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Week in Review

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04/30/2016

For the week 4/25-4/29

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has significant operating expenses.  Your help is appreciated.  Click on the gofundme link above or you can send a check to PO Box 990, New Providence, NJ  07974.

Edition 890

Washington and Wall Street

There was a slew of economic, central bank and corporate data this week.  For starters, the government released its initial look at first-quarter GDP and it came in at a miserable 0.5%* annualized rate, after 1.4% in the fourth quarter and 2.0% in the third.  President Obama has been on his legacy tour and he’s been strutting like a peacock, including positive pronouncements on the economy.  He’s delusional.

*The Atlanta Fed’s GDPNow indicator pegged it at 0.6%.

Aside from the debacle Obama is leaving his successor on the foreign policy front, since he took office, and once the recovery took hold, the U.S. economy has been stuck in neutral, 2% growth, and it’s been a rather long time since he could safely play the “I saved us from another Great Depression” card.

Separately, March new home sales came in less than expected, while the S&P/Case-Shiller home price index for February rose a solid 5.4% year-over-year, up 0.7% from the prior month.

March durable goods, though, came in far less than expected, 0.8% and -0.2% ex-volatile transportation.

March personal income was up a solid 0.4%, but consumption increased only 0.1%.  The Fed’s preferred inflation indicator, the personal consumption expenditures index, rose 1.6% in March, yoy, less than the Fed’s target of 2.0% and down a tick from February.

The Chicago purchasing managers index was a far less than expected 50.4 (50 being the dividing line between growth and contraction).  The PMI readings are important for the Fed and its deliberations and we’ll see the national ISM reading on manufacturing this coming Monday.

Speaking of the Fed, it left the benchmark funds rate unchanged as expected at its latest Open Market Committee meeting and was ambiguous about a June rate hike.  Policy makers did leave the door ajar, but they don’t want to be aggressive in their signals seeing as there will be a lot more important data between now and the June 14-15 confab.  I still believe the Fed will hike then, assuming the data, particularly the next two jobs reports, is strong, but there is one major fly in the ointment for those of us in the minority, forecasting a hike. Britain’s Brexit referendum, June 23.  It’s an easy excuse for the Fed not to act until after the vote is tallied, but I do not think the British people will elect to leave the European Union and I’m assuming the opinion polls there will begin to reflect this.

For now, the Fed, in its policy statement on Wednesday, offered: “Labor market conditions have improved further even as growth in economic activity appears to have slowed.”  Friday’s personal income and spending numbers confirm this.  Income is rising but household spending is diminishing.

Separately, the Fed signaled its concerns over the global economy and issues such as China’s growth rate had lessened.

On the earnings front, I cover some of the bigger individual stories down below, but with 55% of the S&P 500 having reported, Thomson Reuters is forecasting earnings will decline 6.1% in the first quarter, ex-energy still down 0.5%.  This would be the third consecutive quarter of declines.

On the revenue front, the projection is for down 1.4%, but up 1.7% ex-energy, which is hardly robust.  Overall, revenues are forecast to decline for a fifth quarter in a row.

Europe and Asia

Some important data for euroland this week.  A flash reading on first-quarter GDP for the EA19 was up a better than expected 0.6% over the fourth quarter, and up 1.6% year-over year, so a much better pace than the U.S.  Q4 had been up 0.3%.

But the eurozone now has four straight quarters of 1.6% year-over-year growth, as put out by Eurostat. 

1.6% is OK, but you need to see 2%+ to get out of this stagnation phase the region has been stuck in and it doesn’t help that a flash reading on inflation for April came in at -0.2% on an annualized basis, deflation.  It was unchanged in March.  [Spain remains mired in it, -1.2% annualized for April according to the government.]

GDP in Spain, however, increased a solid 0.8% in Q1 over Q4, and it was up a better than expected 0.5% in France for the quarter.  But Spain faces a new election on June 26 as a government couldn’t be formed after December’s fractious parliamentary vote. There is zero guarantee the new one will resolve matters.

A third report from Eurostat, this one on the labor front, has the euro area unemployment rate falling to 10.2% in March, down from 10.4% in February and 11.2% March 2015.

The unemployment rate was 4.2% in Germany, 10.0% in France, 11.4% in Italy, 20.4% in Spain and 24.4% in Greece (Jan.), with youth unemployment rates still sky high in Spain, 45.5%, and Greece, 51.9% (Jan., and a disturbing increase over December).

[For my Irish friends, the jobless rate in Ireland is down to 8.6% from a peak of over 15%.  As Ronald Reagan would have said, ‘Not bad, not bad at all.’]

On a different item, lending to euro area firms and households accelerated in March to a multiyear high, a positive sign and evidence the European Central Bank’s stimulus is gaining traction, but the increase was only 1.1% in March over a year earlier.

As for Brexit, the OECD (Organization for Economic Cooperation and Development) weighed in with a stark warning that a British withdrawal from the European Union could spark an international financial shock.  French economy minister Emmanuel Macron said of Britain this week: “Leave the club and you’ll be alone.”  But France’s far-right and Eurosceptic National Front party is cheering for the UK to leave the EU.  Leader Marine Le Pen is planning to visit the U.K. to campaign in favor of Brexit.

Also, don’t discount the possibility of some kind of mischief on the part of the Kremlin.  Putin wants to see disorder and chaos in Europe; the kind that a Brexit would lead to as other nations could say, ‘If they can leave, why can’t we?’  [I’m not sure what kind of form this mischief would take, but think 1999 Moscow apartment bombings and how Putin created a pretext for his war in Chechnya.]

Britain’s economy, incidentally, slowed to 0.4% in the first three months of the year from a previous quarterly pace of 0.6%, according to the Office for National Statistics.  Year-on-year growth, though, is still 2.1%.

Meanwhile, President Obama told the BBC in an interview last Saturday: “The U.K. would not be able to negotiate something with the United States faster than the EU (should it leave). We wouldn’t abandon our efforts to negotiate a trade deal with our largest trading partner, the European market.  But rather, it could be five years from now, 10 years from now before we were able to actually get something done.”

On the Greek debt crisis and the third bailout, German Finance Minister Wolfgang Schaeuble said Greece doesn’t need debt relief now as long as the troika of creditors determines that debt sustainability is ensured.

The Greek government submitted a bill to parliament the other day overhauling the pension system and raising the income tax on middle and high wage earners; part of a belt-tightening package required by creditors for the conclusion of the bailout review and then further funding.

At the same time, Prime Minister Alexis Tsipras is seeking a meeting of euro area leaders to resolve disagreements between the government and creditors, with Tsipras calling on European Council President Donald Tusk to ask that a Euro summit be convened.

Greece needs to secure emergency loans to avert a default in July when bonds held by the ECB come due.

On the migration front, UN Secretary General Bank Ki-moon, while on a visit to Austria, denounced the spread of xenophobia and anti-migration policies in Europe, a day after Austria introduced tougher asylum laws.

Speaking to the Austrian parliament, Ban applauded the nation and other European countries for the generosity shown so far towards refugees, “But I am concerned that European countries are now adopting increasingly restrictive immigration and refugee policies,” he said. “We have a moral and political obligation to help those who are fleeing wars, human rights violations and persecution.”

The day before, Austrian police said it would put up a fence and introduce strict controls at the Brenner Pass to limit the number of migrants and refugees crossing from Italy.

Austrian authorities foresee a 10-fold increase in the coming weeks as migrants have been flooding Italy, with the new restrictions between Turkey, Greece and the EU forcing many to take a different route.

The new Austrian law allows the government to reject nearly all asylum seekers at the border if it finds that public order and security are endangered.  The law also makes it harder for refugees to bring family to Austria.

If I was a member of the Austrian parliament I would totally support these measures.  I have great sympathy for these nations, including as I said way back, Hungary, for slamming the door.

Austria is not a large country, yet they received 90,000 asylum seekers last year and about 18,000 since the start of 2016, with a new wave about to hit. 

So last Sunday, Austria’s far-right Freedom party won an unexpectedly powerful victory in the first round of the country’s presidential election, highlighting the potential for Europe’s refugee crisis to send shockwaves across the continent.  FPO candidate Norbert Hofer won more than 35% in Sunday’s poll – far more than any other candidate.  Speaking at his final campaign rally in Vienna last Friday, Hofer stressed Austria’s limited capacity to absorb newcomers, saying “we are not the world’s social department.”  Hofer also sharply criticized Germany’s Angela Merkel for concessions she had made to Turkey in an attempt to resolve the crisis and said Islam could not become part of Austrian culture.

The two main parties’ presidential candidates each polled only around 11%!  The final round is May 22...look out.

Earlier in the week, President Obama heaped praise on Merkel for being “on the right side of history” with her open-door stance on refugees.

Obama, in what was probably his last trip to Germany, lauded his “friend and partner” for her “remarkable endurance.”

“Perhaps because she once lived behind a wall herself, Angela understands the aspirations of those who have been denied their freedom and who seek a better life,” Obama said.

Ask the average German, Mr. Obama, how many of the 1 million asylum seekers who arrived in 2015 plan to assimilate? Merkel’s approval rating is at the lowest of her third term, which began in 2013.

On the terror front, the entire population of Belgium is to be issued iodine tablets, after warnings about the threat of ISIS building a dirty bomb. The pills will be sent to pharmacies and the public would be ordered to collect their ration in the event of an incident, including a meltdown at one of two nuclear plants (whose nearby residents were already able to get the tablets).

It emerged following last month’s terrorist attacks that an IS cell may have been plotting to kidnap a nuclear expert in order to build a dirty bomb.

Turning to Asia...China’s industrial profits rose a solid 11.1% in March, year-over-year, according to the National Bureau of Statistics, with key PMI data due to be released on Sunday.

But the country’s total debt rose to a record 237 percent of GDP in the first quarter, raising the risk of a financial crisis or a prolonged slowdown, economists warn.  Chinese debt was only 148 percent of GDP at the end of 2007.

“Every major country with a rapid increase in debt has experienced either a financial crisis or a prolonged slowdown in GDP growth,” Ha Jiming, Goldman Sachs chief investment strategist, wrote in a report this year.  [Financial Times]

Some believe the People’s Bank of China can ward off crisis by flooding the banking system with cash to keep banks liquid, even if non-performing loans rise sharply.  But the greater risk is a Japan-like “lost decade” of slow growth and deflation.

Meanwhile, the Bank of Japan was expected to initiate a new round of stimulus measures for its moribund economy at its latest policy meeting, but instead opted to hold the line, which upset investors, the Tokyo Nikkei falling 3.6% in response.

The BoJ decision was to wait to see what the impact of recently introduced negative interest rates would be, with the central bank offering “it will take time for the results to come through.”  Policy makers are betting that their success in bringing down borrowing costs will accelerate lending.

The BoJ also changed its guess of when inflation would reach the target 2% to sometime in fiscal 2017 from the first half of fiscal 2017.  [Japan’s fiscal year commences in April.]

