWP is obligated to mitigate dust on one of the lakes, which if it dried up would create all manner of problems.]

Meanwhile, Lake Mead sunk to a record low Tuesday, though water managers expect the lake’s level to rebound enough thanks to a wetter-than-expected spring. The reservoir stores water for parts of Arizona, Southern California, southern Nevada and northern Mexico. The next six months or so are critical.

--Bill Gates is doubling down on green technologies to the tune of $2 billion over the next five years to, as he puts it, attempt to “bend the curve” in combating climate change.

Gates told the Financial Times he has invested directly in about 15 companies and indirectly in another 30 via venture capital funds. He also said he rejected calls from environmental groups for shareholders to dump their holdings in oil and gas companies and instead urged “high-risk” investment in new technologies.

Gates said there are major limits to renewables in their current form, citing solar power as an example: “Solar is only during the day, solar only works best in places where it’s warm. We don’t have perfect grids. We don’t have storage.

“There’s no battery technology that’s even close to allowing us to take all of our energy from renewables and be able to use battery storage in order to deal not only with the 24-hour cycle but also with long periods of time where it’s cloudy and you don’t have sun or you don’t have wind.

“Power is about reliability. We need to get something that works reliably.”

Gates is big on “Nuclear recycling,” where he has invested several hundred million dollars.

--As telegraphed earlier, Molycorp, the biggest non-Chinese producer of rare earth metals officially sought bankruptcy protection. The Chinese government failed in its efforts to corner the market and for Molycorp, the average selling price of its materials produced at the Mountain Pass, California location was just $9.64 per kilogram in the first quarter, vs. $72.80 in the second quarter of 2011, when its shares peaked at $79. Thursday the shares were suspended at 36 cents.

Rare earths are used in items such as mobile phones, car exhaust catalyzers and missile guidance systems.

--There is so much to worry about on the cybersecurity front. I know I always wonder just how reliable electronics recyclers are, for example. A recent Crain’s New York Business opinion piece had the following.

Some electronics that companies think are being recycled properly might have their data end up in open-air markets as far away as Ghana.

“Businesses are most vulnerable when ‘recyclers’ don’t perform the data destruction they claim. Such recyclers are really exporters with a single goal: to get your company’s IT assets to developing countries where a thriving black market exists for computers with sensitive corporate and personal information.”

As Crain’s Jeremy Smerd adds, this is a huge problem in New York, for example, where there was a recent data breach at Montefiore hospital with employees stealing the information the old-fashioned way...they just took the raw files. But many smaller operations, like law and accounting firms, “are forgoing the kinds of protections that keep client data safe...(such firms) are increasingly at risk because they often can’t afford to pay for top-flight cybersecurity personnel.”

--Cigna Corp. rejected a $54 billion takeover bid from Anthem Inc., saying the $184-a-share offer was inadequate.

Cigna, the nation’s fifth-largest health insurer, was miffed its private negotiations with Anthem were made public as well as at Anthem’s failure to address the fallout from a massive data breach this year.

As noted last week, you’ve had a scramble for mergers in the healthcare space as insurers look for scale to win better terms from medical providers and to maximize profits in this new Affordable Care Act environment. Aetna has made an offer for Humana Inc. in recent days as well.

If both potential deals went through, there would be just three major insurers, which clearly isn’t good for competition and consumer options in the long run. [UnitedHealth Group Inc. is currently the largest player by revenue, and it has approached Aetna about merging.]

For example, as the Wall Street Journal pointed out, “In Bergen County, N.J., a UnitedHealth-Aetna merger would leave 90% of membership [Ed. in Medicare Advantage] with a single company.”

--On July 1, Dennis Muilenburg is due to take over from Jim McNerney as CEO of Boeing. Muilenburg, a company veteran, faces a record order backlog for 5,700 commercial aircraft, while at the same time, many western governments have been reducing defense spending.

70 percent of Boeing group sales are on the commercial aircraft side, with total company sales hitting $90.8bn last year – compared with $52.5bn in 2004, the year before McNerney became chief executive.

--Last Sunday, Taylor Swift posted an open letter to Apple, criticizing the company for not paying royalties to artists during a three-month trial period for its new music app. Within hours, the company changed its stance and said it would pay artists during this period.

By Thursday, Ms. Swift said she would stream her latest album, “1989,” on Apple’s service, thus ending the dispute.

--Netflix announced a seven-for-one stock split for shareholders of record on July 2; the stock to being trading on a post-split basis on July 15.

Investor Carl Icahn said he sold his last stake in the movie and TV streaming site. In 2012, Icahn owned nearly 10 percent of the company, and his investment vehicle, Icahn Enterprises, originally invested in Netflix at $58. The stock closed the week at $651, after hitting $706 on Thursday.

In April 2014, Apple announced a seven-for-one with the stock at $524 per share. [Icahn owns about a 1 percent stake in this one and has been constantly pressing management to buy back more shares.]

--According to researcher HFR Inc., stock-focused hedge funds were up an average 5% this year vs. a 3.2% rise for the S&P 500 through May (including dividends); the best start to a year since 2009 for the hedgies in terms of the lead over the benchmark.   Many of the funds that had a miserable 2014 have staged big comebacks. Mergers have been a big reason for the performance boost.

--With the egg shortage brought on by bird flu, which wiped out millions of chickens on commercial farms this spring, the price for a dozen Midwest large eggs had soared 120 percent from their mid-April, pre-bird flu prices, as reported by the Associated Press. The U.S. Department of Agriculture said it could take up to two years to return to normal production, though prices have probably peaked.

The price spike, though, has done a number on some restaurants and their profit margins, with many breakfast spots looking to levy surcharges.

--Cincinnati-based regional lender Fifth Third Bancorp said it plans to consolidate or sell about 100 of its branches amid the ongoing move to mobile and electronic banking.

Fifth Third has about 1,300 full-service banking centers through its 15 affiliates.

--Police in Brazil arrested two top industrialists as part of the sweeping investigation into state-owned oil company Petrobras. The two are the most senior corporate figures to be detained over allegations that Brazil’s largest construction companies collaborated with Petrobras executives and scores of politicians in kickback and bribe schemes to gain contracts from the oil company.

Recall that President Dilma Rousseff had been chairwoman of Petrobras from 2003 to 2010.

--There was a story in Crain’s New York Business by Daniel Geiger on New York real estate investor Jerry Gottesman, who is known for buying parking lots in prime Manhattan and Brooklyn areas, as well as self-storage buildings.

“Now, with city real estate selling for record sums, Mr. Gottesman’s low-use properties can be developed into higher-use residential, hotel, office and retail spaces. Last month, he sold a parking lot next to the High Line that’s seen as a sweet site for condominium towers. He bought it for $2.4 million in the 1980s.  It sold for $870 million.”

Yup, that’s a sweet return.

Gottesman, 84, needs to decide what to do with his flagship company, Edison Properties. After a falling out with his brother, there is no apparent successor after his son-in-law and heir apparent abruptly announced his intention to step down.

--Hundreds of French taxi drivers protested against competition from Uber, with drivers blocking the Paris ring road at several points on Thursday, burning tires and clashing with police.

What a nightmare. Being familiar with that road, many trying to reach Charles de Gaulle and Orly airports were caught up in the disturbance and missed their flights.

--A joint study by computer scientists from the U.S. and China found that one in ten Android apps contained malicious code. As reported by the South China Morning Post:

“Over 2,000 (of the apps scanned) had each been downloaded more than 50,000 times, meaning at least 100 million users were exposed to security risks.”

The scientists are using a new algorithm that can “detect malware and viruses within apps in less than 10 seconds.”

--“Jurassic World” became the fastest movie to cross $1 billion in ticket sales worldwide; just 13 days, surpassing the record 14 set by “The Avengers” in 2012.

China is responsible for $164.4 million as of last weekend.

--We’ll see how the “Nightly News with Lester Holt” goes for NBC, but the fallout from Brian Williams’ interview with Matt Lauer last Friday continues.

Andrea Peyser / New York Post

“He’s still a liar.

“ ‘Matt, it is clear that afterward, when I got out of the building, when I got out of the realm, I used a double standard. Something changed. I got sloppier and I said some things that were not true,’ Brian Williams pathetically told Matt Lauer in an ‘I’m Back!’ interview.

“Sloppy is accidentally belching on camera, not plumb forgetting that the Chinook helicopter in which you flew in Iraq was not fired upon, or that the body you claimed you saw floating down the street in New Orleans after Hurricane Katrina was really your living cameraman throwing back Jell-O shots at happy hour.

“The worst part of this depressing blather was that Brian Williams, liar with a capital ‘L,’ flat-out refused to utter the ‘L’ word.

“ ‘I told the story correctly for years before I told it incorrectly,’ he actually said.

“ ‘I was not trying to mislead people. That, to me, is a huge difference here.’

“He said he was powerless over his ego. Seriously.

“But the nadir of this scary program, an insult to children and every viewer with an operating sense of honesty and morality, came when Williams would not admit that he deliberately made stuff up.

“Lauer asked Williams if ‘you knew that you were telling a story that was not true?’

“ ‘No,’ Williams replied.

“What?!

“ ‘It came from a bad place,’ he said. (Where? Mars?)”

--There is a growing outcry to dump Andrew Jackson from the $20, not Alexander Hamilton from the $10. I understand the Treasury Department’s reasoning, that the $10 bill is next in line for being updated, with anti-counterfeiting measures, for example, but it’s not just former Federal Reserve Chairman Ben Bernanke who is upset that a Founding Father like Hamilton is being treated in such a shabby fashion.

New Jersey Dem. Rep. Bill Pascrell Jr., who was once mayor of Paterson, N.J., a city Hamilton founded, said: “In light of Hamilton’s extraordinary contributions to establishing this great nation, I question the decision to remove Hamilton from the $10 dollar bill while President Andrew Jackson continues to be featured on the $20.”

Pascrell added Hamilton was a chief aide to George Washington during the American Revolution, an author of the Federalist Papers, an opponent of slavery, a passionate advocate for the Constitution, and the first U.S. treasury secretary.

Among the things against Jackson, Pascrell wrote, he was “a slaveholder responsible for the Trail of Tears, which forced southeastern Native American tribes into mass migrations westward during the 1830s, resulting in thousands of Native American deaths.”

As for Bernanke, he said the decision to honor a woman on the $10 bill is a “fine idea,” but shouldn’t come at Hamilton’s expense. Jackson, on the other hand, says Bernanke, is a “man of many unattractive qualities,” as well as a “poor president.”

Foreign Affairs

Iran: The deadline is June 30 for negotiating a final deal on Iran’s nuclear program and its obvious talks will be extended for at least a few more days beyond that.

But Iran’s supreme leader, Ayatollah Ali Khamenei, hardened his stance, insisting Iran would only dismantle its nuclear infrastructure if economic sanctions were lifted first.

In a nationally televised speech, Khamenei also ruled out inspections on suspected military sites, as well as a freeze on research and development for 10 years, as is called for in the draft protocols.

“Inspection of our military sites is out of the question and is one of our red lines,” he said.

Iran’s negotiating team is thus hamstrung, since Khamenei has the final say on all state matters.

Editorial / Wall Street Journal

“Doubts about President Obama’s Iran diplomacy are deepening, and some of the gravest misgivings are coming from his former top officials. That’s the import of a statement Wednesday from a bipartisan group under the auspices of the Washington Institute for Near East Policy.

In measured language, the statement offers a list of musts for a good nuclear deal. They include granting nuclear inspectors access to all Iranian sites, including military ones; lifting sanctions only after Iran meets its nuclear obligations; requiring Tehran to come clean on its past nuclear work; and limiting the number of advanced centrifuges Iran can test and deploy. From what we know so far, Iran has balked on all of these points.

“The signers include James Cartwright, former Vice Chairman of the Joint Chiefs of Staff, who became known as ‘Obama’s General.’ Another is former CIA Director David Petraeus. Then there is Dennis Ross, Mr. Obama’s Iran czar in his first term....

“President Obama and his aides often dismiss opponents of his nuclear diplomacy as always preferring war over diplomacy. But the striking fact is how widespread the concerns are as the White House appears to make ever more concessions.”

