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Week in Review

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08/18/2018

For the week 8/13-8/17

[Posted 11:30 PM ET]

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Edition 1,010

Trump World

I write the opening last, as I’m sure you’ve figured out over the years, especially in the era of The Donald when you never know what might reach out of the screen to grab you by the throat.

It’s a stormy night at global HQ, the sky lighting up like Mordor, and Sauron is brooding....

OK, that’s a crappy attempt at a dramatic opening, but all the events of the week are covered below in great detail.  So cue the....

Trumpets....

--The FBI fired Peter Strzok, the agent who helped lead the investigations into Russia’s interference in the 2016 presidential election and into Clinton’s use of a private email server.

Last summer, he was removed from the Russia inquiry by special counsel Robert Mueller when Justice Department Inspector General Michael Horowitz discovered anti-Trump text messages between Strzok and former FBI attorney Lisa Page disparaging the then-presidential candidate.

Trump tweets: “Agent Peter Strzok was just fired from the FBI – finally. The list of bad players in the FBI & DOJ gets longer & longer. Based on the fact that Strzok was in charge of the Witch Hunt, will it be dropped?  It is a total Hoax. No Collusion, No Obstruction – I just fight back!”

“Tom Fitton of Judicial Watch: ‘The Strzok firing is as much about the Mueller operation as anything else. There would be no Mueller Special Councel (sic) to investigate so called collusion but for the machinations of Strzok & his colleagues at the top levels of the FBI. We know this...

“...guy was corrupt and had anti-Trump animus.  Strzok and others at the FBI should be criminally investigated for the way the (sic) conducted this investigation. Instead, Mueller is pretending nothing went wrong.  He used Strzok, he used the Clinton DNC Dossier...the whole thing...

“...should be shut down.  The Strzok firing shows that the fundamental underpinnings of the investigation were corrupt. It should be shut down by the courts or by honest prosecutors.’  Thank you, Judicial Watch, I couldn’t have said it better myself!”

“Lou Dobbs: ‘This cannot go forward...this Special Councel (sic) with all of his conflicts, with his 17 Angry Democrats, without any evidence of collusion by the Trump Campaign and Russia. The Dems are the ones who should be investigated.’ Thank you, Lou, so true!”

--In a remarkable attack on a political opponent, President Trump revoked the security clearance of John O. Brennan, the former CIA director under President Barack Obama, citing what he called Brennan’s “erratic” behavior, which is most rich on the part of Mr. Trump.

The White House had previously threatened to strip Brennan and others in the Obama administration of their security clearances, and at the time, White House press secretary Sarah Huckabee Sanders said the president was considering doing so because “they politicized, and in some cases monetized, their public service and security clearances.”

Brennan has become a frequent critic of the president, including when Trump this week attacked Omarosa by calling her a “dog.”

Brennan wrote: “It’s astounding how often you fail to live up to minimum standards of decency, civility & probity. Seems like you will never understand what it means to be president, nor what it takes to be a good, decent, & honest person. So disheartening, so dangerous for our Nation.”

The president was widely criticized for the move.

The U.S. military commander who oversaw the raid that killed Osama bin Laden asked President Trump to revoke his security clearance on Thursday, taking a dramatic stand of solidarity with former CIA Director Brennan.

William McRaven, a retired Navy admiral who led the team that assassinated bin Laden in 2011, made the request in a blistering open letter to Trump.

“Few Americans have done more to protect this country than John,” McRaven, 62, wrote in the letter to the Washington Post.  “He is a man of unparalleled integrity, whose honesty and character have never been in question, except by those who don’t know him.”

McRaven continued, “Therefore, I would consider it an honor if you would revoke my security clearance as well, so I can add my name to the list of men and women who have spoken up against your presidency.”

McRaven expounded on the qualities that make for a good leader.

“A good leader tries to embody the best qualities of his or her organization,” he wrote.  “A good leader sets the example for others to follow.  A good leader always puts the welfare of others before himself or herself.”

Unfortunately, McRaven wrote, Trump has embodied “little of these qualities.”

“Through your actions, you have embarrassed us in the eyes of our children, humiliated us on the world stage and, worst of all, divided us as a nation,” McRaven said.

David Ignatius / Washington Post

“What Donald Trump did Wednesday isn’t supposed to happen in a democracy.  A president who swore an oath to uphold the Constitution just carried out a personal political vendetta against a career intelligence officer.

“In revoking the security clearance of former CIA director John Brennan, Trump took another step toward the abyss. He cited the ‘risk posed by [Brennan’s] erratic conduct and behavior,’ a ludicrous charge coming from our unguided missile of a chief executive. Brennan’s real crime is that he has been in Trump’s face nearly every day, trading insults on Twitter and cable television. Brennan has taken to using words such as ‘high crimes and misdemeanors’ and ‘nothing short of treasonous’ to describe Trump’s behavior, and likened him to convicted fraudster Bernie Madoff. Stripping Brennan’s clearance was presidential payback, dressed up in national security language.

“I wrote back in January that I wished Brennan and other former intelligence chiefs would resist slugging it out with Trump – not because their criticisms are wrong but because they risked tarnishing the credibility and professionalism of their agencies. As I argued, Trump supporters would ‘fume that the spy chiefs are ganging up on the populist president. Conspiracy theories about an imaginary ‘deep state’ will gain more traction, and the cycle of national mistrust will get worse.’

“But let’s be honest: Brennan isn’t a guy who was going to back down in a bar fight, any more than Trump. He’s tough and stubborn, with a chip on his shoulder. He’s a guy who, if you write five positive things about him and one negative, remembers only the negative. Once Trump insulted Brennan’s integrity, as he did after he won the presidency, these two were going to end up in a cockfight.

“The prevailing media explanation of the Brennan move was that Trump was trying to distract public attention from Omarosa Manigault Newman, a disaffected former staffer who just published a tell-all book about the president titled ‘Unhinged.’  But I wonder if that was the real Brennan trigger.

“Trump himself offered a clearer (and more damning) explanation in an interview Wednesday with the Wall Street Journal, suggesting that he punished Brennan because he was one of the original instigators of the investigation led by special counsel Robert Mueller III.  ‘I call it the rigged witch hunt, [it] is a sham.  And these people led it!  So I think it’s something that had to be done.’

“With Trump, you always have to question what’s rubbing him so raw and driving him toward possibly illegal and unconstitutional actions. As prosecutors like to say: ‘We may not know what he’s done wrong, but he does.’  Does a warped protective impulse drive Trump into these furies of defensive action?....

“Brennan, like Comey, was there at the beginning of this investigation.  Trump must have asked himself: What does Brennan know? What did he learn from the CIA’s deep assets in Moscow, and from liaison partners such as Britain, Israel, Germany and the Netherlands? Does Trump think Brennan will be a less credible witness without a security clearance?

“The Brennan episode is just one more warning of what may be ahead.  Trump appears ready to take our country over the waterfall to save himself. Before it’s too late, Trump should realize: Even in his rage, he can’t fire everybody.”

--A new poll from Quinnipiac University reveals 79% of Americans say it’s never acceptable to seek information from a hostile foreign country about a political opponent, including 92% of Democrats and 69% of Republicans.

1 in 5 Republicans (19%) say it is acceptable to do such a thing, even though it is against the law.  Quinnipiac’s question made no explicit reference to the June 2016 meeting in Trump Tower between senior Trump campaign members and Russians.

As to the Mueller probe, a CNN poll conducted by SSRS has two-thirds of Americans, including majorities across party lines, wanting the investigation into Russian interference in the 2016 election to wrap up before voters go to the polls in November.

34% approve of the president’s handling of the Russia investigation (55% disapprove), which is a gain of five points since June 14-17, while 47% approve of how Mueller is handling it, up six points since June.

70% say the president should testify.

55% of Americans say Trump isn’t tough enough on Russia, 36% say his attitude is about right.

The aforementioned John O. Brennan / New York Times

“When Alexander Bortnikov, the head of Russia’s internal security service, told me during an early August 2016 phone call that Russia wasn’t interfering in our presidential election, I knew he was lying.  Over the previous several years I had grown weary of Mr. Bortnikov’s denials of Russia’s perfidy – about its mistreatment of American diplomats and citizens in Moscow, its repeated failure to adhere to cease-fire agreements in Syria and its paramilitary intervention in eastern Ukraine, to name just a few issues.

“When I warned Mr. Bortnikov that Russian interference in our election was intolerable and would roil United States-Russia relations for many years, he denied Russian involvement in any election, in America or elsewhere, with a feigned sincerity that I had heard many times before.  President Vladimir Putin of Russia reiterated those denials numerous times over the past two years, often to Donald Trump’s seeming approval.

“Russian denials are, in a word, hogwash.

“Before, during and after its now infamous meddling in our last presidential election, Russia practiced the art of shaping political events abroad through its well-honed active measures program, which employs an array of technical capabilities, information operations and old-fashioned human intelligence spycraft.  Electoral politics in Western democracies presents an especially inviting target, as a variety of politicians, political parties, media outlets, think tanks and influencers are readily manipulated, wittingly and unwittingly, or even bought outright by Russian intelligence operatives. The very freedoms and liberties that liberal Western democracies cherish and that autocracies fear have been exploited by Russian intelligence services not only to collect sensitive information but also to distribute propaganda and disinformation, increasingly via the growing number of social media platforms.

“Having worked closely with the FBI over many years on counterintelligence investigations, I was well aware of Russia’s ability to work surreptitiously within the United States, cultivating relationships with individuals who wield actual or potential power.  Like Mr. Bortnikov, these Russian operatives and agents are well trained in the art of deception. They troll political, business and cultural waters in search of gullible or unprincipled individuals who become pliant in the hands of their Russian puppet masters. Too often, those puppets are found....

“The already challenging work of the American intelligence and law enforcement communities was made more difficult in late July 2016, however, when Mr. Trump, then a presidential candidate, publicly called upon Russia to find the missing emails of Mrs. Clinton.  By issuing such a statement, Mr. Trump was not only encouraging a foreign nation to collect intelligence against a United States citizen, but also openly authorizing his followers to work with our primary global adversary against his political opponent.

“Such a public clarion call certainly makes one wonder what Mr. Trump privately encouraged his advisers to do – and what they actually did – to win the election.  While I had deep insight into Russian activities during the 2016 election, I now am aware – thanks to the reporting of an open and free press – of many more of the highly suspicious dalliances of some American citizens with people affiliated with the Russian intelligence services.

“Mr. Trump’s claims of no collusion are, in a word, hogwash.

“The only questions that remain are whether the collusion that took place constituted criminally liable conspiracy, whether obstruction of justice occurred to cover up any collusion or conspiracy, and how many members of ‘Trump Incorporated’ attempted to defraud the government by laundering and concealing the movement of money into their pockets.  A jury is about to deliberate bank and tax fraud charges against one of those people, Paul Manafort, Mr. Trump’s former campaign chairman. And the campaign’s former deputy chairman, Rick Gates, has pleaded guilty to financial fraud and lying to investigators.

“Mr. Trump clearly has become more desperate to protect himself and those close to him, which is why he made the politically motivated decision to revoke my security clearance in an attempt to scare into silence others who might dare to challenge him. Now more than ever, it is critically important that the special counsel, Robert Mueller, and his team of investigators be allowed to complete their work without interference – from Mr. Trump or anyone else – so that all Americans can get the answers they so rightly deserve.”

Trump tweet: “ ‘Director Brennan’s recent statements purport to know as fact that the Trump campaign colluded with a foreign power.  If Director Brennan’s statement is based on intelligence he received while leading the CIA, why didn’t he include it in the Intelligence Community Assessment released in 2017. If his statement is based on intelligence he has seen since leaving office, it constitutes an intelligence breach....’ Richard Burr (R-NC) Senate Intel Cmte Chair.”

--Trump tweets: “THE FAKE NEWS MEDIA IS THE OPPOSITION PARTY.  It is very bad for our Great Country....BUT WE ARE WINNING!”

“The Boston Globe, which was sold to the Failing New York Times for 1.3 BILLION DOLLARS (plus 800 million dollars in losses & investment), or 2.1 BILLION DOLLARS, was then sold by the Times for 1 DOLLAR.  Now the Globe is in COLLUSION with other papers on free press.  PROVE IT!”

“There is nothing that I would want more for our Country than true FREEDOME OF THE PRESS.  The fact is that the Press is FREE to write and say anything it wants, but much of what it says is FAKE NEWS, pushing a political agenda or just plain trying to hurt people. HONESTY WINS!”

You hear that, boys and girls?  Our president just gave us some great advice. Honesty wins!

In the Quinnipiac survey, 65% of voters said the media was an important part of U.S. democracy, compared to 26% who agree with Trump’s assessment that the media is the enemy of the people.

A majority of Republicans...51%...agreed with the president’s statement while 36% did not.

66% said Trump should stay off Twitter, while 26% wanted him to continue.

So the nation’s newspapers, spurred on by the Boston Globe, were urged to stand up for the press with editorials on Thursday and nearly 350 news organizations had pledged to do so.

In St. Louis, the Post-Dispatch called journalists “the truest of patriots.” The Chicago Sun-Times said it believed most Americans know that Trump is talking nonsense. The Fayetteville, N.C. Observer said it hoped Trump would stop, “but we’re not holding our breath.”

“Rather, we hope all the president’s supporters will recognize what he’s doing – manipulating reality to get what he wants,” the Observer said.

The New York Times added a pitch to “subscribe to your local papers.  Praise them when you think they’ve done a good job and criticize them when you think they could do better. We’re all in this together.”

But the Wall Street Journal said it was not participating, with a column from James Freeman noting that the Boston Globe’s effort ran counter to the independence that editorial boards claim to seek.  Freeman wrote that Trump has the right to free speech as much as his media adversaries.

The Baltimore Sun observed: “While we agree that labeling journalists the ‘enemy of the American people’ and journalism ‘fake news’ is not only damaging to our industry but destructive to our democracy, a coordinated response from independent – dare we say ‘mainstream’ – news organizations feeds a narrative that we’re somehow aligned against this Republican president.”

Still, the Sun supported the Globe’s effort and also noted the deaths of five Capital Gazette staff members at the hands of a gunman in nearby Annapolis, Maryland.

But it’s hard to see the newspapers’ efforts being that successful as their editorial boards overwhelmingly opposed Trump’s election in 2016.  A Pew Research Center poll had 85% of Republicans and Republican-leaning independents saying in June 2017 that the news media has a negative effect on the country, up from 68% in 2010.

I do have to relay this editorial from the New York Daily News:

“Trump’s use of the world’s most powerful pulpit to launch a never-ending tirade against those who seek to gather facts, synthesize them and present them to the public has been so vicious, so indiscriminate, so corrosive to our common civic fabric, that it demands an extraordinary rebuke.

“He, who objective analysis proves lies more than any President ever, smears reporters, newspapers and TV channels as ‘fake news’ because they have the temerity to expose uncomfortable truths about his administration.

“He calls us, as a group, the ‘enemy of the people’ – the same horrible term used by murderous guillotining French revolutionaries and Stalin’s secret police.

“And it’s working for him.

“Half of Republicans and a quarter of all voters now agree with the President’s sick ‘enemies’ smear. More than four in 10 Republicans want to give him the power to shut down stations and publications he dislikes. It doesn’t get less American than that.

“The consequences are dire and stretch far beyond this presidency. When a critical mass of our fellow citizens reflexively distrust everything that is written or broadcast because it is written or broadcast, reading not with intelligent skepticism but dismissive cynicism – or, more often, not reading at all unless a piece has the sickly perfume of propaganda – we lose the ability to expose and repair problems in our government.

“To react to common threats. To keep our community and culture from fraying irreparably.

“It is of course fair game for politicians, or anyone, to push back on coverage they consider inaccurate or unfair. Journalists have blind spots. They make mistakes. They chase ratings and clicks. Bias is not a figment of critics’ imagination; it is an infection the media must do its best to fight, and neutralize.

“But to reflexively reject all inconvenient facts as fiction is to weaken the entire nation’s immune system, and render what is supposed to be an informed citizenry incapable of engaging in good-faith debate.

“We react to Trump as intimates, not bystanders. He’s been bloviating around these parts for his entire life. Donald Trump, or John Miller (fake name) or John Barron (fake name), has a long history of using the press to advance his own dishonest narrative.

“Trump learned well from the master, the despicable Roy Cohn, in using lies to inflate himself and smear rivals.

“A veteran local gossip reporter who fielded many a phone call from the man put it this way: ‘Trump turned out to be the king of ersatz.  Not just fake, but false. He lied about everything, with gusto.’

“The earth the President has scorched has another awful side effect for those of us in the nation’s largest  city: It has given license to other politicians to launch smaller wars against the media for their own ends.

“Weeks ago, Gov. Cuomo responded to a legitimate question about campaign financing by unleashing a tirade about the business practices of the parent company for which a reporter happens to work.

“Mayor de Blasio has wished for the demise of a competitor tabloid that gives him a rough run.  He has relished the financial troubles of this newspaper and lashed out at solid reporting with language this close to ‘fake news.’

“Their sins do not compare to Trump’s, but this is the behavior the President has helped to normalize.  This is the country he is molding in his ugly image.  This is the angry ignorance we must all stand against.”

Thursday, the U.S. Senate passed a resolution by unanimous consent affirming that the media “is not the enemy of the people.”  The measure is largely symbolic.

--The Defense Department announced the military parade ordered by President Trump will not happen in 2018. Colonel Rob Manning, a Pentagon spokesman, said the military and the White House “have now agreed to explore opportunities in 2019.”

The announcement came hours after reports the parade would cost about $92 million, according to U.S. officials, citing preliminary estimates, more than three times the price first suggested by the White House.

According to officials, roughly $50 million would cover Pentagon costs for aircraft, equipment, personnel and other support for the November parade in Washington.

The remainder would be borne by other agencies and largely involve security costs.

Officials said the plans had not yet been approved by Defense Secretary Jim Mattis.  [Mattis himself said he had seen no such estimate and questioned the reports.]

Well, whatever the figure is, it was cancelled, soliciting this from our fearless leader....

Trump tweets: “The local politicians who run Washington, D.C. (poorly) know a windfall when they see it. When asked to give us a price for holding a great celebratory military parade, they wanted a number so ridiculously high that I cancelled it. Never let someone hold you up!  I will instead...

“...attend the big parade already scheduled at Andrews Air Force Base on a different date, & go to the Paris parade, celebrating the end of the War, on November 11th. Maybe we will do something next year in D.C. when the cost comes WAY DOWN. Now we can buy some more jet fighters!”

Trump didn’t elaborate on his allegations about the city government. An hour later, D.C. Mayor Muriel E. Bowser (Dem.) tweeted:

“Yup, I’m Muriel Bowser, mayor of Washington, DC, the local politician who finally got thru to the reality star in the White House with the realities ($21.6M) of parades/events/demonstrations in Trump America (sad).”

The National Commander of the American Legion, Denise Rohan, said the organization “appreciates that our President wants to show in a dramatic fashion our nation’s support for our troops.”

“However, until such time as we can celebrate victory in the War on Terrorism and bring our military home, we think the parade money would be better spent fully funding the Department of Veterans Affairs and giving our troops and their families the best care possible.”

Related to the above, it was beyond pathetic that President Trump signed the National Defense Authorization Act – named after Republican Senator John McCain – at Fort Drum, New York, and didn’t have the class to thank the ailing McCain for his efforts.

--I have nothing to add regarding Omarosa Manigault Newman, her new book and accusations President Trump once used the N-word on “The Apprentice,” among other things, except to say she is a vile, despicable woman.

But Trump was once again a fool for falling into her trap and, as usual, feeling the need to fight back rather than to move on and ignore the woman.  Of course he was also a fool to bring her into the White House in the first place.

--Michael Gerson / Washington Post

“From the beginning of the American republic, its founders obsessed about how it all would end.  ‘Democracy never lasts long,’ said John Adams.  ‘There never was a Democracy Yet, that did not commit suicide.’

“George Washington used his farewell address to warn that partisan ‘factions’ could tear the country apart. The Federalists worried that domestic disunity could be exploited by hostile foreign governments. James Madison in particular feared that liberty might be lost by ‘gradual and silent encroachments of those in power.’

Check.  Check.  Check.

“But there is one factor in our politics that the founders could not have predicted: the debilitating infection of celebrity culture.

“Were Washington to be resurrected, it would be difficult to explain how history’s most powerful nation, after surviving civil war and global conflict, turned for leadership to a celebrity known for abusing other celebrities on television. It is the single strangest development in American history. And we have only begun to process its consequences.

“It is not that American leaders have never been famous. Dwight D. Eisenhower was one of the most famous men in the world for organizing victory in World War II.  Ronald Reagan was famous for his acting career but also for being governor of California and an articulate conservative.

“Fame usually has some rough relationship to accomplishment. Celebrity results from mastering the latest technologies of self-exposure.  Ingrid Bergman was famous. Kim Kardashian is a celebrity. Franklin D. Roosevelt was famous. Donald Trump is...not in the same category.

“Within its proper bounds – confined to stunts on a desert island or in a fake boardroom – the ethos of reality television is relatively harmless.  Transposed to the highest level of politics, it is deeply damaging....

“(The) broader influence of celebrity culture on politics is to transform citizens into spectators.  In his book ‘How Democracy Ends,’ David Runciman warns of a political system in which ‘the people are simply watching a performance in which their role is to give or withhold their applause at the appropriate moments.’ In this case, democracy becomes ‘an elaborate show, needing ever more characterful performers to hold the public’s attention.’  Mr. Madison, meet Omarosa.