Consumer prices fell 0.1% in March from a year ago, -0.3% ex-food (Japan’s core); the most in three years as household spending slid and industrial production remained soft.  But the unemployment rate ticked down from 3.3% to 3.2%.

Street Bytes

--Ugly week for equities as the Dow Jones and S&P 500 each lost 1.3%, while Nasdaq declined 2.7%.  Solid results from Amazon and Facebook couldn’t make up for the poor report cards from the likes of Google, Twitter, Apple and Microsoft the past two weeks.

By definition it’s a bull market until you have a bear market, and so despite a number of 10% corrections, there hasn’t been a 20% decline that would denote a bear market since Barack Obama took office in January 2009.   This week thus marked the longest bull market since the dot-com bubble of the 1990s, but as we see above with the GDP data, it is hardly boom times.

The market as measured by the S&P 500 hasn’t seen a new 52-week closing high since 5/21/15 at 2130.  [2065 today.]

--U.S. Treasury Yields

6-mo.  0.38%  2-yr. 0.78%  10-yr. 1.83%  30-yr. 2.68%

--Crude oil, as measured by West Texas Intermediate, finished the week at $45.92, the highest weekly close since last Oct. 30.

Oilfield services company Baker Hughes’ loss widened to $981m in the first three months of the year, compared with $589m a year ago.  Sales fell 42 percent, as the global rig count fell by 41 percent.

In the current quarter, Baker Hughes expects operating rigs to decline by 30 percent compared with the first quarter in North America.  The U.S. rig count is then expected to stabilize in the second half of 2016.

--PetroChina, China’s biggest oil and gas producer, posted a net loss of $2.1bn in the first quarter, the company’s first ever quarterly loss.

--BP disclosed it had almost $1 billion in fresh charges related to the Gulf Coast oil spill, bringing the total bill from the disaster to more than $56bn and counting.

Despite a $20bn settlement with the U.S. government and various state claims, lawsuits continue and could drag on for years.  BP said it was impossible to predict how much more costs would rise.

The company reported a $485 million quarterly net loss owing to the unexpected charge related to a separate settlement with Gulf Coast businesses and residents harmed by the spill, though it made $532m of profit on an underlying replacement cost basis – a metric analysts watch closely.  CapEx is being cut further than originally forecast for 2016.

April 20 was the six-year anniversary of the Macondo well explosion that killed 11 workers and released more than 3 million barrels of oil a day into the Gulf over 87 days.

--ConocoPhillips slashed the number of rigs it has drilling for oil and gas in the U.S., in a further sign that even after the rebound in oil prices, the financial pressures on the industry remain intense.

Conoco, the world’s largest pure exploration and production company, said the number of U.S. rigs it had in the “lower 48” was cut from 13 to just three in April.  It also slashed its capital spending forecast for 2016 to $5.7bn from December’s budgeted $7.7bn.  For the year, Conoco is giving up its plans for deepwater exploration to lower costs.

--Friday, ExxonMobil, the largest U.S. oil group, saw its earnings plunge 63% from $4.9bn to $1.8bn, but this was well ahead of Street expectations, ditto sales, which while falling 28% to $8.7bn also handily beat.

Exxon said it cut first-quarter capital expenditures 33% to $5.1bn (with a full-year target of $23bn...it’s slimmest budget since 2007).

Earlier in the week, Exxon was stripped of its long-held triple A rating by credit agency Standard & Poor’s as the rout in crude prices adds strain to the company’s balance sheet.

The downgrade to double-A plus reflected the ballooning of Exxon’s debt, at the same time that analysts believe the company must spend more on exploration to maintain production.

The move by S&P leaves just two publicly traded U.S. companies with triple-A ratings: Microsoft and Johnson & Johnson. Exxon had held its triple-A status since at least the 1940s.  Its debt has exploded to $35bn from just $2bn in 2012 as it raised funds through bond offerings for capital expenditures.

Practically speaking, at least for now, the downgrade won’t hurt Exxon’s cost of finance, but it hurts reputationally.

--Chevron reported a $725m after-tax loss for the first quarter, almost double the average of analysts’ forecasts.

The company lost $1.46bn in oil and gas production, while making $735m in its refining operations.

--Tragedy outside Bergen, Norway, on Friday as a helicopter carrying 11 passengers and 2 crew member went down on land, coming back from a Statoil ASA-operated offshore oil and gas field.  All were confirmed dead.  It was the first deadly flight accident for Norway’s offshore industry since 1997, when a helicopter crashed in the Norwegian Sea, killing all 12 onboard.

In today’s crash, 11 of the victims were Norwegians.

--Facebook Inc. reported earnings nearly tripled in the first quarter, as advertising revenue jumped 57% to $5.2 billion from $3.3 billion.  Mobile ads accounted for roughly four-fifths of the total.

Chief Operating Officer Sheryl Sandberg said, “Businesses are no longer asking if they should market on mobile, they’re asking how.  This is a shift that we think we’re very well-positioned to take advantage of and build on.”

It is indeed amazing how quickly Facebook has capitalized on mobile.  Overall, the company is expected to garner 12% of the $186.8bn global digital-advertising market this year, up from 10.7% last year and 8.6% in 2014, according to data firm eMarketer; this while Google’s share is projected to fall to 31% from 35% two years ago.

Facebook’s user ranks grew to 1.65 billion from 1.44 billion in the first quarter last year.

The company also said the board approved a new class of nonvoting shares, designed to cement CEO Mark Zuckerberg’s control over the operation.

FB’s net profit was $1.51 billion, almost triple last year’s $512m for the same period.

The company spent $1.1 billion on capital expenditures, including for new data centers in Texas and Ireland, and will shell out over $4bn for the full year.

--So contrast Facebook’s performance with that of Apple.  The company reported earnings of $1.90 a share, below the Street’s forecast of $2.00, but revenue also missed, falling about 12% to $50.6bn, the biggest drop in revenue since the third-quarter of 2001, and the first decline in sales growth in 51 consecutive quarters.  Apple also guided lower for the current quarter.

Apple shipped 51 million smartphones, ahead of expectations, though down 13 percent from a year earlier, while the average selling price was $625, below the $659 analysts were expecting.

Tablet sales also continued their slide, down 19% from last year. Sales of Mac computers fell 12%.

One thing Apple does have is cash, finishing the quarter with $232 billion. The company also boosted its quarterly dividend 10% to 57 cents a share.

CEO Tim Cook said, “Our team executed extremely well in the face of strong macroeconomic headwinds,” conceding the smartphone market “is currently not growing.”

So none of this was good for Apple shares, the company with the biggest market value in the S&P 500, as they fell 8% on the release, and then further on Thursday when investor Carl Icahn announced he had dumped his nearly 1% stake in the company on fears that Chinese authorities would bully the company.

Yes, just as I’ve been warning for some time now, Icahn is one of the first to publicly say it’s not about Chinese growth or lack thereof, but rather the government.  As I wrote last week, Beijing recently shut down Apple’s e-book and digital movie services business in the country. 

Overall Apple sales in China, Taiwan and Hong Kong fell 26 percent in the period.

Leonid Bershidsky / Bloomberg

“During the most recent earnings call, Apple CEO Tim Cook and Chief Financial Officer Luca Maestri talked about the company’s problems in Hong Kong, where the currency is pegged to the U.S. dollar, making it less attractive to tourists.  To an extent, that explains a 26 percent year-on-year revenue drop in Greater China, but there is also an 11 percent decline in Mainland China (7 percent in constant currency terms). This may be due in part to the fizzling of the country’s exuberant growth, but I rather suspect that there’s a limit to how many Chinese consumers may be seduced by a strong Western brand over price and tech considerations.  Xiaomi and Huawei are the market leaders in China in terms of unit shipments.  They make great phones, and they sell them for less than 60 percent of Apple’s prices.

“I said last year that Apple’s Chinese miracle, which explained the phenomenal sales of the iPhone 6, was over.   Now the numbers prove it....

“Time is not on Apple’s side where the iPhone is concerned.  It has been overtaken and undercut by the competition, and it’s hard to imagine how Apple will keep up, since it outsources production and buys components from the same vendors as the competition.”

But the detractors are missing the big picture.  President Xi can play the nationalism card at a moment’s notice, and it could easily be related to actions in the South China Sea or Taiwan (see below).

--Amazon delivered a blowout quarter, with net income of $513 million, up from a loss of $57 million in the same period a year ago.

Revenue rose to $29.13 billion from $22.72 billion a year ago.  Amazon’s shares soared in response.

The biggest source of the company’s profits is Amazon Web Services, the cloud computing business that is now on track to bring in more than $10bn a year in revenue.  A.W.S. is becoming a destination not just for start-ups, but also big companies that want to rent their computing capacity rather than run their own hardware and software.

Cloud computing is far more profitable than Amazon’s retail business, which continues to run at a loss.  A.W.S. had operating income of $604 million, even though revenue from the division was just $2.57bn of the $29.13bn total.

That said, retail sales in North America still rose a whopping 27%, with Amazon Prime memberships increasing 51% to an estimated 65m, according to analysts at Bernstein (the company doesn’t give an exact figure).

--LinkedIn handily beat the Street’s expectations in the first quarter, with earnings almost 20% higher than forecast. Revenue also came in higher than consensus at $861m, up 35% year-on-year.

Recruiters continue to spend on the social network platform. CEO Jeff Weiner cited the new mobile experience.

The shares rallied strongly.

--Procter & Gamble posted a drop in fiscal third-quarter sales as strength in the U.S. dollar took a toll.  Net sales fell 7% to $15.8bn, in line with expectations, but if you strip out the impact of currency swings, ‘organic’ sales rose 1%.

P&G has been streamlining its product line, with the sale of the Duracell business, while it announced a spin-off of Clairol and 42 other beauty brands to Coty.

--DuPont Co. boosted its 2016 profit outlook amid more upbeat results in its agriculture and nutrition divisions.  The company is nonetheless proceeding with plans to cut $730 million in annual costs, including 5,000 layoffs.

Despite the optimistic tone, DuPont sales in the quarter fell 6%, but they were ahead of forecasts.

--Ford recorded its most profitable quarter ever in the first three months of the year, with net income more than doubling to $2.45bn.

Ford continues to benefit from record sales rates in North America, thanks to strong sales of SUVs and the popularity of its F150 pick-up truck, the continent’s most popular single vehicle.

Revenue was up 19% to $23.9bn. 

In Europe the company turned a pre-tax profit of $434m vs. a $42m loss last year in Q1, on flat revenue of $6.9bn.

But Ford’s losses in South America widened to $256m, on revenue that was down 44%.

--Mitsubishi Motors Corp. acknowledged last week it had intentionally lied about fuel economy data for some of its models going back to 1991.  Details are sketchy.

--Despite the campaign rhetoric from the likes of Bernie Sanders about the big banks, deposits continue to flow into the big four commercial institutions – J.P. Morgan Chase, Bank of America, Wells Fargo and Citigroup – with deposits up 2.1% in the first quarter to $4.2 trillion, outpacing the overall growth of deposits at U.S. banks, according to Federal Reserve data and the Wall Street Journal.