Editorial / Washington Post

“Both U.S. and Iranian officials are hinting that a final nuclear deal may not be reached by a Tuesday deadline. And no wonder, judging from the speech delivered Tuesday by Supreme Leader Ayatollah Ali Khamenei. Iran’s ruler spelled out conditions that would make an accord impossible, short of a complete capitulation by the United States and its five partners. He rejected a long-term limitation of Iran’s uranium enrichment, curbs on its research and development and international inspections of military facilities, and he said all U.S. and United Nations sanctions must be lifted ‘immediately after the signing of the agreement.’....

“It’s possible that the ayatollah’s speech was bluff intended to improve Iran’s bargaining position. A more disturbing possibility is that Iran’s ruler is setting the precedent for disregarding a deal sometime after it is concluded and after the regime pockets the tens of billions of dollars in immediate financial relief it could receive.

“Whatever the case, the Obama administration must resist the temptation to respond with eleventh-hour concessions. On the contrary, the compromises already struck in the preliminary accord make it essential that the United States insist on terms for inspections and timid sanctions relief that cross the Khamenei lines....

“(The) United States and its partners must at the least ensure that Iran will respect the decade-long moratorium and will not secretly pursue a bomb, as it has in the past. That means that international inspectors must have the right to visit any suspicious sites quickly, including on military bases. It was at the Parchin military base that Iran was believed to have carried out work on military warheads, and U.N. investigators seeking to visit the site have been stonewalled for nine years....

“Throughout the Iran negotiations, Mr. Obama has insisted that he is ready to walk away rather than accept a bad deal. In light of the Khamenei speech, the White House must be ready to act on that threat.”

Separately, the State Department, in an annual report of global terrorism between 2013 and 2014, said Iran’s support for terrorism was “undiminished.”

Broadly, the report said nearly 33,000 people were killed in almost 13,500 terror attacks around the world last year. 20 of the attacks killed more than 100 people compared with two on that scale in 2013.

The increase is all about the rise of ISIS and failed states in Yemen, Syria, Libya, Nigeria and Iraq.

Meanwhile, Royal Dutch Shell became the first international oil group to admit it has been talking with Tehran to discuss investments in Iran’s energy industry once a nuclear deal is reached.

Iran will needs $billions in foreign investment to reach its goal of doubling production by 2020.

Iraq/ISIS/Syria: Islamic State has warned the Muslim holy month of Ramadan would be a time of action for the terror group, as earlier this week an IS spokesman called on the group’s followers to turn Ramadan into a time of “calamity for the infidels...Shiites and apostate Muslims.”

Last year, ISIS declared its ‘caliphate’ on the first day of Ramadan, shortly after which Abu Bakr al-Baghdadi made his first public appearance. At that time he said: “There is no deed in this virtuous month or in any other month better than jihad in the path of Allah, so take advantage of this opportunity and walk the path of your righteous predecessors.” [Adam Taylor / Washington Post]

This week IS fighters launched simultaneous attacks against Syrian government and Kurdish militia forces, moving back on the offensive after suffering a series of losses in recent days to Kurdish-led forces near the ‘caliphate’s’ capital of Raqqa, with the Kurds advancing to within 30 miles of the city, though they have said they have no plans to march on it.

ISIS went back into the Kurdish-held town of Kobani on the Turkish border, scene of one of the biggest battles last year, and the town of Hassakeh in the northeast. At least 164 civilians have been killed in the renewed fighting in Kobani and a nearby village as of Friday, in what a monitor called one of the militants’ “worst massacres” in Syria. 120 of the civilians were said to be executed. [42 ISIS fighters and 10 Kurds also died in the assault.]

As for the Syrian government, Assad’s forces have steadily been losing ground since March, including the city of Palmyra, which fell to ISIS last month. [ISIS appeared to blow up two historic tombs near Palmyra this week, the first sites in the ancient city they have claimed to destroy.]

Assad’s control is now mainly confined to the major population centers of western Syria, where he is receiving the help of Hizbullah’s militia, as well as Iran.

David Gardner / Financial Times

“(In) recent months, Assad forces have started losing ground again – to ISIS jihadis in central and eastern Syria, and to a rival Islamist alliance in the north and mainstream Sunni rebels in the south.

“Syrian Kurdish fighters, meanwhile, have inflicted a string of defeats on ISIS to strengthen their grip on the northeast of the country. What is left of the Syrian army, severely depleted after four years of civil war, looks to be pulling back to defensive lines – reinforced by the IRGC [Iran’s Islamic Revolution Guard Corps] and Hizbullah.

“The regime still holds Damascus, but the capital could soon be threatened from the south, where rebels are poised to capture Deraa on the border with Jordan....

“As Mr. Assad’s rump state shrinks further, his near total dependence on Iran and its auxiliaries has never been clearer. What seems to be hardening, though, is the pattern of de facto partition emerging in Syria – just as it is in Iraq.”

China: In an annual Cabinet-level meeting between Washington and Beijing, what is known as the U.S.-China Strategic and Economic Dialogue, U.S. Treasury Secretary Jack Lew said Washington remains “deeply concerned about government-sponsored cyber theft from companies and commercial sectors.”

Lew said China had a responsibility “to abide by certain standards of behavior within cyberspace.”

Vice President Joe Biden said, “There’s an urgent need to agree on a rule-based system for rapidly evolving areas ranging from cyberspace to outer space.”

China’s State Councilor Yang Jiechi said the U.S. and other countries must develop an “international code of conduct for cyber information sharing.”

Biden said China would ultimately suffer from pursuing economic espionage.

“Nations that use cyber technology and economic weapons to profit from the theft of intellectual property are sacrificing tomorrow’s gains for short term gains today. They diminish the innovative drive and determination of their own people when they do not reward and protect intellectual property.”

Biden also voiced concerns over China’s reclamation projects in the South China Sea.

“The notion of sea lanes being open and protected is even more crucial today than any time in human history, because of the interconnectedness of the world.” [Wall Street Journal]

For its part, ahead of the talks, Beijing claimed the facilities being built in the South China Sea were for improving weather forecasts.

But U.S. defense and security analysts say the construction of the artificial islands and military facilities is likely to be used for China’s growing fleet of nuclear submarines armed with ballistic missiles; a deep-water “bastion” where the sub fleet could avoid detection.

Admiral William Gortney, commander of the U.S. Northern Command, said, “Any time a nation has developed nuclear weapons and delivery platforms that can range the homeland, it’s a concern of mine.” [Stuart Leavenworth / Sydney Morning Herald]

U.S. authorities are investigating links between Beijing’s top military aircraft manufacturer and Iran’s ballistic missile program. A number of universities in Britain are also under investigation for high-tech collaboration with China’s aerospace sector.

As Charles Clover writes in the Financial Times: “The questions over (the tie-ins) underline the potential pitfalls of the U.K. government’s rapid expansion of trade and investment with China, which has recently invested in sensitive British industries such as nuclear power and telecoms. They also highlight the difficulty in carrying out due diligence given the opaque nature of many of the companies concerned.”

And this from the South China Morning Post: “China is mounting a serious effort to challenge U.S. military superiority in air and space, forcing the Pentagon to seek new technologies and systems to stay ahead of its rapidly developing rival, Deputy Defense Secretary Robert Work said.

“The Pentagon’s chief operating officer, speaking to a group of military and aerospace experts, said China was quickly closing the technological gaps, developing radar-evading aircraft, advanced reconnaissance planes, sophisticated missiles and top-notch electronic warfare equipment....

“Work, citing a Harvard study on rising powers confronting established powers, told the conference that interactions between the two often result in war. As a result, the Defense Department must ‘hedge against this international competition turning more heated.’”

On a totally different issue, prosecutors in Italy are seeking to try the Bank of China’s Milan branch and 297 individuals, mostly Chinese living in Italy, on money smuggling and other crimes.

An investigation called “River of Money,” which started in 2008, points to the growing influence of Chinese criminal groups in Italy’s Tuscany region.

Russia: In a speech at the Kremlin on Thursday, President Vladimir Putin said Russia needs a mighty military to fend off threats near its borders, saying a “powerful army equipped with modern weapons is the guarantor of sovereignty and territorial integrity of Russia.”

Despite its economic issues, Putin plans to spend $400 billion through 2020 to give the armed forces dozens of navy ships, hundreds of new planes and missiles and thousands of tanks.

Startlingly, a new poll from the independent Levada Center showed Putin’s approval rating reaching an all-time high of 89 percent this month. Ah, the power of controlling the media, with the Ukrainian crisis, for one, being painted as part of the West’s efforts to weaken Russia.

Levada head Lev Gudkov said television propaganda was the main factor behind Putin’s numbers.

“This is a very aggressive and false propaganda,” he said. “All alternative channels, therefore all alternative points of view, assessments are pushed out of the public sphere.” [AP]

NATO is reviewing its nuclear policy as a result of what it calls irresponsible rhetoric coming out of Moscow about the potential use of nukes.

For the first time since the end of the Cold War, defense ministers are talking of strengthening the military alliance’s nuclear deterrent, though NATO Sec.-Gen. Jens Stoltenberg vowed, “We will not be dragged into an arms race.”

Of course as Geoff Dyer and Alex Barker of the Financial Times point out, “Any effort to beef up NATO’s nuclear rhetoric would leave Barack Obama in an uncomfortable position after the U.S. president came to office pledging to make nuclear disarmament one of his administration’s main priorities.”

Sergei Ivanov, Putin’s chief of staff, said this week: “If the military infrastructure of NATO is greatly strengthened in eastern Europe, or the U.S. starts to really place potent missile defense systems in Romania, Bulgaria or Poland, we will say that the external threat has grown stronger.” [Financial Times]

But only five of 28 total NATO members are meeting military spending targets of 2% of GDP; the U.S., Great Britain, Greece, Estonia and Poland....despite Russia’s growing assertiveness.

Back to Ukraine, as reported in The Economist: “In the past 18 months, a psychological shift has seen public opinion in Ukraine turn sharply against Russia. In September 2013, just before the Maidan revolution, 88% of Ukrainians felt ‘positively’ about Russia, says the Kiev International Institute of Sociology. By May 2015, that number had fallen to 30% (it would be a lot lower if it excluded people in the rebel-held southeast).”

In areas controlled by the government, polling by the International Republican Institute finds a majority of Ukrainians favoring membership in the European Union, with only 13% wanting to join Russia’s customs union.

Lastly, former Russian prime minister and leading diplomat, Yevgeny Primakov, died Friday at the age of 85. In the early 1990s, he was one of the first major Russian statesmen to speak out against the country’s new pro-Western policies. As head of Russia’s Foreign Intelligence Service in 1993, the FIS produced a report claiming that NATO’s expansion toward Eastern Europe was a threat to Russia’s interests.

According to Boris Yeltsin’s daughter, Primakov once requested that Yeltsin fire Putin, but Yeltsin refused to do so and Primakov and Putin ended up getting along well.

Tunisia: The horrific attack on the seaside resort of Sousse, about 90 miles south of the capital, Tunis, follows on the heels of the March attack on the Bardo museum in Tunis that killed 22, as the terrorists seek to deal Tunisia’s critical tourism industry a mortal blow.

Afghanistan: The Taliban launched a brazen attack on the Afghan parliament Monday and attempted to storm the building before being turned back by security forces in a battle that left two civilians killed and at least 40 people wounded.

The day before the Taliban seized a key northern district in the province of Kunduz after a day of fighting reportedly left 12 Afghan soldiers dead. Then another district fell to the insurgents on Monday.

One Afghan soldier said in a video, “No reinforcements came. We had to flee.” [Los Angeles Times]

While the Afghan forces in Kabul did an admirable job, security forces elsewhere are taking heavy casualties as the Taliban has launched a wave of attacks. They now control a district just a few miles from Kunduz’ provincial capital, also called Kunduz, which has 300,000 residents.

Pakistan: The death toll from a heat wave in the nation’s largest city of Karachi has claimed over 1,000, though the temperature has ‘cooled’ to a more seasonal 100 F. Last weekend the temperature hit 113.

Two things compounded the situation. One is Ramadan, which requires fasting and abstaining from drinking water from dawn until dusk, with religious leaders urging folks to break the fast if they didn’t feel well.

The other issue is intermittent power in many neighborhoods, which means no air-conditioning.