“Trump is sometimes called a populist. But all this is a far cry from the prairie populism of William Jennings Bryan, who sought to elevate the influence of common people. Instead, we are seeing a drama with one hero, pitted against an array of villains. And those villains are defined as anyone who opposes or obstructs the president, including the press, the courts and federal law enforcement. Trump’s stump speeches are not a call to arms against want; they are a call to oppose his enemies. This is not the agenda of a movement; it is the agenda of a cult.

“Will the republic survive all this? Of course it will. But it won’t be the same.”

--Philip Rucker of the Washington Post notes that “In President Trump’s singular lexicon, there is no more vicious putdown than likening an adversary to a dog.

“Choked like a dog.”

“Fired like a dog.”

“Sweat like a dog.”

“Good work by General Kelly for quickly firing that dog!”

It’s not just Omarosa.  Sally Yates, Steve Bannon, Mitt Romney, Marco Rubio...all have been called dogs.

So the point is, Trump hates dogs, as first wife Ivana writes in her memoir, and as Rucker points out, he’s “the first modern president not to have a dog – or any pet – in the White House.”

Wall Street and Trade

The week was about Turkey, China, strong U.S. corporate earnings, and Elon Musk’s ongoing issues, and as I go to post, the Wall Street Journal is reporting, “Chinese and U.S. negotiators are mapping out talks to try to end their trade standoff ahead of planned meetings between President Trump and Chinese leader Xi Jinping at multilateral summits in November, said officials in both nations.”  At the same time, everything could just fall apart.

I detail the situation in Turkey further below, but for the purposes of the week’s market action, the nation’s finance chief tried to reassure thousands of international investors on a conference call Thursday, in which he pledged to fix the economic troubles that have seen the country spiral into a currency crisis. This came a day after Qatar pledged $15 billion in investments and the lira rallied a bit.

Berat Albayrak said Turkey’s banks are “healthy and strong” and that implementing structural reforms and maintaining a tight monetary policy to fight inflation remains a priority. He also ruled out any moves to limit money flows, which is  a possibility that worries investors, or any assistance from the International Monetary Fund.

The biggest concern is Turkey’s high levels of foreign debt that fueled growth in recent years, but as the currency drops, that debt becomes so much more expensive to repay, leading to potential bankruptcies.

But President Erdogan has refused to allow the central bank to raise interest rates to support the currency, as  experts say it should.  Albayrak didn’t appear to address the central bank’s independence.

As for the U.S. economy, July retail sales were stronger than expected 0.5%, 0.6% ex-autos, but June was revised down from 0.5% to 0.2%.  Put the two together, though, and it’s very solid.

July industrial production was less than forecast, 0.1%.

July housing starts were troubling, far less than expected, as the poor data on the housing front continues.  Shares in homebuilders have been hit hard.  Home prices are rising, no doubt, but mortgage rates are rising in kind, and affordability is clearly an issue, despite the booming economy.

The closely-watched Atlanta Fed’s GDPNow barometer, however, is pegging third-quarter growth at 4.3%, but it’s early in analyzing the data for the three month period, and we need to see if trade tensions begin to work their way into the numbers.

Trade Wars: A senior Chinese delegation will arrive in Washington for trade talks later this month, it was announced this week, with a statement from China’s Commerce Ministry saying the delegation would be led by commerce vice-minister Wang Shouwen, which will meet U.S. Treasury undersecretary David Malpass to discuss “economic and trade issues between China and the U.S.”

These would be the first formal talks between the two sides since July, Beijing and Washington having started a tit-for-tat trade war last month, each imposing 25 percent tariffs on $34 billion of each other’s exports.

Washington is imposing further tariffs on another $16bn of Chinese goods on August 23, and China has said it will retaliate. The U.S. then said it is prepared to target $200 billion more in Chinese products, and China said it was preparing another $60bn in tariffs on U.S. goods.  Public hearings on the U.S. $200bn are scheduled to begin on Monday.  These likely wouldn’t be implemented until the fall, if at all.

The main purpose from China’s standpoint in the upcoming talks is to see whether both sides are really interested in having further dialogue.

Meanwhile, U.S. Trade Representative Robert Lighthizer on Thursday expressed hope a breakthrough could be made in the coming days in efforts to rework NAFTA, though his Mexican counterpart said flexibility was needed to reach agreement.

But President Trump said he was in “no rush” to conclude the talks, repeating his oft-stated complaint that the 24-year-old trade agreement had been a “disaster” for the United States during a cabinet meeting at the White House yesterday.

“We have much better alternatives than that. So if you can’t make the right deal, don’t make it,” Trump told Lighthizer.

The U.S. and Mexico began meeting without the third member of the pact – Canada – in an effort to tackle bones of contention, including revamped automotive sector rules and a sunset clause that could kill NAFTA after five years.

But when it comes to all the trade talk in general, South Korea offers a cautionary tale.

I’m on record as saying the March 28 agreement between South Korea and the United States was a sham, and it’s proving to be worse than that for the South Koreans.

As reported by Gina Chon of Reuters:

“Avoiding a trade war with the United States has blown up in South Korea’s face.  It dodged U.S. steel tariffs by agreeing to a quota, but the terms turned out to be onerous.  It’s a cautionary tale for EU President Jean-Claude Juncker and others negotiating with Team Trump.

“Exporting limited quantities of steel to America seemed like a clever workaround to tariffs. South Korea and the United States unveiled an agreement on March 28, four weeks after President Trump threatened the levies.

“Fifty-four kinds of South Korean steel products are now subject to a U.S. quota, equivalent to 70 percent of the average annual import volume of such products from 2015 to 2017.  The final deal came with surprises, though. For one thing, quotas were applied retroactively to Jan. 1. That meant imports of one product already were capped on May 1, the day the deal went into effect. Eight others reached their limits on July 1.

“Seoul also wrongly assumed companies could apply for an exemption and that quotas would be measured annually, instead of quarterly.  It has affected manufacturers Trump purports to support.  Micro, a New Jersey-based employer of nearly 500 people, can no longer access the special steel tubing it needs to make medical devices. It might have been able to absorb tariff-induced higher prices.  “Instead, we have a hard cap on our supply that is 30 percent below what we use today, and we are a growing company,” Micro President Brian Semcer told Breakingviews.  Two new products set to launch in the fourth quarter are in jeopardy. Quickly finding alternatives is unrealistic.  Micro’s products need to stand up to strict regulatory scrutiny, and it can take up to two years to obtain approval. Searches for similar supplies made domestically that meet the company’s standards have been fruitless.

“Unlike the tariffs, which could be temporary, the Korean steel quota also may be a longer-term fixture.  Customers like Micro could be lost forever. Argentina and Brazil, which also agreed to quotas, are in the same boat. The European Union and others talking trade with the White House will have to keep a closer eye on the fine print.”

Robert J. Samuelson / Washington Post

“When all is said and done, President Trump’s trade war may be fated to fail.  There are many reasons. One is that the target countries – prominently, China, Japan and Germany – won’t accede to his demands. This is already happening. Another threat is a backlash among U.S. firms, hurt by tariffs that raise their products’ prices. This, too, is happening.

“But even if all these possibilities were avoided, the larger threat to Trump’s trade agenda is the dollar’s role as the major world currency.  It dictates trade policy in ways not widely understood and is the ultimate cause of chronic U.S. trade deficits.

“The dollar’s role as the major world currency means it’s used to settle trade transactions and make cross-border investments, even when Americans are not involved. As I’ve written before, the extra dollar demand boosts its value on foreign exchange markets. U.S. exports become more expensive and U.S. imports less so.

“Trade deficits result. Since 1981, the United States has had only one current account surplus.  (The current account is the broadest measure of the trade balance.)

“When something continues that long, it’s not an aberration.  It’s an integral part of the global economy.  In effect, the dollar provides a service to the rest of the world.

“We are compensated for this service by receiving imports greater than our exports.  Many Americans benefit.  Imports restrain inflation and expand consumer choice; the flows of money into dollar instruments (Treasury securities, bank deposits, stocks, bonds) tend to lower interest rates.

“But there are losers: most conspicuously, U.S. farmers, manufacturers and their workers. They face tougher foreign competition in both import and export markets.

“Or as economist C. Fred Bergsten of the Peterson Institute puts it: ‘There’s a structural component to our trade deficits, which is the central currency role of the dollar. This produces a constant over-valuation in trade terms... We disadvantage ourselves by running the world’s key currency.’....

‘None of this is easy to convey to the public. Much simpler is Trump’s narrative: U.S. trade deficits prove that other countries discriminate against American products; U.S. import restrictions are too loose. The cure is to eliminate the discrimination and to tighten import restrictions. The anti-American bias will disappear, as will large U.S. trade deficits.

“It’s a congenial theory, because – by assumption – trade deficits automatically become evidence that U.S. firms are being victimized by someone, including their own government. If that were true, Trump’s obsession with trade deficits would make sense.  The trouble is that it isn’t true.

“The reality is that, well before Trump became president, global trade imbalances were shrinking. Figures from the International Monetary Fund (IMF) show that, as a share of the economy (gross domestic product), the U.S. current account deficit hit a recent peak of 5.8 percent in 2006 and dropped to 2.4 percent by 2017. The comparable figures for China were 9.9 percent of GDP in 2007 and 1.4 percent in 2017.

“What caused the dramatic shift?  Mainly changes in the business cycle, says a recent IMF report. Before the economy’s collapse in 2008, strong spending generated huge trade flows and high oil prices. These produced large trade imbalances. When the Great Recession struck, these trends reversed. Trade flows weakened, oil prices fell, trade imbalances shrank.

“The implications are unexpected.  Even according to Trump’s twisted view of trade, much of the needed adjustments have already occurred. If Trump succeeded – implausibly – in getting China and others to agree to reduce their trade imbalances, the needed changes would probably be milder than imagined....

“Trump has maneuvered himself and the country into a no-win conflict. He has infuriated America’s allies by his reckless actions to raise tariffs and disrupt existing trade arrangements.  If the impasse continues for months or years – a possibility – the damage to the world economy would be significant.

“But even if these negotiations conclude successfully, the scope to make dramatic trade improvement is limited. The dollar’s role as the major global currency imposes constraints.  An appreciating dollar will tend to widen U.S. trade deficits.  Trump has backed himself into a corner from which there is no easy exit.”

The Federal Reserve Bank of New York issued a report on Trump’s tariffs, and concluded there will be fewer U.S. imports and exports and they would do little to redress the trade deficit.

The tariffs are likely to push up costs for U.S. companies and make U.S. products less competitive.

U.S. exports are likely to fall “not only because of other countries’ retaliatory tariffs on U.S. exports, but also because the costs for U.S. firms producing goods for export will rise and make U.S. exports less competitive on the world market,” the analysis said.

“The end result is likely to be lower imports and lower exports, with little or no improvement in the trade deficit.”

Europe and Asia

In economic news for the eurozone (EA19), Eurostat, the statistical arm of the European Union, raised its estimate for second-quarter GDP to 1.5% annualized.  GDP in Q2 is 0.4% compared with Q1, 2.2% year-on-year, vs. 2.5% yoy in Q1.

Germany is at 1.9% annualized; Spain 2.7%; France 1.7%; Italy 1.1%; Netherlands 2.7%; U.K. 1.3%.

The German government’s statisticians place second-quarter GDP at a solid 0.5%, 1.8% annualized.

Euro area annual inflation for July was 2.1%, up from 2.0% in June.  A year earlier, the rate was 1.3%, according to Eurostat. But ex-food and energy, core inflation was 1.3%, same as a year ago.

Eurobits....

Italy: Grief here has been mixed with anger after the collapse of a motorway bridge in Genoa that claimed 39 lives.  The anger is in how such a vital structure could have simply given way, after the Morandi bridge fell 148 feet on Tuesday amid a fierce storm.

Residents of housing blocks under one pillar were ready to move back, but were then told it was cracking and their homes were at risk.

The bridge, built in the 1960s, stands on the A10 toll motorway, an important road for good from local ports that serves the Italian Riviera and southeast coast of France.

The victims were people going to work, people on holiday.  Just awful in so many ways.

But now the finger-pointing, with top management of Autostrade per L’Italia, which oversees maintenance, called on to resign, but the company repeated that it had monitored the bridge quarterly, as required by law, and there was maintenance ongoing at the time.

And the bridge collapse had Deputy Prime Minister Matteo Salvini saying the European Union must allow Rome to include in its next budget all the funds needed to ensure the country’s infrastructure was safe.

That investment, yet to be calculated, comes on top of plans outlined by the government, which took office in June, to spend tens of billions of euros on tax cuts, easing pension rules and a basic income for the poor.

The yield on Italy’s 10-year bond is up to 3.11%, from 2.58% four weeks earlier.  For Italy’s creditors, the fiscal gap is a growing worry, with debt to GDP at 135%, which is bound to climb higher.  Any contagion from Turkey redounds to Italy as well.

Germany: The country reached an agreement with Greece to send back migrants to Greece if they have already applied for asylum there.  Last week Germany and Spain sealed a similar deal on returning migrants.  Both deals come after a dispute between Chancellor Angela Merkel’s conservatives and their Bavarian allies over returning migrants that nearly split them and brought down the government.

The agreements affect migrants entering via Germany’s border with Austria and Germany would be able to send them back to Greece within 48 hours, but the deals, and one that may occur with Italy, likely affect few refugees in numbers.

More than 1.6 million migrants have arrived in Germany since mid-2014, propelling the far-right Alternative for Germany (AfD) into the national parliament. While Merkel has repeatedly defended her 2015 decision to admit hundreds of thousands of migrants as a humanitarian necessity, she has since vowed to prevent a re-run of such a migrant influx.

Spain: This has become the new front line in Europe’s migration crisis, with nearly 25,000 migrants having entered Spain by sea this year – three times as many as in the same period in 2017 and more than the number to Greece and Italy, according to the International Organization for Migration.  Arrivals during the first eight days of August were at least five times those in either Italy or Greece.  On Monday alone, 475 migrants on 12 different boats and an inflatable raft were rescued off Spain’s southern coast.

And as you can imagine, it’s straining local infrastructure and fraying nerves. Spain and Germany have been calling on the EU to grant more aid to Morocco – just 14km away – to manage its borders.

Officials and analysts say arrivals are increasing mainly because of a crackdown on the central Mediterranean crossing from Libya to Italy – where the new government has taken a much harsher line against migrants, turning away some boats.

At the same time, though, the new government in Spain of Premier Pedro Sanchez, a socialist, promised better treatment of migrants. While initially popular, this more accommodating stance has become more divisive as the numbers pile up.

Turning to Asia, China released a slew of data points that continued to reflect a slowing economy. Fixed-asset investment rose just 5.5% in the January thru July period, according to the National Bureau of Statistics (NBS), the lowest growth rate since 1999 as Beijing has been seeking to curb borrowings of local governments on big infrastructure projects.  But now, amid the trade fight with the United States, Beijing is encouraging banks to open up the spigot, so we’ll see what this key figure looks like in a few more months.

The NBS said retail sales in July rose 8.5% vs. 9.0% in June.  This one has almost always been in double-digits.

And the unemployment rate for last month rose from 4.8% to 5.1%.

The one sector that continues to rock is housing, despite attempts by the government to rein in the real estate market.  New home prices rose 1.1% in July over June, according to the NBS, with the 70-city index up 5.8% year-on-year vs. 5.0% in June.

Street Bytes

--Stocks shook off an early Turkey-induced swoon, as well as further trade concerns, to finish mixed.  The Dow gained 396 points on Thursday, its best day since April, largely on the heels of Walmart’s outstanding earnings report, and then reduced trade fears.

Earnings have been super, up 24.6% for the second quarter on the S&P 500.

On the week the Dow gained 1.4% to 25669, the S&P added 0.6%, but Nasdaq fell 0.3%.

But Friday, President Trump shook things up a bit with the following tweet out of left field:

“In speaking with some of the world’s top business leaders I asked what it is that would make business (jobs) even better in the U.S.  ‘Stop quarterly reporting & go to a six month system,’ said one.  That would allow greater flexibility & save money. I have asked the SEC to study!”

The business leader was Indra Nooyi, departing CEO of PepsiCo. The SEC dutifully said it would look into it, as part of their ongoing study of such issues.

I am not wasting a second more on it, though.  Ain’t gonna happen.  And in terms of the focus on the short term, and managing to earnings, just change CEO compensation.

--U.S. Treasury Yields

6-mo. 2.22%  2-yr. 2.61%  10-yr. 2.86%  30-yr. 3.02%

Yields were unchanged across the board, no more than a one basis point move over the prior week.

--OPEC’s oil production ticked up slightly in July, the cartel said Monday, even as production in Saudi Arabia – the de facto leader of the group – declined.

OPEC production rose to 32.32 million barrels a day, driven by increases in Kuwait, Nigeria, the UAE and Iraq.

But Saudi crude output fell by nearly 53,000 barrels a day in the month, according to some sources, while the Saudis told OPEC directly their production actually fell 200,000 barrels daily, to 10.29 million barrels a day.

Last Friday, the International Energy Agency reported a 110,000 barrel a day decline in Saudi production in July, while at the same time cutting its forecast on demand growth. Concerns that escalating trade tensions between the U.S. and China could slow future growth have also been troubling the energy markets.

--Walmart Inc. said its quarterly sales rose at the fastest rate in over a decade as the world’s largest retailer continues to draw more people to its stores and benefit from the stronger economy.

Americans are spending more on everything these days, with Walmart CEO Doug McMillon telling investors Thursday, “Customers tell us that they feel better about the current health of the U.S. economy as well as their personal finances. They’re more confident about their employment opportunities.”

Walmart booked $128 billion in global quarterly revenue, up 3.8%, while reporting a 40% jump in U.S. e-commerce sales, though this remains a sliver of its business.  Same-store sales increased a super 4.5%, far better than analysts’ forecasts of 2.4%.

The company’s shares soared 10% on the great news.

The National Retail Federation recently raised its 2018 sales forecast to 4.5% growth over last year.  Previously, the trade group had expected sales to increase 3.8% to 4.4%.

--Home Depot Inc.’s profit and revenue topped forecasts despite signs of a slowdown in the housing market, boosted by a rebound in demand for seasonal products and as shoppers spent more to remodel their homes.  The No. 1 U.S. home improvement chain also raised its guidance for the year.

Consumers are investing in their homes, even as higher mortgage rates and rising real estate prices have hurt home sales this summer. Sales of new single-family homes fell to an eight-month low in June and data for the prior month was revised sharply lower, for example.

Home Depot CEO Craig Menear sought to allay concerns the overall macro picture had been slowing down, saying the U.S. economy and factors driving home-improvement spending remained strong.

Homeowners are spending more as prices appreciate, while continuing to view their homes as an investment and not an expense, Menear said.

Second-quarter sales rebounded from the first quarter when cooler-than-normal weather in some parts of the United States hurt demand for spring season products.   Menear said that a majority of seasonal sales lost in the first quarter were picked up in the second.  Lumber, indoor and outdoor garden products, lawn-mowers, patio furniture, interior and exterior paint all posted strong growth.

Overall, net earnings increased to $3.5 billion, up from $2.7bn.  Net sales rose 8.4% to $30.5bn, beating expectations on both the top and bottom line.

Same-store sales climbed a stupendous 8%, handily exceeding analysts’ forecasts, and the company sees comp-store growth of about 5.3% for the full year.  HD also raised its full-year earnings forecast.

--Tesla shares fell Wednesday after reports the SEC issued a subpoena to the electric car company as the firm copes with communications by CEO Elon Musk over the possibility of taking the company private.  Tesla stock fell about 3%.

Both the New York Times and Fox Business reported the development, with the SEC trying to determine whether Musk’s actions intended to mislead investors and certainly the price action in the stock after Musk tweeted he was “considering taking Tesla private” and had “funding secured” to complete a privatization deal at a share price of $420 was as intended.

In subsequent days, Musk issued additional statements amid widespread questioning about the accuracy of the tweet.

That was two weeks ago, as I reported extensively in my last review. This Monday in a blog post, Musk disclosed that he had held discussions with Saudi Arabia’s sovereign wealth fund during the past two years about taking the company private.  The Saudi fund has accumulated nearly 5 percent of Tesla shares by acquiring it in the open market.

Musk wrote that he came away from a July 31 meeting with the managing director of the Saudi fund “with no question that a deal...could be closed, and that it was just a matter of getting the process moving.  This is why I referred to ‘funding secured’ in the August 7th announcement.”

Tesla’s board has been scrambling to cover for Musk, forming an independent committee to assess the possibility of going private. But the committee stressed it had not received a firm offer or “reached any conclusion as to the advisability or feasibility of such a transaction.”

Institutional investors, such as Vanguard and its mammoth index funds, won’t hold a private, illiquid company.  [Most of them.]

Well, Thursday night, we had reports from the New York Times and Wall Street Journal that added layers to the story.

Musk gave an interview to the Times at his home in Los Angeles wherein he admitted, “This past year has been the most difficult and painful year of my career. It was excruciating.”  The interview was brutally honest.