Total loans in the first quarter were also up significantly at the big four, including 11% at JPM.

--According to the IMF in its Western Hemisphere regional economic outlook, Latin America and the Caribbean are on course for a 0.5 percent economic contraction this year, making it the first time since the debt crisis of 1982-83 that the region has seen two consecutive years of negative growth.

Further, the IMF says: “Growth prospects over the next five years will likely remain subdued, particularly for those [countries] facing lower commodity prices and weak investment.  Throughout the region, policies and economic reforms should be tailored to manage this transition.”

Mexico* is projected to grow 2.4 percent this year, but Brazil is forecast to contract 3.8 percent.  [Financial Times]

*Friday, the Mexican government reported GDP for the first quarter came in at a healthy 0.8%, or up 2.7% annualized, higher than analysts’ expectations.

--Just in time for the political conventions, insurers will be seeking significant premium hikes under ObamaCare this summer.  The healthcare law has been a financial drain for many companies and there could be a round of double-digit hikes for 2017.

For example, in Virginia, nine insurers returning to the HealthCare.gov marketplace are seeking average premium increases that range from 9.4 percent to 37.1 percent.

This year, premiums for a benchmark silver plan rose by more than 7%, according to administration figures.

Marc A. Thiessen / Washington Post

“The president promised ObamaCare would ‘lower premiums by up to $2,500 for a typical family per year.’  But insurers are raising premiums instead to cover the massive losses, and even Marilyn Tavenner – the former Obama administration official who ran ObamaCare – has predicted premiums will rise even further next year. As they do, young, healthy individuals will be priced out of the exchanges – and the only people who will be able to afford ObamaCare will be high-risk patients who qualify for federal subsidies. Without enough healthy people in the exchanges to pay for the sick ones, taxpayers will be stuck with more and more of the costs over time – a situation that is unsustainable in the long run.”

--From the Wall Street Journal: “The scale and severity of prenatal damage by the Zika virus are far worse than past birth defects associated with microcephaly, a condition characterized by a small head and brain abnormalities. Scans, imaging and autopsies show that Zika eats away at the fetal brain.  It shrinks or destroys lobes that control thought, vision and other basic functions. It prevents parts of the brain not yet formed from developing....

“The sickest Zika babies in Brazil have died before delivery or within hours of birth.  No one knows yet how long the survivors will live or how much they can be helped in the years ahead.  Brazil is now bracing for a second stage of the 6-month-old crisis: Caring for infants with a wide range of disabilities.” [Luciana Magalhaes and Betsy McKay]

But this will continue to become more and more of an economic story, as much as a human tragedy.  Friday, the U.S. reported the first Zika-related fatality in Puerto Rico, a 70-year-old man, which is troubling.

--Boeing reported a drop in first quarter profits to $1.2bn, compared with $1.3bn a year ago.  Revenues climbed 2 percent to $22.6bn, ahead of the Street’s forecasts.

--SpaceX plans to send an unmanned Dragon spacecraft to Mars as early as 2018, a first step in achieving founder Elon Musk’s goal of flying people to another planet.  NASA, which is planning a manned mission to Mars in the 2030s, said it will provide SpaceX with technical support.

Some of you are aware “The Most Interesting Man In The World” is currently on a one-way trip to Mars.  Prior to liftoff, reporters asked him if he’d be lonely.  He reminded them there was a female flight attendant on board.

--The average U.S. airfare dropped to $377 last year, its lowest level since 2010 and down nearly 4% from 2014, according to the Dept. of Transportation’s Bureau of Statistics.

However, these figures don’t include the cost of additional passenger fees, such as for checking your bag.  [Hugo Martin / L.A. Times]

--Chipotle Mexican Grill posted its first loss ever as a public company, after a series of disease outbreaks last year.  Same-store sales fell a whopping 29.7% during the quarter, steeper than analysts forecast, with revenue declining 23.4% to $834.5 million from $1.09bn.

The company has been trying to win back its once-loyal customers with giveaways and new menu items, while at the same time it continued to open new restaurants, 58 in the quarter, bringing the total to 2,066.

So I finally used my coupon for a free burrito (it expires May 1 if you haven’t done the same!), never having been inside my local Chipotle, and it was delicious.  I also didn’t get sick!  Yes, I’ll now go back.

--NBCUniversal announced it has acquired DreamWorks Animation for $3.8 billion. The animation studio will be folded into the Universal Filmed Entertainment group,

DreamWorks CEO Jeffrey Katzenberg will become chairman of DreamWorks New Media.

--No one vacations in Acapulco anymore and for good reason...ever-soaring crime.  Last year there were 903 murders in a city of 800,000, more than any other city in Mexico.

Actually, I don’t know why I just stuck this tidbit in here.  Those of us of a certain age remember Acapulco for ABC’s “Wide World of Sports” and the cliff-diving...led by the great Barney Cipriani.

--The feel-good story of the week was courtesy of Hamdi Ulukaya, CEO of Greek yogurt maker Chobani, who told the company’s 2,000 full-time employees at its upstate New York plant Tuesday that they’ll receive shares worth up to 10% of the company’s value when it goes public or is sold.

“This isn’t a gift,” Ulukaya said in a letter to employees.  “It’s a mutual promise to work together with a shared purpose and responsibility. To continue to create something special and of lasting value.”  [USA TODAY]

The average award is estimated to be worth tens of thousands of dollars, but up to a $1 million for some employees.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: As President Obama announced the U.S. will deploy 250 more troops* in Syria to help local militias fight ISIS, there was a devastating series of air strikes in the Syrian city of Aleppo on Thursday, including a hit on a hospital run by Medecins sans Frontieres (Doctors Without Border) that killed 50, including at least three doctors and numerous children.

*Just a day before, Obama told the BBC, “It would be a mistake for the United States, or Great Britain...to send in ground troops and overthrow the Assad regime.”

The U.N. called on Presidents Obama and Vladimir Putin to intervene in the Syrian peace process to keep the talks from collapsing, as Aleppo becomes the epicenter of the military escalation.  Through Friday, seven days of air strikes and rebel shelling of the place, which is split between government forces and rebels, killed well over 200 people, two-thirds of them on the opposition side, according to the Syrian Observatory for Human Rights.  The U.N.’s chairman of the humanitarian task force, Jan Egeland, said there has been a “catastrophic deterioration in Aleppo over the last 24-48 hours” and that aid supply lines are jeopardized.

Understand, as I’ve said since 2012, it was already “over” in Syria...lost.  Valter Gros, who heads the International Committee of the Red Cross’ Aleppo office, said, “There is no neighborhood that hasn’t been hit.”

For his part, Syrian President Bashar Al-Assad, “has essentially shrugged off Moscow’s interests, and he believes that Russia has no choice but to support the regime no matter how intransigent he gets in peace talks,” says Vladimir Frolov, a Russian international affairs expert.  “And he has been proven correct, for the moment.  Moscow is kind of stuck in Syria.”

As Matthew Bodner writes in the Moscow Times: “Assad’s obstinate stance risks creating real dilemmas for Russia.  At times, it appears the embattled leader believes he can once again be ruler of all Syria. He has rejected several proposals calling for the federalization of Syria, or his stepping down as its leader. This position has complicated Moscow’s support for Syrian Kurds, largely proffered to spite Turkey.”

Moscow is being undermined as an invaluable partner in the peace process.  The Foreign Ministry office also offered this week it saw no chance for better relations with Turkey in the foreseeable future, citing “an anti-Russian position” taken by the Turkish leadership.

For their part, the Kurdish rebel PKK movement told the BBC it is ready to intensify its fight against Turkey, with PKK leader Cemil Bayik saying President Erdogan was “escalating this war.”

“The Kurds will defend themselves to the end, so long as this is the Turkish approach – of course the PKK will escalate the war,” he said.

An aide to Erdogan ruled out any negotiations with the PKK.

Separately, Gen. Peter E. Gersten, Deputy Commander for Operations and Intelligence for the U.S.-led campaign against ISIS, said the number of foreign fighters arriving in Iraq and Syria to join Islamic State has declined to about 200 a month from as many as 2,000 a year ago.

During a news conference, Gen. Gersten said, “We’re seeing an increase in the desertion rates of [IS] fighters. We’re seeing a fracture in their morale.”  [Paul Sloane / Wall Street Journal]

Gersten also said the U.S. has repeatedly targeted ISIS’ stores of cash, blowing up an estimated $800m, which is contributing to a jump in defections and a drop in new arrivals.  But the general didn’t specify how he knew how much cash had been destroyed.  Gersten said $150m was blown up in a single house after the U.S. received intelligence.  [Personally, I think you have to treat some of this with skepticism.  Propaganda works both ways, but if potential recruits believe these stories and opt to stay home to play video games, great.]

ISIS does continue to hold large swaths of territory, and it doesn’t appear as if the battle to retake Mosul is going to take place any time soon, as I’ve been noting the past few weeks.  The Iraqi buildup for the offensive has been slow to materialize and they need better equipment and training prior to launching the main assault.

This week the U.S. also acknowledged its airstrikes have left over 40 civilians dead.  James R. Clapper Jr., the director of national intelligence, also said at a conference that Islamic State is operating clandestine terrorist cells in Britain, Germany and Italy, similar to the groups that carried out the attacks in Paris and Brussels.  British counterterrorism officials say they have thwarted seven plots in the past 18 months or so.

Lastly, in a survey by the U.S. State Department Inspector General’s Office, one-third of Iraqis believe the U.S. is secretly supporting ISIS.

40% of Iraqis believe the United States is working to destabilize Iraq and control its natural resources.

50% of Iraqi Sunnis and Shiites say they oppose the American-led coalition conducting airstrikes on ISIS targets and providing train-advise-and-assist support for the Iraqi military.

Only 18% of Iraqis have a favorable view of the U.S., vs. 38% who did in December 2014.

Only 10% of Sunni Arabs have a favorable view, vs. 54% who did in December 2014.  [Andrew Tilghman / Army Times]

Iran: Iranian media reported Monday that President Hassan Rouhani requested the words “Death to Israel” be removed from the nation’s ballistic missiles. Rouhani sent a letter to Supreme Leader Ayatollah Ali Khamenei after Khamenei himself used the line “Death to Israel,” which Rouhani condemned at the time.

As reported by the Jerusalem Post: “Experts on Iranian affairs explained that Rouhani fully understands the influence of the Israel lobby on decisions related to Israel in the European Union and the United States and is concerned that the slogan ‘Death to Israel’ that is written on the missiles will work against the agenda he is trying to promote in his speeches, one of peace and stability in the Middle East.”

Of course at the same time Rouhani is a duplicitous SOB.

Saudi Arabia: Deputy Crown Prince Mohammed bin Salman, the fast-rising 31-year-old said to be at the helm of Saudi economic policy, with the blessing of King Salman, laid out a plan, known as Vision 2030, for moving the kingdom away from its “addiction to oil.”