Random Musings

--The U.S. Supreme Court ruled 5-4 in favor of same-sex marriage, declaring the Constitution requires same-sex marriage be legalized in all 50 states.

The court was split along ideological lines with Justice Anthony Kennedy once again the swing vote in a majority opinion that sweeps away the state bans on gay marriage that still exist in 13 states.

Kennedy wrote:

“Under the Constitution, same-sex couples seek in marriage the same legal treatment as opposite-sex couples, and it would disparage their choices and diminish their personhood to deny them this right.”

In his dissent, Chief Justice John Roberts said in part:

“Today...the Court takes the extraordinary step of ordering every State to license and recognize same-sex marriage. Many people will rejoice at this decision, and I begrudge none their celebration. But for those who believe in a government of laws, not of men, the majority’s approach is deeply disheartening. Supporters of same-sex marriage have achieved considerable success persuading their fellow citizens – through the democratic process – to adopt their view. That ends today. Five lawyers have closed the debate and enacted their own vision of marriage as a matter of constitutional law.   Stealing this issue from the people will for many cast a cloud over same-sex marriage, making a dramatic social change that much more difficult to accept.”

Near the end of his 29-page long dissent, Roberts added:

“If you are among the many Americans – of whatever sexual orientation – who favor expanding same-sex marriage, by all means celebrate today’s decision. Celebrate the achievement of a desired goal. Celebrate the opportunity for a new expression of commitment to a partner. Celebrate the availability of new benefits. But do not celebrate the Constitution. It had nothing to do with it.”

Justice Antonin Scalia called the decision a “threat to American democracy,” saying it was “constitutional revision by an unelected committee of nine.”

According to a Pew Research Center survey released this month, 57% of adults now support marriage equality, up from just 36% in 2005. [A CNN/ORC poll has 63% supporting same-sex marriage today, vs. 45% in May 2009.]

--President Obama announced Wednesday that the U.S. government will no longer threaten to prosecute those who pay ransom for loved ones taken hostage by terrorist groups.

“When it comes to how our government works to recover Americans held hostage and how we work with their families, we are changing how we do business,” said the president.

Obama reaffirmed the administration’s “no-concessions” policy toward terrorists, but said he had to balance this with reality. If his family were at risk, he said, “I would move heaven and earth to get those loved ones back.” But as a president, “I also have to consider our larger national security.”

Counterterrorism adviser Lisa Monaco then said, “There’s no doubt that the payment of ransoms fuels the very activity that we are trying to stop. At the same time, we’ve got a responsibility to stand with families.” [Rebecca Nelson / Defense One]

Editorial / Wall Street Journal

“The danger of Mr. Obama’s good intentions is that he is giving terrorists even more incentive to snatch more Americans....

“More troubling is the signal Mr. Obama is sending about how the U.S. will handle hostage communications with kidnappers going forward. ‘I am reaffirming that the United States government will not make concessions, such as paying ransom, to terrorist groups holding American hostages,’ Mr. Obama said.

“But he went on to say that ‘we are clarifying that our policy does not prevent communications with hostage-takers – by our government, the families of hostages, or third parties who help these families. And, when appropriate, our government may assist these families and private efforts in those communications.’

“So while the U.S. government will pay no ransom, it will facilitate the efforts of others to pay ransom. And while the FBI or State Department might assist in connecting kidnappers with American ransom-payers, no one should think they will do any negotiating on behalf of the U.S. government. Don’t be surprised if terrorists fail to appreciate this fine distinction....

“The entire point of the longstanding U.S. policy not to negotiate was to make Americans less inviting targets for hostage-taking, in contrast to the French or Italians who are well known for paying. The chief take-away from this new policy will be that kidnapping Americans is now more likely to lead to a payday than a raid by U.S. Special Forces....

“Mr. Obama reported that more than 80 Americans have been taken hostage since 9/11, but he cited by name only two who had been rescued. This is what happens when our enemies don’t fear American retribution. They won’t be any more fearful with this new hostage policy.”

--The Office of Personnel Management is now saying as many as 18 million had their Social Security numbers taken in the massive cyberattack revealed in recent weeks, far more than the initial 4 million estimate.

Donna Seymour, OPM’s chief information officer, testified before a House committee that hackers stole “manuals about the way we do business,” including data about the agency’s servers, in a March 2014 hacking attack, one of two breaches agency officials believe were conducted.

James Clapper, director of national intelligence, said on Thursday that China is the “leading suspect” in the OPM hack, the first government official to publicly blame China for the breaches.

Chinese officials continue to deny the country is behind the hacks.

--In a Suffolk University Political Research Center poll of New Hampshire GOP primary voters, Jeb Bush leads with 14%, while Donald Trump polls second with 11%. They are the only two in double digits.

Wisconsin Gov. Scott Walker received 8%, Sen. Marco Rubio 7%, Ben Carson 6%, New Jersey Gov. Chris Christie 5%.

Overall, 49% of likely voters had an unfavorable opinion of Trump, while 37% viewed him positively.

--In a new NBC News/Wall Street Journal national poll of likely Republican primary voters, Jeb Bush leads with 22%, followed by Scott Walker at 17%, Marco Rubio 14%, Ben Carson 11% and Mike Huckabee 9%.

In this survey, Trump is at 1%, but he won’t remain there.

Trump, though, suffered a blow when Univision, which owns the Spanish-language rights to the Miss USA beauty pageant, said it would cut ties to both Miss USA, slated for July 12, and the Miss Universe pageants, both owned by Trump, following remarks Trump made during his campaign kickoff about Mexican immigrants. [“They’re bringing drugs, they’re bringing crime, they’re rapists.”]

Trump said he would sue the network for breaking “an ironclad contract.”

--Chris Christie, who is going to formally announce his candidacy for the Republican nomination for president this Tuesday, saw his job approval rating in my state hit another record low.

Just 30% approve of the job he is doing, while 55% disapprove, according to the Fairleigh Dickinson University PublicMind survey. [Post Superstorm Sandy, Christie had a 77% approval rating.]

Christie’s predecessor, Democratic Gov. Jon Corzine, left office with 58% job disapproval, 33% approval.

--On the Democratic side, the aforementioned NBC News/Wall Street Journal poll shows that among Democratic primary voters, Hillary Clinton takes 75%, with Bernie Sanders at 15%.

Looking ahead to the November 2016 election, Clinton leads Bush 48-40 percent in a hypothetical matchup. She leads Rubio by 10 points and Walker by 14.

--Jennifer Rubin / Washington Post...on some of the problems for Hillary Clinton.

The success of Sen. Bernie Sanders (I-Vt.) should be worrisome. Polling suggests he is cutting into Hillary’s lead in New Hampshire*. He is raising money. He is drawing big crowds. The media are treating him seriously. If such an improbable candidate is doing so well why wouldn’t Vice President Joe Biden or some other big-name Democrat get into the race?....

Her ethical issues are not going away....

The Republicans are running people who match up very well against her. There are multiple governors and ex-governors who have accomplished more and who can relate better to average Americans. Rubio and Wisconsin Gov. Scot Walker can play the populist card effectively against her. The winner on the GOP side in all likelihood will be more practiced and appealing, younger and more energetic.

As Iran and the Islamic State gain strength and American influence diminishes her ‘experience’ becomes an anvil, weighing her down.”

*Sanders trails Clinton just 43-35 in New Hampshire, according to a CNN/WMUR poll. Jeb Bush leads among Republicans in this one with 16%, Trump at 11% and Paul 9%.

--Speaking of ‘ethical issues,’ Clinton claimed she provided the State Department with all of her work-related emails from her personal account when she was in office, but according to officials in the agency, they have received several related to Libya that she had not handed over; emails between her and longtime adviser Sidney Blumenthal, who wasn’t working for the department at the time but was sending her intelligence.

Blumenthal gave the House committee investigating the 2012 Benghazi, Libya, attack 15 emails that the State Department cannot find among the cache Clinton handed over last year.

--Leading U.S. retailers such as Walmart, Sears, eBay, Amazon and Google announced they were removing all Confederate flag merchandise in the wake of the killing of nine black churchgoers in Charleston, South Carolina by a white supremacist.

Among the other reactions to the massacre were statements by the Republican candidate for governor of Kentucky, Matt Bevin, and U.S. Sen. Mitch McConnell that a statue of Confederate President Jefferson Davis should be removed from the Capitol rotunda in that state.

Democratic Virginia Gov. Terry McAuliffe said he wanted the state to stop issuing vanity license plates for the Sons of Confederate Veterans that includes the battle flag.

Tennessee Republican legislators called for removing a Capitol grounds bust of Nathan Bedford Forrest, a Confederate general and early Ku Klux Klan leader.

And on and on...Jeb Bush and Mitt Romney were among other leading Republicans calling for the removal of the flag from the South Carolina Capitol.

Jonah Goldberg / New York Post

“There are few subjects that ignite more casual, uninformed bigotry and condescension from elites in this nation than Dixie.

“ ‘Practically the whole region has rejected nearly everything that’s good about this country and has become just one big nuclear waste site of choleric, and extremely racialized, resentment,’ the Daily Beast’s Michael Tomasky wrote last year.

“How, then, to explain the tens of thousands of South Carolinians, white and black, marching in unity across the Ravenel Bridge on Sunday night? Did the city bus in decent Northerners?

“The Washington Post’s Sally Jenkins glibly asserts that ‘the Confederate battle flag is an American swastika, the relic of traitors and totalitarians, symbol of a brutal regime, not a republic.’

“If it were left to me, I’d take the flag down. But this kind of cheap moral preening is galling. Is it really too much for people to muster the moral imagination that the issue isn’t nearly as simple as that?

“A November poll of South Carolinians found that 61 percent of blacks wanted it down. That means nearly four in 10 blacks felt differently. Are they the moral equivalent of self-loathing Jews, happy to live under a swastika?....

“If we’re going to offer ridiculous flag comparisons, a better one would be the Japanese imperial flag. After World War II, the United States banned it until 1949.

“Douglas MacArthur then opted to let a defeated, once-authoritarian society keep a few symbols of its past in order to build a better future.

“Can anyone argue that the South hasn’t done likewise? White Northern liberals explain how the South is an irredeemable cesspool of hate, while ignoring the fact that blacks are abandoning the Northern blue states in huge numbers to move to the South.

“Demographer Joel Kotkin found that 13 of the 15 best cities in the country for African-Americans to live in are now in the South. Over the last decade, millions of African-Americans have been reversing the Great Migration of a century ago to live in Dixie.

“A big part of that story is economic, of course – the ‘blue state’ model has failed generations of minorities – but it’s also cultural....

“No, the South isn’t perfect; name a region that is. But it does have good manners, which is why it routinely acts with more dignity – and in Charleston, with more grace – than its critics to the north.”

Kathleen Parker / Washington Post

“The grief Charleston and all of us feel is nauseating. The layers and layers of meaning in that single, sick act – the church’s historic role as a meeting place for blacks from before the Civil War through the civil rights era to the present – add extra dimension to losses so profound and freighted with sorrow that one weeps for humanity.

“To the people of Charleston, among whom I count myself as my family settled there more than 300 years ago, this senseless murder was a deep gouge in the soul of a city that has deliberately reconstructed itself as both a place of beauty and a beacon of diversity. For most of recent history, blacks, who make up about a third of the city’s population, and whites, have governed the city together with the mutual goal of racial harmony and cooperation. Much credit goes to the leadership of Mayor Joseph P. Riley Jr., who was mayor when I began covering him in the late 1970s as a reporter for Charleston’s afternoon paper....

“He is one of the nation’s longest-serving mayors for good reason. Not only did he envision that Charleston could become a tourist destination but he also has been a leader for social justice and racial reconciliation for decades....

“Charlestonians, black and white, have responded to his leadership with civic pride and racial unity, as television viewers have witnessed these past few days. At least several residents have reminded reporters that the shooter wasn’t from Charleston. We’re not like that, they were saying.

“Thus, my sadness as I write is also for Riley, who has worked so hard to achieve what was unimaginable not so long ago – a vibrant, diverse city where race isn’t swept under the rug but discussed with mutual respect and purpose. This is the Riley difference.”

--South Carolina Republican Gov. Nikki Haley sure rocketed into the 2016 conversation with her terrific policy statement on taking the flag down from the capitol building.