And now his year has gotten more intense.  Asked if the exhaustion was taking a toll on his physical health, Mr. Musk answered: “It’s not been great, actually.  I’ve had friends come by who are really concerned.” Musk acknowledged his myriad executive responsibilities are taking a steep personal toll.  He said he had been working up to 120 hours a week recently.  He added he hadn’t taken off more than a week since 2001, when he was bedridden with malaria.

Musk also acknowledged his tweet of Tues., Aug. 7, asserting he had “funding secured” for a deal to take Twitter private at $420 billion, had not been reviewed or seen before he posted it.  Musk said he wanted to offer a roughly 20 percent premium over where the stock had been recently trading.

Musk added he did not regret the post, and that he didn’t recall “getting any communications from the board at all” afterward.

The Times said the SEC investigation appears to be intensifying rapidly.

The Journal said securities regulators began investigating Tesla last year on whether it was misleading investors about its Model 3 car production problems, according to people familiar with the matter.

The paper says the SEC subpoenaed a parts supplier for the auto maker as part of the probe, one of the people said, well before the regulators began looking into Elon Musk’s tweet last week about taking the company private.

Market reaction today to the stories, particularly the Times’, was swift and the stock finished down 9% to $305.20, well below the $340 level the stock was at before the first Aug. 7 tweet that kicked off this tale.

--Shares in China’s Tencent Holdings lost more ground this week after the company logged its first quarterly profit decline in nearly 13 years and said it did not know when it would get Chinese approval to make money off its most popular game.

The earnings miss highlighted the impact of a freeze on new China approvals for the gaming industry since March due to the restructuring of related regulatory agencies in the world’s biggest gaming market.

Gaming revenue accounts for 40 percent of Tencent’s total revenue, but China has a complex approvals process for games, and Tencent yas yet to receive the nod to monetize Player Unknowns’ Battlegrounds (PUBG) video game.  More than 400 million players worldwide play this, the game developed with Tencent’s South Korean partner.

Tencent had to pull another game, “Monster Hunter: World,” four days after its China launch, because as company President Martin Lau told an earnings call on Wednesday, the content wasn’t fully compliant.  He didn’t elaborate.

China’s Communist Party is a big part of this story.  In July 2017, the party’s mouthpiece, the People’s Daily, criticized Tencent, describing its “Honour of Kings” game as poison and called for tighter regulatory controls of online games.

Tencent, founded in 1998, also operates China’s dominant social network, WeChat,which has more than 1 billion users.  Even with a big drop in its shares of 12 percent this week, it remained the biggest listed firm in Asia with a market cap of nearly $400 billion.

Yes, it’s a censorship story.  But the government also has legitimate concerns over its people becoming addicted to games, a problem faced for years in South Korea.

--Last week I wrote of Google developing a mobile search service for the China market that would censor websites and search terms prohibited by the Chinese government.

Thursday, CEO Sundar Pichai told staff that though development is in an early stage, whether the company could or would launch search in China “is all very unclear. The team has been in an exploration stage for quite a while now, and I think they are exploring many options.”

Some Google employees and human rights advocacy organizations have voiced their opposition to the effort, which violates the company’s “don’t be evil” clause in Google’s code of conduct.  Employees are calling on the company to provide more “transparency, oversight and accountability.”  The employees are demanding a seat at the table so they know “what we’re building.”

--Related to the above, a Beijing-based start-up that claimed to have developed an original China web browser has admitted it had based its software on Google’s Chrome, following online accusations that it had ripped off the American company’s program.

Redcore, which recently raised $36 million in funds, said on its website that its browser had “broken the American monopoly.”  That claim was challenged after an online posting purporting to show the installer containing Chrome files went viral.

Thursday, Chen Benfeng, founder and CEO of Redcore, said in an interview at the company’s offices in northwest Beijing, that it was wrong to have made such a claim.

“We don’t deny building on Chrome’s browser engine,” said Chen.  “The web browser is a very old technology, writing the code from scratch will take many years. It’s like Android was built on the foundation of Linux, but nobody doubts Android or Google’s innovation. Google and Apple also did not write the first line of code, doing so would be reinventing the wheel.”

[Viewers of HBO’s “Silicon Valley” may be having flashbacks from this past season.]

--Asset management giant BlackRock Inc. is among the investors nursing losses from Turkey’s volatile market in recent days.  The Turkish lira’s fall last Friday and Monday, which was among the largest moves in any currency in recent years, caught BlackRock and others flat-footed.  BlackRock is the largest foreign holder of Turkish government bonds, and had outsized positions in some of its actively managed funds when the crisis hit, as reported by the Wall Street Journal. 

--Shares in Macy’s plunged 16% on Wednesday even after the company lifted its full-year sales guidance against a backdrop of strong U.S. economic growth and consumer spending.

For the three months to July 29, Macy’s sales dropped 1.1% from a year ago to $5.572bn, while net income rose to $166m from $111m a year ago. Earnings per share of $0.53 were above expectations, with sales in line.

Comparable store sales posted a 0.5% advance from a year ago when a small decline was expected.

Macy’s chairman and CEO Jeff Gennette said the results demonstrated that its “strategic initiatives” to help bolster growth in the face of shifting consumer habits was “gaining traction.”

The company now forecasts same-store sales rising 2% to 2.5% for the full year.

So why did the company’s shares sell off?  The stock had been up 66% this year, and some investors are skeptical with Macy’s relatively bullish forecast given the still poor long-term forecast for retailers of Macy’s ilk.

--But Nordstrom’s shares soared  after the upscale department-store chain raised its full-year revenue and earnings outlook following stronger-than-expected quarterly sales growth.

Net sales rose 7.1% year-on-year to $3.98 billion, while net earnings came in at $162m, versus $110m a year ago., both exceeding analysts’ forecasts.

Comp-store sales were up a solid 4% over a year ago, also beating expectations.

--Shares of JCPenney, however, sank below $2 for the first time on Thursday after it forecast a wider-than-expected full-year loss and posted disappointing results on the back of price cuts across product lines. Penney also forecast a much bigger loss than expected for the full year.

The company said it was marking down and clearing excess inventory across many categories, citing the unusually long winter for hurting demand for spring clothing lines.

Same-store sales rose 0.3 percent, short of analysts’ estimates.

It doesn’t help that Penney has been without a CEO since May.

The company’s bonds dropped more than 5 cents on the dire news to 79 cents.

--Cisco Systems Inc. on Wednesday reported its third-consecutive quarter of revenue growth, evidence the networking-gear maker’s move to build up its software business is paying off. Shares rose sharply in response.

Cisco generated revenue of $12.84 billion in its fiscal fourth quarter, up 6% from a year earlier, which comes after two years of declining revenues as it faced increasing competition and the burden of slowing hardware sales.

CEO Chuck Robbins has successfully turned things around and the company expects the good times to continue, calling for revenue growth of between 5% and 7% in the current quarter.

Cisco also reported revenue in its security segment jumped 12% to $627 million, with its focus on software sales.

Revenue for its largest segment, infrastructure platforms, grew 7% to $7.44bn.

The growing trade dispute between the U.S. and China could hurt the company, however, with items such as Cisco’s routers and switches potential tariff targets.  Cisco makes some of these in China and imports to the U.S. Robbins said the company was in talks with the administration.

--Uber Technologies Inc. reported second-quarter revenue rose 63% from the prior year to $2.8 billion, while gross bookings, a measure of the overall demand for its ride and delivery services, jumped 41% to about $12 billion, according to a financial statement released by the company.

Uber narrowed its loss to $891 million in the quarter from $1.1 billion a year ago, though this was wider than the first quarter’s loss of $550 million, not including a $3bn gain from the sale of its southeast Asian and Russian operations.  The company is spending more money on new businesses such as food delivery and scooters,

CEO Dara Khosrowshahi, who replaced Travis Kalanick last August, has been working to cut expenses in preparation for an initial public offering.  Khosrowshahi said Uber planned at the same time to continue investing in future areas of growth, including “high-potential markets in the Middle East and India.”

But on Tuesday, New York City approved a package of bills that freezes new issuances of ride-hailing licenses and set a minimum payment for drivers in Uber’s biggest U.S. market. Seattle is considering similar measures.  So there’s been pushback.

And Khosrowshahi had to face a crisis at Uber’s money-losing driverless car operation after a fatal crash involving one of its robot cars in March.  Uber eliminated hundreds of jobs in the unit and closed its operations in Arizona.

And then you have competition, specifically smaller rival Lyft Inc., which is making gains in market share.

Uber is currently looking to go public in the second half of 2019 in what will be one of the largest IPOs in history.  Currently, the company is valued somewhere in the neighborhood of $70 billion (Lyft is up to $15 billion with new investments).

--Shares in Kimberly-Clark, maker of Kleenex tissues, Huggies and Cottonelle toilet paper, rose smartly after it informed Wall Street that it is planning to raise net selling prices across a majority of its North America consumer products business.

So stock up quickly on TP, sports fans.

But the move by Kimberly to raise prices is also part of a broad boost in similar products, owing to “significant commodity cost inflation,” the company said in a statement. 

Last month the company raised its forecast for inflation in “key input costs” to come in between $675m and $775m, up from $400m to $550m.

It was a few weeks ago that Procter & Gamble said it would raise prices on a slew of similar products on the back of commodity price increases.

--Kroger Co. said it would sell its products in China on an e-commerce site owned by Alibaba Group Holding Ltd., the grocer’s first foray into foreign sales amid a broader push into online retail.

Kroger said the initial product offerings on its online storefront will include dietary supplements and private-label products, much of it natural and organic goods.

The new China push is Kroger’s fifth e-commerce initiative as it attempts to fend off stiffer competition from Amazon.com, the Whole Foods grocery stores it owns, and other food sellers.

I like the China initiative.  Consumers there are dying for products they can trust (i.e., despite the trade tensions, American food and health products...see Foreign Affairs section below).

--Shares in Bayer AG fell sharply on Monday, and the rest of the week, after Monsanto Co. – which the German chemical company recently acquired – was ordered to pay $289.2 million in a landmark lawsuit over whether exposure to two of its weed killers caused cancer.

Last Friday a California jury found that Monsanto’s Roundup and Ranger Pro products presented a “substantial danger” to consumers, and that the St. Louis-based company knew – or should have known – the potential risks they posed.

The case is but the first of many that could go to trial, this after Bayer closed its $60 billion-plus acquisition of Monsanto in June after two years of wrangling.

Bayer said on Monday that the jury’s verdict was “at odds with the weight of scientific evidence, decades of real world experience and the conclusion of regulators around the world.”  The verdict also remains subject to post-trial motions and an appeal.

Bayer shares closed at a 5-year low this week, down over 10%.             

--From Daniela Hernandez and Ted Greenwald / Wall Street Journal

“Can Watson cure cancer?

“That’s what International Business Machines Corp. asked soon after its artificial-intelligence system beat humans at the quiz show ‘Jeopardy!’ in 2011.  Watson could read documents quickly and find patterns in data. Could it match patient information with the latest in medical studies to deliver personalized treatment recommendations?

“ ‘Watson represents a technology breakthrough that can help physicians improve patient outcomes,’ said Herbert Chase, a professor of biomedical informatics at Columbia University, in a 2012 IBM press release.

“Six years and billions of dollars later, the diagnosis for Watson is gloomy.

“More than a dozen IBM partners and clients have halted or shrunk Watson’s oncology-related projects. Watson cancer applications have had limited impact on patients, according to dozens of interviews with medical centers, companies and doctors who have used it, as well as documents reviewed by The Wall Street Journal.

“In many cases, the tools didn’t add much value. In some cases, Watson wasn’t accurate....

“No published research shows Watson improving patient outcomes.”

I told you years ago the whole Watson project was vastly overrated, but to be fair I was going on instinct, not actual science and results like the Journal now has.

This also doesn’t mean AI doesn’t hold great promise in helping doctors diagnose and treat diseases, but Watson’s struggles show this won’t be easy.

IBM spent $15 billion on Watson and related efforts as of 2015, according to that year’s annual report.

--Bitcoin was on a wild ride this week, falling below $6,000 for the first time since late June before rebounding to around $6,500 today.  Many are pointing to the failure of bitcoin, ether and other popular cryptocurrencies to gain widespread adoption in the economy.  Most see such a step as necessary to justify valuations that despite the selling remain well above year-ago figures.

But there is a growing recognition that prices may never again reach the high levels of December and January of $20,000.

--New Jersey had some awful flash flooding in communities near mine last Saturday, and in talking with Dina T., who is an executive in the insurance industry, she said the government really screws up in what is designated a flood zone and what isn’t, which we saw an example of in Little Falls, N.J., as well as Brick, N.J.

Dina’s advice is everyone should buy flood insurance, and it is cheap.  So many of the people impacted last weekend didn’t have it.

--A toxic red algae bloom has left a trail of dead fish, as well as fleeing tourists and abandoned beaches along 150 miles of southwestern Florida coastline, prompting Gov. Rick Scott to issue a state of emergency.

It’s an economic emergency for a region so dependent on tourism, but the toxins released by the algae have poisoned dolphins, manatees and tons of fish.  It’s disgusting...the beaches deluged by dead and rotting wildlife.  Parts of the same region had suffered a similar severe algae tide in 2016.

The toxins can aerosolize in the wind that drifts ashore, triggering respiratory problems or worsening conditions such as asthma.

The naturally occurring algae – known as a red tide or red bloom – has affected the shore since October.  Human activity, like releasing nitrogen-rich fertilizer into the water, can exacerbate the problem, researchers say (let alone climate change).

The algae tides have been noted for centuries. Republican Gov. Scott, running for Democratic Sen. Bill Nelson’s seat, has been attacking Nelson, as Nelson attacks Scott, for a lethargic response to a blue-green algae bloom threatening the coast in other parts of the state.

--But speaking of fish, new rules introduced in China mean rainbow trout can now be labeled and sold domestically as salmon.

Why?  Because a media report earlier this year caused a splash by revealing that rainbow trout had for years been labeled as the similar-looking fish.

Authorities then decided that instead of banning the practice, the best solution would be to legitimize it.

Rainbow trout are freshwater fish, whereas salmon are born in freshwater but then live much of their lives in saltwater. 

While the two are outwardly different, both have reddish meat and closely resemble each other.

Well, for years I have been talking about mislabeled fish, urging you never, ever to buy fish whose source is China, but that’s more for safety reasons.  It’s also true that you’ll probably seldom see China as the source, because the food/fish markets are likely checking off a different box on the wrapper.  [Heck, there’s a scandal in the Chesapeake Bay Area with some local eateries selling oysters that are not locally sourced as advertised.]

But back to China, consumers are up in arms, particularly over fears the trout are more susceptible to parasites.

Foreign Affairs

Turkey: Amidst the financial crisis, Turkey won a measure of international support in its increasingly tense standoff with the United States on Wednesday when as noted above Qatar pledged to invest $15 billion in the country.

The sum is a small fraction of what Turkey would need to shore up its economy or pay its dollar debts, which are unsustainable given the sharp decline in the Turkish lira.

But the move by Qatar followed a meeting in Ankara between President Erdogan and Sheikh Tamin bin Hamad al-Thani, the emir of Qatar. The investment came the same day Turkey was rejecting a second legal appeal to release the American pastor Andrew Brunson at the heart of the crisis.

Last week, President Trump imposed 50 percent tariffs on imported Turkish steel after talks to release Brunson broke down, cutting Turkey’s steel producers off from their biggest overseas market.

Treasury Secretary Steven Mnuchin said the U.S. is prepared to slap additional sanctions on Turkey if it refuses to release Brunson.

Qatar’s support is no surprise, as they have lined up with Turkey against the Trump-allied rulers of Saudi Arabia and UAE. Others, such as Russia, have offered verbal support, but not financial as yet.

More than 20 American citizens, including Brunson, have been detained over the past two years on terrorism charges under the state of emergency imposed after the failed coup in July 2016.

Erdogan stepped up his attacks on the U.S., calling for a boycott of Apple’s iPhones and other U.S. electronic goods, warning that Turkey would “seek new friends.”

German Chancellor Angela Merkel has been in talks with Erdogan to set up a meeting with their respective finance ministers.  Berlin hasn’t offered any direct aid, but it is Turkey’s biggest economic partner by far, accounting for some $42 billion in bilateral trade last year. About 6,500 partly or wholly-owned German companies operate in Turkey, while Turkey ranks 16th among Germany’s export markets, ahead of Japan and many smaller European Union countries.

Any aid from Germany will be contingent on Turkey shifting to a credible monetary policy that’s independent, with higher interest rates.

Iran:  Iranian Vice President Eshaq Jahangiri said on Wednesday that the United States is trying to make Iran surrender through the imposition of sanctions.  New U.S. sanctions are now in effect, and President Trump said companies doing business with the country will be barred from the United States.

“The first priority for all of us under a sanctions situation is to work toward managing the country in a way that brings the least amount of damage to people’s lives,” Fars News quoted Jahangiri as saying.  “America is trying by applying various pressures on our society to force us to retreat and surrender.”

The new sanctions targeted Iranian purchases of U.S. dollars, metals trading, coal, industrial software and its auto sector, though the toughest measures targeting oil exports do not take effect until November.

With few U.S. companies actually doing business in Iran, the impact of the sanctions stems from Washington’s ability to block European and Asian firms from trading there.

President Hassan Rouhani, in recent remarks, said on state TV: “We will not let the enemy bring us to our knees. If the enemy thinks they will defeat us they will take this hope to the grave with them.”

Washington continues to say Iran’s only chance of avoiding the sanctions would be to accept an offer to negotiate a tougher nuclear deal than the international accord struck in 2015.

But Rouhani said, according to the Islamic Republic News Agency, “America itself took actions which destroyed the conditions for negotiations. There were conditions for negotiation and we were negotiating. They destroyed the bridge themselves.  If you’re telling the truth then come now and build the bridge again.”

Monday, Supreme Leader Ayatollah Ali Khamenei ruled out the possibility of talks with the U.S.

“Recently, U.S. officials have been talking blatantly about us. Beside sanctions, they are talking about war and negotiations,” he said through his official Twitter account in English.  “In this regard, let me say a few words to the people: THERE WILL BE NO WAR, NOR WILL WE NEGOTIATE WITH THE U.S.”

Thousands of Iranians continue to protest in recent weeks against sharp price hikes of some food items, a lack of jobs and state corruption.

Afghanistan: This week saw a staggering spate of violence.  Wednesday, a blast killed at least 48, mostly students, at a school in Kabul, when a man wearing an explosives vest blew himself up in a classroom.  Suspicion fell on ISIS, which has been behind a series of attacks in mainly Shiite neighborhoods of western Kabul.

The Taliban denied responsibility for the Kabul suicide attack, but it came on the back of some horrific violence the militants have been involved in since last Friday, when they launched a predawn attack on the strategic eastern city of Ghazni, a two-hour drive from Kabul.

Local officials and residents of Ghazni accused the government and military of ignoring their warnings of an impending Taliban attack, and then responded too slowly once it started. At least 100 members of the security forces were killed in the fighting, with the UN saying as many as 150 civilians may have died as well.

After five days, Afghan forces regained control of the city, with the Taliban pulling out, though the Taliban denied their forces were routed. The U.S. carried out air strikes and sent military advisers to aid Afghan troops.

But also last weekend, the Taliban seized control of the Ajristan District, where an elite army commando unit had been defending it.  The unit disappeared, and their superiors were uncertain of their fate.  Then they were found.  At least 40 had been killed.

And in Faryab Province, an isolated Afghan National Army base of 100 soldiers lost more than half of its men in a Taliban assault.

Then late Tuesday, Taliban fighters attacked a police garrison on the outskirts of the northern city of Baghlan, triggering a battle that left 37 officers dead.  The militants also seized weapons caches and at least four armored vehicles.

The Taliban later said it could no longer guarantee safe passage for Red Cross staff working in Afghanistan, amid a row over the treatment of Taliban prisoners in a jail in Kabul.

China: Signs of unease over President Xi Jinping’s leadership have emerged amid the public dispute with the U.S. over trade, and with a sluggish economy and various health and financial scandals.  Clearly, some academics are beginning to speak out, some going so far as to denounce Xi’s leadership, particularly his moves to quash dissent and scrap term limits to make himself president for life.

Just months ago, Xi’s clout was unassailable, but while he may have lost some of his ability to inspire confidence among his people, he is still more than capable of inspiring fear. His anticorruption campaign has netted more than 1.5 million officials.  And there are, critically, no outwardly visible signs of organized opposition against him inside the party.

The only thing that would take Xi down is a massive product safety, environmental disaster, but in response, as I’ve written for years, Xi would then play the nationalism card and lash out against Taiwan.  I still maintain that could happen this year.  In my scenario, Apple would of course be another victim. 

A Chinese provincial deputy governor and the mayor of a major city were fired Tuesday as the Communist Party tried to defuse public outrage over revelations of misconduct by a major vaccine producer.

The officials were among four people ordered dismissed following a meeting of the party’s ruling Standing Committee led by President Xi.

The revelation in July that Changchun Changsheng Life Sciences Ltd. falsified production records for an anti-rabies vaccine added to a string of politically damaging scandals over deaths and injuries due to fake or shoddy drugs, food and other products.

No. 2 leader, Premier Li Keqiang, could be the fall guy eventually, as items such as this are supposed to be under his purview. 