Mohammed, in an interview with al-Arabiya news channel, said the country will exist “without any dependence on oil” by 2020 and would soon be a “global player” on the world investment stage.

The most immediate action to be taken will be the sale of shares in the state-owned oil giant Aramco.  While only 5% will be sold, Mohammed said the company will be valued at $2.5 trillion.  Some of the money from the sale would be used to help create a $2 trillion sovereign wealth fund that would invest abroad.

Yemen: Agence France Presse reported that Yemeni troops backed by Arab coalition air strikes killed more than 800 members of Al-Qaeda in an attack on a southeastern provincial capital held by the group for the past year.  Pro-government forces also recaptured an oil terminal at the city of Mukalla.

The death toll could not be confirmed, nor was there any talk of civilian casualties in the statement released by Arab coalition commanders.  Mukalla is home to an estimated 200,000 people.  [I don’t believe these figures.]

China: President Xi Jinping said territorial disputes in the South China Sea must be resolved through negotiations between the countries involved.

Speaking at an international security forum in Beijing, Xi also said China was committed to peace and security on the Korean peninsula and would not allow it to fall into war and chaos amid tensions over the North’s weapons tests.

But regarding the South China Sea, China has described U.S. naval and air force patrols in areas being reclaimed by China as an act of provocation.

Meanwhile, legislators passed a law on Thursday granting police sweeping authority to supervise foreign nonprofit groups, as President Xi continues to consolidate government control over all facets of Chinese society, culture and the economy.

The White House said it was “deeply concerned” this new law on NGOs (non-governmental organizations) will narrow the space for civil society in China, urging Beijing to respect the rights and freedoms of human rights defenders, journalists, business groups and others, “including by protecting the ability of foreign NGOs to operate in China,” as put forward by the National Security Council in a statement.  [Reuters]

Finally, Beijing is stepping up pressure on Taiwan ahead of next month’s presidential inauguration of Tsai Ing-wen in an attempt to force her to accept the “one-China” principle.

There have been a series of challenges to Taiwan’s standing on the global stage in the past few weeks, including even the changing of its name from “Chinese Taipei” to “China, Taipei” during the Asian qualifier for the 2018 World Cup.

Applications by mainland tourists for travel to the island have also fallen by about 30 percent from year ago levels.  Local travel agencies believe China is stopping its residents from visiting.

Tsai, of the independence-leaning Democratic Progressive Party, takes office on May 20, becoming Taiwan’s first woman leader. Although she has pledged to maintain the cross-strait status quo and pursue peaceful development of ties, she campaigned on a platform of being reluctant to accept the consensus, reached in 1992 as a way for the two sides to temporarily shelve thorny political issues with a tacit understanding there is “one China” and each side can have its own interpretation of what that represents.

North Korea: The regime fired two ballistic missiles on Thursday but both tests appeared to have failed, according to both South Korean and U.S. officials. While this is humiliating for Kim Jong Un and no doubt led to the execution of a scientist or two, with each test Kim and his Orcs learn more.

Last Sunday, for example, North Korea said it had conducted a submarine-launched ballistic missile test and it was a “great success” that gave the country “one more means for powerful nuclear attack.”  The South Korean Defense Ministry said the missile flew about 18 miles, which while not a full success is certainly disturbing.  The U.S., or Japan or South Korea, certainly doesn’t want a nuclear-capable North Korean sub off its shores.

Next week, the regime is holding a congress of its ruling Workers’ party for the first time in 36 years.  It is expected Kim will formally declare the country as a nuclear state, thus the concerns another nuclear test is about to be conducted.

Separately, an American who has been held in North Korea since October, Kim Dong-chul, was sentenced to 10 years of hard labor for spying and other offenses, according to Chinese and Japanese news agencies. This comes six weeks after an American college student, Otto F. Warmbier, was sentenced to 15 years of hard labor for trying to steal a political banner from his hotel in Pyongyang.

Earlier in the week, North Korea’s foreign minister said in an interview with the Associated Press that Pyongyang would halt its nuclear tests if the United States suspends its annual military exercises with South Korea.

Ri Su-yong said the U.S. drove his country to develop nuclear weapons as an act of self-defense.

“If we continue on this path of confrontation, this will lead to very catastrophic results.”

Russia: A Russian SU-27 intercepted a U.S. reconnaissance aircraft in international waters in the Baltic Sea Friday, according to a senior defense official; the latest in a series of incidents with Russian aircraft.

“This unsafe and unprofessional air intercept has the potential to cause serious harm and injury to all aircrews involved,” Navy Cmdr. Bill Urban, who is a Department of Defense spokesman, said in a statement, according to Reuters.  “More importantly, the unsafe and unprofessional actions of a single pilot have the potential to unnecessarily escalate tensions between countries.”

Ukraine: This week marked the 30th anniversary of the Chernobyl nuclear plant disaster, the worst in history.  Back then, the KGB had been secretly warning Soviet leadership about safety breaches and the reactor’s flaws.  An explosion during a test of the plant’s systems blew off the roof of the reactor and set off a graphite fire, leading to the release of 400 times as much radioactive material as the atomic bomb dropped on Hiroshima.

Soviet officials did not report the accident, as the first information came from Sweden, which detected a rise in radioactivity.  Incredibly, while firefighters heroically tried to put out the blaze [in 2006, I went to the Chernobyl museum in Kiev and you wouldn’t believe the “protective gear” the firefighters went in with...just basic raincoats], children were playing in the streets of neighboring Pripyat, a town built next door for the plant’s workers and their families.

Two days later, the Kremlin issued a 15-second statement on the evening news, and on May Day, thousands attended a May Day parade in Kiev, not knowing they were receiving radiation several times higher than normal.

41 died as a result of the explosion, and a World Health Organization study ultimately found that it had caused 4,000 premature deaths.  [With other groups arguing the final Chernobyl-related toll could be as high as 100,000.]  More than 6,300 square miles of land is still classified as unusable.

Years later, Mikhail Gorbachev reflected the meltdown, “even more than my launch of perestroika (restructuring), was perhaps the real cause of the collapse of the Soviet Union.”  It was a catalyst for glasnost, the opening up of the media.

A transcript of a Politburo meeting after the explosion shows that Gorbachev was furious he had limited access to information: “Everything was kept secret from the Central Committee.  The whole system was penetrated by the spirit of boot-licking, persecution of dissidents, window-dressing and nepotism.”

Glasnost would commence shortly thereafter and with the opening of the press, the pillar of lies under which the system existed was exposed.

Venezuela: The country receives 75 percent of its power from the Guri hydroelectric dam and due to the El Nino-related drought, with water levels at record lows the government keeps introducing more drastic measures.

First it announced a four-day work week to save power, then the government moved the clocks forward 30 minutes to increase daylight hours.

Now it’s imposed a two-day week for public sector workers; mandatory leave Wednesdays through Fridays until further notice.

After falling 5.7 percent last year, the IMF sees the nation’s GDP cratering another 8 percent this year.

Random Musings

Tuesday, April 26, Primary Results

Republicans

CT: Donald Trump 58%, John Kasich 28%, Ted Cruz 12%
DE: Trump 61%, Kasich 20%, Cruz 16%
MD: Trump 54%, Kasich 23%, Cruz 19%
PA: Trump 57%, Cruz 22%, Kasich 19%
RI: Trump 64%, Kasich 24%, Cruz 10%

Delegates (1,237 needed for the nomination)

Trump 996
Cruz 565
Kasich 153

[USA TODAY]

Democrats

CT: Hillary Clinton 52%, Bernie Sanders 47%
DE: Clinton 60%, Sanders 39%
MD: Clinton 63%, Sanders 33%
PA: Clinton 56%, Sanders 44%
RI: Sanders 55%, Clinton 43%

Delegates (2,383 needed for the nomination)

Clinton 2,165 (including superdelegates)
Sanders 1,357

For good reason after Tuesday night’s results, Trump declared himself the “presumptive nominee,” while Hillary Clinton doesn’t want to call the race over just yet for fear of alienating Sanders supporters.

In her victory speech, Clinton praised Sanders and his flock, while saying Republicans were deeply out of touch with the needs of middle class Americans.

--John Kasich’s campaign said he would clear a path for Ted Cruz in next week’s Indiana primary, while Cruz will back off in Oregon and New Mexico.

“Donald Trump doesn’t have the support of a majority of Republicans – not even close, but he currently does have almost half the delegates because he’s benefited from the existing primary system,” Kasich chief strategist John Weaver said in a statement.

“Our goal is to have an open convention in Cleveland, where we are confident a candidate capable of uniting the Party and winning in November will emerge as a the nominee.”

Cruz’s campaign manager echoed Weaver’s criticism of Trump.

Trump called the collusion “sad,” adding, “Collusion is often illegal in many other industries and yet these two Washington insiders have had to revert to collusion in order to stay alive.”

Friday, Gov. Mike Pence endorsed Cruz, but also praised Trump; Pence facing re-election.

--In his first major foreign-policy address, Donald Trump on Wednesday called for the U.S. to pull back from global engagements, while outlining a set of principles, some of which were contradictory, and excoriating both the vision of President George W. Bush as well as Barack Obama.

In a rather somber speech delivered a few blocks from the White House, Trump said the U.S. must reset its relations with other countries, including with Russia and China, saying, “We are not bound to be adversaries.”

He was also unambiguous in saying he would demand allies pay their fair share for any bills incurred in defending them, or else they’d have to defend themselves.

“My foreign policy will always put the interests of the American people and American security above all else.  It has to be first.  Has to be.”

Editorial / Wall Street Journal

“(Donald Trump’s) maiden policy speech on Wednesday, devoted to foreign affairs, earns an ‘incomplete’ at Trump University.  ‘America First will be the major and overriding theme of my Administration,’ Mr. Trump said.  He called for ‘a new foreign-policy direction for our country – one that replaces randomness with purpose, ideology with strategy and chaos with peace.’...

“The 5,000-word speech lacked specifics by normal political standards, if not his own.  The central motif, like all of Mr. Trump’s political thought, is that the businessman has the brains and strength to solve a given problem, and everybody else is a pathetic loser, so trust his instincts and temperament.  ‘I’m the only one – believe me, I know them all – I’m the only one who knows how to fix it,’ he said.

“Mr. Trump’s intuition does sometimes lead in constructive directions.  He is right to identify rising world disorder as the pre-eminent threat to American security and interests.  He said President Obama ‘dislikes our friends and bows to our enemies,’ which is an overstatement that nonetheless captures the reality.

“Mr. Obama’s leadership-from-behind philosophy has confused allies, and many have decided that they can’t depend on U.S. commitments.  Adversaries like China, Russia and Iran are testing the limits of his resolve as they push for hegemony in their regions.

“Mr. Trump is also correct that if he rebuilds alliances he ought to expect more from U.S. partners....