--Responding to the removal of the Confederate flag in states across the country, former Virginia Sen. Jim Webb said: “The Confederate Battle Flag has wrongly been used for racist and other purposes in recent decades. It should not be used in any way as a political symbol that divides us.”

But Webb added: “We should also remember that honorable Americans fought on both sides in the Civil War, including slave holders in the Union Army from states such as Missouri, Kentucky, Maryland and Delaware, and that many non-slave holders fought for the South. It was in recognition of the character of soldiers on both sides that the federal government authorized the construction of the Confederate Memorial 100 years ago, on the grounds of Arlington National Cemetery.

“This is a time for us to come together, and to recognize once more that our complex multicultural society is founded on the principle of mutual respect,” he said.

--Meanwhile, Apple removed Civil War games from its App Store that included images of the Confederate flag, which is beyond absurd. One historian, Joan Waugh of UCLA, spoke for many when she told the Los Angeles Times, “I cannot support the ill-considered action by Apple or any other company to remove the flag from a Civil War game,” she said.

In a tweet on Sunday, Apple CEO Tim Cook had called for removing the “symbols and words” that feed racism.

--The Washington Times reports that the State Department’s inspector general said in an oversight report, “A significant increase in reported harassment inquiries in the Department of State over the past few fiscal years supports the need for mandatory harassment training.”

From the Times: “The report states that formal harassment claims rose from 88 cases in 2011, during Mrs. Clinton’s third year as America’s top diplomat, to 248 in 2014, Mr. Kerry’s second year as secretary.”

The inspector general’s report stated that there has not been enough mandatory sexual harassment training.

--Oh, I wish I could comment on a certain big city mayor’s kid, who just graduated from high school with his father speaking at the graduation ceremony. The boy, who is heading to Yale, showing up in flip flops, as well as being the only kid who didn’t wear his mortarboard because it didn’t fit on his head due to his hair.

But, no, that would be tacky.

Meanwhile, this particular kid’s father reached a budget deal with his city council that includes the hiring of 1,300 new police officers, after said mayor had been criticized for not agreeing with his police commissioner who was calling for same.

This mayor, with the disrespectful kid who nonetheless was the star in a campaign commercial that helped lead to his father’s election (which shows how incredibly shallow this city’s voters are), said the budget deal included savings that allowed for the increase in the police force.

Many of the new officers will be used to create a dedicated counterterrorism force, because this rather large metropolis is the number one target of terrorists.

---

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

God bless America.
---

Gold $1173
Oil $59.63

Returns for the week 6/22-6/26

Dow Jones -0.4% [17946]
S&P 500 -0.4% [2101]
S&P MidCap -0.5%
Russell 2000 -0.4%
Nasdaq -0.7%

Returns for the period 1/1/15-6/26/15

Dow Jones +0.7%
S&P 500 +2.1%
S&P MidCap +5.5%
Russell 2000 +6.2%
Nasdaq +7.3%

Bulls 51.6
Bears 15.4 [Source: Investors Intelligence]

Have a great week. Thank you to those who have supported my fundraising efforts to date. Click on the link above to contribute.

Brian Trumbore



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Week in Review

06/27/2015

For the week 6/22-6/26

[Posted 10:30 PM ET, Friday]

Edition 846

Washington and Wall Street

What an extraordinary week...what an extraordinary 48 hours for President Obama, with wins on his trade initiative and victories in the Supreme Court on ObamaCare and same-sex marriage.

But also on Friday, Islamic State (ISIS) carried out a suicide attack on a Shia mosque in Kuwait City that killed at least 25, with over 200 wounded. An ISIS attack on a U.S. company in Lyon, France, resulted in the decapitation of the attacker’s boss. An ISIS terror attack on a Tunisian seaside resort led to the deaths of at least 37, mostly foreign tourists.

And this coming week, if not a week after, we are to learn the fate of the Iranian nuclear talks, while that of Greece remains unknown.

President Obama can claim successes on the domestic front, but when you also add the likes of Russia and China to the foreign policy discussion, the global outlook has not been this depressing in a long time.

I address the Supreme Court’s same-sex marriage decision below, but on ObamaCare (the Affordable Care Act), a 6-3 decision upheld the broad reach of the law, ruling the government may continue to provide tax subsidies for low- and middle-income people who buy insurance nationwide, even in states that did not create an official exchange.

Chief Justice Roberts, writing for the court, said the “tax credits are available to individuals in states that have a federal exchange.” He also wrote: “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible we must interpret the Act in a way that is consistent with the former, and avoids the latter.”

If no tax credits were allowed in these states, it “could well push a state’s individual market into a death spiral,” Roberts added.

Justice Antonin Scalia wrote in dissent that Roberts, who wrote the decision in 2012 that saved the ACA from a previous challenge, has performed “somersaults of statutory interpretation” to preserve the law.

“We should start calling this law SCOTUScare,” Scalia said. The two cases “will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites.”

[Health-care stocks rose in the aftermath of the decision, and it’s good for hospitals who will see fewer uninsured patients in emergency rooms.]

By affirming subsidies, ObamaCare now has the legal footing the president and its proponents have long said it did. The president declared: “The Affordable Care Act is here to stay.”

George Will / Washington Post

“The most durable damage from Thursday’s decision is not the perpetuation of the ACA, which can be undone by what created it – legislative action. The paramount injury is the court’s embrace of a duty to ratify and even facilitate lawless discretion exercised by administrative agencies and the executive branch generally....

“What Roberts does by way of, to be polite, creative construing...is legislating, not judging.”

Editorial / Wall Street Journal

“Far from putting this debate behind us, the ruling has freed Washington to take it up. Now that the long months of waiting silently and expectantly for the court’s decision are over, debate on ObamaCare is about to explode in a way not witnessed since 2010.”

One bill at a time.

On the trade front, just 12 days after all seemed lost for President Obama’s pet project of his second term, the multi-nation Trans-Pacific Partnership, or TPP, Congress resurrected it, thanks to Republican leadership and the president’s willingness to work with same; namely Senate Majority Leader Mitch McConnell and House Speaker John Boehner.

On Wednesday, the Senate voted 60-38 to grant final approval for the “fast-track” trade authority, and then key House Democrats conceded defeat and supported related legislation [Trade Adjustment Assistance, TAA] – which they had blocked two weeks ago to stall the overall package – which provides assistance for displaced workers. The key vote in the House was 286 to 138.

But the acrimony within the Democratic Party will linger, with many warning the TPP will cost U.S. workers jobs in manufacturing industries and, indeed, the actual trade negotiations still have to settle on the details for such items as access to the Japanese auto and agriculture markets.

Once negotiations are complete, the administration then has to get a final deal through Congress again and the unions will try one last time to scuttle it.

China is not part of the TPP and while it can eventually join, it first needs to meet stringent labor and environmental standards being worked into the agreement.

However, this is exactly why TPP was such a huge deal for some of us, and, yes, I’m a supporter. A failure would have once again showed allies such as Japan and South Korea that the United States can’t be relied upon and that the shift to the Pacific was nothing more than rhetoric.

As a policy analyst, Michael Green, told the Washington Post, “Confidence [in the United States] was hemorrhaging in Asia.”

Meanwhile, in a new Wall Street Journal/NBC News survey, voters were asked if free trade between the U.S. and foreign countries has helped or hurt the U.S. and only 29% said it helped – down from 37% in April. The share who said trade has hurt rose to 34% from 31% over the same period.

Turning to the economic data of the week, May existing home sales rose 5.1% over April, with the median price up 7.9% year over year. May new home sales also came in better than expected, up 19.5% year over year, though the median price is down 1%, but this anomaly will rectify itself soon.

In both categories, the percentage of first-time buyers is increasing, a good sign and the difference between growth and stagnation.

May durable goods (big-ticket items), were worse than expected, down 1.8%, but ex-aircraft were up 0.5%.

Then you had personal income and consumption for May, up a solid 0.5% for a second consecutive month on the former, and up 0.9% from a month earlier on the latter. This increase was the biggest jump since Aug. 2009.

Gasoline prices are still 24% below year ago levels and consumers are beginning to spend the savings.

But the Fed’s preferred inflation indicator, the personal consumption expenditures index, is still up just 1.2% year over year on core. The Fed would prefer to see this at 2%.

Lastly, we had the final revision to first-quarter GDP, now -0.2% from -0.7%, which was as expected. Encouragingly, household spending in the quarter was revised to 2.1% from 1.8%, which is also in keeping with the consumption trends as noted above.

Many economists still peg second-quarter GDP at 2% to 3%. Interestingly, the Atlanta Fed’s GDPNow indicator is all the way up to 2.1%. Recall, it bottomed at 0.6% not too long ago.

Finally, Robert Samuelson / Washington Post

“A recent Congressional Budget Office report, ‘The 2015 Long-Term Budget Outlook,’ reminds us that the federal government is slowly becoming an agency for taking care of the elderly. Almost everything else is being crowded out. We ignored that during the Obama presidency, and now it seems that the fledgling presidential campaign may do likewise. Hillary Clinton and other Democrats plug fairer economic growth. Jeb Bush and other Republicans are more forthcoming (they talk about raising Social Security’s eligibility age) but concentrate their rhetoric on creating faster economic growth....

“In 1990, federal spending equaled about 21 percent of the economy, gross domestic product (GDP). Social Security and major health programs (mainly Medicare and Medicaid) represented a little less than one-third of all spending. The rest was defense, domestic ‘discretionary’ programs (homeland security, environment regulation, law enforcement and the like) and non-elderly ‘entitlements’ (unemployment insurance, welfare). In 2015, the federal government is still spending 21 percent of GDP, but now Social Security and major health programs consume about half the budget, according to the CBO report. Most health spending goes to the elderly.

“As the CBO makes clear, an aging population and high health costs will perpetuate this trend for years. Under current law, Social Security and health programs will account for two-thirds of today’s budget levels (measured by GDP) by 2040, estimates the CBO. What’s left for the rest? Not much. The remaining amounts are ‘the lowest...relative to the size of the economy since the 1930s,’ says the CBO. Either the rest of government will shrink dramatically, or Congress will expand government spending sharply. The latter, of course, would require higher taxes or bigger deficits.”

Europe and Asia

[Note: There was a late development Friday night regarding Greece but I’m not rewriting this section written prior to the news. It’s a good summary of the week’s events anyway.]

Yet another emergency meeting is being held Saturday between Greece and eurozone finance ministers, Greece facing a Tuesday deadline to pay the International Monetary Fund $1.7 billion. Nations that miss IMF payments are ineligible for further funds as long as they are in arrears and Managing Director Christine Lagarde has said Greece would be in default if it fails to repay its loans June 30.

Greece is trying to unlock the final 7.2bn euro in bailout aid as it seeks to get EU leaders to accept its latest reform plan. Four previous times in the past week the finance ministers and Greece failed to reach common ground.

The talks collapsed Thursday morning after the bailout monitors, the IMF, European Commission and European Central Bank, demanded Greek Prime Minister Alexis Tsipras accept their compromise proposal, at which time Greece’s finance minister, Yanis Varoufakis, presented a new Greek offering.

But multiple officials said there was no chance the Greece plan would be accepted as they prepared to “ring fence” the country so that any economic upheaval unleashed by a default would not spread.

German finance minister Wolfgang Schauble told colleagues, according to the Financial Times, “It is looking bleak.”

Tsipras also wants to negotiate with his fellow leaders, but German Chancellor Angela Merkel said it’s up to the finance ministers to reach an agreement. Merkel said late in the week, “In some areas, you have the impression that we have even gone backwards a bit.”

As I’ve been saying for months, since the Tsipras government took power, it’s all about the pension issue. For instance, the creditors’ plan calls for Athens to increase the retirement age to 67 by 2022, but the Greek government’s proposal is for this to occur by 2025. The creditor plan would allow for retirement at 62, but only for those who have paid into the system for 40 years.

Creditors such as the IMF are also concerned that Greece’s proposals just don’t add up. They are filled with far more tax hikes than spending cuts, and this from a government that has major trouble collecting taxes in the first place.

Plus all the tax hikes, especially on middle- and upper-income folks, will impede economic growth at a time when Greece needs it most. So an economy that is back in recession could fall into depression all over again.