One other related development today. China ordered the world’s top pork producer, WH Group Ltd., to shut a major slaughterhouse as authorities race to stop the spread of deadly African swine fever (ASF) after a second outbreak in the planet’s biggest hog herd in two weeks.  Though often fatal to pigs, with no vaccine available, ASF does not affect humans, according to the UN’s Food and Agriculture Organization, but of course it has renewed food safety concerns in the public.

Separately, China’s military “is likely training for strikes” against U.S. and allied targets in the Pacific, a Pentagon report warned. The annual report to Congress says China is increasing its ability to send bomber planes further afield.

“Over the last three years, the PLA [People’s Liberation Army] has rapidly expanded its overwater bomber operating areas, gaining experience in critical maritime regions and likely training for strikes against the U.S. and allied targets,” the report says.

It goes on to say it is not clear what China is trying to prove by such flights.

The PLA may demonstrate the “capability to strike U.S. and allied forces and military bases in the western Pacific Ocean, including Guam,” the report adds.

China, it says, is transforming its ground forces to “fight and win.”

“The purpose of these reforms is to create a more mobile, modular, lethal ground force capable of being the core of joint operations,” the report says.

China lodged complaints about measures in the new $716 billion defense policy act that authorizes military spending and adds teeth to controls on U.S. government contracts with the likes of China’s ZTE Corp. and Huawei Technologies Co. Ltd.

The National Defense Authorization Act, or NDAA, strengthens the Committee on Foreign Investment in the United States (CFIUS), which reviews proposals to determine if they threaten national security. That measure was seen as targeting China.

The legislation also calls “long-term strategic competition with China” a top priority for the United States, which should improve the defense capabilities of Taiwan.

In a separate statement, China’s foreign ministry said the United States passed the act despite China’s strong objections and it was dissatisfied with the “negative content related to China.”

China’s Defense Ministry weighed in, saying the act “exaggerated Sino-U.S. antagonism,” damaged trust between the two militaries and involved the most important and sensitive issue in bilateral ties, namely Taiwan.

Meanwhile, the Trump administration denied Tuesday any change to its “One China” policy after Taiwan President Tsai Ing-wen made a political speech in the U.S., the first time in 15 years a Taiwanese leader has done so.

Beijing said it had lodged an official protest with the United States over Tsai’s speech Monday in Los Angeles, where she said Taiwan’s freedom and future was not negotiable.

Tsai spoke at the Ronald Reagan Presidential Library, while in transit on a trip to Paraguay and Belize, two of the few countries that continue to recognize the government of Taipei.

A State Department spokeswoman said the speech did not represent any move by the administration to alter the official U.S. stance that accepts Beijing as the sole government of China, and does not officially recognize Taiwan’s government.

“Our policy on Taiwan has not changed,” said Heather Nauert.  “The United States in regard to this trip facilitates from time to time representatives of the Taiwan authorities to transit the United States.

“Those are largely undertaken out of consideration for the safety and the comfort of those travelers, and that is in keeping with our One China policy.”

But previous administrations have prevented Taiwan leaders from making speeches in the U.S. that would elevate their diplomatic status and upset Beijing.

Tsai, a firm defender of Taiwan’s independence, said in the speech that “We will keep our pledge that we are willing to jointly promote regional stability and peace under the principles of national interests, freedom and democracy.... We only need to be firm so that no one can obliterate Taiwan’s existence.”

Lastly, China rejected allegations raised by a UN panel that 1 million Uighurs may be held in internment camps in the restive Xinjiang region, but said that some people underwent reeducation after being deceived by extremists.

Hu Lianhe, a senior Communist Party official, said authorities in the far western Xinjiang region guarantee citizens freedom of religious belief and protect “normal religious activities.”

China has long said Xinjiang faces a serious threat from Islamist militants and separatists who plot attacks and stir up tensions between the mostly Muslim Uighur minority who call the region home and the ethnic Han Chinese majority.

But the UN panel says it has received many credible reports that 1 million ethnic Uighurs were being held in what resembles a “massive internment camp that is shrouded in secrecy, a sort of no rights zone.”

Editorial / Wall Street Journal

“(Uighurs) in general adhere to a moderate form of Islam and have long resisted radicalization.  If that is changing, it is due in large part to the government’s punishment of any expression of Islamic faith. In recent years the authorities have forbidden Uighurs to fast during Ramadan, grow beards or give their children Islamic names.  Officials search their homes for religious materials, and many mosques have been demolished.

“Florida Senator Marco Rubio is one of several lawmakers calling for the U.S. to sanction the officials responsible. Vice President Mike Pence has condemned China’s treatment of Muslims. On Friday a United Nations panel on racial discrimination reviewed evidence that China’s human-rights abuses are violating international covenants.

“The Uighurs’ plight has wider significance.  China’s supreme leader Xi Jinping is using propaganda campaigns, surveillance and detention to an extent China hasn’t seen since Mao Zedong. Chinese police are pioneering new techniques and surveillance technology in Xinjiang and deploying them across the country. The U.S. has many important issues with Beijing, but the systematic repression of the Uighurs reveals the nature Xi Jinping’s government.”

North Korea: South Korea’s President Moon Jae-in said on Wednesday his planned third summit with North Korean leader Kim Jong Un next month in Pyongyang would be another step towards the denuclearization of the Korean peninsula and an end to the 1950-53 Korean War.  Moon said he hoped for speedy progress in talks between North Korea and the United States.  He also said he aimed to begin construction of the inter-Korean railway this year.

For its part, North Korea has denounced U.S.-led efforts to maintain sanctions despite what Pyongyang says are goodwill gestures, including halting its weapons testing and returning the remains of U.S. troops killed in the 1950-53 Korean War.

U.S. officials familiar with the talks, however, told Reuters that North Korea had yet to agree to a timeline for eliminating its nuclear arsenal or to disclose its size, which U.S. estimates have put at between 30 and 60 warheads.

President Trump told us there is no more nuclear threat from Kim and his Orcs.

Russia: The United States voiced deep concern on Tuesday about Russia’s pursuit of weapons including a mobile laser system to destroy satellites in space, as well as its putting into orbit of a new “space apparatus inspector.”

Yleem D.S. Poblete, U.S. Assistant Secretary of State for Arms Control, Verification and Compliance, was addressing the U.N.’s Conference on Disarmament in Geneva, which has been discussing a new treaty to prevent an arms race in outer space.

“To the United States this is yet further proof that the Russian actions do not match their words,” she told the forum.  Russia’s pursuit of counterspace capabilities “is disturbing given the recent pattern of Russian malign behavior,” she added.

Wednesday there was the report of a Russian satellite that in the past two years has “birthed” two new satellites for the first time in history, a Russian “nesting” satellite.  The Pentagon has no idea what the other two are doing, Russia giving no details but, tellingly, announcing the ‘births’ through their military.

Separately, the parent company of two popular Russian social network sites has asked the government to stop prosecuting social media users under anti-terrorism laws, and offer an amnesty for people already convicted.

Mail.ru Group, which owns the Vkontakte and Odnoklassniki social media websites, called on the authorities last week to pardon those convicted of extremism for their posts.  Russia’s Supreme Court estimates that criminal prosecutions for memes, likes and other social media content has more than tripled between 2012 and 2017.  [Moscow Times]

Random Musings

--Presidential tracking polls....

Gallup: 39% approval of President Trump’s performance, 56% disapproval (Aug. 12).
Rasmussen: 48% approve of Trump’s performance, 51% disapprove (Aug. 17).

In a new CNN poll, Trump has an overall approval rating of 42%, about the same as its level this spring.

In the above noted Quinnipiac University poll, President Trump’s job approval was 41%.  [In this survey, like virtually all the others, Trump’s approval rating has been in a narrow range all year, 37% to 43%.]

--Democrats now lead Republicans by 52% to 41% in a nationwide generic Congressional ballot, according to CNN. The blue lead was eight percentage points in June.

But a plurality (48%) in the same poll believe Republicans will maintain control of Congress, compared with 40% who believe Democrats will gain control.

Compared to previous elections, 68% of registered voters say they’re more enthusiastic to vote in this election than in the past.  Registered Democrats and Republicans report being more excited to vote at similar levels, with 70% and 68% saying so, respectively.  [But Democrats are far more enthusiastic than they were in Sept. 2016, when only 38% said they were “more enthusiastic,” while 48% of Republicans said the same.]

Health care still tops the list of important issues with 81% saying it’s extremely or very important to their vote for congress.  Immigration is up from 38% in May to 44% now as a critical issue.

Six-in-ten say it’s very or somewhat likely that a foreign government will interfere in the U.S. elections this fall with only 37% saying it’s not too likely or not likely at all.  35% of Republicans see meddling as likely, well below Democrats (83%) and Independents (56% likely).

--Kansas Gov. Jeff Colyer conceded the Republican primary to Kris Kobach.  Kobach’s forceful condemnations of illegal immigration over the years endeared him to President Trump.

A tabulation of the provisional and mail-in ballots increased Kobach’s lead to nearly 300 votes in the election held last week, out of more than 313,000 votes cast.

Kobach will face state Sen. Laura Kelly in November, Kelly painting Kobach as too extreme for the state and too close to Trump.  This will be one of the more interesting races across the country.

Elsewhere, in primaries on Tuesday, Minnesota State Rep. Ilhan Omar, the nation’s first Somali-American legislator who once lived in a Kenyan refugee camp, is now likely to break that same barrier for Congress after winning the Democratic nod to compete for a safe blue House district in Minneapolis.  If she wins, Omar and Democrat Rashida Tlaib, who will run unopposed in Michigan’s 13th Congressional District in November, will be the first Muslim women in Congress.

Vermont Democrats made history by nominating Christine Hallquist, the nation’s first transgender gubernatorial candidate from a major political party.  Hallquist now faces Gov. Phil Scott, a Republican, who is seeking his second term.

Back in Minnesota, former Gov. Tim Pawlenty lost in the GOP gubernatorial primary to county commissioner Jeff Johnson, both candidates taking heat for anti-Trump comments in 2016.

--Democratic New York Gov. Andrew Cuomo shockingly blew up any chance of being on the national party ticket in 2020 when in a speech on Wednesday knocking President Trump, out of nowhere he stupidly said, “We’re not going to make America great again. It was never that great.”

Trump immediately tweeted: “ ‘WE’RE NOT GOING TO MAKE AMERICA GREAT AGAIN, IT WAS NEVER THAT GREAT.’  Can you believe this is the Governor of the Highest Taxed State in the U.S., Andrew Cuomo, having a total meltdown!”

Cuomo is going to be re-elected this fall, and probably handily, but with this single statement he torpedoed any chances of him ever becoming president, which has long been his dream.

The GOP caught a huge break with Cuomo’s gaffe and you’ll see it in every congressional campaign the rest of the way.  Trump will also be employing it at every campaign rally.

Cuomo continued after in his speech: “We have not reached greatness. We will reach greatness when every American is fully engaged. We will reach greatness when discrimination and stereotyping against women – 51 percent of our population – is gone.”

Cuomo’s spokespeople are scrambling feverishly to quell the outrage, but it’s too late.  The governor broke two days of silence today and said the wording was “inartful.”

Trump tweet: “Wow! Big pushback on Governor Andrew Cuomo of New York for his realy dumb statement about America’s lack of greatness.  I have already MADE America Great Again, just look at the markets, jobs, military – setting records, and we will do even better. Andrew ‘choked’ badly, mistake!”

“When a politician admits that ‘We’re not going to make America great again,’ there doesn’t seem to be much reason to ever vote for him. This could be a career threatening statement by Andrew Cuomo, with many wanting him to resign – he will get higher ratings than his brother Chris!”

--CNN reported that the Defense Department is investigating one of the top civilian advisers, Dana White, a Trump appointee who works as the Pentagon’s chief spokeswoman, for allegedly retaliating against staffers who complained after she ordered them to run personal errands for her on the taxpayers’ dime.

White had staffers pick up her dry cleaning, hit the pharmacy for snacks and pantyhose and work on her personal mortgage paperwork among other tasks, CNN reported, citing a quartet of sources.

By the way, CNN’s Pentagon reporter Barbara Starr said Defense Secretary Jim Mattis picks up his own dry cleaning.

--Kathleen Parker / Washington Post

“No sooner had I ordered the 2011 book ‘Less Than Human’ for a late-summer read than President Trump called Omarosa Manigault Newman a ‘dog’ and a ‘lowlife.’ Those two slurs fit nicely into author David Livingstone Smith’s philosophical study of man’s capacity to inflict cruelty by first dehumanizing the ‘other.’

“Trump’s personal template is familiar. He likes someone, then doesn’t, then reduces the object of his scorn to something less than human. The mononymously known Omarosa, whose friendship with Trump began when she appeared on ‘The Apprentice,’ was fired last year from her job as a White House aide.

“During the past few days, she has released secretly taped recordings of her firing as well as a later conversation with Trump, published a tell-all account of her time in the White House and told MSNBC’s Chris Matthews that she’s willing to cooperate with special counsel Robert S. Mueller III’s investigation.  (How interested Mueller is in her input isn’t clear.)

“All things considered, it sounds as if Trump and Omarosa may deserve each other.  Recording people without their knowledge, especially in the White House, is certainly un-kosher if not illegal.  On Tuesday, the Trump campaign filed an arbitration action against Omarosa for breach of a 2016 nondisclosure agreement.  More important, however, is the risk of having exposed top officials to hackers if Omarosa used her cellphone to record these and other conversations....

“(What) makes the president’s remarks especially repugnant is that they were aimed at a minority woman and followed a spate of similar insults targeting African Americans....

“Granted, all of (them...Maxine Waters, Don Lemon, LeBron) have been critical of Trump, but so what?  Presidents are frequently under fire. Yet, through some strange reasoning, Americans are supposed to accept that, you know, Trump’s a fighter. He always fires back, as though this were justification for the bile he releases into the atmosphere. In the process, he has offered aid to his enemies by displaying a pattern of racially charged commentary.

“It’s a simple matter of fact that certain insults have greater or lesser impact when applied to particular individuals or groups of people.  Comparing Mitt Romney or Stephen K. Bannon to a dog, as Trump previously did, obviously isn’t the same as calling a black woman a dog. Questioning the intelligence of African Americans is especially blistering.

“Did Trump mean for us to treat his comments so literally? Who cares? He’s the president of the United States and should be able to muzzle his schoolyard impulses. He should also know that dehumanization – or ‘othering,’ to use current vernacular – leads to marginalization, which can lead to cruelty (say, separating young migrant children from their parents), which can lead to far worse.

“As Smith explains in his book, it’s much easier to hurt, maim or kill another when you no longer see them as quite human. World history’s catalogue of atrocities confirms this. Which is why no one living today should be comfortable with the language of dehumanization, no matter how relatively minor the degree.

“Least of all the president.”

--One year after the deadly rally in Charlottesville, Virginia, most Americans feel racial tensions have grown, and partisans – as well as white and black Americans – divide sharply on how President Trump handles race relations.

A new CBS News poll conducted by YouGov finds 61% of Americans say that racial tensions have increased over the past year.

Majorities of whites, blacks and Hispanics feel this way, but blacks are especially likely to think so: 78% feel tensions have increased.

58% of Americans disapprove of how President Trump is handling race relations and racial issues, but these are split along party lines and race.

82% of blacks disapprove and 73% of Hispanics disapprove.  Whites are evenly split (49% approve, 51% disapprove), while 83% of Republicans approve of the president’s handling of racial issues, and 90% of Democrats disapprove.

I’m biting my tongue when it comes to my fellow Republicans.  Let’s just say I’m not part of the 83%.

Thankfully, last week’s rallies and counter-rallies commemorating the one-year anniversary were none events.

Trump tweet: “I condemn all types of racism and acts of violence. Peace to ALL Americans!”

--A damning new grand jury report from Pennsylvania revealed hundreds of pedophile priests abused and terrorized Pennsylvania children for decades, while complicit Catholic Church officials covered up their offenses or turned a blind eye.

Over the course of 70 years, the trusted, ordained men of God, more than 300 in all, raped and abused more than 1,000 boys and girls with impunity while serving an institution that routinely shuffled them from parish to parish, giving them license and enabling them to prey upon new victims.

The statewide grand jury report that was two years in the making, was described by officials as the biggest and most exhaustive ever undertaken by a U.S. state.

“The main thing was not to help children, but to avoid scandal,” the report says.  “Priests were raping little boys and girls and the men of God who were responsible for them not only did nothing: They hid it all.”

[I read the report on the Dioceses of Pittsburgh and Greensburg, to see who was implicated from churches I went to as a kid, my mother being part of a large, very devout Catholic family from those parts.  It’s sickening.]

The Vatican issued a response on Thursday, saying Pope Francis was on the side of the victims.

“Victims should know that the pope is on their side,” the statement read. “Those who have suffered are his priority, and the Church wants to listen to them to root out this tragic horror that destroys the lives of the innocent.”

“There are two words that can express the feelings faced with these horrible crimes: shame and sorrow,” it said.

The Vatican added that the church needed to learn “hard lessons from its past, and there should be accountability for both abusers and those who permitted abuse to occur.”

The Pope is heading to Ireland in about two weeks and there are calls from some priests there for him to cancel the visit.

Cardinal Timothy Dolan, Archbishop of New York, uttered what so many of us have been thinking.  His priests are telling him they are embarrassed to wear their collars when walking around the city.  That’s incredibly depressing.

I’ve decided I’m keeping the photo of myself and disgraced Cardinal McCarrick until his Vatican trial.

--The stunning hijack of a 76-seat Bombardier commercial airplane, belonging to his employer, Horizon Air, by 29-year-old Richard Russell rightfully has heightened worries about gaps in U.S. aviation security.

Russell performed midair stunts over Puget Sound, wondering at one point what would happen if he tried to do a “backflip” with the plane he had stolen from Seattle’s main airport.  When the control tower urged him to attempt to land the empty aircraft, Russell, worried about harm to others on the ground, said it was better to take a nose dive, “and call it a night.”

The crash on a sparsely populated island in the Sound took no other lives than Russell’s, but everyone is asking how a baggage handler and grounds crew member could take control of the plane, get it up in the air and fly it all over a major U.S. metropolitan area for nearly an hour.

But the industry operates on a principle of performing background checks on employees, not locking down airplanes in secure areas.    The planes require constant access from many individuals aside from pilots.

--Vienna dislodged Melbourne, Australia, for the first time at the top of the Economist Intelligence Unit’s (EIU) Global Livability Index. The two metropolises have been neck and neck in the annual survey of 140 urban centers for years, with Melbourne on top the past seven editions.

Great pick. I’ve been to Vienna a number of times and just love it. Though, as I’ve written, from a train ride I took into the suburbs years ago, it got kind of spooky (i.e., think 1938).

Vienna regularly tops a larger ranking of cities by quality of life compiled by consulting firm Mercer.

Rest of the top ten....

3. Osaka, Japan. 4. Calgary, Canada.  5. Sydney, Australia. 6. Vancouver, Canada. T-7. Toronto and Tokyo.  9. Copenhagen, Denmark.  10. Adelaide, Australia.

Kind of surprised Singapore was just 37, while Hong Kong climbed from 45 to 35.

Honolulu was the No. 1 U.S. city at No. 23. Pittsburgh next at 32.

Paris is No. 19, London 48, and New York 57.

The least livable city in the world is Dakar, Senegal, followed by Algiers, Algeria. 

So if your boss comes to you one morning and says, “John, you always said you wanted to travel, we’re sending you to Dakar,” find a way to sneak your belongings out at lunch time and just never return.

Several of the world’s most dangerous capitals, such as Baghdad and Kabul, are not ranked.

--Finally, NASA successfully launched a spacecraft toward the sun on Sunday, hoping to increase scientific knowledge of how it works.

The Parker Solar Probe is to set a plethora of records, including speediest spacecraft, highest velocity while leaving Earth and closest solar approach.  It also marks the first robotic visit to such a hostile environment.

The launch speed of the Delta IV rocket of 43,000 miles per hour was expected to be the fastest of any previous launch because of the pace required to set a course directly to the sun.

The United Launch Alliance is a joint venture of Boeing Co. and Lockheed Martin Corp.  The Parker will attain a top speed of 430,000 mph – about 120 miles a second – and at its closest approach will be only 3.8 million miles from the sun.

The probe is to investigate two key questions about solar physics: How does the solar wind start and attain speeds of as much as 1.8 million mph? And why is the sun’s surface, at 10,000 degrees Fahrenheit (5,500 Celsius), just a tiny fraction of the million-plus degree corona?  [I think you’d agree; 10,000 F. is hot enough.]

By the way, if you’re thinking about sunscreens, Consumer Reports says Equate SPF 50 is a good budget buy.

More importantly, the Parker will make 24 orbits of the sun over almost seven years, using Venus to help slow down and reduce its orbital distance to the sun.  Parker’s first approach, at 15 million miles, is expected on Nov. 1.

---

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

God bless America.

---

Gold $1191...lowest weekly close since Jan. 2017
Oil 
$65.92...down a seventh straight week

Returns for the week 8/13-8/17

Dow Jones  +1.4%  [25669]
S&P 500  +0.6%  [2818]
S&P MidCap  +0.7%
Russell 2000  +0.4%
Nasdaq  -0.3%  [7816]

Returns for the period 1/1/18-8/17/18

Dow Jones  +3.8%
S&P 500  +6.6%
S&P MidCap  +5.8%
Russell 2000  +10.3%
Nasdaq  +13.2%

Bulls 57.3
Bears 18.4

Have a great week.