“Yet as Mr. Trump critiqued the results of Mr. Obama’s withdrawal from the world, he also assailed the international engagement that could lead to better outcomes.  ‘We need a long-term plan to halt the spread and reach of radical Islam,’ he said, without saying what that plan is, though he did note that ‘our actions in Iraq, Libya and Syria have helped unleash ISIS.’....

“Mr. Trump isn’t known for close readings of his briefing books, if such documents exist, and deep policy knowledge is obviously not the source of his political appeal.  But Americans typically prefer Presidents who are conversant about the world’s biggest problems beyond a sound bite or two, and Hillary Clinton will aggressively litigate the businessman’s Commander in Chief credentials, to put it mildly.”

Editorial / Washington Post

“What was supposed to be a rare set-piece speech by Donald Trump on foreign policy Wednesday resembled a pastiche of his off-the-cuff postulations from the campaign trail, cobbled together under the slogan ‘America First.’  Like the previous rhetoric, his proposals were loose, frequently contradictory and embedded in a bucket of falsehoods.  Of these, the biggest was Mr. Trump’s claim that he could somehow reverse the historical tides that have created a globalized economy and remedy the complex security challenges of the 21st century with a simple ‘plan for victory with a capital V.’”

--Joe Scarborough / Washington Post

“In his book ‘Coming Apart: The State of White America, 1960-2010,’ Charles Murray wrote about the rise of a new American upper class and the ‘narrow elites’ who shape America’s economy, culture and government.  The number of players who dominate the direction of media, politics and finance is surprisingly concentrated for a country as sprawling and diverse as the United States.  And yet almost all of these ‘influencers’ across Manhattan and Washington were incapable of blunting Trump’s meteoric rise.  Time and again over the past year, Washington insiders and media moguls misread the mood of working-class voters and their attraction to the populist message championed by Trump....

“So why did these ‘narrow elites’ miss the mark so badly...?  Because most of them are hopelessly isolated from the other 300 million or so Americans who inconveniently share their country.

“Murray writes that most members of the narrow elite don’t watch much television.  If they watch any news programs, it is probably the PBS NewsHour (or Morning Joe!).  Powerful influencers have also watched other television shows over the past decade like ‘Mad Men,’ ‘House of Cards,’ ‘Breaking Bad,’ ‘Game of Thrones’ and ‘Curb Your Enthusiasm.’  [Ed. I watched Mad Men, GoT and Curb Your Enthusiasm.  Just wish I was a powerful influencer.]  While such critically acclaimed shows are often consumed by narrow elites in frantic fits of binge watching, the other 300 million Americans view television a bit differently.

“Murray reports that the average American watches about 35 hours of television a week. Since 2004, Trump has starred in 14 seasons of ‘The Apprentice.’  And if you’re a member of the narrow elite that holds sway over media coverage or government policy, chances are good that you saw few episodes of ‘The Apprentice’ or ‘Survivor.’  [Ed. this is funny.  I maybe watched one episode of these two, combined!]

“But millions of Americans did, and perhaps that kind of mass consumption is why Trump will beat Don Draper at the polls every time.”

Scarborough goes on to note how Ronald Reagan built his national audience through years of hosting General Electric Theater (1956-62), with his “image beamed into more than 20 million homes every week.  The successful run on TV gave Reagan a connection with American voters that his movie career never could.  By the time Reagan ran for governor of California in 1966, the GE host was a household name.  Reagan’s landslide victory shocked elites in and out of the political class and launched a conservative revolution that would last a generation.

“50 years later, that revolution is being undone by another TV star who has been underestimated by elites while being elevated by working-class voters....The odds may be long for the New York developer and reality star, but no longer than the ones he faced last June when he first sought the GOP nomination.”

--Meanwhile, Ted Cruz, trying desperately to remain relevant, selected Carly Fiorina to be his running mate, months before the Republican convention and with zero shot at winning the nomination unless through a brokered contest.

John Podhoretz / New York Post

“For the past few weeks, Republican campaign professionals and conservatives who are seeing the GOP nomination heading into Donald Trump’s hands have been counseling anti-Trump voters not to panic and consoling themselves with the notion that things will turn around for Ted Cruz when the final weeks of the campaign shift to the Midwest and mountain states.

After Trump’s astounding five-for-five primary night, by margins that were likely surprising even for Trump fans, it’s now Indiana or bust.  If Trump wins the primary next week in the Hoosier state, Cruz is toast and Trump will almost certainly be the Republican nominee.

“There’s no putting lipstick on this pig.  Cruz’s numbers Tuesday night, like his numbers in New York last week, were beyond horrible....

“It isn’t only that the not-Trump vote is failing to coalesce around Cruz; he’s going backwards.

“And people are kidding themselves if they think Tuesday night’s results won’t have an effect on voters in Indiana and elsewhere.”

--Former House speaker John Boehner, speaking at Stanford University, described Ted Cruz as “Lucifer in the flesh,” adding “I have never worked with a more miserable son of a bitch in my life.”

Boehner said he is a golf and texting buddy of Donald Trump’s and that he would vote for him this fall.

--Bernie Sanders said he’s laying off hundreds of field staff, but is not pulling out and, instead, will focus on California.  It’s about ensuring he has as strong a voice as possible in shaping the platform at the Democratic convention.  [Which he won’t be able to do...but he’ll get his primetime speaking slot.]

It also just makes sense that, as he put it, the race is over in Connecticut so he doesn’t need people there.

--Among those Hillary Clinton is beginning to vet, at least informally, in terms of a running mate is Sen. Mark Warner (Va.), who I’d have zero problem with.  Another said to be on the list is current labor secretary Thomas Perez.  Ughh.

--Trump should go with Florida Gov. Rick Scott.  Kasich seemed like a natural, given Ohio’s importance, but some of us, even when we were supporting the guy, knew of his prickly, preachy side.  Let’s face it he has been a prickly jerk the last few weeks in particular.  He’s off my list.

--Registration among Hispanic voters is skyrocketing. Arturo Vargas, executive director of the National Association of Elected and Appointed Officials, projects 13.1 million Hispanics will vote nationwide in 2016, compared to 11.2 million in 2012 and 9.7 million in 2008.

Many of these voters are of course expected to vote against Trump in a general election.

80% of respondents in a poll of registered Hispanic voters in Colorado and Nevada said Trump’s views on immigration made them less likely to vote for Republicans in November.  In Florida, that number was 68 percent.

Obama won 51.5% of the vote in Colorado in 2012, and 52% in Nevada, compared to Mitt Romney’s 46% in both.

According to exit polls, Obama won 74% of the overall Hispanic vote in 2012.

--In the latest USA TODAY/Suffolk University Poll, Hillary Clinton had an unfavorable rating of 54% and Trump 61%.  37% of likely voters had a positive view of Clinton, 28% had a favorable view of Trump.

Clinton’s net negative rating is a dismal 17 points, but Trump’s a catastrophic 33 points.

The thing is, when Trump talks about changing things around during the general election campaign, in this USA TODAY poll, fewer than one in 10 didn’t already have an opinion about Clinton and Trump.

In the survey of 1,000 likely voters nationwide, only five hadn’t heard of Trump, and seven hadn’t heard of Clinton.  That’s pretty remarkable, and speaks to Scarborough’s earlier point.

--Former House speaker Dennis Hastert was sentenced to 15 months in prison for paying $1.7 million in hush money to cover up sexual abuse from his days as a teacher and wrestling coach.  U.S. District Judge Thomas Durkin said Hastert’s sentence would have been harsher were it not for his age, 74, and health.

The sentence was handed down after Hastert admitted for the first time that he sexually abused athletes while he was wrestling coach at Yorkville High School.  Also, for the first time, two accusers took the stand and described how Hastert sexually abused them.

--New York City Mayor Bill de Blasio is under fire as his office has received subpoenas from federal and state prosecutors in connection with a series of overlapping investigations into his campaign fund-raising activities.

De Blasio’s counsel, Maya Wiley, conceded, “City Hall has been subpoenaed.  We are fully cooperating with the investigation.  The mayor has not been personally served.”

One of his top aides, Emma Wolfe, was subpoenaed, as well as Ross A. Offinger, his campaign finance director.

While details have not been forthcoming as yet, the New York Times and others believe the authorities are delving into aspects of de Blasio’s fundraising on behalf of State Senate Democrats in 2014.

“In the case of the 2014 election, they are looking to see whether donations to candidates were funneled through county party committees to evade contribution limits, a violation of state law and a possible felony.”

Greg David / Crain’s New York Business

“Now that the presidential campaign has moved on from New York, the spotlight will focus brightly on Mayor Bill de Blasio’s new biggest problem: corruption investigations. Start with the gifts to top-ranking NYPD officers, possible illegal fundraising in the mayor’s various campaign efforts and the inexplicable success of a developer in persuading city officials to allow the conversion of a Lower East Side nursing home into luxury condos, creating a financial bonanza....

“What is already known is damaging to the mayor. The most charitable explanation for the nursing home arrangement is that the developer bamboozled city officials, increasing the perception that the mayor isn’t interested in or capable of running the government.

“And de Blasio has made the situation worse.  On the fundraising investigation, he has changed his story numerous times, sometimes within the same day.  On the nursing home controversy, he has said he was out of the loop and uninformed.  No one seems to have been held accountable for that either.”

Editorial / New York Daily News

“While disputing not a single fact in a report that damningly detailed his elaborate scheme to evade New York campaign finance laws, Mayor de Blasio proclaimed Monday that he is nonetheless a victim of political persecution.

“The mayor’s lawyer also let stand the machinations revealed by the state Board of Elections enforcement counsel. Instead, the attorney raged that the counsel’s rather convincing finding of criminality was leaked to the public – and more important that de Blasio was merely conducting business as usual in New York.

“Good luck with that, Mr. Mayor. See the convictions of Sheldon Silver and Dean Skelos, who sang the same New York-way song to their juries.”

Editorial / New York Post

“What had been a drip, drip, drip of de Blasio scandal over the weekend became a torrent – exposing not just arrogance, recklessness and dishonesty, but profound corruption....

“It seems City Hall ordered donations to upstate party committees in order for the cash to be handed on to its favored candidates – and some checks even had ‘donation per Mayor’ in the memo line.

“On Sunday, The Post’s Isabel Vincent and Melissa Klein caught Mayor de Blasio himself in a lie. When news of the rancid Rivington nursing-home real-estate flip broke in March, the mayor claimed he’d learned of it from the press.  But The Post has evidence that Deputy Mayor Alicia Glen’s chief of staff, James Patchett, in fact desperately tried to undo the deal in late February.

“Patchett told the developer the reversal was ‘what the Mayor’s Office wants’ and called the situation ‘important to us.’ He plainly knew the flip would be trouble for de Blasio – the city charged $16.1 million to lift deed restrictions that wound up letting the developer make a $72 million profit, while robbing the neighborhood of a nursing facility.

“How could word of the coming public-relations nightmare not make it back to de Blasio?  Unless his minions are simply afraid to bring him bad news, the mayor lied about when he learned of the mess....