With no agreement this weekend, there is simply not enough time for the reform measures to be voted on by the Greek parliament, as well as the German Bundestag, which must approve any bailout extension, before the bailout agreement ends on Tuesday, which, again, is the IMF deadline as well.

If Greece goes into default, you will be looking at capital controls and bank runs. Many in the eurozone are also seriously calling into question all the liquidity the ECB has been supplying Greece to keep its banks afloat. Deposits at Greek banks fell to their lowest level in almost 11 years in May.

There are some saying it should be no problem for the rest of the eurozone and EU if Greece were to leave the currency union.

But the unrest in the streets, particularly remembering this is the Balkans, could be explosive and contagious. The bad blood between Greece and its counterparts in the EU is palpable.

And while some say the peripheral eurozone countries are less vulnerable today than, say, in 2012, Moody’s warned, “Banks in the periphery markets have strengthened their financial positions in recent years. But legacy issues from the previous crisis still weigh on their ability to return to full financial health, while they are also more susceptible to restricted market access and higher cost of wholesale funding in the event of an adverse shock, given their more limited balance sheet of flexibility.”

In a report this week, Moody’s added a Greek exit would have “severe direct consequences” for Greek banks, and “material consequences” for the entire euro area.

“The exit of a member state from the single currency bloc, which was built to be irreversible, would damage confidence in the region in the immediate aftermath and raise concerns of other countries following suit over the longer term.” [Irish Independent]

One other thing is for sure, it’s not just the likes of Ireland, Portugal, Italy and Spain that could suffer some from a Grexit, but the economies of central and eastern Europe would get hammered. Bank lending would freeze up, for starters, while the likes of Czech Republic, Hungary and Poland would be hit hard on the export front.

So that’s what I wrote up Friday afternoon, New York time.

But late Friday night/early Saturday morning in Athens, Prime Minister Tsipras called a referendum for July 5 on the terms offered by creditors for the aid package, saying they’re seeking to humiliate the Greek people.

A Greek government official said the country’s banks will open as normal on Monday and that no capital controls are planned.

Tsipras said Merkel and ECB chief Mario Draghi have been informed and that he’ll request an extension of Greece’s existing bailout by a few days to permit the vote.

Euro finance ministers will still meet Saturday to discuss details of their proposal, which would unlock 15.5bn euro in aid and extend the program through November, in return for a commitment to pension cuts and higher taxes.

Merkel touted the extension’s terms as “very generous.” Tsipras compared them to an “ultimatum” and “blackmail.” He continues to talk of debt relief which as I’ve noted before is a total non-starter.

So now we wait another week.   The biggest immediate issue on Monday is what will the people do at the banks?

Also, what will the IMF do when Greece doesn’t make its payment on Tuesday?

And there are major issues as to the legality of the referendum. The Greek constitution doesn’t allow them on fiscal issues, supposedly.

Lawrence Summers / Financial Times

“When Greece fails as a state, Europe will collect far less debt than it would with an orderly debt restructuring. And a massive northern out-migration of Greeks will strain national budgets throughout Europe – not to mention the challenges that will come as Russia achieves a presence in Greece....

“The IMF needs to recognize that this is now not about the numbers. It is about the high politics of Europe. Its job is to stand behind any deal that avoids breakdown.”

Anne Applebaum / Washington Post

“The crisis in Greece is not, at base, an economic story: It is a political story, a story about the promises that governments make to their citizens and about the ability of any state to guarantee a particular standard of living to its citizens, not only in Greece but also all over Europe.

“The current Greek government was elected on a completely false premise: that Greece could continue to run one of the most expensive pension systems and one of the largest bureaucracies in Europe, relatively speaking – and that other countries would pay for it. Not all Greeks believe this fairy tale, but there were enough of them to elect a governing coalition of the far left and far right, both of which have publicly stated that they will not abide by the rules set by financial institutions, that they don’t like the European Union, which has been bailing them out for years, and that they might just prefer an alliance with Russia instead....

“Meanwhile, all across the continent – in Spain, France, the Netherlands – populist parties of both the right and the left, some very similar to Greece’s ruling party Syriza, threaten governments that are trying to maintain fiscal balance, stay inside the European Union and play by existing rules. If Greece is allowed to change those rules, many European politicians will have a much tougher time winning their next elections. For some of those politicians, the wrong Greek scenario could mean their own political demise.”

There was some economic news on the continent this week. The ‘flash’ composite PMI for the eurozone in June hit 54.1 vs. 53.6 in May, a 49-month high. The manufacturing PMI was 52.5 vs. 52.2 last month (50 being the dividing line between growth and contraction).

The flash readings from Markit look at just France and Germany, individually, and France’s comp was 53.4 vs. 52.0, a 13-month high, while the manufacturing PMI was 50.5 vs. 49.4.

In Germany, the comp was 54.0 vs. 52.6, and the manufacturing PMI was 51.9 vs. 51.1 in May.

Chris Williamson, chief economist at Markit:

“Despite the cloud of the Greek debt crisis hanging over the region, the eurozone saw economic growth accelerate to a four-year high in June.

“The PMI is signaling GDP growth of 0.4% for the region as a whole in the second quarter. The upturn is also looking encouragingly broad-based.”

Back to France, the official government figure for first-quarter GDP was up 0.6%, with officials still pegging 1% for the full year.

Finally, the EU made an effort to find a solution to the migrant issue, Italy having received about 50,000 thus far in 2015, and it ended up being one of the more contentious European Councils in recent memory.

The goal was to divvy up 40,000 migrants – but on a voluntary basis, and the EU’s eastern members opposed having to take any on, at which point Italian Prime Minister Matteo Renzi said, “If this is Europe, you can keep it!”

So in the end they have a target of 40,000 but no way of enforcing it. As noted in some of the commentary above, many of today’s Euro governments are under threat from anti-immigration, populist parties.

The leader of Italy’s populist Northern League said, “It is another embarrassment in Europe for Renzi. Ninety percent of those who land will stay.”

Turning to Asia, China’s Shanghai Composite index fell 7.4% on Friday, with the benchmark now at its lowest level in 7 weeks. 

It seems Chinese authorities are willing to accept greater market volatility, with the state media playing a role. In a front-page commentary on Tuesday, the China Securities Journal said the nation’s “liquidity bull market” was “taking a break.” Future gains would be “slow” and driven by government efforts to reform state-owned companies, it said.

Authorities also seem to be trying to steer investors from placing speculative bets on small-cap stocks towards large, state-run companies, which tend to carry lower valuations.

And the government is set to scrap its loan-to-deposit ratio requirement for commercial banks in a bid to bolster lending as the economy slows. The State Council said the sector’s regulator would keep monitoring loan activity and risk in real time after the ratio was scrapped.

As reported by the South China Morning Post, “Under real-time monitoring, the China Banking Regulatory Commission will use administrative powers to stop or suspend lending by specific banks when risks arise.”

Separately, a flash reading from HSBC on the manufacturing sector in June came in at 49.6 vs. 49.2 in May

In Japan, Markit’s flash manufacturing PMI for June was 49.9 vs. 50.8 last month. The Tokyo Nikkei stock index hit an 18-year high on Wednesday, 20868, before backing off to 20706 by week’s end.

Street Bytes

--Stocks finished down on the week, with the Dow Jones losing 0.4% to 17946, while the S&P 500 fell a like amount, and Nasdaq declined 0.7%. Nasdaq did, however, set a new closing high on Tuesday of 5160.

As we approach the end of the quarter, FactSet estimates second-quarter earnings per share on the S&P 500 will fall 4.7%, but if you take out what will be miserable earnings comparisons in the energy sector, eps will rise 2%, which is still putrid.

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.71% 10-yr. 2.47% 30-yr. 3.24%

Yields rose across the curve on the better economic news and the feeling the Federal Reserve will indeed be acting soon. Fed Gov. Jerome Powell predicted the first rate rise will come as soon as September and then another increase in December.

The 10-year Treasury yield of 2.47% is back to its highest level since last September.

But I have to comment on the euro bond market in this space because it was interesting. The German 10-year bund saw its yield rise from 0.75% to 0.92% this week as the ‘safe haven’ play came off because it was felt there would be a solution to the Greek debt crisis.

At the same time, the yield on the Italian 10-year fell from 2.28% to 2.14% because contagion was supposedly off the table.

But with Greece’s late announcement today, now what?

--June was the busiest month of the year on the IPO front, with twenty companies going public, the most since November, according to S&P Capital IQ. June is also the top month for money raised, $4.74 billion.

But, overall, there have been just 89 IPOs thus far in 2015, raising $16.1bn, vs. 144 companies that went public in the first six months of 2014 (with $30.7bn in proceeds).

--The news on the California drought just gets worse and worse. The Los Angeles Times had a story Thursday on Mono Lake, which “is within two feet of the level that state officials say threatens the alpine ecosystem at the base of the eastern Sierra Nevada.”

On the ecological side, if the water level drops another two feet, coyotes could then cross to access the second-largest California gull colony in the state; the coyotes known to feast on the eggs.

But as for the water supply, the Los Angeles Department of Water and Power has been forced to reduce its take from Mono’s tributaries by more than two-thirds, while in a separate move to conserve meager eastern Sierra snow runoff, “The DWP damned the Los Angeles Aqueduct this year, with the aqueduct supplying L.A. with a third of its water. [It’s complicated, but the DWP is obligated to mitigate dust on one of the lakes, which if it dried up would create all manner of problems.]

Meanwhile, Lake Mead sunk to a record low Tuesday, though water managers expect the lake’s level to rebound enough thanks to a wetter-than-expected spring. The reservoir stores water for parts of Arizona, Southern California, southern Nevada and northern Mexico. The next six months or so are critical.

--Bill Gates is doubling down on green technologies to the tune of $2 billion over the next five years to, as he puts it, attempt to “bend the curve” in combating climate change.

Gates told the Financial Times he has invested directly in about 15 companies and indirectly in another 30 via venture capital funds. He also said he rejected calls from environmental groups for shareholders to dump their holdings in oil and gas companies and instead urged “high-risk” investment in new technologies.

Gates said there are major limits to renewables in their current form, citing solar power as an example: “Solar is only during the day, solar only works best in places where it’s warm. We don’t have perfect grids. We don’t have storage.

“There’s no battery technology that’s even close to allowing us to take all of our energy from renewables and be able to use battery storage in order to deal not only with the 24-hour cycle but also with long periods of time where it’s cloudy and you don’t have sun or you don’t have wind.

“Power is about reliability. We need to get something that works reliably.”

Gates is big on “Nuclear recycling,” where he has invested several hundred million dollars.

--As telegraphed earlier, Molycorp, the biggest non-Chinese producer of rare earth metals officially sought bankruptcy protection. The Chinese government failed in its efforts to corner the market and for Molycorp, the average selling price of its materials produced at the Mountain Pass, California location was just $9.64 per kilogram in the first quarter, vs. $72.80 in the second quarter of 2011, when its shares peaked at $79. Thursday the shares were suspended at 36 cents.

Rare earths are used in items such as mobile phones, car exhaust catalyzers and missile guidance systems.

--There is so much to worry about on the cybersecurity front. I know I always wonder just how reliable electronics recyclers are, for example. A recent Crain’s New York Business opinion piece had the following.

Some electronics that companies think are being recycled properly might have their data end up in open-air markets as far away as Ghana.

“Businesses are most vulnerable when ‘recyclers’ don’t perform the data destruction they claim. Such recyclers are really exporters with a single goal: to get your company’s IT assets to developing countries where a thriving black market exists for computers with sensitive corporate and personal information.”

As Crain’s Jeremy Smerd adds, this is a huge problem in New York, for example, where there was a recent data breach at Montefiore hospital with employees stealing the information the old-fashioned way...they just took the raw files. But many smaller operations, like law and accounting firms, “are forgoing the kinds of protections that keep client data safe...(such firms) are increasingly at risk because they often can’t afford to pay for top-flight cybersecurity personnel.”

--Cigna Corp. rejected a $54 billion takeover bid from Anthem Inc., saying the $184-a-share offer was inadequate.

Cigna, the nation’s fifth-largest health insurer, was miffed its private negotiations with Anthem were made public as well as at Anthem’s failure to address the fallout from a massive data breach this year.