Brian Trumbore



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Week in Review

08/18/2018

For the week 8/13-8/17

[Posted 11:30 PM ET]

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

Edition 1,010

Trump World

I write the opening last, as I’m sure you’ve figured out over the years, especially in the era of The Donald when you never know what might reach out of the screen to grab you by the throat.

It’s a stormy night at global HQ, the sky lighting up like Mordor, and Sauron is brooding....

OK, that’s a crappy attempt at a dramatic opening, but all the events of the week are covered below in great detail.  So cue the....

Trumpets....

--The FBI fired Peter Strzok, the agent who helped lead the investigations into Russia’s interference in the 2016 presidential election and into Clinton’s use of a private email server.

Last summer, he was removed from the Russia inquiry by special counsel Robert Mueller when Justice Department Inspector General Michael Horowitz discovered anti-Trump text messages between Strzok and former FBI attorney Lisa Page disparaging the then-presidential candidate.

Trump tweets: “Agent Peter Strzok was just fired from the FBI – finally. The list of bad players in the FBI & DOJ gets longer & longer. Based on the fact that Strzok was in charge of the Witch Hunt, will it be dropped?  It is a total Hoax. No Collusion, No Obstruction – I just fight back!”

“Tom Fitton of Judicial Watch: ‘The Strzok firing is as much about the Mueller operation as anything else. There would be no Mueller Special Councel (sic) to investigate so called collusion but for the machinations of Strzok & his colleagues at the top levels of the FBI. We know this...

“...guy was corrupt and had anti-Trump animus.  Strzok and others at the FBI should be criminally investigated for the way the (sic) conducted this investigation. Instead, Mueller is pretending nothing went wrong.  He used Strzok, he used the Clinton DNC Dossier...the whole thing...

“...should be shut down.  The Strzok firing shows that the fundamental underpinnings of the investigation were corrupt. It should be shut down by the courts or by honest prosecutors.’  Thank you, Judicial Watch, I couldn’t have said it better myself!”

“Lou Dobbs: ‘This cannot go forward...this Special Councel (sic) with all of his conflicts, with his 17 Angry Democrats, without any evidence of collusion by the Trump Campaign and Russia. The Dems are the ones who should be investigated.’ Thank you, Lou, so true!”

--In a remarkable attack on a political opponent, President Trump revoked the security clearance of John O. Brennan, the former CIA director under President Barack Obama, citing what he called Brennan’s “erratic” behavior, which is most rich on the part of Mr. Trump.

The White House had previously threatened to strip Brennan and others in the Obama administration of their security clearances, and at the time, White House press secretary Sarah Huckabee Sanders said the president was considering doing so because “they politicized, and in some cases monetized, their public service and security clearances.”

Brennan has become a frequent critic of the president, including when Trump this week attacked Omarosa by calling her a “dog.”

Brennan wrote: “It’s astounding how often you fail to live up to minimum standards of decency, civility & probity. Seems like you will never understand what it means to be president, nor what it takes to be a good, decent, & honest person. So disheartening, so dangerous for our Nation.”

The president was widely criticized for the move.

The U.S. military commander who oversaw the raid that killed Osama bin Laden asked President Trump to revoke his security clearance on Thursday, taking a dramatic stand of solidarity with former CIA Director Brennan.

William McRaven, a retired Navy admiral who led the team that assassinated bin Laden in 2011, made the request in a blistering open letter to Trump.

“Few Americans have done more to protect this country than John,” McRaven, 62, wrote in the letter to the Washington Post.  “He is a man of unparalleled integrity, whose honesty and character have never been in question, except by those who don’t know him.”

McRaven continued, “Therefore, I would consider it an honor if you would revoke my security clearance as well, so I can add my name to the list of men and women who have spoken up against your presidency.”

McRaven expounded on the qualities that make for a good leader.

“A good leader tries to embody the best qualities of his or her organization,” he wrote.  “A good leader sets the example for others to follow.  A good leader always puts the welfare of others before himself or herself.”

Unfortunately, McRaven wrote, Trump has embodied “little of these qualities.”

“Through your actions, you have embarrassed us in the eyes of our children, humiliated us on the world stage and, worst of all, divided us as a nation,” McRaven said.

David Ignatius / Washington Post

“What Donald Trump did Wednesday isn’t supposed to happen in a democracy.  A president who swore an oath to uphold the Constitution just carried out a personal political vendetta against a career intelligence officer.

“In revoking the security clearance of former CIA director John Brennan, Trump took another step toward the abyss. He cited the ‘risk posed by [Brennan’s] erratic conduct and behavior,’ a ludicrous charge coming from our unguided missile of a chief executive. Brennan’s real crime is that he has been in Trump’s face nearly every day, trading insults on Twitter and cable television. Brennan has taken to using words such as ‘high crimes and misdemeanors’ and ‘nothing short of treasonous’ to describe Trump’s behavior, and likened him to convicted fraudster Bernie Madoff. Stripping Brennan’s clearance was presidential payback, dressed up in national security language.

“I wrote back in January that I wished Brennan and other former intelligence chiefs would resist slugging it out with Trump – not because their criticisms are wrong but because they risked tarnishing the credibility and professionalism of their agencies. As I argued, Trump supporters would ‘fume that the spy chiefs are ganging up on the populist president. Conspiracy theories about an imaginary ‘deep state’ will gain more traction, and the cycle of national mistrust will get worse.’

“But let’s be honest: Brennan isn’t a guy who was going to back down in a bar fight, any more than Trump. He’s tough and stubborn, with a chip on his shoulder. He’s a guy who, if you write five positive things about him and one negative, remembers only the negative. Once Trump insulted Brennan’s integrity, as he did after he won the presidency, these two were going to end up in a cockfight.

“The prevailing media explanation of the Brennan move was that Trump was trying to distract public attention from Omarosa Manigault Newman, a disaffected former staffer who just published a tell-all book about the president titled ‘Unhinged.’  But I wonder if that was the real Brennan trigger.

“Trump himself offered a clearer (and more damning) explanation in an interview Wednesday with the Wall Street Journal, suggesting that he punished Brennan because he was one of the original instigators of the investigation led by special counsel Robert Mueller III.  ‘I call it the rigged witch hunt, [it] is a sham.  And these people led it!  So I think it’s something that had to be done.’

“With Trump, you always have to question what’s rubbing him so raw and driving him toward possibly illegal and unconstitutional actions. As prosecutors like to say: ‘We may not know what he’s done wrong, but he does.’  Does a warped protective impulse drive Trump into these furies of defensive action?....

“Brennan, like Comey, was there at the beginning of this investigation.  Trump must have asked himself: What does Brennan know? What did he learn from the CIA’s deep assets in Moscow, and from liaison partners such as Britain, Israel, Germany and the Netherlands? Does Trump think Brennan will be a less credible witness without a security clearance?

“The Brennan episode is just one more warning of what may be ahead.  Trump appears ready to take our country over the waterfall to save himself. Before it’s too late, Trump should realize: Even in his rage, he can’t fire everybody.”

--A new poll from Quinnipiac University reveals 79% of Americans say it’s never acceptable to seek information from a hostile foreign country about a political opponent, including 92% of Democrats and 69% of Republicans.

1 in 5 Republicans (19%) say it is acceptable to do such a thing, even though it is against the law.  Quinnipiac’s question made no explicit reference to the June 2016 meeting in Trump Tower between senior Trump campaign members and Russians.

As to the Mueller probe, a CNN poll conducted by SSRS has two-thirds of Americans, including majorities across party lines, wanting the investigation into Russian interference in the 2016 election to wrap up before voters go to the polls in November.

34% approve of the president’s handling of the Russia investigation (55% disapprove), which is a gain of five points since June 14-17, while 47% approve of how Mueller is handling it, up six points since June.

70% say the president should testify.

55% of Americans say Trump isn’t tough enough on Russia, 36% say his attitude is about right.

The aforementioned John O. Brennan / New York Times

“When Alexander Bortnikov, the head of Russia’s internal security service, told me during an early August 2016 phone call that Russia wasn’t interfering in our presidential election, I knew he was lying.  Over the previous several years I had grown weary of Mr. Bortnikov’s denials of Russia’s perfidy – about its mistreatment of American diplomats and citizens in Moscow, its repeated failure to adhere to cease-fire agreements in Syria and its paramilitary intervention in eastern Ukraine, to name just a few issues.

“When I warned Mr. Bortnikov that Russian interference in our election was intolerable and would roil United States-Russia relations for many years, he denied Russian involvement in any election, in America or elsewhere, with a feigned sincerity that I had heard many times before.  President Vladimir Putin of Russia reiterated those denials numerous times over the past two years, often to Donald Trump’s seeming approval.

“Russian denials are, in a word, hogwash.

“Before, during and after its now infamous meddling in our last presidential election, Russia practiced the art of shaping political events abroad through its well-honed active measures program, which employs an array of technical capabilities, information operations and old-fashioned human intelligence spycraft.  Electoral politics in Western democracies presents an especially inviting target, as a variety of politicians, political parties, media outlets, think tanks and influencers are readily manipulated, wittingly and unwittingly, or even bought outright by Russian intelligence operatives. The very freedoms and liberties that liberal Western democracies cherish and that autocracies fear have been exploited by Russian intelligence services not only to collect sensitive information but also to distribute propaganda and disinformation, increasingly via the growing number of social media platforms.

“Having worked closely with the FBI over many years on counterintelligence investigations, I was well aware of Russia’s ability to work surreptitiously within the United States, cultivating relationships with individuals who wield actual or potential power.  Like Mr. Bortnikov, these Russian operatives and agents are well trained in the art of deception. They troll political, business and cultural waters in search of gullible or unprincipled individuals who become pliant in the hands of their Russian puppet masters. Too often, those puppets are found....

“The already challenging work of the American intelligence and law enforcement communities was made more difficult in late July 2016, however, when Mr. Trump, then a presidential candidate, publicly called upon Russia to find the missing emails of Mrs. Clinton.  By issuing such a statement, Mr. Trump was not only encouraging a foreign nation to collect intelligence against a United States citizen, but also openly authorizing his followers to work with our primary global adversary against his political opponent.

“Such a public clarion call certainly makes one wonder what Mr. Trump privately encouraged his advisers to do – and what they actually did – to win the election.  While I had deep insight into Russian activities during the 2016 election, I now am aware – thanks to the reporting of an open and free press – of many more of the highly suspicious dalliances of some American citizens with people affiliated with the Russian intelligence services.

“Mr. Trump’s claims of no collusion are, in a word, hogwash.

“The only questions that remain are whether the collusion that took place constituted criminally liable conspiracy, whether obstruction of justice occurred to cover up any collusion or conspiracy, and how many members of ‘Trump Incorporated’ attempted to defraud the government by laundering and concealing the movement of money into their pockets.  A jury is about to deliberate bank and tax fraud charges against one of those people, Paul Manafort, Mr. Trump’s former campaign chairman. And the campaign’s former deputy chairman, Rick Gates, has pleaded guilty to financial fraud and lying to investigators.

“Mr. Trump clearly has become more desperate to protect himself and those close to him, which is why he made the politically motivated decision to revoke my security clearance in an attempt to scare into silence others who might dare to challenge him. Now more than ever, it is critically important that the special counsel, Robert Mueller, and his team of investigators be allowed to complete their work without interference – from Mr. Trump or anyone else – so that all Americans can get the answers they so rightly deserve.”

Trump tweet: “ ‘Director Brennan’s recent statements purport to know as fact that the Trump campaign colluded with a foreign power.  If Director Brennan’s statement is based on intelligence he received while leading the CIA, why didn’t he include it in the Intelligence Community Assessment released in 2017. If his statement is based on intelligence he has seen since leaving office, it constitutes an intelligence breach....’ Richard Burr (R-NC) Senate Intel Cmte Chair.”

--Trump tweets: “THE FAKE NEWS MEDIA IS THE OPPOSITION PARTY.  It is very bad for our Great Country....BUT WE ARE WINNING!”

“The Boston Globe, which was sold to the Failing New York Times for 1.3 BILLION DOLLARS (plus 800 million dollars in losses & investment), or 2.1 BILLION DOLLARS, was then sold by the Times for 1 DOLLAR.  Now the Globe is in COLLUSION with other papers on free press.  PROVE IT!”

“There is nothing that I would want more for our Country than true FREEDOME OF THE PRESS.  The fact is that the Press is FREE to write and say anything it wants, but much of what it says is FAKE NEWS, pushing a political agenda or just plain trying to hurt people. HONESTY WINS!”

You hear that, boys and girls?  Our president just gave us some great advice. Honesty wins!

In the Quinnipiac survey, 65% of voters said the media was an important part of U.S. democracy, compared to 26% who agree with Trump’s assessment that the media is the enemy of the people.

A majority of Republicans...51%...agreed with the president’s statement while 36% did not.

66% said Trump should stay off Twitter, while 26% wanted him to continue.

So the nation’s newspapers, spurred on by the Boston Globe, were urged to stand up for the press with editorials on Thursday and nearly 350 news organizations had pledged to do so.

In St. Louis, the Post-Dispatch called journalists “the truest of patriots.” The Chicago Sun-Times said it believed most Americans know that Trump is talking nonsense. The Fayetteville, N.C. Observer said it hoped Trump would stop, “but we’re not holding our breath.”

“Rather, we hope all the president’s supporters will recognize what he’s doing – manipulating reality to get what he wants,” the Observer said.

The New York Times added a pitch to “subscribe to your local papers.  Praise them when you think they’ve done a good job and criticize them when you think they could do better. We’re all in this together.”

But the Wall Street Journal said it was not participating, with a column from James Freeman noting that the Boston Globe’s effort ran counter to the independence that editorial boards claim to seek.  Freeman wrote that Trump has the right to free speech as much as his media adversaries.

The Baltimore Sun observed: “While we agree that labeling journalists the ‘enemy of the American people’ and journalism ‘fake news’ is not only damaging to our industry but destructive to our democracy, a coordinated response from independent – dare we say ‘mainstream’ – news organizations feeds a narrative that we’re somehow aligned against this Republican president.”

Still, the Sun supported the Globe’s effort and also noted the deaths of five Capital Gazette staff members at the hands of a gunman in nearby Annapolis, Maryland.

But it’s hard to see the newspapers’ efforts being that successful as their editorial boards overwhelmingly opposed Trump’s election in 2016.  A Pew Research Center poll had 85% of Republicans and Republican-leaning independents saying in June 2017 that the news media has a negative effect on the country, up from 68% in 2010.

I do have to relay this editorial from the New York Daily News:

“Trump’s use of the world’s most powerful pulpit to launch a never-ending tirade against those who seek to gather facts, synthesize them and present them to the public has been so vicious, so indiscriminate, so corrosive to our common civic fabric, that it demands an extraordinary rebuke.

“He, who objective analysis proves lies more than any President ever, smears reporters, newspapers and TV channels as ‘fake news’ because they have the temerity to expose uncomfortable truths about his administration.

“He calls us, as a group, the ‘enemy of the people’ – the same horrible term used by murderous guillotining French revolutionaries and Stalin’s secret police.

“And it’s working for him.

“Half of Republicans and a quarter of all voters now agree with the President’s sick ‘enemies’ smear. More than four in 10 Republicans want to give him the power to shut down stations and publications he dislikes. It doesn’t get less American than that.

“The consequences are dire and stretch far beyond this presidency. When a critical mass of our fellow citizens reflexively distrust everything that is written or broadcast because it is written or broadcast, reading not with intelligent skepticism but dismissive cynicism – or, more often, not reading at all unless a piece has the sickly perfume of propaganda – we lose the ability to expose and repair problems in our government.

“To react to common threats. To keep our community and culture from fraying irreparably.

“It is of course fair game for politicians, or anyone, to push back on coverage they consider inaccurate or unfair. Journalists have blind spots. They make mistakes. They chase ratings and clicks. Bias is not a figment of critics’ imagination; it is an infection the media must do its best to fight, and neutralize.

“But to reflexively reject all inconvenient facts as fiction is to weaken the entire nation’s immune system, and render what is supposed to be an informed citizenry incapable of engaging in good-faith debate.

“We react to Trump as intimates, not bystanders. He’s been bloviating around these parts for his entire life. Donald Trump, or John Miller (fake name) or John Barron (fake name), has a long history of using the press to advance his own dishonest narrative.

“Trump learned well from the master, the despicable Roy Cohn, in using lies to inflate himself and smear rivals.

“A veteran local gossip reporter who fielded many a phone call from the man put it this way: ‘Trump turned out to be the king of ersatz.  Not just fake, but false. He lied about everything, with gusto.’

“The earth the President has scorched has another awful side effect for those of us in the nation’s largest  city: It has given license to other politicians to launch smaller wars against the media for their own ends.

“Weeks ago, Gov. Cuomo responded to a legitimate question about campaign financing by unleashing a tirade about the business practices of the parent company for which a reporter happens to work.

“Mayor de Blasio has wished for the demise of a competitor tabloid that gives him a rough run.  He has relished the financial troubles of this newspaper and lashed out at solid reporting with language this close to ‘fake news.’

“Their sins do not compare to Trump’s, but this is the behavior the President has helped to normalize.  This is the country he is molding in his ugly image.  This is the angry ignorance we must all stand against.”

Thursday, the U.S. Senate passed a resolution by unanimous consent affirming that the media “is not the enemy of the people.”  The measure is largely symbolic.

--The Defense Department announced the military parade ordered by President Trump will not happen in 2018. Colonel Rob Manning, a Pentagon spokesman, said the military and the White House “have now agreed to explore opportunities in 2019.”

The announcement came hours after reports the parade would cost about $92 million, according to U.S. officials, citing preliminary estimates, more than three times the price first suggested by the White House.

According to officials, roughly $50 million would cover Pentagon costs for aircraft, equipment, personnel and other support for the November parade in Washington.

The remainder would be borne by other agencies and largely involve security costs.

Officials said the plans had not yet been approved by Defense Secretary Jim Mattis.  [Mattis himself said he had seen no such estimate and questioned the reports.]

Well, whatever the figure is, it was cancelled, soliciting this from our fearless leader....

Trump tweets: “The local politicians who run Washington, D.C. (poorly) know a windfall when they see it. When asked to give us a price for holding a great celebratory military parade, they wanted a number so ridiculously high that I cancelled it. Never let someone hold you up!  I will instead...

“...attend the big parade already scheduled at Andrews Air Force Base on a different date, & go to the Paris parade, celebrating the end of the War, on November 11th. Maybe we will do something next year in D.C. when the cost comes WAY DOWN. Now we can buy some more jet fighters!”

Trump didn’t elaborate on his allegations about the city government. An hour later, D.C. Mayor Muriel E. Bowser (Dem.) tweeted:

“Yup, I’m Muriel Bowser, mayor of Washington, DC, the local politician who finally got thru to the reality star in the White House with the realities ($21.6M) of parades/events/demonstrations in Trump America (sad).”

The National Commander of the American Legion, Denise Rohan, said the organization “appreciates that our President wants to show in a dramatic fashion our nation’s support for our troops.”

“However, until such time as we can celebrate victory in the War on Terrorism and bring our military home, we think the parade money would be better spent fully funding the Department of Veterans Affairs and giving our troops and their families the best care possible.”

Related to the above, it was beyond pathetic that President Trump signed the National Defense Authorization Act – named after Republican Senator John McCain – at Fort Drum, New York, and didn’t have the class to thank the ailing McCain for his efforts.

--I have nothing to add regarding Omarosa Manigault Newman, her new book and accusations President Trump once used the N-word on “The Apprentice,” among other things, except to say she is a vile, despicable woman.

But Trump was once again a fool for falling into her trap and, as usual, feeling the need to fight back rather than to move on and ignore the woman.  Of course he was also a fool to bring her into the White House in the first place.

--Michael Gerson / Washington Post

“From the beginning of the American republic, its founders obsessed about how it all would end.  ‘Democracy never lasts long,’ said John Adams.  ‘There never was a Democracy Yet, that did not commit suicide.’

“George Washington used his farewell address to warn that partisan ‘factions’ could tear the country apart. The Federalists worried that domestic disunity could be exploited by hostile foreign governments. James Madison in particular feared that liberty might be lost by ‘gradual and silent encroachments of those in power.’

Check.  Check.  Check.

“But there is one factor in our politics that the founders could not have predicted: the debilitating infection of celebrity culture.

“Were Washington to be resurrected, it would be difficult to explain how history’s most powerful nation, after surviving civil war and global conflict, turned for leadership to a celebrity known for abusing other celebrities on television. It is the single strangest development in American history. And we have only begun to process its consequences.

“It is not that American leaders have never been famous. Dwight D. Eisenhower was one of the most famous men in the world for organizing victory in World War II.  Ronald Reagan was famous for his acting career but also for being governor of California and an articulate conservative.

“Fame usually has some rough relationship to accomplishment. Celebrity results from mastering the latest technologies of self-exposure.  Ingrid Bergman was famous. Kim Kardashian is a celebrity. Franklin D. Roosevelt was famous. Donald Trump is...not in the same category.

“Within its proper bounds – confined to stunts on a desert island or in a fake boardroom – the ethos of reality television is relatively harmless.  Transposed to the highest level of politics, it is deeply damaging....