“Even at this early stage of the investigations, Team de Blasio stands exposed as corrupt.  Private firms don’t make six-figure gifts to upstate political committees (or to pet mayoral nonprofits) for nothing.

“At a minimum, they plainly understood it was the price of having any hope of city action on their business – which means that anyone who won’t pay up never gets action.

“And other de Blasio priorities – his war on Uber, his drive to kill the tiny carriage-horse industry – make sense only as making good on ironclad promises to donors.

“The mayor will surely deny it all, just as he denied knowing about the nursing-home flip.  Yet it’s plain that the mayor and his minions in and out of government are selling public policy for cash to boost his political power.

“Bill de Blasio’s city is for sale.”

Michael Goodwin / New York Post...the man I noted a while ago who nailed this topic very early on.

“The veneer of business as usual is shredded. Never again can de Blasio wave off questions about the mushrooming investigations of his administration. As revelations pile up day after day, allies will desert him and the Putz will find himself a very lonely man.

“There is no way to sugarcoat the facts: de Blasio is in trouble.  Maybe very big trouble.

“His City Hall is being depicted as the seat of a criminal enterprise. And so far, he offers nothing resembling a convincing denial....

“He raised as much as $40 million and deposited it in various slush funds he formed, including the Campaign for One New York, which he started before he even took the oath of office....

“The money would come from real-estate developers, yellow-taxi medallion owners, teachers unions and anybody else willing to play ball in hopes the mayor would return the favors....

“It can be no comfort to him that Bharara, who brought down former Albany kingpins Sheldon Silver and Dean Skelos, is on the case. If the mayor knows a good defense lawyer, he ought to hire him immediately.”

Personally, what pisses me off is the story that one group that was formed, NYCLASS, spent nearly $1 million destroying de Blasio rival Christine Quinn in the 2013 Democratic primary.  I supported Quinn in these pages.  The leaders of the group aligned against her, “wanted to ban carriage horses, and when de Blasio promised he would after Quinn refused, a barrage of ads against Quinn helped demolish her.”

At least de Blasio has been unable to shut down the horse-carriage industry.  NYCLASS received a subpoena. 

[And why did your editor like the Democrat Quinn?  The Republican candidates for mayor were awful and Quinn is a classic, feisty New Yorker who you’d like to drink a beer with, plus she had extensive city government experience and could reach across the aisle.]

--As alluded to above, the NYPD has had a tough stretch with some of the corruption allegations, but on Wednesday, federal prosecutors charged 120 members of two rival street gangs in the Bronx in what most agree was the biggest takedown in city history.

Law-enforcement officials said the gangs – 2Fly YGz and Big Money Bosses – have terrorized a segment of the north Bronx for years, particularly around public-housing complexes.

U.S. Attorney Preet Bharara said the charges (which include everything from shootings and robberies to murder) and arrests dismantle both gangs “from top to bottom.” 

--Former Democratic U.S. senator Jim Webb (Va.) / Washington Post

“One would think we could celebrate the recognition that Harriet Tubman will be given on future $20 bills without demeaning former president Andrew Jackson as a ‘monster,’ as a recent Huffington Post headline did. And summarizing his legendary tenure as being ‘known primarily for a brutal genocidal campaign against native Americans,’ as reported in The Post, offers an indication of how far political correctness has invaded our educational system and skewed our national consciousness.

“This dismissive characterization of one of our great presidents is not occurring in a vacuum. Any white person whose ancestral relations trace to the American South now risks being characterized as having roots based on bigotry and undeserved privilege.  Meanwhile, race relations are at their worst point in decades.

“Far too many of our most important discussions are being debated emotionally, without full regard for historical facts. The myth of universal white privilege and universal disadvantage among racial minorities has become a mantra, even though white and minority cultures alike vary greatly in their ethnic and geographic origins, in their experiences in the United States and in their educational and financial well-being.

“Into this uninformed debate come the libels of ‘Old Hickory.’  Not unlike the recently lionized Alexander Hamilton, Jackson was himself a ‘brilliant orphan.’  A product of the Scots-Irish migration from war-torn Ulster into the Appalachian Mountains, his father died before he was born. His mother and born brothers died in the Revolutionary War, where he himself became a wounded combat veteran by age 13. Self-made and aggressive, he found wealth in the wilds of Tennessee and, like other plantation owners such as George Washington, Thomas Jefferson and James Madison, owned slaves.  He was a transformational president, hated by the reigning English American elites as he brought populist, frontier-style democracy to our political system....

“Mark Twain once commented that ‘to arrive at a just estimate of a renowned man’s character one must judge it by the standards of his time, not ours.’ By any standard we should respect both Jackson’s and Tubman’s contributions.  And our national leaders should put aside their deliberate divisiveness and encourage that we do so.”

--Interesting piece in the current issue of Rolling Stone magazine by Kyle Dickman on where the “worst wildfire disaster in U.S. history” might happen.  Not out West, but here in New Jersey!

Mr. Dickman is talking about the dangers in the Pine Barrens, or as he calls it, the Pinelands, a 1.1-million-acre tract in the southern part of the state that is home to 500,000 people. The height of the danger is late April to May and the scenario he lays out makes perfect sense.  Flames fueled by the pine needles could overcome an area loaded with retirement communities, a military base and a nuclear plant.

Large swaths of the Pinelands have remained relatively untouched for decades, making it a giant tinderbox of untended woods that’s surrounded by 100,000-person suburbs.

The last bad Pinelands blaze was in 1963, devouring 190,000 acres from Long Beach Island to Atlantic City, killing seven and destroying 400 buildings.  The damage was ‘light’ because there just weren’t that many buildings in the area back then.  That is no longer the case.

Today, a fast-moving fire, especially over, say, Memorial Day weekend with hundreds of thousands in the area and on the main roads (which go through the Pinelands), would be catastrophic.    

---

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

God bless America.

---

Gold $1293...up $60 and the highest weekly close since Aug. 2014
Oil $45.92...highest since last Oct. 30

Returns for the week 4/25-4/29

Dow Jones  -1.3%  [17773]
S&P 500  -1.3%  [2065]
S&P MidCap  -1.0%
Russell 2000  -1.4%
Nasdaq  -2.7%  [4775]

Returns for the period 1/1/16-4/29/16

Dow Jones  +2.0%
S&P 500  +1.1%
S&P MidCap  +4.5%
Russell 2000  -0.4%
Nasdaq  -4.6%

Bulls  44.3
Bears  20.6  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore



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-04/30/2016-      
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Week in Review

04/30/2016

For the week 4/25-4/29

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has significant operating expenses.  Your help is appreciated.  Click on the gofundme link above or you can send a check to PO Box 990, New Providence, NJ  07974.

Edition 890

Washington and Wall Street

There was a slew of economic, central bank and corporate data this week.  For starters, the government released its initial look at first-quarter GDP and it came in at a miserable 0.5%* annualized rate, after 1.4% in the fourth quarter and 2.0% in the third.  President Obama has been on his legacy tour and he’s been strutting like a peacock, including positive pronouncements on the economy.  He’s delusional.

*The Atlanta Fed’s GDPNow indicator pegged it at 0.6%.

Aside from the debacle Obama is leaving his successor on the foreign policy front, since he took office, and once the recovery took hold, the U.S. economy has been stuck in neutral, 2% growth, and it’s been a rather long time since he could safely play the “I saved us from another Great Depression” card.

Separately, March new home sales came in less than expected, while the S&P/Case-Shiller home price index for February rose a solid 5.4% year-over-year, up 0.7% from the prior month.

March durable goods, though, came in far less than expected, 0.8% and -0.2% ex-volatile transportation.

March personal income was up a solid 0.4%, but consumption increased only 0.1%.  The Fed’s preferred inflation indicator, the personal consumption expenditures index, rose 1.6% in March, yoy, less than the Fed’s target of 2.0% and down a tick from February.

The Chicago purchasing managers index was a far less than expected 50.4 (50 being the dividing line between growth and contraction).  The PMI readings are important for the Fed and its deliberations and we’ll see the national ISM reading on manufacturing this coming Monday.

Speaking of the Fed, it left the benchmark funds rate unchanged as expected at its latest Open Market Committee meeting and was ambiguous about a June rate hike.  Policy makers did leave the door ajar, but they don’t want to be aggressive in their signals seeing as there will be a lot more important data between now and the June 14-15 confab.  I still believe the Fed will hike then, assuming the data, particularly the next two jobs reports, is strong, but there is one major fly in the ointment for those of us in the minority, forecasting a hike. Britain’s Brexit referendum, June 23.  It’s an easy excuse for the Fed not to act until after the vote is tallied, but I do not think the British people will elect to leave the European Union and I’m assuming the opinion polls there will begin to reflect this.

For now, the Fed, in its policy statement on Wednesday, offered: “Labor market conditions have improved further even as growth in economic activity appears to have slowed.”  Friday’s personal income and spending numbers confirm this.  Income is rising but household spending is diminishing.

Separately, the Fed signaled its concerns over the global economy and issues such as China’s growth rate had lessened.

On the earnings front, I cover some of the bigger individual stories down below, but with 55% of the S&P 500 having reported, Thomson Reuters is forecasting earnings will decline 6.1% in the first quarter, ex-energy still down 0.5%.  This would be the third consecutive quarter of declines.

On the revenue front, the projection is for down 1.4%, but up 1.7% ex-energy, which is hardly robust.  Overall, revenues are forecast to decline for a fifth quarter in a row.

Europe and Asia

Some important data for euroland this week.  A flash reading on first-quarter GDP for the EA19 was up a better than expected 0.6% over the fourth quarter, and up 1.6% year-over year, so a much better pace than the U.S.  Q4 had been up 0.3%.

But the eurozone now has four straight quarters of 1.6% year-over-year growth, as put out by Eurostat. 

1.6% is OK, but you need to see 2%+ to get out of this stagnation phase the region has been stuck in and it doesn’t help that a flash reading on inflation for April came in at -0.2% on an annualized basis, deflation.  It was unchanged in March.  [Spain remains mired in it, -1.2% annualized for April according to the government.]

GDP in Spain, however, increased a solid 0.8% in Q1 over Q4, and it was up a better than expected 0.5% in France for the quarter.  But Spain faces a new election on June 26 as a government couldn’t be formed after December’s fractious parliamentary vote. There is zero guarantee the new one will resolve matters.

A third report from Eurostat, this one on the labor front, has the euro area unemployment rate falling to 10.2% in March, down from 10.4% in February and 11.2% March 2015.

The unemployment rate was 4.2% in Germany, 10.0% in France, 11.4% in Italy, 20.4% in Spain and 24.4% in Greece (Jan.), with youth unemployment rates still sky high in Spain, 45.5%, and Greece, 51.9% (Jan., and a disturbing increase over December).

[For my Irish friends, the jobless rate in Ireland is down to 8.6% from a peak of over 15%.  As Ronald Reagan would have said, ‘Not bad, not bad at all.’]