As noted last week, you’ve had a scramble for mergers in the healthcare space as insurers look for scale to win better terms from medical providers and to maximize profits in this new Affordable Care Act environment. Aetna has made an offer for Humana Inc. in recent days as well.

If both potential deals went through, there would be just three major insurers, which clearly isn’t good for competition and consumer options in the long run. [UnitedHealth Group Inc. is currently the largest player by revenue, and it has approached Aetna about merging.]

For example, as the Wall Street Journal pointed out, “In Bergen County, N.J., a UnitedHealth-Aetna merger would leave 90% of membership [Ed. in Medicare Advantage] with a single company.”

--On July 1, Dennis Muilenburg is due to take over from Jim McNerney as CEO of Boeing. Muilenburg, a company veteran, faces a record order backlog for 5,700 commercial aircraft, while at the same time, many western governments have been reducing defense spending.

70 percent of Boeing group sales are on the commercial aircraft side, with total company sales hitting $90.8bn last year – compared with $52.5bn in 2004, the year before McNerney became chief executive.

--Last Sunday, Taylor Swift posted an open letter to Apple, criticizing the company for not paying royalties to artists during a three-month trial period for its new music app. Within hours, the company changed its stance and said it would pay artists during this period.

By Thursday, Ms. Swift said she would stream her latest album, “1989,” on Apple’s service, thus ending the dispute.

--Netflix announced a seven-for-one stock split for shareholders of record on July 2; the stock to being trading on a post-split basis on July 15.

Investor Carl Icahn said he sold his last stake in the movie and TV streaming site. In 2012, Icahn owned nearly 10 percent of the company, and his investment vehicle, Icahn Enterprises, originally invested in Netflix at $58. The stock closed the week at $651, after hitting $706 on Thursday.

In April 2014, Apple announced a seven-for-one with the stock at $524 per share. [Icahn owns about a 1 percent stake in this one and has been constantly pressing management to buy back more shares.]

--According to researcher HFR Inc., stock-focused hedge funds were up an average 5% this year vs. a 3.2% rise for the S&P 500 through May (including dividends); the best start to a year since 2009 for the hedgies in terms of the lead over the benchmark.   Many of the funds that had a miserable 2014 have staged big comebacks. Mergers have been a big reason for the performance boost.

--With the egg shortage brought on by bird flu, which wiped out millions of chickens on commercial farms this spring, the price for a dozen Midwest large eggs had soared 120 percent from their mid-April, pre-bird flu prices, as reported by the Associated Press. The U.S. Department of Agriculture said it could take up to two years to return to normal production, though prices have probably peaked.

The price spike, though, has done a number on some restaurants and their profit margins, with many breakfast spots looking to levy surcharges.

--Cincinnati-based regional lender Fifth Third Bancorp said it plans to consolidate or sell about 100 of its branches amid the ongoing move to mobile and electronic banking.

Fifth Third has about 1,300 full-service banking centers through its 15 affiliates.

--Police in Brazil arrested two top industrialists as part of the sweeping investigation into state-owned oil company Petrobras. The two are the most senior corporate figures to be detained over allegations that Brazil’s largest construction companies collaborated with Petrobras executives and scores of politicians in kickback and bribe schemes to gain contracts from the oil company.

Recall that President Dilma Rousseff had been chairwoman of Petrobras from 2003 to 2010.

--There was a story in Crain’s New York Business by Daniel Geiger on New York real estate investor Jerry Gottesman, who is known for buying parking lots in prime Manhattan and Brooklyn areas, as well as self-storage buildings.

“Now, with city real estate selling for record sums, Mr. Gottesman’s low-use properties can be developed into higher-use residential, hotel, office and retail spaces. Last month, he sold a parking lot next to the High Line that’s seen as a sweet site for condominium towers. He bought it for $2.4 million in the 1980s.  It sold for $870 million.”

Yup, that’s a sweet return.

Gottesman, 84, needs to decide what to do with his flagship company, Edison Properties. After a falling out with his brother, there is no apparent successor after his son-in-law and heir apparent abruptly announced his intention to step down.

--Hundreds of French taxi drivers protested against competition from Uber, with drivers blocking the Paris ring road at several points on Thursday, burning tires and clashing with police.

What a nightmare. Being familiar with that road, many trying to reach Charles de Gaulle and Orly airports were caught up in the disturbance and missed their flights.

--A joint study by computer scientists from the U.S. and China found that one in ten Android apps contained malicious code. As reported by the South China Morning Post:

“Over 2,000 (of the apps scanned) had each been downloaded more than 50,000 times, meaning at least 100 million users were exposed to security risks.”

The scientists are using a new algorithm that can “detect malware and viruses within apps in less than 10 seconds.”

--“Jurassic World” became the fastest movie to cross $1 billion in ticket sales worldwide; just 13 days, surpassing the record 14 set by “The Avengers” in 2012.

China is responsible for $164.4 million as of last weekend.

--We’ll see how the “Nightly News with Lester Holt” goes for NBC, but the fallout from Brian Williams’ interview with Matt Lauer last Friday continues.

Andrea Peyser / New York Post

“He’s still a liar.

“ ‘Matt, it is clear that afterward, when I got out of the building, when I got out of the realm, I used a double standard. Something changed. I got sloppier and I said some things that were not true,’ Brian Williams pathetically told Matt Lauer in an ‘I’m Back!’ interview.

“Sloppy is accidentally belching on camera, not plumb forgetting that the Chinook helicopter in which you flew in Iraq was not fired upon, or that the body you claimed you saw floating down the street in New Orleans after Hurricane Katrina was really your living cameraman throwing back Jell-O shots at happy hour.

“The worst part of this depressing blather was that Brian Williams, liar with a capital ‘L,’ flat-out refused to utter the ‘L’ word.

“ ‘I told the story correctly for years before I told it incorrectly,’ he actually said.

“ ‘I was not trying to mislead people. That, to me, is a huge difference here.’

“He said he was powerless over his ego. Seriously.

“But the nadir of this scary program, an insult to children and every viewer with an operating sense of honesty and morality, came when Williams would not admit that he deliberately made stuff up.

“Lauer asked Williams if ‘you knew that you were telling a story that was not true?’

“ ‘No,’ Williams replied.

“What?!

“ ‘It came from a bad place,’ he said. (Where? Mars?)”

--There is a growing outcry to dump Andrew Jackson from the $20, not Alexander Hamilton from the $10. I understand the Treasury Department’s reasoning, that the $10 bill is next in line for being updated, with anti-counterfeiting measures, for example, but it’s not just former Federal Reserve Chairman Ben Bernanke who is upset that a Founding Father like Hamilton is being treated in such a shabby fashion.

New Jersey Dem. Rep. Bill Pascrell Jr., who was once mayor of Paterson, N.J., a city Hamilton founded, said: “In light of Hamilton’s extraordinary contributions to establishing this great nation, I question the decision to remove Hamilton from the $10 dollar bill while President Andrew Jackson continues to be featured on the $20.”

Pascrell added Hamilton was a chief aide to George Washington during the American Revolution, an author of the Federalist Papers, an opponent of slavery, a passionate advocate for the Constitution, and the first U.S. treasury secretary.

Among the things against Jackson, Pascrell wrote, he was “a slaveholder responsible for the Trail of Tears, which forced southeastern Native American tribes into mass migrations westward during the 1830s, resulting in thousands of Native American deaths.”

As for Bernanke, he said the decision to honor a woman on the $10 bill is a “fine idea,” but shouldn’t come at Hamilton’s expense. Jackson, on the other hand, says Bernanke, is a “man of many unattractive qualities,” as well as a “poor president.”

Foreign Affairs

Iran: The deadline is June 30 for negotiating a final deal on Iran’s nuclear program and its obvious talks will be extended for at least a few more days beyond that.

But Iran’s supreme leader, Ayatollah Ali Khamenei, hardened his stance, insisting Iran would only dismantle its nuclear infrastructure if economic sanctions were lifted first.

In a nationally televised speech, Khamenei also ruled out inspections on suspected military sites, as well as a freeze on research and development for 10 years, as is called for in the draft protocols.

“Inspection of our military sites is out of the question and is one of our red lines,” he said.

Iran’s negotiating team is thus hamstrung, since Khamenei has the final say on all state matters.

Editorial / Wall Street Journal

“Doubts about President Obama’s Iran diplomacy are deepening, and some of the gravest misgivings are coming from his former top officials. That’s the import of a statement Wednesday from a bipartisan group under the auspices of the Washington Institute for Near East Policy.

In measured language, the statement offers a list of musts for a good nuclear deal. They include granting nuclear inspectors access to all Iranian sites, including military ones; lifting sanctions only after Iran meets its nuclear obligations; requiring Tehran to come clean on its past nuclear work; and limiting the number of advanced centrifuges Iran can test and deploy. From what we know so far, Iran has balked on all of these points.

“The signers include James Cartwright, former Vice Chairman of the Joint Chiefs of Staff, who became known as ‘Obama’s General.’ Another is former CIA Director David Petraeus. Then there is Dennis Ross, Mr. Obama’s Iran czar in his first term....

“President Obama and his aides often dismiss opponents of his nuclear diplomacy as always preferring war over diplomacy. But the striking fact is how widespread the concerns are as the White House appears to make ever more concessions.”

Editorial / Washington Post

“Both U.S. and Iranian officials are hinting that a final nuclear deal may not be reached by a Tuesday deadline. And no wonder, judging from the speech delivered Tuesday by Supreme Leader Ayatollah Ali Khamenei. Iran’s ruler spelled out conditions that would make an accord impossible, short of a complete capitulation by the United States and its five partners. He rejected a long-term limitation of Iran’s uranium enrichment, curbs on its research and development and international inspections of military facilities, and he said all U.S. and United Nations sanctions must be lifted ‘immediately after the signing of the agreement.’....

“It’s possible that the ayatollah’s speech was bluff intended to improve Iran’s bargaining position. A more disturbing possibility is that Iran’s ruler is setting the precedent for disregarding a deal sometime after it is concluded and after the regime pockets the tens of billions of dollars in immediate financial relief it could receive.

“Whatever the case, the Obama administration must resist the temptation to respond with eleventh-hour concessions. On the contrary, the compromises already struck in the preliminary accord make it essential that the United States insist on terms for inspections and timid sanctions relief that cross the Khamenei lines....

“(The) United States and its partners must at the least ensure that Iran will respect the decade-long moratorium and will not secretly pursue a bomb, as it has in the past. That means that international inspectors must have the right to visit any suspicious sites quickly, including on military bases. It was at the Parchin military base that Iran was believed to have carried out work on military warheads, and U.N. investigators seeking to visit the site have been stonewalled for nine years....

“Throughout the Iran negotiations, Mr. Obama has insisted that he is ready to walk away rather than accept a bad deal. In light of the Khamenei speech, the White House must be ready to act on that threat.”

Separately, the State Department, in an annual report of global terrorism between 2013 and 2014, said Iran’s support for terrorism was “undiminished.”

Broadly, the report said nearly 33,000 people were killed in almost 13,500 terror attacks around the world last year. 20 of the attacks killed more than 100 people compared with two on that scale in 2013.

The increase is all about the rise of ISIS and failed states in Yemen, Syria, Libya, Nigeria and Iraq.

Meanwhile, Royal Dutch Shell became the first international oil group to admit it has been talking with Tehran to discuss investments in Iran’s energy industry once a nuclear deal is reached.

Iran will needs $billions in foreign investment to reach its goal of doubling production by 2020.

Iraq/ISIS/Syria: Islamic State has warned the Muslim holy month of Ramadan would be a time of action for the terror group, as earlier this week an IS spokesman called on the group’s followers to turn Ramadan into a time of “calamity for the infidels...Shiites and apostate Muslims.”

Last year, ISIS declared its ‘caliphate’ on the first day of Ramadan, shortly after which Abu Bakr al-Baghdadi made his first public appearance. At that time he said: “There is no deed in this virtuous month or in any other month better than jihad in the path of Allah, so take advantage of this opportunity and walk the path of your righteous predecessors.” [Adam Taylor / Washington Post]

This week IS fighters launched simultaneous attacks against Syrian government and Kurdish militia forces, moving back on the offensive after suffering a series of losses in recent days to Kurdish-led forces near the ‘caliphate’s’ capital of Raqqa, with the Kurds advancing to within 30 miles of the city, though they have said they have no plans to march on it.