“(The) broader influence of celebrity culture on politics is to transform citizens into spectators.  In his book ‘How Democracy Ends,’ David Runciman warns of a political system in which ‘the people are simply watching a performance in which their role is to give or withhold their applause at the appropriate moments.’ In this case, democracy becomes ‘an elaborate show, needing ever more characterful performers to hold the public’s attention.’  Mr. Madison, meet Omarosa.

“Trump is sometimes called a populist. But all this is a far cry from the prairie populism of William Jennings Bryan, who sought to elevate the influence of common people. Instead, we are seeing a drama with one hero, pitted against an array of villains. And those villains are defined as anyone who opposes or obstructs the president, including the press, the courts and federal law enforcement. Trump’s stump speeches are not a call to arms against want; they are a call to oppose his enemies. This is not the agenda of a movement; it is the agenda of a cult.

“Will the republic survive all this? Of course it will. But it won’t be the same.”

--Philip Rucker of the Washington Post notes that “In President Trump’s singular lexicon, there is no more vicious putdown than likening an adversary to a dog.

“Choked like a dog.”

“Fired like a dog.”

“Sweat like a dog.”

“Good work by General Kelly for quickly firing that dog!”

It’s not just Omarosa.  Sally Yates, Steve Bannon, Mitt Romney, Marco Rubio...all have been called dogs.

So the point is, Trump hates dogs, as first wife Ivana writes in her memoir, and as Rucker points out, he’s “the first modern president not to have a dog – or any pet – in the White House.”

Wall Street and Trade

The week was about Turkey, China, strong U.S. corporate earnings, and Elon Musk’s ongoing issues, and as I go to post, the Wall Street Journal is reporting, “Chinese and U.S. negotiators are mapping out talks to try to end their trade standoff ahead of planned meetings between President Trump and Chinese leader Xi Jinping at multilateral summits in November, said officials in both nations.”  At the same time, everything could just fall apart.

I detail the situation in Turkey further below, but for the purposes of the week’s market action, the nation’s finance chief tried to reassure thousands of international investors on a conference call Thursday, in which he pledged to fix the economic troubles that have seen the country spiral into a currency crisis. This came a day after Qatar pledged $15 billion in investments and the lira rallied a bit.

Berat Albayrak said Turkey’s banks are “healthy and strong” and that implementing structural reforms and maintaining a tight monetary policy to fight inflation remains a priority. He also ruled out any moves to limit money flows, which is  a possibility that worries investors, or any assistance from the International Monetary Fund.

The biggest concern is Turkey’s high levels of foreign debt that fueled growth in recent years, but as the currency drops, that debt becomes so much more expensive to repay, leading to potential bankruptcies.

But President Erdogan has refused to allow the central bank to raise interest rates to support the currency, as  experts say it should.  Albayrak didn’t appear to address the central bank’s independence.

As for the U.S. economy, July retail sales were stronger than expected 0.5%, 0.6% ex-autos, but June was revised down from 0.5% to 0.2%.  Put the two together, though, and it’s very solid.

July industrial production was less than forecast, 0.1%.

July housing starts were troubling, far less than expected, as the poor data on the housing front continues.  Shares in homebuilders have been hit hard.  Home prices are rising, no doubt, but mortgage rates are rising in kind, and affordability is clearly an issue, despite the booming economy.

The closely-watched Atlanta Fed’s GDPNow barometer, however, is pegging third-quarter growth at 4.3%, but it’s early in analyzing the data for the three month period, and we need to see if trade tensions begin to work their way into the numbers.

Trade Wars: A senior Chinese delegation will arrive in Washington for trade talks later this month, it was announced this week, with a statement from China’s Commerce Ministry saying the delegation would be led by commerce vice-minister Wang Shouwen, which will meet U.S. Treasury undersecretary David Malpass to discuss “economic and trade issues between China and the U.S.”

These would be the first formal talks between the two sides since July, Beijing and Washington having started a tit-for-tat trade war last month, each imposing 25 percent tariffs on $34 billion of each other’s exports.

Washington is imposing further tariffs on another $16bn of Chinese goods on August 23, and China has said it will retaliate. The U.S. then said it is prepared to target $200 billion more in Chinese products, and China said it was preparing another $60bn in tariffs on U.S. goods.  Public hearings on the U.S. $200bn are scheduled to begin on Monday.  These likely wouldn’t be implemented until the fall, if at all.

The main purpose from China’s standpoint in the upcoming talks is to see whether both sides are really interested in having further dialogue.

Meanwhile, U.S. Trade Representative Robert Lighthizer on Thursday expressed hope a breakthrough could be made in the coming days in efforts to rework NAFTA, though his Mexican counterpart said flexibility was needed to reach agreement.

But President Trump said he was in “no rush” to conclude the talks, repeating his oft-stated complaint that the 24-year-old trade agreement had been a “disaster” for the United States during a cabinet meeting at the White House yesterday.

“We have much better alternatives than that. So if you can’t make the right deal, don’t make it,” Trump told Lighthizer.

The U.S. and Mexico began meeting without the third member of the pact – Canada – in an effort to tackle bones of contention, including revamped automotive sector rules and a sunset clause that could kill NAFTA after five years.

But when it comes to all the trade talk in general, South Korea offers a cautionary tale.

I’m on record as saying the March 28 agreement between South Korea and the United States was a sham, and it’s proving to be worse than that for the South Koreans.

As reported by Gina Chon of Reuters:

“Avoiding a trade war with the United States has blown up in South Korea’s face.  It dodged U.S. steel tariffs by agreeing to a quota, but the terms turned out to be onerous.  It’s a cautionary tale for EU President Jean-Claude Juncker and others negotiating with Team Trump.

“Exporting limited quantities of steel to America seemed like a clever workaround to tariffs. South Korea and the United States unveiled an agreement on March 28, four weeks after President Trump threatened the levies.

“Fifty-four kinds of South Korean steel products are now subject to a U.S. quota, equivalent to 70 percent of the average annual import volume of such products from 2015 to 2017.  The final deal came with surprises, though. For one thing, quotas were applied retroactively to Jan. 1. That meant imports of one product already were capped on May 1, the day the deal went into effect. Eight others reached their limits on July 1.

“Seoul also wrongly assumed companies could apply for an exemption and that quotas would be measured annually, instead of quarterly.  It has affected manufacturers Trump purports to support.  Micro, a New Jersey-based employer of nearly 500 people, can no longer access the special steel tubing it needs to make medical devices. It might have been able to absorb tariff-induced higher prices.  “Instead, we have a hard cap on our supply that is 30 percent below what we use today, and we are a growing company,” Micro President Brian Semcer told Breakingviews.  Two new products set to launch in the fourth quarter are in jeopardy. Quickly finding alternatives is unrealistic.  Micro’s products need to stand up to strict regulatory scrutiny, and it can take up to two years to obtain approval. Searches for similar supplies made domestically that meet the company’s standards have been fruitless.

“Unlike the tariffs, which could be temporary, the Korean steel quota also may be a longer-term fixture.  Customers like Micro could be lost forever. Argentina and Brazil, which also agreed to quotas, are in the same boat. The European Union and others talking trade with the White House will have to keep a closer eye on the fine print.”

Robert J. Samuelson / Washington Post

“When all is said and done, President Trump’s trade war may be fated to fail.  There are many reasons. One is that the target countries – prominently, China, Japan and Germany – won’t accede to his demands. This is already happening. Another threat is a backlash among U.S. firms, hurt by tariffs that raise their products’ prices. This, too, is happening.

“But even if all these possibilities were avoided, the larger threat to Trump’s trade agenda is the dollar’s role as the major world currency.  It dictates trade policy in ways not widely understood and is the ultimate cause of chronic U.S. trade deficits.

“The dollar’s role as the major world currency means it’s used to settle trade transactions and make cross-border investments, even when Americans are not involved. As I’ve written before, the extra dollar demand boosts its value on foreign exchange markets. U.S. exports become more expensive and U.S. imports less so.

“Trade deficits result. Since 1981, the United States has had only one current account surplus.  (The current account is the broadest measure of the trade balance.)

“When something continues that long, it’s not an aberration.  It’s an integral part of the global economy.  In effect, the dollar provides a service to the rest of the world.

“We are compensated for this service by receiving imports greater than our exports.  Many Americans benefit.  Imports restrain inflation and expand consumer choice; the flows of money into dollar instruments (Treasury securities, bank deposits, stocks, bonds) tend to lower interest rates.

“But there are losers: most conspicuously, U.S. farmers, manufacturers and their workers. They face tougher foreign competition in both import and export markets.

“Or as economist C. Fred Bergsten of the Peterson Institute puts it: ‘There’s a structural component to our trade deficits, which is the central currency role of the dollar. This produces a constant over-valuation in trade terms... We disadvantage ourselves by running the world’s key currency.’....

‘None of this is easy to convey to the public. Much simpler is Trump’s narrative: U.S. trade deficits prove that other countries discriminate against American products; U.S. import restrictions are too loose. The cure is to eliminate the discrimination and to tighten import restrictions. The anti-American bias will disappear, as will large U.S. trade deficits.

“It’s a congenial theory, because – by assumption – trade deficits automatically become evidence that U.S. firms are being victimized by someone, including their own government. If that were true, Trump’s obsession with trade deficits would make sense.  The trouble is that it isn’t true.

“The reality is that, well before Trump became president, global trade imbalances were shrinking. Figures from the International Monetary Fund (IMF) show that, as a share of the economy (gross domestic product), the U.S. current account deficit hit a recent peak of 5.8 percent in 2006 and dropped to 2.4 percent by 2017. The comparable figures for China were 9.9 percent of GDP in 2007 and 1.4 percent in 2017.

“What caused the dramatic shift?  Mainly changes in the business cycle, says a recent IMF report. Before the economy’s collapse in 2008, strong spending generated huge trade flows and high oil prices. These produced large trade imbalances. When the Great Recession struck, these trends reversed. Trade flows weakened, oil prices fell, trade imbalances shrank.

“The implications are unexpected.  Even according to Trump’s twisted view of trade, much of the needed adjustments have already occurred. If Trump succeeded – implausibly – in getting China and others to agree to reduce their trade imbalances, the needed changes would probably be milder than imagined....

“Trump has maneuvered himself and the country into a no-win conflict. He has infuriated America’s allies by his reckless actions to raise tariffs and disrupt existing trade arrangements.  If the impasse continues for months or years – a possibility – the damage to the world economy would be significant.

“But even if these negotiations conclude successfully, the scope to make dramatic trade improvement is limited. The dollar’s role as the major global currency imposes constraints.  An appreciating dollar will tend to widen U.S. trade deficits.  Trump has backed himself into a corner from which there is no easy exit.”

The Federal Reserve Bank of New York issued a report on Trump’s tariffs, and concluded there will be fewer U.S. imports and exports and they would do little to redress the trade deficit.

The tariffs are likely to push up costs for U.S. companies and make U.S. products less competitive.

U.S. exports are likely to fall “not only because of other countries’ retaliatory tariffs on U.S. exports, but also because the costs for U.S. firms producing goods for export will rise and make U.S. exports less competitive on the world market,” the analysis said.

“The end result is likely to be lower imports and lower exports, with little or no improvement in the trade deficit.”

Europe and Asia

In economic news for the eurozone (EA19), Eurostat, the statistical arm of the European Union, raised its estimate for second-quarter GDP to 1.5% annualized.  GDP in Q2 is 0.4% compared with Q1, 2.2% year-on-year, vs. 2.5% yoy in Q1.

Germany is at 1.9% annualized; Spain 2.7%; France 1.7%; Italy 1.1%; Netherlands 2.7%; U.K. 1.3%.

The German government’s statisticians place second-quarter GDP at a solid 0.5%, 1.8% annualized.

Euro area annual inflation for July was 2.1%, up from 2.0% in June.  A year earlier, the rate was 1.3%, according to Eurostat. But ex-food and energy, core inflation was 1.3%, same as a year ago.

Eurobits....

Italy: Grief here has been mixed with anger after the collapse of a motorway bridge in Genoa that claimed 39 lives.  The anger is in how such a vital structure could have simply given way, after the Morandi bridge fell 148 feet on Tuesday amid a fierce storm.

Residents of housing blocks under one pillar were ready to move back, but were then told it was cracking and their homes were at risk.

The bridge, built in the 1960s, stands on the A10 toll motorway, an important road for good from local ports that serves the Italian Riviera and southeast coast of France.

The victims were people going to work, people on holiday.  Just awful in so many ways.

But now the finger-pointing, with top management of Autostrade per L’Italia, which oversees maintenance, called on to resign, but the company repeated that it had monitored the bridge quarterly, as required by law, and there was maintenance ongoing at the time.

And the bridge collapse had Deputy Prime Minister Matteo Salvini saying the European Union must allow Rome to include in its next budget all the funds needed to ensure the country’s infrastructure was safe.

That investment, yet to be calculated, comes on top of plans outlined by the government, which took office in June, to spend tens of billions of euros on tax cuts, easing pension rules and a basic income for the poor.

The yield on Italy’s 10-year bond is up to 3.11%, from 2.58% four weeks earlier.  For Italy’s creditors, the fiscal gap is a growing worry, with debt to GDP at 135%, which is bound to climb higher.  Any contagion from Turkey redounds to Italy as well.

Germany: The country reached an agreement with Greece to send back migrants to Greece if they have already applied for asylum there.  Last week Germany and Spain sealed a similar deal on returning migrants.  Both deals come after a dispute between Chancellor Angela Merkel’s conservatives and their Bavarian allies over returning migrants that nearly split them and brought down the government.

The agreements affect migrants entering via Germany’s border with Austria and Germany would be able to send them back to Greece within 48 hours, but the deals, and one that may occur with Italy, likely affect few refugees in numbers.

More than 1.6 million migrants have arrived in Germany since mid-2014, propelling the far-right Alternative for Germany (AfD) into the national parliament. While Merkel has repeatedly defended her 2015 decision to admit hundreds of thousands of migrants as a humanitarian necessity, she has since vowed to prevent a re-run of such a migrant influx.

Spain: This has become the new front line in Europe’s migration crisis, with nearly 25,000 migrants having entered Spain by sea this year – three times as many as in the same period in 2017 and more than the number to Greece and Italy, according to the International Organization for Migration.  Arrivals during the first eight days of August were at least five times those in either Italy or Greece.  On Monday alone, 475 migrants on 12 different boats and an inflatable raft were rescued off Spain’s southern coast.

And as you can imagine, it’s straining local infrastructure and fraying nerves. Spain and Germany have been calling on the EU to grant more aid to Morocco – just 14km away – to manage its borders.

Officials and analysts say arrivals are increasing mainly because of a crackdown on the central Mediterranean crossing from Libya to Italy – where the new government has taken a much harsher line against migrants, turning away some boats.

At the same time, though, the new government in Spain of Premier Pedro Sanchez, a socialist, promised better treatment of migrants. While initially popular, this more accommodating stance has become more divisive as the numbers pile up.

Turning to Asia, China released a slew of data points that continued to reflect a slowing economy. Fixed-asset investment rose just 5.5% in the January thru July period, according to the National Bureau of Statistics (NBS), the lowest growth rate since 1999 as Beijing has been seeking to curb borrowings of local governments on big infrastructure projects.  But now, amid the trade fight with the United States, Beijing is encouraging banks to open up the spigot, so we’ll see what this key figure looks like in a few more months.

The NBS said retail sales in July rose 8.5% vs. 9.0% in June.  This one has almost always been in double-digits.

And the unemployment rate for last month rose from 4.8% to 5.1%.

The one sector that continues to rock is housing, despite attempts by the government to rein in the real estate market.  New home prices rose 1.1% in July over June, according to the NBS, with the 70-city index up 5.8% year-on-year vs. 5.0% in June.

Street Bytes

--Stocks shook off an early Turkey-induced swoon, as well as further trade concerns, to finish mixed.  The Dow gained 396 points on Thursday, its best day since April, largely on the heels of Walmart’s outstanding earnings report, and then reduced trade fears.

Earnings have been super, up 24.6% for the second quarter on the S&P 500.

On the week the Dow gained 1.4% to 25669, the S&P added 0.6%, but Nasdaq fell 0.3%.

But Friday, President Trump shook things up a bit with the following tweet out of left field:

“In speaking with some of the world’s top business leaders I asked what it is that would make business (jobs) even better in the U.S.  ‘Stop quarterly reporting & go to a six month system,’ said one.  That would allow greater flexibility & save money. I have asked the SEC to study!”

The business leader was Indra Nooyi, departing CEO of PepsiCo. The SEC dutifully said it would look into it, as part of their ongoing study of such issues.

I am not wasting a second more on it, though.  Ain’t gonna happen.  And in terms of the focus on the short term, and managing to earnings, just change CEO compensation.

--U.S. Treasury Yields

6-mo. 2.22%  2-yr. 2.61%  10-yr. 2.86%  30-yr. 3.02%

Yields were unchanged across the board, no more than a one basis point move over the prior week.

--OPEC’s oil production ticked up slightly in July, the cartel said Monday, even as production in Saudi Arabia – the de facto leader of the group – declined.

OPEC production rose to 32.32 million barrels a day, driven by increases in Kuwait, Nigeria, the UAE and Iraq.

But Saudi crude output fell by nearly 53,000 barrels a day in the month, according to some sources, while the Saudis told OPEC directly their production actually fell 200,000 barrels daily, to 10.29 million barrels a day.

Last Friday, the International Energy Agency reported a 110,000 barrel a day decline in Saudi production in July, while at the same time cutting its forecast on demand growth. Concerns that escalating trade tensions between the U.S. and China could slow future growth have also been troubling the energy markets.

--Walmart Inc. said its quarterly sales rose at the fastest rate in over a decade as the world’s largest retailer continues to draw more people to its stores and benefit from the stronger economy.

Americans are spending more on everything these days, with Walmart CEO Doug McMillon telling investors Thursday, “Customers tell us that they feel better about the current health of the U.S. economy as well as their personal finances. They’re more confident about their employment opportunities.”

Walmart booked $128 billion in global quarterly revenue, up 3.8%, while reporting a 40% jump in U.S. e-commerce sales, though this remains a sliver of its business.  Same-store sales increased a super 4.5%, far better than analysts’ forecasts of 2.4%.

The company’s shares soared 10% on the great news.

The National Retail Federation recently raised its 2018 sales forecast to 4.5% growth over last year.  Previously, the trade group had expected sales to increase 3.8% to 4.4%.

--Home Depot Inc.’s profit and revenue topped forecasts despite signs of a slowdown in the housing market, boosted by a rebound in demand for seasonal products and as shoppers spent more to remodel their homes.  The No. 1 U.S. home improvement chain also raised its guidance for the year.

Consumers are investing in their homes, even as higher mortgage rates and rising real estate prices have hurt home sales this summer. Sales of new single-family homes fell to an eight-month low in June and data for the prior month was revised sharply lower, for example.

Home Depot CEO Craig Menear sought to allay concerns the overall macro picture had been slowing down, saying the U.S. economy and factors driving home-improvement spending remained strong.

Homeowners are spending more as prices appreciate, while continuing to view their homes as an investment and not an expense, Menear said.

Second-quarter sales rebounded from the first quarter when cooler-than-normal weather in some parts of the United States hurt demand for spring season products.   Menear said that a majority of seasonal sales lost in the first quarter were picked up in the second.  Lumber, indoor and outdoor garden products, lawn-mowers, patio furniture, interior and exterior paint all posted strong growth.

Overall, net earnings increased to $3.5 billion, up from $2.7bn.  Net sales rose 8.4% to $30.5bn, beating expectations on both the top and bottom line.

Same-store sales climbed a stupendous 8%, handily exceeding analysts’ forecasts, and the company sees comp-store growth of about 5.3% for the full year.  HD also raised its full-year earnings forecast.

--Tesla shares fell Wednesday after reports the SEC issued a subpoena to the electric car company as the firm copes with communications by CEO Elon Musk over the possibility of taking the company private.  Tesla stock fell about 3%.

Both the New York Times and Fox Business reported the development, with the SEC trying to determine whether Musk’s actions intended to mislead investors and certainly the price action in the stock after Musk tweeted he was “considering taking Tesla private” and had “funding secured” to complete a privatization deal at a share price of $420 was as intended.

In subsequent days, Musk issued additional statements amid widespread questioning about the accuracy of the tweet.

That was two weeks ago, as I reported extensively in my last review. This Monday in a blog post, Musk disclosed that he had held discussions with Saudi Arabia’s sovereign wealth fund during the past two years about taking the company private.  The Saudi fund has accumulated nearly 5 percent of Tesla shares by acquiring it in the open market.

Musk wrote that he came away from a July 31 meeting with the managing director of the Saudi fund “with no question that a deal...could be closed, and that it was just a matter of getting the process moving.  This is why I referred to ‘funding secured’ in the August 7th announcement.”

Tesla’s board has been scrambling to cover for Musk, forming an independent committee to assess the possibility of going private. But the committee stressed it had not received a firm offer or “reached any conclusion as to the advisability or feasibility of such a transaction.”

Institutional investors, such as Vanguard and its mammoth index funds, won’t hold a private, illiquid company.  [Most of them.]

Well, Thursday night, we had reports from the New York Times and Wall Street Journal that added layers to the story.

Musk gave an interview to the Times at his home in Los Angeles wherein he admitted, “This past year has been the most difficult and painful year of my career. It was excruciating.”  The interview was brutally honest.