On a different item, lending to euro area firms and households accelerated in March to a multiyear high, a positive sign and evidence the European Central Bank’s stimulus is gaining traction, but the increase was only 1.1% in March over a year earlier.

As for Brexit, the OECD (Organization for Economic Cooperation and Development) weighed in with a stark warning that a British withdrawal from the European Union could spark an international financial shock.  French economy minister Emmanuel Macron said of Britain this week: “Leave the club and you’ll be alone.”  But France’s far-right and Eurosceptic National Front party is cheering for the UK to leave the EU.  Leader Marine Le Pen is planning to visit the U.K. to campaign in favor of Brexit.

Also, don’t discount the possibility of some kind of mischief on the part of the Kremlin.  Putin wants to see disorder and chaos in Europe; the kind that a Brexit would lead to as other nations could say, ‘If they can leave, why can’t we?’  [I’m not sure what kind of form this mischief would take, but think 1999 Moscow apartment bombings and how Putin created a pretext for his war in Chechnya.]

Britain’s economy, incidentally, slowed to 0.4% in the first three months of the year from a previous quarterly pace of 0.6%, according to the Office for National Statistics.  Year-on-year growth, though, is still 2.1%.

Meanwhile, President Obama told the BBC in an interview last Saturday: “The U.K. would not be able to negotiate something with the United States faster than the EU (should it leave). We wouldn’t abandon our efforts to negotiate a trade deal with our largest trading partner, the European market.  But rather, it could be five years from now, 10 years from now before we were able to actually get something done.”

On the Greek debt crisis and the third bailout, German Finance Minister Wolfgang Schaeuble said Greece doesn’t need debt relief now as long as the troika of creditors determines that debt sustainability is ensured.

The Greek government submitted a bill to parliament the other day overhauling the pension system and raising the income tax on middle and high wage earners; part of a belt-tightening package required by creditors for the conclusion of the bailout review and then further funding.

At the same time, Prime Minister Alexis Tsipras is seeking a meeting of euro area leaders to resolve disagreements between the government and creditors, with Tsipras calling on European Council President Donald Tusk to ask that a Euro summit be convened.

Greece needs to secure emergency loans to avert a default in July when bonds held by the ECB come due.

On the migration front, UN Secretary General Bank Ki-moon, while on a visit to Austria, denounced the spread of xenophobia and anti-migration policies in Europe, a day after Austria introduced tougher asylum laws.

Speaking to the Austrian parliament, Ban applauded the nation and other European countries for the generosity shown so far towards refugees, “But I am concerned that European countries are now adopting increasingly restrictive immigration and refugee policies,” he said. “We have a moral and political obligation to help those who are fleeing wars, human rights violations and persecution.”

The day before, Austrian police said it would put up a fence and introduce strict controls at the Brenner Pass to limit the number of migrants and refugees crossing from Italy.

Austrian authorities foresee a 10-fold increase in the coming weeks as migrants have been flooding Italy, with the new restrictions between Turkey, Greece and the EU forcing many to take a different route.

The new Austrian law allows the government to reject nearly all asylum seekers at the border if it finds that public order and security are endangered.  The law also makes it harder for refugees to bring family to Austria.

If I was a member of the Austrian parliament I would totally support these measures.  I have great sympathy for these nations, including as I said way back, Hungary, for slamming the door.

Austria is not a large country, yet they received 90,000 asylum seekers last year and about 18,000 since the start of 2016, with a new wave about to hit. 

So last Sunday, Austria’s far-right Freedom party won an unexpectedly powerful victory in the first round of the country’s presidential election, highlighting the potential for Europe’s refugee crisis to send shockwaves across the continent.  FPO candidate Norbert Hofer won more than 35% in Sunday’s poll – far more than any other candidate.  Speaking at his final campaign rally in Vienna last Friday, Hofer stressed Austria’s limited capacity to absorb newcomers, saying “we are not the world’s social department.”  Hofer also sharply criticized Germany’s Angela Merkel for concessions she had made to Turkey in an attempt to resolve the crisis and said Islam could not become part of Austrian culture.

The two main parties’ presidential candidates each polled only around 11%!  The final round is May 22...look out.

Earlier in the week, President Obama heaped praise on Merkel for being “on the right side of history” with her open-door stance on refugees.

Obama, in what was probably his last trip to Germany, lauded his “friend and partner” for her “remarkable endurance.”

“Perhaps because she once lived behind a wall herself, Angela understands the aspirations of those who have been denied their freedom and who seek a better life,” Obama said.

Ask the average German, Mr. Obama, how many of the 1 million asylum seekers who arrived in 2015 plan to assimilate? Merkel’s approval rating is at the lowest of her third term, which began in 2013.

On the terror front, the entire population of Belgium is to be issued iodine tablets, after warnings about the threat of ISIS building a dirty bomb. The pills will be sent to pharmacies and the public would be ordered to collect their ration in the event of an incident, including a meltdown at one of two nuclear plants (whose nearby residents were already able to get the tablets).

It emerged following last month’s terrorist attacks that an IS cell may have been plotting to kidnap a nuclear expert in order to build a dirty bomb.

Turning to Asia...China’s industrial profits rose a solid 11.1% in March, year-over-year, according to the National Bureau of Statistics, with key PMI data due to be released on Sunday.

But the country’s total debt rose to a record 237 percent of GDP in the first quarter, raising the risk of a financial crisis or a prolonged slowdown, economists warn.  Chinese debt was only 148 percent of GDP at the end of 2007.

“Every major country with a rapid increase in debt has experienced either a financial crisis or a prolonged slowdown in GDP growth,” Ha Jiming, Goldman Sachs chief investment strategist, wrote in a report this year.  [Financial Times]

Some believe the People’s Bank of China can ward off crisis by flooding the banking system with cash to keep banks liquid, even if non-performing loans rise sharply.  But the greater risk is a Japan-like “lost decade” of slow growth and deflation.

Meanwhile, the Bank of Japan was expected to initiate a new round of stimulus measures for its moribund economy at its latest policy meeting, but instead opted to hold the line, which upset investors, the Tokyo Nikkei falling 3.6% in response.

The BoJ decision was to wait to see what the impact of recently introduced negative interest rates would be, with the central bank offering “it will take time for the results to come through.”  Policy makers are betting that their success in bringing down borrowing costs will accelerate lending.

The BoJ also changed its guess of when inflation would reach the target 2% to sometime in fiscal 2017 from the first half of fiscal 2017.  [Japan’s fiscal year commences in April.]

Consumer prices fell 0.1% in March from a year ago, -0.3% ex-food (Japan’s core); the most in three years as household spending slid and industrial production remained soft.  But the unemployment rate ticked down from 3.3% to 3.2%.

Street Bytes

--Ugly week for equities as the Dow Jones and S&P 500 each lost 1.3%, while Nasdaq declined 2.7%.  Solid results from Amazon and Facebook couldn’t make up for the poor report cards from the likes of Google, Twitter, Apple and Microsoft the past two weeks.

By definition it’s a bull market until you have a bear market, and so despite a number of 10% corrections, there hasn’t been a 20% decline that would denote a bear market since Barack Obama took office in January 2009.   This week thus marked the longest bull market since the dot-com bubble of the 1990s, but as we see above with the GDP data, it is hardly boom times.

The market as measured by the S&P 500 hasn’t seen a new 52-week closing high since 5/21/15 at 2130.  [2065 today.]

--U.S. Treasury Yields

6-mo.  0.38%  2-yr. 0.78%  10-yr. 1.83%  30-yr. 2.68%

--Crude oil, as measured by West Texas Intermediate, finished the week at $45.92, the highest weekly close since last Oct. 30.

Oilfield services company Baker Hughes’ loss widened to $981m in the first three months of the year, compared with $589m a year ago.  Sales fell 42 percent, as the global rig count fell by 41 percent.

In the current quarter, Baker Hughes expects operating rigs to decline by 30 percent compared with the first quarter in North America.  The U.S. rig count is then expected to stabilize in the second half of 2016.

--PetroChina, China’s biggest oil and gas producer, posted a net loss of $2.1bn in the first quarter, the company’s first ever quarterly loss.

--BP disclosed it had almost $1 billion in fresh charges related to the Gulf Coast oil spill, bringing the total bill from the disaster to more than $56bn and counting.

Despite a $20bn settlement with the U.S. government and various state claims, lawsuits continue and could drag on for years.  BP said it was impossible to predict how much more costs would rise.

The company reported a $485 million quarterly net loss owing to the unexpected charge related to a separate settlement with Gulf Coast businesses and residents harmed by the spill, though it made $532m of profit on an underlying replacement cost basis – a metric analysts watch closely.  CapEx is being cut further than originally forecast for 2016.

April 20 was the six-year anniversary of the Macondo well explosion that killed 11 workers and released more than 3 million barrels of oil a day into the Gulf over 87 days.

--ConocoPhillips slashed the number of rigs it has drilling for oil and gas in the U.S., in a further sign that even after the rebound in oil prices, the financial pressures on the industry remain intense.

Conoco, the world’s largest pure exploration and production company, said the number of U.S. rigs it had in the “lower 48” was cut from 13 to just three in April.  It also slashed its capital spending forecast for 2016 to $5.7bn from December’s budgeted $7.7bn.  For the year, Conoco is giving up its plans for deepwater exploration to lower costs.

--Friday, ExxonMobil, the largest U.S. oil group, saw its earnings plunge 63% from $4.9bn to $1.8bn, but this was well ahead of Street expectations, ditto sales, which while falling 28% to $8.7bn also handily beat.

Exxon said it cut first-quarter capital expenditures 33% to $5.1bn (with a full-year target of $23bn...it’s slimmest budget since 2007).

Earlier in the week, Exxon was stripped of its long-held triple A rating by credit agency Standard & Poor’s as the rout in crude prices adds strain to the company’s balance sheet.

The downgrade to double-A plus reflected the ballooning of Exxon’s debt, at the same time that analysts believe the company must spend more on exploration to maintain production.

The move by S&P leaves just two publicly traded U.S. companies with triple-A ratings: Microsoft and Johnson & Johnson. Exxon had held its triple-A status since at least the 1940s.  Its debt has exploded to $35bn from just $2bn in 2012 as it raised funds through bond offerings for capital expenditures.

Practically speaking, at least for now, the downgrade won’t hurt Exxon’s cost of finance, but it hurts reputationally.

--Chevron reported a $725m after-tax loss for the first quarter, almost double the average of analysts’ forecasts.

The company lost $1.46bn in oil and gas production, while making $735m in its refining operations.

--Tragedy outside Bergen, Norway, on Friday as a helicopter carrying 11 passengers and 2 crew member went down on land, coming back from a Statoil ASA-operated offshore oil and gas field.  All were confirmed dead.  It was the first deadly flight accident for Norway’s offshore industry since 1997, when a helicopter crashed in the Norwegian Sea, killing all 12 onboard.

In today’s crash, 11 of the victims were Norwegians.

--Facebook Inc. reported earnings nearly tripled in the first quarter, as advertising revenue jumped 57% to $5.2 billion from $3.3 billion.  Mobile ads accounted for roughly four-fifths of the total.