ISIS went back into the Kurdish-held town of Kobani on the Turkish border, scene of one of the biggest battles last year, and the town of Hassakeh in the northeast. At least 164 civilians have been killed in the renewed fighting in Kobani and a nearby village as of Friday, in what a monitor called one of the militants’ “worst massacres” in Syria. 120 of the civilians were said to be executed. [42 ISIS fighters and 10 Kurds also died in the assault.]

As for the Syrian government, Assad’s forces have steadily been losing ground since March, including the city of Palmyra, which fell to ISIS last month. [ISIS appeared to blow up two historic tombs near Palmyra this week, the first sites in the ancient city they have claimed to destroy.]

Assad’s control is now mainly confined to the major population centers of western Syria, where he is receiving the help of Hizbullah’s militia, as well as Iran.

David Gardner / Financial Times

“(In) recent months, Assad forces have started losing ground again – to ISIS jihadis in central and eastern Syria, and to a rival Islamist alliance in the north and mainstream Sunni rebels in the south.

“Syrian Kurdish fighters, meanwhile, have inflicted a string of defeats on ISIS to strengthen their grip on the northeast of the country. What is left of the Syrian army, severely depleted after four years of civil war, looks to be pulling back to defensive lines – reinforced by the IRGC [Iran’s Islamic Revolution Guard Corps] and Hizbullah.

“The regime still holds Damascus, but the capital could soon be threatened from the south, where rebels are poised to capture Deraa on the border with Jordan....

“As Mr. Assad’s rump state shrinks further, his near total dependence on Iran and its auxiliaries has never been clearer. What seems to be hardening, though, is the pattern of de facto partition emerging in Syria – just as it is in Iraq.”

China: In an annual Cabinet-level meeting between Washington and Beijing, what is known as the U.S.-China Strategic and Economic Dialogue, U.S. Treasury Secretary Jack Lew said Washington remains “deeply concerned about government-sponsored cyber theft from companies and commercial sectors.”

Lew said China had a responsibility “to abide by certain standards of behavior within cyberspace.”

Vice President Joe Biden said, “There’s an urgent need to agree on a rule-based system for rapidly evolving areas ranging from cyberspace to outer space.”

China’s State Councilor Yang Jiechi said the U.S. and other countries must develop an “international code of conduct for cyber information sharing.”

Biden said China would ultimately suffer from pursuing economic espionage.

“Nations that use cyber technology and economic weapons to profit from the theft of intellectual property are sacrificing tomorrow’s gains for short term gains today. They diminish the innovative drive and determination of their own people when they do not reward and protect intellectual property.”

Biden also voiced concerns over China’s reclamation projects in the South China Sea.

“The notion of sea lanes being open and protected is even more crucial today than any time in human history, because of the interconnectedness of the world.” [Wall Street Journal]

For its part, ahead of the talks, Beijing claimed the facilities being built in the South China Sea were for improving weather forecasts.

But U.S. defense and security analysts say the construction of the artificial islands and military facilities is likely to be used for China’s growing fleet of nuclear submarines armed with ballistic missiles; a deep-water “bastion” where the sub fleet could avoid detection.

Admiral William Gortney, commander of the U.S. Northern Command, said, “Any time a nation has developed nuclear weapons and delivery platforms that can range the homeland, it’s a concern of mine.” [Stuart Leavenworth / Sydney Morning Herald]

U.S. authorities are investigating links between Beijing’s top military aircraft manufacturer and Iran’s ballistic missile program. A number of universities in Britain are also under investigation for high-tech collaboration with China’s aerospace sector.

As Charles Clover writes in the Financial Times: “The questions over (the tie-ins) underline the potential pitfalls of the U.K. government’s rapid expansion of trade and investment with China, which has recently invested in sensitive British industries such as nuclear power and telecoms. They also highlight the difficulty in carrying out due diligence given the opaque nature of many of the companies concerned.”

And this from the South China Morning Post: “China is mounting a serious effort to challenge U.S. military superiority in air and space, forcing the Pentagon to seek new technologies and systems to stay ahead of its rapidly developing rival, Deputy Defense Secretary Robert Work said.

“The Pentagon’s chief operating officer, speaking to a group of military and aerospace experts, said China was quickly closing the technological gaps, developing radar-evading aircraft, advanced reconnaissance planes, sophisticated missiles and top-notch electronic warfare equipment....

“Work, citing a Harvard study on rising powers confronting established powers, told the conference that interactions between the two often result in war. As a result, the Defense Department must ‘hedge against this international competition turning more heated.’”

On a totally different issue, prosecutors in Italy are seeking to try the Bank of China’s Milan branch and 297 individuals, mostly Chinese living in Italy, on money smuggling and other crimes.

An investigation called “River of Money,” which started in 2008, points to the growing influence of Chinese criminal groups in Italy’s Tuscany region.

Russia: In a speech at the Kremlin on Thursday, President Vladimir Putin said Russia needs a mighty military to fend off threats near its borders, saying a “powerful army equipped with modern weapons is the guarantor of sovereignty and territorial integrity of Russia.”

Despite its economic issues, Putin plans to spend $400 billion through 2020 to give the armed forces dozens of navy ships, hundreds of new planes and missiles and thousands of tanks.

Startlingly, a new poll from the independent Levada Center showed Putin’s approval rating reaching an all-time high of 89 percent this month. Ah, the power of controlling the media, with the Ukrainian crisis, for one, being painted as part of the West’s efforts to weaken Russia.

Levada head Lev Gudkov said television propaganda was the main factor behind Putin’s numbers.

“This is a very aggressive and false propaganda,” he said. “All alternative channels, therefore all alternative points of view, assessments are pushed out of the public sphere.” [AP]

NATO is reviewing its nuclear policy as a result of what it calls irresponsible rhetoric coming out of Moscow about the potential use of nukes.

For the first time since the end of the Cold War, defense ministers are talking of strengthening the military alliance’s nuclear deterrent, though NATO Sec.-Gen. Jens Stoltenberg vowed, “We will not be dragged into an arms race.”

Of course as Geoff Dyer and Alex Barker of the Financial Times point out, “Any effort to beef up NATO’s nuclear rhetoric would leave Barack Obama in an uncomfortable position after the U.S. president came to office pledging to make nuclear disarmament one of his administration’s main priorities.”

Sergei Ivanov, Putin’s chief of staff, said this week: “If the military infrastructure of NATO is greatly strengthened in eastern Europe, or the U.S. starts to really place potent missile defense systems in Romania, Bulgaria or Poland, we will say that the external threat has grown stronger.” [Financial Times]

But only five of 28 total NATO members are meeting military spending targets of 2% of GDP; the U.S., Great Britain, Greece, Estonia and Poland....despite Russia’s growing assertiveness.

Back to Ukraine, as reported in The Economist: “In the past 18 months, a psychological shift has seen public opinion in Ukraine turn sharply against Russia. In September 2013, just before the Maidan revolution, 88% of Ukrainians felt ‘positively’ about Russia, says the Kiev International Institute of Sociology. By May 2015, that number had fallen to 30% (it would be a lot lower if it excluded people in the rebel-held southeast).”

In areas controlled by the government, polling by the International Republican Institute finds a majority of Ukrainians favoring membership in the European Union, with only 13% wanting to join Russia’s customs union.

Lastly, former Russian prime minister and leading diplomat, Yevgeny Primakov, died Friday at the age of 85. In the early 1990s, he was one of the first major Russian statesmen to speak out against the country’s new pro-Western policies. As head of Russia’s Foreign Intelligence Service in 1993, the FIS produced a report claiming that NATO’s expansion toward Eastern Europe was a threat to Russia’s interests.

According to Boris Yeltsin’s daughter, Primakov once requested that Yeltsin fire Putin, but Yeltsin refused to do so and Primakov and Putin ended up getting along well.

Tunisia: The horrific attack on the seaside resort of Sousse, about 90 miles south of the capital, Tunis, follows on the heels of the March attack on the Bardo museum in Tunis that killed 22, as the terrorists seek to deal Tunisia’s critical tourism industry a mortal blow.

Afghanistan: The Taliban launched a brazen attack on the Afghan parliament Monday and attempted to storm the building before being turned back by security forces in a battle that left two civilians killed and at least 40 people wounded.

The day before the Taliban seized a key northern district in the province of Kunduz after a day of fighting reportedly left 12 Afghan soldiers dead. Then another district fell to the insurgents on Monday.

One Afghan soldier said in a video, “No reinforcements came. We had to flee.” [Los Angeles Times]

While the Afghan forces in Kabul did an admirable job, security forces elsewhere are taking heavy casualties as the Taliban has launched a wave of attacks. They now control a district just a few miles from Kunduz’ provincial capital, also called Kunduz, which has 300,000 residents.

Pakistan: The death toll from a heat wave in the nation’s largest city of Karachi has claimed over 1,000, though the temperature has ‘cooled’ to a more seasonal 100 F. Last weekend the temperature hit 113.

Two things compounded the situation. One is Ramadan, which requires fasting and abstaining from drinking water from dawn until dusk, with religious leaders urging folks to break the fast if they didn’t feel well.

The other issue is intermittent power in many neighborhoods, which means no air-conditioning.

Random Musings

--The U.S. Supreme Court ruled 5-4 in favor of same-sex marriage, declaring the Constitution requires same-sex marriage be legalized in all 50 states.

The court was split along ideological lines with Justice Anthony Kennedy once again the swing vote in a majority opinion that sweeps away the state bans on gay marriage that still exist in 13 states.

Kennedy wrote:

“Under the Constitution, same-sex couples seek in marriage the same legal treatment as opposite-sex couples, and it would disparage their choices and diminish their personhood to deny them this right.”

In his dissent, Chief Justice John Roberts said in part:

“Today...the Court takes the extraordinary step of ordering every State to license and recognize same-sex marriage. Many people will rejoice at this decision, and I begrudge none their celebration. But for those who believe in a government of laws, not of men, the majority’s approach is deeply disheartening. Supporters of same-sex marriage have achieved considerable success persuading their fellow citizens – through the democratic process – to adopt their view. That ends today. Five lawyers have closed the debate and enacted their own vision of marriage as a matter of constitutional law.   Stealing this issue from the people will for many cast a cloud over same-sex marriage, making a dramatic social change that much more difficult to accept.”

Near the end of his 29-page long dissent, Roberts added:

“If you are among the many Americans – of whatever sexual orientation – who favor expanding same-sex marriage, by all means celebrate today’s decision. Celebrate the achievement of a desired goal. Celebrate the opportunity for a new expression of commitment to a partner. Celebrate the availability of new benefits. But do not celebrate the Constitution. It had nothing to do with it.”

Justice Antonin Scalia called the decision a “threat to American democracy,” saying it was “constitutional revision by an unelected committee of nine.”

According to a Pew Research Center survey released this month, 57% of adults now support marriage equality, up from just 36% in 2005. [A CNN/ORC poll has 63% supporting same-sex marriage today, vs. 45% in May 2009.]

--President Obama announced Wednesday that the U.S. government will no longer threaten to prosecute those who pay ransom for loved ones taken hostage by terrorist groups.

“When it comes to how our government works to recover Americans held hostage and how we work with their families, we are changing how we do business,” said the president.

Obama reaffirmed the administration’s “no-concessions” policy toward terrorists, but said he had to balance this with reality. If his family were at risk, he said, “I would move heaven and earth to get those loved ones back.” But as a president, “I also have to consider our larger national security.”

Counterterrorism adviser Lisa Monaco then said, “There’s no doubt that the payment of ransoms fuels the very activity that we are trying to stop. At the same time, we’ve got a responsibility to stand with families.” [Rebecca Nelson / Defense One]

Editorial / Wall Street Journal

“The danger of Mr. Obama’s good intentions is that he is giving terrorists even more incentive to snatch more Americans....

“More troubling is the signal Mr. Obama is sending about how the U.S. will handle hostage communications with kidnappers going forward. ‘I am reaffirming that the United States government will not make concessions, such as paying ransom, to terrorist groups holding American hostages,’ Mr. Obama said.

“But he went on to say that ‘we are clarifying that our policy does not prevent communications with hostage-takers – by our government, the families of hostages, or third parties who help these families. And, when appropriate, our government may assist these families and private efforts in those communications.’