And now his year has gotten more intense.  Asked if the exhaustion was taking a toll on his physical health, Mr. Musk answered: “It’s not been great, actually.  I’ve had friends come by who are really concerned.” Musk acknowledged his myriad executive responsibilities are taking a steep personal toll.  He said he had been working up to 120 hours a week recently.  He added he hadn’t taken off more than a week since 2001, when he was bedridden with malaria.

Musk also acknowledged his tweet of Tues., Aug. 7, asserting he had “funding secured” for a deal to take Twitter private at $420 billion, had not been reviewed or seen before he posted it.  Musk said he wanted to offer a roughly 20 percent premium over where the stock had been recently trading.

Musk added he did not regret the post, and that he didn’t recall “getting any communications from the board at all” afterward.

The Times said the SEC investigation appears to be intensifying rapidly.

The Journal said securities regulators began investigating Tesla last year on whether it was misleading investors about its Model 3 car production problems, according to people familiar with the matter.

The paper says the SEC subpoenaed a parts supplier for the auto maker as part of the probe, one of the people said, well before the regulators began looking into Elon Musk’s tweet last week about taking the company private.

Market reaction today to the stories, particularly the Times’, was swift and the stock finished down 9% to $305.20, well below the $340 level the stock was at before the first Aug. 7 tweet that kicked off this tale.

--Shares in China’s Tencent Holdings lost more ground this week after the company logged its first quarterly profit decline in nearly 13 years and said it did not know when it would get Chinese approval to make money off its most popular game.

The earnings miss highlighted the impact of a freeze on new China approvals for the gaming industry since March due to the restructuring of related regulatory agencies in the world’s biggest gaming market.

Gaming revenue accounts for 40 percent of Tencent’s total revenue, but China has a complex approvals process for games, and Tencent yas yet to receive the nod to monetize Player Unknowns’ Battlegrounds (PUBG) video game.  More than 400 million players worldwide play this, the game developed with Tencent’s South Korean partner.

Tencent had to pull another game, “Monster Hunter: World,” four days after its China launch, because as company President Martin Lau told an earnings call on Wednesday, the content wasn’t fully compliant.  He didn’t elaborate.

China’s Communist Party is a big part of this story.  In July 2017, the party’s mouthpiece, the People’s Daily, criticized Tencent, describing its “Honour of Kings” game as poison and called for tighter regulatory controls of online games.

Tencent, founded in 1998, also operates China’s dominant social network, WeChat,which has more than 1 billion users.  Even with a big drop in its shares of 12 percent this week, it remained the biggest listed firm in Asia with a market cap of nearly $400 billion.

Yes, it’s a censorship story.  But the government also has legitimate concerns over its people becoming addicted to games, a problem faced for years in South Korea.

--Last week I wrote of Google developing a mobile search service for the China market that would censor websites and search terms prohibited by the Chinese government.

Thursday, CEO Sundar Pichai told staff that though development is in an early stage, whether the company could or would launch search in China “is all very unclear. The team has been in an exploration stage for quite a while now, and I think they are exploring many options.”

Some Google employees and human rights advocacy organizations have voiced their opposition to the effort, which violates the company’s “don’t be evil” clause in Google’s code of conduct.  Employees are calling on the company to provide more “transparency, oversight and accountability.”  The employees are demanding a seat at the table so they know “what we’re building.”

--Related to the above, a Beijing-based start-up that claimed to have developed an original China web browser has admitted it had based its software on Google’s Chrome, following online accusations that it had ripped off the American company’s program.

Redcore, which recently raised $36 million in funds, said on its website that its browser had “broken the American monopoly.”  That claim was challenged after an online posting purporting to show the installer containing Chrome files went viral.

Thursday, Chen Benfeng, founder and CEO of Redcore, said in an interview at the company’s offices in northwest Beijing, that it was wrong to have made such a claim.

“We don’t deny building on Chrome’s browser engine,” said Chen.  “The web browser is a very old technology, writing the code from scratch will take many years. It’s like Android was built on the foundation of Linux, but nobody doubts Android or Google’s innovation. Google and Apple also did not write the first line of code, doing so would be reinventing the wheel.”

[Viewers of HBO’s “Silicon Valley” may be having flashbacks from this past season.]

--Asset management giant BlackRock Inc. is among the investors nursing losses from Turkey’s volatile market in recent days.  The Turkish lira’s fall last Friday and Monday, which was among the largest moves in any currency in recent years, caught BlackRock and others flat-footed.  BlackRock is the largest foreign holder of Turkish government bonds, and had outsized positions in some of its actively managed funds when the crisis hit, as reported by the Wall Street Journal. 

--Shares in Macy’s plunged 16% on Wednesday even after the company lifted its full-year sales guidance against a backdrop of strong U.S. economic growth and consumer spending.

For the three months to July 29, Macy’s sales dropped 1.1% from a year ago to $5.572bn, while net income rose to $166m from $111m a year ago. Earnings per share of $0.53 were above expectations, with sales in line.

Comparable store sales posted a 0.5% advance from a year ago when a small decline was expected.

Macy’s chairman and CEO Jeff Gennette said the results demonstrated that its “strategic initiatives” to help bolster growth in the face of shifting consumer habits was “gaining traction.”

The company now forecasts same-store sales rising 2% to 2.5% for the full year.

So why did the company’s shares sell off?  The stock had been up 66% this year, and some investors are skeptical with Macy’s relatively bullish forecast given the still poor long-term forecast for retailers of Macy’s ilk.

--But Nordstrom’s shares soared  after the upscale department-store chain raised its full-year revenue and earnings outlook following stronger-than-expected quarterly sales growth.

Net sales rose 7.1% year-on-year to $3.98 billion, while net earnings came in at $162m, versus $110m a year ago., both exceeding analysts’ forecasts.

Comp-store sales were up a solid 4% over a year ago, also beating expectations.

--Shares of JCPenney, however, sank below $2 for the first time on Thursday after it forecast a wider-than-expected full-year loss and posted disappointing results on the back of price cuts across product lines. Penney also forecast a much bigger loss than expected for the full year.

The company said it was marking down and clearing excess inventory across many categories, citing the unusually long winter for hurting demand for spring clothing lines.

Same-store sales rose 0.3 percent, short of analysts’ estimates.

It doesn’t help that Penney has been without a CEO since May.

The company’s bonds dropped more than 5 cents on the dire news to 79 cents.

--Cisco Systems Inc. on Wednesday reported its third-consecutive quarter of revenue growth, evidence the networking-gear maker’s move to build up its software business is paying off. Shares rose sharply in response.

Cisco generated revenue of $12.84 billion in its fiscal fourth quarter, up 6% from a year earlier, which comes after two years of declining revenues as it faced increasing competition and the burden of slowing hardware sales.

CEO Chuck Robbins has successfully turned things around and the company expects the good times to continue, calling for revenue growth of between 5% and 7% in the current quarter.

Cisco also reported revenue in its security segment jumped 12% to $627 million, with its focus on software sales.

Revenue for its largest segment, infrastructure platforms, grew 7% to $7.44bn.

The growing trade dispute between the U.S. and China could hurt the company, however, with items such as Cisco’s routers and switches potential tariff targets.  Cisco makes some of these in China and imports to the U.S. Robbins said the company was in talks with the administration.

--Uber Technologies Inc. reported second-quarter revenue rose 63% from the prior year to $2.8 billion, while gross bookings, a measure of the overall demand for its ride and delivery services, jumped 41% to about $12 billion, according to a financial statement released by the company.

Uber narrowed its loss to $891 million in the quarter from $1.1 billion a year ago, though this was wider than the first quarter’s loss of $550 million, not including a $3bn gain from the sale of its southeast Asian and Russian operations.  The company is spending more money on new businesses such as food delivery and scooters,

CEO Dara Khosrowshahi, who replaced Travis Kalanick last August, has been working to cut expenses in preparation for an initial public offering.  Khosrowshahi said Uber planned at the same time to continue investing in future areas of growth, including “high-potential markets in the Middle East and India.”

But on Tuesday, New York City approved a package of bills that freezes new issuances of ride-hailing licenses and set a minimum payment for drivers in Uber’s biggest U.S. market. Seattle is considering similar measures.  So there’s been pushback.

And Khosrowshahi had to face a crisis at Uber’s money-losing driverless car operation after a fatal crash involving one of its robot cars in March.  Uber eliminated hundreds of jobs in the unit and closed its operations in Arizona.

And then you have competition, specifically smaller rival Lyft Inc., which is making gains in market share.

Uber is currently looking to go public in the second half of 2019 in what will be one of the largest IPOs in history.  Currently, the company is valued somewhere in the neighborhood of $70 billion (Lyft is up to $15 billion with new investments).

--Shares in Kimberly-Clark, maker of Kleenex tissues, Huggies and Cottonelle toilet paper, rose smartly after it informed Wall Street that it is planning to raise net selling prices across a majority of its North America consumer products business.

So stock up quickly on TP, sports fans.

But the move by Kimberly to raise prices is also part of a broad boost in similar products, owing to “significant commodity cost inflation,” the company said in a statement. 

Last month the company raised its forecast for inflation in “key input costs” to come in between $675m and $775m, up from $400m to $550m.

It was a few weeks ago that Procter & Gamble said it would raise prices on a slew of similar products on the back of commodity price increases.

--Kroger Co. said it would sell its products in China on an e-commerce site owned by Alibaba Group Holding Ltd., the grocer’s first foray into foreign sales amid a broader push into online retail.

Kroger said the initial product offerings on its online storefront will include dietary supplements and private-label products, much of it natural and organic goods.

The new China push is Kroger’s fifth e-commerce initiative as it attempts to fend off stiffer competition from Amazon.com, the Whole Foods grocery stores it owns, and other food sellers.

I like the China initiative.  Consumers there are dying for products they can trust (i.e., despite the trade tensions, American food and health products...see Foreign Affairs section below).

--Shares in Bayer AG fell sharply on Monday, and the rest of the week, after Monsanto Co. – which the German chemical company recently acquired – was ordered to pay $289.2 million in a landmark lawsuit over whether exposure to two of its weed killers caused cancer.

Last Friday a California jury found that Monsanto’s Roundup and Ranger Pro products presented a “substantial danger” to consumers, and that the St. Louis-based company knew – or should have known – the potential risks they posed.

The case is but the first of many that could go to trial, this after Bayer closed its $60 billion-plus acquisition of Monsanto in June after two years of wrangling.

Bayer said on Monday that the jury’s verdict was “at odds with the weight of scientific evidence, decades of real world experience and the conclusion of regulators around the world.”  The verdict also remains subject to post-trial motions and an appeal.

Bayer shares closed at a 5-year low this week, down over 10%.             

--From Daniela Hernandez and Ted Greenwald / Wall Street Journal

“Can Watson cure cancer?

“That’s what International Business Machines Corp. asked soon after its artificial-intelligence system beat humans at the quiz show ‘Jeopardy!’ in 2011.  Watson could read documents quickly and find patterns in data. Could it match patient information with the latest in medical studies to deliver personalized treatment recommendations?

“ ‘Watson represents a technology breakthrough that can help physicians improve patient outcomes,’ said Herbert Chase, a professor of biomedical informatics at Columbia University, in a 2012 IBM press release.

“Six years and billions of dollars later, the diagnosis for Watson is gloomy.

“More than a dozen IBM partners and clients have halted or shrunk Watson’s oncology-related projects. Watson cancer applications have had limited impact on patients, according to dozens of interviews with medical centers, companies and doctors who have used it, as well as documents reviewed by The Wall Street Journal.

“In many cases, the tools didn’t add much value. In some cases, Watson wasn’t accurate....

“No published research shows Watson improving patient outcomes.”

I told you years ago the whole Watson project was vastly overrated, but to be fair I was going on instinct, not actual science and results like the Journal now has.

This also doesn’t mean AI doesn’t hold great promise in helping doctors diagnose and treat diseases, but Watson’s struggles show this won’t be easy.

IBM spent $15 billion on Watson and related efforts as of 2015, according to that year’s annual report.

--Bitcoin was on a wild ride this week, falling below $6,000 for the first time since late June before rebounding to around $6,500 today.  Many are pointing to the failure of bitcoin, ether and other popular cryptocurrencies to gain widespread adoption in the economy.  Most see such a step as necessary to justify valuations that despite the selling remain well above year-ago figures.

But there is a growing recognition that prices may never again reach the high levels of December and January of $20,000.

--New Jersey had some awful flash flooding in communities near mine last Saturday, and in talking with Dina T., who is an executive in the insurance industry, she said the government really screws up in what is designated a flood zone and what isn’t, which we saw an example of in Little Falls, N.J., as well as Brick, N.J.

Dina’s advice is everyone should buy flood insurance, and it is cheap.  So many of the people impacted last weekend didn’t have it.

--A toxic red algae bloom has left a trail of dead fish, as well as fleeing tourists and abandoned beaches along 150 miles of southwestern Florida coastline, prompting Gov. Rick Scott to issue a state of emergency.

It’s an economic emergency for a region so dependent on tourism, but the toxins released by the algae have poisoned dolphins, manatees and tons of fish.  It’s disgusting...the beaches deluged by dead and rotting wildlife.  Parts of the same region had suffered a similar severe algae tide in 2016.

The toxins can aerosolize in the wind that drifts ashore, triggering respiratory problems or worsening conditions such as asthma.

The naturally occurring algae – known as a red tide or red bloom – has affected the shore since October.  Human activity, like releasing nitrogen-rich fertilizer into the water, can exacerbate the problem, researchers say (let alone climate change).

The algae tides have been noted for centuries. Republican Gov. Scott, running for Democratic Sen. Bill Nelson’s seat, has been attacking Nelson, as Nelson attacks Scott, for a lethargic response to a blue-green algae bloom threatening the coast in other parts of the state.

--But speaking of fish, new rules introduced in China mean rainbow trout can now be labeled and sold domestically as salmon.

Why?  Because a media report earlier this year caused a splash by revealing that rainbow trout had for years been labeled as the similar-looking fish.

Authorities then decided that instead of banning the practice, the best solution would be to legitimize it.

Rainbow trout are freshwater fish, whereas salmon are born in freshwater but then live much of their lives in saltwater. 

While the two are outwardly different, both have reddish meat and closely resemble each other.

Well, for years I have been talking about mislabeled fish, urging you never, ever to buy fish whose source is China, but that’s more for safety reasons.  It’s also true that you’ll probably seldom see China as the source, because the food/fish markets are likely checking off a different box on the wrapper.  [Heck, there’s a scandal in the Chesapeake Bay Area with some local eateries selling oysters that are not locally sourced as advertised.]

But back to China, consumers are up in arms, particularly over fears the trout are more susceptible to parasites.

Foreign Affairs

Turkey: Amidst the financial crisis, Turkey won a measure of international support in its increasingly tense standoff with the United States on Wednesday when as noted above Qatar pledged to invest $15 billion in the country.

The sum is a small fraction of what Turkey would need to shore up its economy or pay its dollar debts, which are unsustainable given the sharp decline in the Turkish lira.

But the move by Qatar followed a meeting in Ankara between President Erdogan and Sheikh Tamin bin Hamad al-Thani, the emir of Qatar. The investment came the same day Turkey was rejecting a second legal appeal to release the American pastor Andrew Brunson at the heart of the crisis.

Last week, President Trump imposed 50 percent tariffs on imported Turkish steel after talks to release Brunson broke down, cutting Turkey’s steel producers off from their biggest overseas market.

Treasury Secretary Steven Mnuchin said the U.S. is prepared to slap additional sanctions on Turkey if it refuses to release Brunson.

Qatar’s support is no surprise, as they have lined up with Turkey against the Trump-allied rulers of Saudi Arabia and UAE. Others, such as Russia, have offered verbal support, but not financial as yet.

More than 20 American citizens, including Brunson, have been detained over the past two years on terrorism charges under the state of emergency imposed after the failed coup in July 2016.

Erdogan stepped up his attacks on the U.S., calling for a boycott of Apple’s iPhones and other U.S. electronic goods, warning that Turkey would “seek new friends.”

German Chancellor Angela Merkel has been in talks with Erdogan to set up a meeting with their respective finance ministers.  Berlin hasn’t offered any direct aid, but it is Turkey’s biggest economic partner by far, accounting for some $42 billion in bilateral trade last year. About 6,500 partly or wholly-owned German companies operate in Turkey, while Turkey ranks 16th among Germany’s export markets, ahead of Japan and many smaller European Union countries.

Any aid from Germany will be contingent on Turkey shifting to a credible monetary policy that’s independent, with higher interest rates.

Iran:  Iranian Vice President Eshaq Jahangiri said on Wednesday that the United States is trying to make Iran surrender through the imposition of sanctions.  New U.S. sanctions are now in effect, and President Trump said companies doing business with the country will be barred from the United States.

“The first priority for all of us under a sanctions situation is to work toward managing the country in a way that brings the least amount of damage to people’s lives,” Fars News quoted Jahangiri as saying.  “America is trying by applying various pressures on our society to force us to retreat and surrender.”

The new sanctions targeted Iranian purchases of U.S. dollars, metals trading, coal, industrial software and its auto sector, though the toughest measures targeting oil exports do not take effect until November.

With few U.S. companies actually doing business in Iran, the impact of the sanctions stems from Washington’s ability to block European and Asian firms from trading there.

President Hassan Rouhani, in recent remarks, said on state TV: “We will not let the enemy bring us to our knees. If the enemy thinks they will defeat us they will take this hope to the grave with them.”

Washington continues to say Iran’s only chance of avoiding the sanctions would be to accept an offer to negotiate a tougher nuclear deal than the international accord struck in 2015.

But Rouhani said, according to the Islamic Republic News Agency, “America itself took actions which destroyed the conditions for negotiations. There were conditions for negotiation and we were negotiating. They destroyed the bridge themselves.  If you’re telling the truth then come now and build the bridge again.”

Monday, Supreme Leader Ayatollah Ali Khamenei ruled out the possibility of talks with the U.S.

“Recently, U.S. officials have been talking blatantly about us. Beside sanctions, they are talking about war and negotiations,” he said through his official Twitter account in English.  “In this regard, let me say a few words to the people: THERE WILL BE NO WAR, NOR WILL WE NEGOTIATE WITH THE U.S.”

Thousands of Iranians continue to protest in recent weeks against sharp price hikes of some food items, a lack of jobs and state corruption.

Afghanistan: This week saw a staggering spate of violence.  Wednesday, a blast killed at least 48, mostly students, at a school in Kabul, when a man wearing an explosives vest blew himself up in a classroom.  Suspicion fell on ISIS, which has been behind a series of attacks in mainly Shiite neighborhoods of western Kabul.

The Taliban denied responsibility for the Kabul suicide attack, but it came on the back of some horrific violence the militants have been involved in since last Friday, when they launched a predawn attack on the strategic eastern city of Ghazni, a two-hour drive from Kabul.

Local officials and residents of Ghazni accused the government and military of ignoring their warnings of an impending Taliban attack, and then responded too slowly once it started. At least 100 members of the security forces were killed in the fighting, with the UN saying as many as 150 civilians may have died as well.

After five days, Afghan forces regained control of the city, with the Taliban pulling out, though the Taliban denied their forces were routed. The U.S. carried out air strikes and sent military advisers to aid Afghan troops.

But also last weekend, the Taliban seized control of the Ajristan District, where an elite army commando unit had been defending it.  The unit disappeared, and their superiors were uncertain of their fate.  Then they were found.  At least 40 had been killed.

And in Faryab Province, an isolated Afghan National Army base of 100 soldiers lost more than half of its men in a Taliban assault.

Then late Tuesday, Taliban fighters attacked a police garrison on the outskirts of the northern city of Baghlan, triggering a battle that left 37 officers dead.  The militants also seized weapons caches and at least four armored vehicles.

The Taliban later said it could no longer guarantee safe passage for Red Cross staff working in Afghanistan, amid a row over the treatment of Taliban prisoners in a jail in Kabul.

China: Signs of unease over President Xi Jinping’s leadership have emerged amid the public dispute with the U.S. over trade, and with a sluggish economy and various health and financial scandals.  Clearly, some academics are beginning to speak out, some going so far as to denounce Xi’s leadership, particularly his moves to quash dissent and scrap term limits to make himself president for life.

Just months ago, Xi’s clout was unassailable, but while he may have lost some of his ability to inspire confidence among his people, he is still more than capable of inspiring fear. His anticorruption campaign has netted more than 1.5 million officials.  And there are, critically, no outwardly visible signs of organized opposition against him inside the party.

The only thing that would take Xi down is a massive product safety, environmental disaster, but in response, as I’ve written for years, Xi would then play the nationalism card and lash out against Taiwan.  I still maintain that could happen this year.  In my scenario, Apple would of course be another victim. 

A Chinese provincial deputy governor and the mayor of a major city were fired Tuesday as the Communist Party tried to defuse public outrage over revelations of misconduct by a major vaccine producer.

The officials were among four people ordered dismissed following a meeting of the party’s ruling Standing Committee led by President Xi.

The revelation in July that Changchun Changsheng Life Sciences Ltd. falsified production records for an anti-rabies vaccine added to a string of politically damaging scandals over deaths and injuries due to fake or shoddy drugs, food and other products.

No. 2 leader, Premier Li Keqiang, could be the fall guy eventually, as items such as this are supposed to be under his purview. 

One other related development today. China ordered the world’s top pork producer, WH Group Ltd., to shut a major slaughterhouse as authorities race to stop the spread of deadly African swine fever (ASF) after a second outbreak in the planet’s biggest hog herd in two weeks.  Though often fatal to pigs, with no vaccine available, ASF does not affect humans, according to the UN’s Food and Agriculture Organization, but of course it has renewed food safety concerns in the public.

Separately, China’s military “is likely training for strikes” against U.S. and allied targets in the Pacific, a Pentagon report warned. The annual report to Congress says China is increasing its ability to send bomber planes further afield.

“Over the last three years, the PLA [People’s Liberation Army] has rapidly expanded its overwater bomber operating areas, gaining experience in critical maritime regions and likely training for strikes against the U.S. and allied targets,” the report says.

It goes on to say it is not clear what China is trying to prove by such flights.

The PLA may demonstrate the “capability to strike U.S. and allied forces and military bases in the western Pacific Ocean, including Guam,” the report adds.

China, it says, is transforming its ground forces to “fight and win.”

“The purpose of these reforms is to create a more mobile, modular, lethal ground force capable of being the core of joint operations,” the report says.

China lodged complaints about measures in the new $716 billion defense policy act that authorizes military spending and adds teeth to controls on U.S. government contracts with the likes of China’s ZTE Corp. and Huawei Technologies Co. Ltd.

The National Defense Authorization Act, or NDAA, strengthens the Committee on Foreign Investment in the United States (CFIUS), which reviews proposals to determine if they threaten national security. That measure was seen as targeting China.

The legislation also calls “long-term strategic competition with China” a top priority for the United States, which should improve the defense capabilities of Taiwan.

In a separate statement, China’s foreign ministry said the United States passed the act despite China’s strong objections and it was dissatisfied with the “negative content related to China.”

China’s Defense Ministry weighed in, saying the act “exaggerated Sino-U.S. antagonism,” damaged trust between the two militaries and involved the most important and sensitive issue in bilateral ties, namely Taiwan.

Meanwhile, the Trump administration denied Tuesday any change to its “One China” policy after Taiwan President Tsai Ing-wen made a political speech in the U.S., the first time in 15 years a Taiwanese leader has done so.

Beijing said it had lodged an official protest with the United States over Tsai’s speech Monday in Los Angeles, where she said Taiwan’s freedom and future was not negotiable.

Tsai spoke at the Ronald Reagan Presidential Library, while in transit on a trip to Paraguay and Belize, two of the few countries that continue to recognize the government of Taipei.

A State Department spokeswoman said the speech did not represent any move by the administration to alter the official U.S. stance that accepts Beijing as the sole government of China, and does not officially recognize Taiwan’s government.

“Our policy on Taiwan has not changed,” said Heather Nauert.  “The United States in regard to this trip facilitates from time to time representatives of the Taiwan authorities to transit the United States.

“Those are largely undertaken out of consideration for the safety and the comfort of those travelers, and that is in keeping with our One China policy.”

But previous administrations have prevented Taiwan leaders from making speeches in the U.S. that would elevate their diplomatic status and upset Beijing.

Tsai, a firm defender of Taiwan’s independence, said in the speech that “We will keep our pledge that we are willing to jointly promote regional stability and peace under the principles of national interests, freedom and democracy.... We only need to be firm so that no one can obliterate Taiwan’s existence.”

Lastly, China rejected allegations raised by a UN panel that 1 million Uighurs may be held in internment camps in the restive Xinjiang region, but said that some people underwent reeducation after being deceived by extremists.

Hu Lianhe, a senior Communist Party official, said authorities in the far western Xinjiang region guarantee citizens freedom of religious belief and protect “normal religious activities.”

China has long said Xinjiang faces a serious threat from Islamist militants and separatists who plot attacks and stir up tensions between the mostly Muslim Uighur minority who call the region home and the ethnic Han Chinese majority.

But the UN panel says it has received many credible reports that 1 million ethnic Uighurs were being held in what resembles a “massive internment camp that is shrouded in secrecy, a sort of no rights zone.”

Editorial / Wall Street Journal

“(Uighurs) in general adhere to a moderate form of Islam and have long resisted radicalization.  If that is changing, it is due in large part to the government’s punishment of any expression of Islamic faith. In recent years the authorities have forbidden Uighurs to fast during Ramadan, grow beards or give their children Islamic names.  Officials search their homes for religious materials, and many mosques have been demolished.

“Florida Senator Marco Rubio is one of several lawmakers calling for the U.S. to sanction the officials responsible. Vice President Mike Pence has condemned China’s treatment of Muslims. On Friday a United Nations panel on racial discrimination reviewed evidence that China’s human-rights abuses are violating international covenants.

“The Uighurs’ plight has wider significance.  China’s supreme leader Xi Jinping is using propaganda campaigns, surveillance and detention to an extent China hasn’t seen since Mao Zedong. Chinese police are pioneering new techniques and surveillance technology in Xinjiang and deploying them across the country. The U.S. has many important issues with Beijing, but the systematic repression of the Uighurs reveals the nature Xi Jinping’s government.”

North Korea: South Korea’s President Moon Jae-in said on Wednesday his planned third summit with North Korean leader Kim Jong Un next month in Pyongyang would be another step towards the denuclearization of the Korean peninsula and an end to the 1950-53 Korean War.  Moon said he hoped for speedy progress in talks between North Korea and the United States.  He also said he aimed to begin construction of the inter-Korean railway this year.

For its part, North Korea has denounced U.S.-led efforts to maintain sanctions despite what Pyongyang says are goodwill gestures, including halting its weapons testing and returning the remains of U.S. troops killed in the 1950-53 Korean War.

U.S. officials familiar with the talks, however, told Reuters that North Korea had yet to agree to a timeline for eliminating its nuclear arsenal or to disclose its size, which U.S. estimates have put at between 30 and 60 warheads.

President Trump told us there is no more nuclear threat from Kim and his Orcs.

Russia: The United States voiced deep concern on Tuesday about Russia’s pursuit of weapons including a mobile laser system to destroy satellites in space, as well as its putting into orbit of a new “space apparatus inspector.”

Yleem D.S. Poblete, U.S. Assistant Secretary of State for Arms Control, Verification and Compliance, was addressing the U.N.’s Conference on Disarmament in Geneva, which has been discussing a new treaty to prevent an arms race in outer space.

“To the United States this is yet further proof that the Russian actions do not match their words,” she told the forum.  Russia’s pursuit of counterspace capabilities “is disturbing given the recent pattern of Russian malign behavior,” she added.

Wednesday there was the report of a Russian satellite that in the past two years has “birthed” two new satellites for the first time in history, a Russian “nesting” satellite.  The Pentagon has no idea what the other two are doing, Russia giving no details but, tellingly, announcing the ‘births’ through their military.

Separately, the parent company of two popular Russian social network sites has asked the government to stop prosecuting social media users under anti-terrorism laws, and offer an amnesty for people already convicted.

Mail.ru Group, which owns the Vkontakte and Odnoklassniki social media websites, called on the authorities last week to pardon those convicted of extremism for their posts.  Russia’s Supreme Court estimates that criminal prosecutions for memes, likes and other social media content has more than tripled between 2012 and 2017.  [Moscow Times]

Random Musings

--Presidential tracking polls....

Gallup: 39% approval of President Trump’s performance, 56% disapproval (Aug. 12).
Rasmussen: 48% approve of Trump’s performance, 51% disapprove (Aug. 17).

In a new CNN poll, Trump has an overall approval rating of 42%, about the same as its level this spring.

In the above noted Quinnipiac University poll, President Trump’s job approval was 41%.  [In this survey, like virtually all the others, Trump’s approval rating has been in a narrow range all year, 37% to 43%.]

--Democrats now lead Republicans by 52% to 41% in a nationwide generic Congressional ballot, according to CNN. The blue lead was eight percentage points in June.

But a plurality (48%) in the same poll believe Republicans will maintain control of Congress, compared with 40% who believe Democrats will gain control.

Compared to previous elections, 68% of registered voters say they’re more enthusiastic to vote in this election than in the past.  Registered Democrats and Republicans report being more excited to vote at similar levels, with 70% and 68% saying so, respectively.  [But Democrats are far more enthusiastic than they were in Sept. 2016, when only 38% said they were “more enthusiastic,” while 48% of Republicans said the same.]

Health care still tops the list of important issues with 81% saying it’s extremely or very important to their vote for congress.  Immigration is up from 38% in May to 44% now as a critical issue.

Six-in-ten say it’s very or somewhat likely that a foreign government will interfere in the U.S. elections this fall with only 37% saying it’s not too likely or not likely at all.  35% of Republicans see meddling as likely, well below Democrats (83%) and Independents (56% likely).

--Kansas Gov. Jeff Colyer conceded the Republican primary to Kris Kobach.  Kobach’s forceful condemnations of illegal immigration over the years endeared him to President Trump.

A tabulation of the provisional and mail-in ballots increased Kobach’s lead to nearly 300 votes in the election held last week, out of more than 313,000 votes cast.

Kobach will face state Sen. Laura Kelly in November, Kelly painting Kobach as too extreme for the state and too close to Trump.  This will be one of the more interesting races across the country.

Elsewhere, in primaries on Tuesday, Minnesota State Rep. Ilhan Omar, the nation’s first Somali-American legislator who once lived in a Kenyan refugee camp, is now likely to break that same barrier for Congress after winning the Democratic nod to compete for a safe blue House district in Minneapolis.  If she wins, Omar and Democrat Rashida Tlaib, who will run unopposed in Michigan’s 13th Congressional District in November, will be the first Muslim women in Congress.

Vermont Democrats made history by nominating Christine Hallquist, the nation’s first transgender gubernatorial candidate from a major political party.  Hallquist now faces Gov. Phil Scott, a Republican, who is seeking his second term.

Back in Minnesota, former Gov. Tim Pawlenty lost in the GOP gubernatorial primary to county commissioner Jeff Johnson, both candidates taking heat for anti-Trump comments in 2016.

--Democratic New York Gov. Andrew Cuomo shockingly blew up any chance of being on the national party ticket in 2020 when in a speech on Wednesday knocking President Trump, out of nowhere he stupidly said, “We’re not going to make America great again. It was never that great.”

Trump immediately tweeted: “ ‘WE’RE NOT GOING TO MAKE AMERICA GREAT AGAIN, IT WAS NEVER THAT GREAT.’  Can you believe this is the Governor of the Highest Taxed State in the U.S., Andrew Cuomo, having a total meltdown!”

Cuomo is going to be re-elected this fall, and probably handily, but with this single statement he torpedoed any chances of him ever becoming president, which has long been his dream.

The GOP caught a huge break with Cuomo’s gaffe and you’ll see it in every congressional campaign the rest of the way.  Trump will also be employing it at every campaign rally.

Cuomo continued after in his speech: “We have not reached greatness. We will reach greatness when every American is fully engaged. We will reach greatness when discrimination and stereotyping against women – 51 percent of our population – is gone.”

Cuomo’s spokespeople are scrambling feverishly to quell the outrage, but it’s too late.  The governor broke two days of silence today and said the wording was “inartful.”

Trump tweet: “Wow! Big pushback on Governor Andrew Cuomo of New York for his realy dumb statement about America’s lack of greatness.  I have already MADE America Great Again, just look at the markets, jobs, military – setting records, and we will do even better. Andrew ‘choked’ badly, mistake!”

“When a politician admits that ‘We’re not going to make America great again,’ there doesn’t seem to be much reason to ever vote for him. This could be a career threatening statement by Andrew Cuomo, with many wanting him to resign – he will get higher ratings than his brother Chris!”

--CNN reported that the Defense Department is investigating one of the top civilian advisers, Dana White, a Trump appointee who works as the Pentagon’s chief spokeswoman, for allegedly retaliating against staffers who complained after she ordered them to run personal errands for her on the taxpayers’ dime.

White had staffers pick up her dry cleaning, hit the pharmacy for snacks and pantyhose and work on her personal mortgage paperwork among other tasks, CNN reported, citing a quartet of sources.

By the way, CNN’s Pentagon reporter Barbara Starr said Defense Secretary Jim Mattis picks up his own dry cleaning.

--Kathleen Parker / Washington Post

“No sooner had I ordered the 2011 book ‘Less Than Human’ for a late-summer read than President Trump called Omarosa Manigault Newman a ‘dog’ and a ‘lowlife.’ Those two slurs fit nicely into author David Livingstone Smith’s philosophical study of man’s capacity to inflict cruelty by first dehumanizing the ‘other.’

“Trump’s personal template is familiar. He likes someone, then doesn’t, then reduces the object of his scorn to something less than human. The mononymously known Omarosa, whose friendship with Trump began when she appeared on ‘The Apprentice,’ was fired last year from her job as a White House aide.

“During the past few days, she has released secretly taped recordings of her firing as well as a later conversation with Trump, published a tell-all account of her time in the White House and told MSNBC’s Chris Matthews that she’s willing to cooperate with special counsel Robert S. Mueller III’s investigation.  (How interested Mueller is in her input isn’t clear.)

“All things considered, it sounds as if Trump and Omarosa may deserve each other.  Recording people without their knowledge, especially in the White House, is certainly un-kosher if not illegal.  On Tuesday, the Trump campaign filed an arbitration action against Omarosa for breach of a 2016 nondisclosure agreement.  More important, however, is the risk of having exposed top officials to hackers if Omarosa used her cellphone to record these and other conversations....

“(What) makes the president’s remarks especially repugnant is that they were aimed at a minority woman and followed a spate of similar insults targeting African Americans....

“Granted, all of (them...Maxine Waters, Don Lemon, LeBron) have been critical of Trump, but so what?  Presidents are frequently under fire. Yet, through some strange reasoning, Americans are supposed to accept that, you know, Trump’s a fighter. He always fires back, as though this were justification for the bile he releases into the atmosphere. In the process, he has offered aid to his enemies by displaying a pattern of racially charged commentary.

“It’s a simple matter of fact that certain insults have greater or lesser impact when applied to particular individuals or groups of people.  Comparing Mitt Romney or Stephen K. Bannon to a dog, as Trump previously did, obviously isn’t the same as calling a black woman a dog. Questioning the intelligence of African Americans is especially blistering.

“Did Trump mean for us to treat his comments so literally? Who cares? He’s the president of the United States and should be able to muzzle his schoolyard impulses. He should also know that dehumanization – or ‘othering,’ to use current vernacular – leads to marginalization, which can lead to cruelty (say, separating young migrant children from their parents), which can lead to far worse.

“As Smith explains in his book, it’s much easier to hurt, maim or kill another when you no longer see them as quite human. World history’s catalogue of atrocities confirms this. Which is why no one living today should be comfortable with the language of dehumanization, no matter how relatively minor the degree.

“Least of all the president.”

--One year after the deadly rally in Charlottesville, Virginia, most Americans feel racial tensions have grown, and partisans – as well as white and black Americans – divide sharply on how President Trump handles race relations.

A new CBS News poll conducted by YouGov finds 61% of Americans say that racial tensions have increased over the past year.

Majorities of whites, blacks and Hispanics feel this way, but blacks are especially likely to think so: 78% feel tensions have increased.

58% of Americans disapprove of how President Trump is handling race relations and racial issues, but these are split along party lines and race.

82% of blacks disapprove and 73% of Hispanics disapprove.  Whites are evenly split (49% approve, 51% disapprove), while 83% of Republicans approve of the president’s handling of racial issues, and 90% of Democrats disapprove.

I’m biting my tongue when it comes to my fellow Republicans.  Let’s just say I’m not part of the 83%.

Thankfully, last week’s rallies and counter-rallies commemorating the one-year anniversary were none events.

Trump tweet: “I condemn all types of racism and acts of violence. Peace to ALL Americans!”

--A damning new grand jury report from Pennsylvania revealed hundreds of pedophile priests abused and terrorized Pennsylvania children for decades, while complicit Catholic Church officials covered up their offenses or turned a blind eye.

Over the course of 70 years, the trusted, ordained men of God, more than 300 in all, raped and abused more than 1,000 boys and girls with impunity while serving an institution that routinely shuffled them from parish to parish, giving them license and enabling them to prey upon new victims.

The statewide grand jury report that was two years in the making, was described by officials as the biggest and most exhaustive ever undertaken by a U.S. state.

“The main thing was not to help children, but to avoid scandal,” the report says.  “Priests were raping little boys and girls and the men of God who were responsible for them not only did nothing: They hid it all.”

[I read the report on the Dioceses of Pittsburgh and Greensburg, to see who was implicated from churches I went to as a kid, my mother being part of a large, very devout Catholic family from those parts.  It’s sickening.]

The Vatican issued a response on Thursday, saying Pope Francis was on the side of the victims.

“Victims should know that the pope is on their side,” the statement read. “Those who have suffered are his priority, and the Church wants to listen to them to root out this tragic horror that destroys the lives of the innocent.”

“There are two words that can express the feelings faced with these horrible crimes: shame and sorrow,” it said.

The Vatican added that the church needed to learn “hard lessons from its past, and there should be accountability for both abusers and those who permitted abuse to occur.”

The Pope is heading to Ireland in about two weeks and there are calls from some priests there for him to cancel the visit.

Cardinal Timothy Dolan, Archbishop of New York, uttered what so many of us have been thinking.  His priests are telling him they are embarrassed to wear their collars when walking around the city.  That’s incredibly depressing.

I’ve decided I’m keeping the photo of myself and disgraced Cardinal McCarrick until his Vatican trial.

--The stunning hijack of a 76-seat Bombardier commercial airplane, belonging to his employer, Horizon Air, by 29-year-old Richard Russell rightfully has heightened worries about gaps in U.S. aviation security.

Russell performed midair stunts over Puget Sound, wondering at one point what would happen if he tried to do a “backflip” with the plane he had stolen from Seattle’s main airport.  When the control tower urged him to attempt to land the empty aircraft, Russell, worried about harm to others on the ground, said it was better to take a nose dive, “and call it a night.”

The crash on a sparsely populated island in the Sound took no other lives than Russell’s, but everyone is asking how a baggage handler and grounds crew member could take control of the plane, get it up in the air and fly it all over a major U.S. metropolitan area for nearly an hour.

But the industry operates on a principle of performing background checks on employees, not locking down airplanes in secure areas.    The planes require constant access from many individuals aside from pilots.

--Vienna dislodged Melbourne, Australia, for the first time at the top of the Economist Intelligence Unit’s (EIU) Global Livability Index. The two metropolises have been neck and neck in the annual survey of 140 urban centers for years, with Melbourne on top the past seven editions.

Great pick. I’ve been to Vienna a number of times and just love it. Though, as I’ve written, from a train ride I took into the suburbs years ago, it got kind of spooky (i.e., think 1938).

Vienna regularly tops a larger ranking of cities by quality of life compiled by consulting firm Mercer.

Rest of the top ten....

3. Osaka, Japan. 4. Calgary, Canada.  5. Sydney, Australia. 6. Vancouver, Canada. T-7. Toronto and Tokyo.  9. Copenhagen, Denmark.  10. Adelaide, Australia.

Kind of surprised Singapore was just 37, while Hong Kong climbed from 45 to 35.

Honolulu was the No. 1 U.S. city at No. 23. Pittsburgh next at 32.

Paris is No. 19, London 48, and New York 57.

The least livable city in the world is Dakar, Senegal, followed by Algiers, Algeria. 

So if your boss comes to you one morning and says, “John, you always said you wanted to travel, we’re sending you to Dakar,” find a way to sneak your belongings out at lunch time and just never return.

Several of the world’s most dangerous capitals, such as Baghdad and Kabul, are not ranked.

--Finally, NASA successfully launched a spacecraft toward the sun on Sunday, hoping to increase scientific knowledge of how it works.

The Parker Solar Probe is to set a plethora of records, including speediest spacecraft, highest velocity while leaving Earth and closest solar approach.  It also marks the first robotic visit to such a hostile environment.

The launch speed of the Delta IV rocket of 43,000 miles per hour was expected to be the fastest of any previous launch because of the pace required to set a course directly to the sun.

The United Launch Alliance is a joint venture of Boeing Co. and Lockheed Martin Corp.  The Parker will attain a top speed of 430,000 mph – about 120 miles a second – and at its closest approach will be only 3.8 million miles from the sun.

The probe is to investigate two key questions about solar physics: How does the solar wind start and attain speeds of as much as 1.8 million mph? And why is the sun’s surface, at 10,000 degrees Fahrenheit (5,500 Celsius), just a tiny fraction of the million-plus degree corona?  [I think you’d agree; 10,000 F. is hot enough.]

By the way, if you’re thinking about sunscreens, Consumer Reports says Equate SPF 50 is a good budget buy.

More importantly, the Parker will make 24 orbits of the sun over almost seven years, using Venus to help slow down and reduce its orbital distance to the sun.  Parker’s first approach, at 15 million miles, is expected on Nov. 1.

---

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

God bless America.

---

Gold $1191...lowest weekly close since Jan. 2017
Oil 
$65.92...down a seventh straight week

Returns for the week 8/13-8/17

Dow Jones  +1.4%  [25669]
S&P 500  +0.6%  [2818]
S&P MidCap  +0.7%
Russell 2000  +0.4%
Nasdaq  -0.3%  [7816]

Returns for the period 1/1/18-8/17/18

Dow Jones  +3.8%
S&P 500  +6.6%
S&P MidCap  +5.8%
Russell 2000  +10.3%
Nasdaq  +13.2%

Bulls 57.3
Bears 18.4

Have a great week.

Brian Trumbore