“So while the U.S. government will pay no ransom, it will facilitate the efforts of others to pay ransom. And while the FBI or State Department might assist in connecting kidnappers with American ransom-payers, no one should think they will do any negotiating on behalf of the U.S. government. Don’t be surprised if terrorists fail to appreciate this fine distinction....

“The entire point of the longstanding U.S. policy not to negotiate was to make Americans less inviting targets for hostage-taking, in contrast to the French or Italians who are well known for paying. The chief take-away from this new policy will be that kidnapping Americans is now more likely to lead to a payday than a raid by U.S. Special Forces....

“Mr. Obama reported that more than 80 Americans have been taken hostage since 9/11, but he cited by name only two who had been rescued. This is what happens when our enemies don’t fear American retribution. They won’t be any more fearful with this new hostage policy.”

--The Office of Personnel Management is now saying as many as 18 million had their Social Security numbers taken in the massive cyberattack revealed in recent weeks, far more than the initial 4 million estimate.

Donna Seymour, OPM’s chief information officer, testified before a House committee that hackers stole “manuals about the way we do business,” including data about the agency’s servers, in a March 2014 hacking attack, one of two breaches agency officials believe were conducted.

James Clapper, director of national intelligence, said on Thursday that China is the “leading suspect” in the OPM hack, the first government official to publicly blame China for the breaches.

Chinese officials continue to deny the country is behind the hacks.

--In a Suffolk University Political Research Center poll of New Hampshire GOP primary voters, Jeb Bush leads with 14%, while Donald Trump polls second with 11%. They are the only two in double digits.

Wisconsin Gov. Scott Walker received 8%, Sen. Marco Rubio 7%, Ben Carson 6%, New Jersey Gov. Chris Christie 5%.

Overall, 49% of likely voters had an unfavorable opinion of Trump, while 37% viewed him positively.

--In a new NBC News/Wall Street Journal national poll of likely Republican primary voters, Jeb Bush leads with 22%, followed by Scott Walker at 17%, Marco Rubio 14%, Ben Carson 11% and Mike Huckabee 9%.

In this survey, Trump is at 1%, but he won’t remain there.

Trump, though, suffered a blow when Univision, which owns the Spanish-language rights to the Miss USA beauty pageant, said it would cut ties to both Miss USA, slated for July 12, and the Miss Universe pageants, both owned by Trump, following remarks Trump made during his campaign kickoff about Mexican immigrants. [“They’re bringing drugs, they’re bringing crime, they’re rapists.”]

Trump said he would sue the network for breaking “an ironclad contract.”

--Chris Christie, who is going to formally announce his candidacy for the Republican nomination for president this Tuesday, saw his job approval rating in my state hit another record low.

Just 30% approve of the job he is doing, while 55% disapprove, according to the Fairleigh Dickinson University PublicMind survey. [Post Superstorm Sandy, Christie had a 77% approval rating.]

Christie’s predecessor, Democratic Gov. Jon Corzine, left office with 58% job disapproval, 33% approval.

--On the Democratic side, the aforementioned NBC News/Wall Street Journal poll shows that among Democratic primary voters, Hillary Clinton takes 75%, with Bernie Sanders at 15%.

Looking ahead to the November 2016 election, Clinton leads Bush 48-40 percent in a hypothetical matchup. She leads Rubio by 10 points and Walker by 14.

--Jennifer Rubin / Washington Post...on some of the problems for Hillary Clinton.

The success of Sen. Bernie Sanders (I-Vt.) should be worrisome. Polling suggests he is cutting into Hillary’s lead in New Hampshire*. He is raising money. He is drawing big crowds. The media are treating him seriously. If such an improbable candidate is doing so well why wouldn’t Vice President Joe Biden or some other big-name Democrat get into the race?....

Her ethical issues are not going away....

The Republicans are running people who match up very well against her. There are multiple governors and ex-governors who have accomplished more and who can relate better to average Americans. Rubio and Wisconsin Gov. Scot Walker can play the populist card effectively against her. The winner on the GOP side in all likelihood will be more practiced and appealing, younger and more energetic.

As Iran and the Islamic State gain strength and American influence diminishes her ‘experience’ becomes an anvil, weighing her down.”

*Sanders trails Clinton just 43-35 in New Hampshire, according to a CNN/WMUR poll. Jeb Bush leads among Republicans in this one with 16%, Trump at 11% and Paul 9%.

--Speaking of ‘ethical issues,’ Clinton claimed she provided the State Department with all of her work-related emails from her personal account when she was in office, but according to officials in the agency, they have received several related to Libya that she had not handed over; emails between her and longtime adviser Sidney Blumenthal, who wasn’t working for the department at the time but was sending her intelligence.

Blumenthal gave the House committee investigating the 2012 Benghazi, Libya, attack 15 emails that the State Department cannot find among the cache Clinton handed over last year.

--Leading U.S. retailers such as Walmart, Sears, eBay, Amazon and Google announced they were removing all Confederate flag merchandise in the wake of the killing of nine black churchgoers in Charleston, South Carolina by a white supremacist.

Among the other reactions to the massacre were statements by the Republican candidate for governor of Kentucky, Matt Bevin, and U.S. Sen. Mitch McConnell that a statue of Confederate President Jefferson Davis should be removed from the Capitol rotunda in that state.

Democratic Virginia Gov. Terry McAuliffe said he wanted the state to stop issuing vanity license plates for the Sons of Confederate Veterans that includes the battle flag.

Tennessee Republican legislators called for removing a Capitol grounds bust of Nathan Bedford Forrest, a Confederate general and early Ku Klux Klan leader.

And on and on...Jeb Bush and Mitt Romney were among other leading Republicans calling for the removal of the flag from the South Carolina Capitol.

Jonah Goldberg / New York Post

“There are few subjects that ignite more casual, uninformed bigotry and condescension from elites in this nation than Dixie.

“ ‘Practically the whole region has rejected nearly everything that’s good about this country and has become just one big nuclear waste site of choleric, and extremely racialized, resentment,’ the Daily Beast’s Michael Tomasky wrote last year.

“How, then, to explain the tens of thousands of South Carolinians, white and black, marching in unity across the Ravenel Bridge on Sunday night? Did the city bus in decent Northerners?

“The Washington Post’s Sally Jenkins glibly asserts that ‘the Confederate battle flag is an American swastika, the relic of traitors and totalitarians, symbol of a brutal regime, not a republic.’

“If it were left to me, I’d take the flag down. But this kind of cheap moral preening is galling. Is it really too much for people to muster the moral imagination that the issue isn’t nearly as simple as that?

“A November poll of South Carolinians found that 61 percent of blacks wanted it down. That means nearly four in 10 blacks felt differently. Are they the moral equivalent of self-loathing Jews, happy to live under a swastika?....

“If we’re going to offer ridiculous flag comparisons, a better one would be the Japanese imperial flag. After World War II, the United States banned it until 1949.

“Douglas MacArthur then opted to let a defeated, once-authoritarian society keep a few symbols of its past in order to build a better future.

“Can anyone argue that the South hasn’t done likewise? White Northern liberals explain how the South is an irredeemable cesspool of hate, while ignoring the fact that blacks are abandoning the Northern blue states in huge numbers to move to the South.

“Demographer Joel Kotkin found that 13 of the 15 best cities in the country for African-Americans to live in are now in the South. Over the last decade, millions of African-Americans have been reversing the Great Migration of a century ago to live in Dixie.

“A big part of that story is economic, of course – the ‘blue state’ model has failed generations of minorities – but it’s also cultural....

“No, the South isn’t perfect; name a region that is. But it does have good manners, which is why it routinely acts with more dignity – and in Charleston, with more grace – than its critics to the north.”

Kathleen Parker / Washington Post

“The grief Charleston and all of us feel is nauseating. The layers and layers of meaning in that single, sick act – the church’s historic role as a meeting place for blacks from before the Civil War through the civil rights era to the present – add extra dimension to losses so profound and freighted with sorrow that one weeps for humanity.

“To the people of Charleston, among whom I count myself as my family settled there more than 300 years ago, this senseless murder was a deep gouge in the soul of a city that has deliberately reconstructed itself as both a place of beauty and a beacon of diversity. For most of recent history, blacks, who make up about a third of the city’s population, and whites, have governed the city together with the mutual goal of racial harmony and cooperation. Much credit goes to the leadership of Mayor Joseph P. Riley Jr., who was mayor when I began covering him in the late 1970s as a reporter for Charleston’s afternoon paper....

“He is one of the nation’s longest-serving mayors for good reason. Not only did he envision that Charleston could become a tourist destination but he also has been a leader for social justice and racial reconciliation for decades....

“Charlestonians, black and white, have responded to his leadership with civic pride and racial unity, as television viewers have witnessed these past few days. At least several residents have reminded reporters that the shooter wasn’t from Charleston. We’re not like that, they were saying.

“Thus, my sadness as I write is also for Riley, who has worked so hard to achieve what was unimaginable not so long ago – a vibrant, diverse city where race isn’t swept under the rug but discussed with mutual respect and purpose. This is the Riley difference.”

--South Carolina Republican Gov. Nikki Haley sure rocketed into the 2016 conversation with her terrific policy statement on taking the flag down from the capitol building.

--Responding to the removal of the Confederate flag in states across the country, former Virginia Sen. Jim Webb said: “The Confederate Battle Flag has wrongly been used for racist and other purposes in recent decades. It should not be used in any way as a political symbol that divides us.”

But Webb added: “We should also remember that honorable Americans fought on both sides in the Civil War, including slave holders in the Union Army from states such as Missouri, Kentucky, Maryland and Delaware, and that many non-slave holders fought for the South. It was in recognition of the character of soldiers on both sides that the federal government authorized the construction of the Confederate Memorial 100 years ago, on the grounds of Arlington National Cemetery.

“This is a time for us to come together, and to recognize once more that our complex multicultural society is founded on the principle of mutual respect,” he said.

--Meanwhile, Apple removed Civil War games from its App Store that included images of the Confederate flag, which is beyond absurd. One historian, Joan Waugh of UCLA, spoke for many when she told the Los Angeles Times, “I cannot support the ill-considered action by Apple or any other company to remove the flag from a Civil War game,” she said.

In a tweet on Sunday, Apple CEO Tim Cook had called for removing the “symbols and words” that feed racism.

--The Washington Times reports that the State Department’s inspector general said in an oversight report, “A significant increase in reported harassment inquiries in the Department of State over the past few fiscal years supports the need for mandatory harassment training.”

From the Times: “The report states that formal harassment claims rose from 88 cases in 2011, during Mrs. Clinton’s third year as America’s top diplomat, to 248 in 2014, Mr. Kerry’s second year as secretary.”

The inspector general’s report stated that there has not been enough mandatory sexual harassment training.

--Oh, I wish I could comment on a certain big city mayor’s kid, who just graduated from high school with his father speaking at the graduation ceremony. The boy, who is heading to Yale, showing up in flip flops, as well as being the only kid who didn’t wear his mortarboard because it didn’t fit on his head due to his hair.

But, no, that would be tacky.

Meanwhile, this particular kid’s father reached a budget deal with his city council that includes the hiring of 1,300 new police officers, after said mayor had been criticized for not agreeing with his police commissioner who was calling for same.

This mayor, with the disrespectful kid who nonetheless was the star in a campaign commercial that helped lead to his father’s election (which shows how incredibly shallow this city’s voters are), said the budget deal included savings that allowed for the increase in the police force.

Many of the new officers will be used to create a dedicated counterterrorism force, because this rather large metropolis is the number one target of terrorists.

---

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

God bless America.
---

Gold $1173
Oil $59.63

Returns for the week 6/22-6/26

Dow Jones -0.4% [17946]
S&P 500 -0.4% [2101]
S&P MidCap -0.5%
Russell 2000 -0.4%
Nasdaq -0.7%

Returns for the period 1/1/15-6/26/15

Dow Jones +0.7%
S&P 500 +2.1%
S&P MidCap +5.5%
Russell 2000 +6.2%
Nasdaq +7.3%

Bulls 51.6
Bears 15.4 [Source: Investors Intelligence]

Have a great week. Thank you to those who have supported my fundraising efforts to date. Click on the link above to contribute.

Brian Trumbore