Chief Operating Officer Sheryl Sandberg said, “Businesses are no longer asking if they should market on mobile, they’re asking how.  This is a shift that we think we’re very well-positioned to take advantage of and build on.”

It is indeed amazing how quickly Facebook has capitalized on mobile.  Overall, the company is expected to garner 12% of the $186.8bn global digital-advertising market this year, up from 10.7% last year and 8.6% in 2014, according to data firm eMarketer; this while Google’s share is projected to fall to 31% from 35% two years ago.

Facebook’s user ranks grew to 1.65 billion from 1.44 billion in the first quarter last year.

The company also said the board approved a new class of nonvoting shares, designed to cement CEO Mark Zuckerberg’s control over the operation.

FB’s net profit was $1.51 billion, almost triple last year’s $512m for the same period.

The company spent $1.1 billion on capital expenditures, including for new data centers in Texas and Ireland, and will shell out over $4bn for the full year.

--So contrast Facebook’s performance with that of Apple.  The company reported earnings of $1.90 a share, below the Street’s forecast of $2.00, but revenue also missed, falling about 12% to $50.6bn, the biggest drop in revenue since the third-quarter of 2001, and the first decline in sales growth in 51 consecutive quarters.  Apple also guided lower for the current quarter.

Apple shipped 51 million smartphones, ahead of expectations, though down 13 percent from a year earlier, while the average selling price was $625, below the $659 analysts were expecting.

Tablet sales also continued their slide, down 19% from last year. Sales of Mac computers fell 12%.

One thing Apple does have is cash, finishing the quarter with $232 billion. The company also boosted its quarterly dividend 10% to 57 cents a share.

CEO Tim Cook said, “Our team executed extremely well in the face of strong macroeconomic headwinds,” conceding the smartphone market “is currently not growing.”

So none of this was good for Apple shares, the company with the biggest market value in the S&P 500, as they fell 8% on the release, and then further on Thursday when investor Carl Icahn announced he had dumped his nearly 1% stake in the company on fears that Chinese authorities would bully the company.

Yes, just as I’ve been warning for some time now, Icahn is one of the first to publicly say it’s not about Chinese growth or lack thereof, but rather the government.  As I wrote last week, Beijing recently shut down Apple’s e-book and digital movie services business in the country. 

Overall Apple sales in China, Taiwan and Hong Kong fell 26 percent in the period.

Leonid Bershidsky / Bloomberg

“During the most recent earnings call, Apple CEO Tim Cook and Chief Financial Officer Luca Maestri talked about the company’s problems in Hong Kong, where the currency is pegged to the U.S. dollar, making it less attractive to tourists.  To an extent, that explains a 26 percent year-on-year revenue drop in Greater China, but there is also an 11 percent decline in Mainland China (7 percent in constant currency terms). This may be due in part to the fizzling of the country’s exuberant growth, but I rather suspect that there’s a limit to how many Chinese consumers may be seduced by a strong Western brand over price and tech considerations.  Xiaomi and Huawei are the market leaders in China in terms of unit shipments.  They make great phones, and they sell them for less than 60 percent of Apple’s prices.

“I said last year that Apple’s Chinese miracle, which explained the phenomenal sales of the iPhone 6, was over.   Now the numbers prove it....

“Time is not on Apple’s side where the iPhone is concerned.  It has been overtaken and undercut by the competition, and it’s hard to imagine how Apple will keep up, since it outsources production and buys components from the same vendors as the competition.”

But the detractors are missing the big picture.  President Xi can play the nationalism card at a moment’s notice, and it could easily be related to actions in the South China Sea or Taiwan (see below).

--Amazon delivered a blowout quarter, with net income of $513 million, up from a loss of $57 million in the same period a year ago.

Revenue rose to $29.13 billion from $22.72 billion a year ago.  Amazon’s shares soared in response.

The biggest source of the company’s profits is Amazon Web Services, the cloud computing business that is now on track to bring in more than $10bn a year in revenue.  A.W.S. is becoming a destination not just for start-ups, but also big companies that want to rent their computing capacity rather than run their own hardware and software.

Cloud computing is far more profitable than Amazon’s retail business, which continues to run at a loss.  A.W.S. had operating income of $604 million, even though revenue from the division was just $2.57bn of the $29.13bn total.

That said, retail sales in North America still rose a whopping 27%, with Amazon Prime memberships increasing 51% to an estimated 65m, according to analysts at Bernstein (the company doesn’t give an exact figure).

--LinkedIn handily beat the Street’s expectations in the first quarter, with earnings almost 20% higher than forecast. Revenue also came in higher than consensus at $861m, up 35% year-on-year.

Recruiters continue to spend on the social network platform. CEO Jeff Weiner cited the new mobile experience.

The shares rallied strongly.

--Procter & Gamble posted a drop in fiscal third-quarter sales as strength in the U.S. dollar took a toll.  Net sales fell 7% to $15.8bn, in line with expectations, but if you strip out the impact of currency swings, ‘organic’ sales rose 1%.

P&G has been streamlining its product line, with the sale of the Duracell business, while it announced a spin-off of Clairol and 42 other beauty brands to Coty.

--DuPont Co. boosted its 2016 profit outlook amid more upbeat results in its agriculture and nutrition divisions.  The company is nonetheless proceeding with plans to cut $730 million in annual costs, including 5,000 layoffs.

Despite the optimistic tone, DuPont sales in the quarter fell 6%, but they were ahead of forecasts.

--Ford recorded its most profitable quarter ever in the first three months of the year, with net income more than doubling to $2.45bn.

Ford continues to benefit from record sales rates in North America, thanks to strong sales of SUVs and the popularity of its F150 pick-up truck, the continent’s most popular single vehicle.

Revenue was up 19% to $23.9bn. 

In Europe the company turned a pre-tax profit of $434m vs. a $42m loss last year in Q1, on flat revenue of $6.9bn.

But Ford’s losses in South America widened to $256m, on revenue that was down 44%.

--Mitsubishi Motors Corp. acknowledged last week it had intentionally lied about fuel economy data for some of its models going back to 1991.  Details are sketchy.

--Despite the campaign rhetoric from the likes of Bernie Sanders about the big banks, deposits continue to flow into the big four commercial institutions – J.P. Morgan Chase, Bank of America, Wells Fargo and Citigroup – with deposits up 2.1% in the first quarter to $4.2 trillion, outpacing the overall growth of deposits at U.S. banks, according to Federal Reserve data and the Wall Street Journal.

Total loans in the first quarter were also up significantly at the big four, including 11% at JPM.

--According to the IMF in its Western Hemisphere regional economic outlook, Latin America and the Caribbean are on course for a 0.5 percent economic contraction this year, making it the first time since the debt crisis of 1982-83 that the region has seen two consecutive years of negative growth.

Further, the IMF says: “Growth prospects over the next five years will likely remain subdued, particularly for those [countries] facing lower commodity prices and weak investment.  Throughout the region, policies and economic reforms should be tailored to manage this transition.”

Mexico* is projected to grow 2.4 percent this year, but Brazil is forecast to contract 3.8 percent.  [Financial Times]

*Friday, the Mexican government reported GDP for the first quarter came in at a healthy 0.8%, or up 2.7% annualized, higher than analysts’ expectations.

--Just in time for the political conventions, insurers will be seeking significant premium hikes under ObamaCare this summer.  The healthcare law has been a financial drain for many companies and there could be a round of double-digit hikes for 2017.

For example, in Virginia, nine insurers returning to the HealthCare.gov marketplace are seeking average premium increases that range from 9.4 percent to 37.1 percent.

This year, premiums for a benchmark silver plan rose by more than 7%, according to administration figures.

Marc A. Thiessen / Washington Post

“The president promised ObamaCare would ‘lower premiums by up to $2,500 for a typical family per year.’  But insurers are raising premiums instead to cover the massive losses, and even Marilyn Tavenner – the former Obama administration official who ran ObamaCare – has predicted premiums will rise even further next year. As they do, young, healthy individuals will be priced out of the exchanges – and the only people who will be able to afford ObamaCare will be high-risk patients who qualify for federal subsidies. Without enough healthy people in the exchanges to pay for the sick ones, taxpayers will be stuck with more and more of the costs over time – a situation that is unsustainable in the long run.”

--From the Wall Street Journal: “The scale and severity of prenatal damage by the Zika virus are far worse than past birth defects associated with microcephaly, a condition characterized by a small head and brain abnormalities. Scans, imaging and autopsies show that Zika eats away at the fetal brain.  It shrinks or destroys lobes that control thought, vision and other basic functions. It prevents parts of the brain not yet formed from developing....

“The sickest Zika babies in Brazil have died before delivery or within hours of birth.  No one knows yet how long the survivors will live or how much they can be helped in the years ahead.  Brazil is now bracing for a second stage of the 6-month-old crisis: Caring for infants with a wide range of disabilities.” [Luciana Magalhaes and Betsy McKay]

But this will continue to become more and more of an economic story, as much as a human tragedy.  Friday, the U.S. reported the first Zika-related fatality in Puerto Rico, a 70-year-old man, which is troubling.

--Boeing reported a drop in first quarter profits to $1.2bn, compared with $1.3bn a year ago.  Revenues climbed 2 percent to $22.6bn, ahead of the Street’s forecasts.

--SpaceX plans to send an unmanned Dragon spacecraft to Mars as early as 2018, a first step in achieving founder Elon Musk’s goal of flying people to another planet.  NASA, which is planning a manned mission to Mars in the 2030s, said it will provide SpaceX with technical support.

Some of you are aware “The Most Interesting Man In The World” is currently on a one-way trip to Mars.  Prior to liftoff, reporters asked him if he’d be lonely.  He reminded them there was a female flight attendant on board.

--The average U.S. airfare dropped to $377 last year, its lowest level since 2010 and down nearly 4% from 2014, according to the Dept. of Transportation’s Bureau of Statistics.

However, these figures don’t include the cost of additional passenger fees, such as for checking your bag.  [Hugo Martin / L.A. Times]

--Chipotle Mexican Grill posted its first loss ever as a public company, after a series of disease outbreaks last year.  Same-store sales fell a whopping 29.7% during the quarter, steeper than analysts forecast, with revenue declining 23.4% to $834.5 million from $1.09bn.

The company has been trying to win back its once-loyal customers with giveaways and new menu items, while at the same time it continued to open new restaurants, 58 in the quarter, bringing the total to 2,066.

So I finally used my coupon for a free burrito (it expires May 1 if you haven’t done the same!), never having been inside my local Chipotle, and it was delicious.  I also didn’t get sick!  Yes, I’ll now go back.

--NBCUniversal announced it has acquired DreamWorks Animation for $3.8 billion. The animation studio will be folded into the Universal Filmed Entertainment group,

DreamWorks CEO Jeffrey Katzenberg will become chairman of DreamWorks New Media.

--No one vacations in Acapulco anymore and for good reason...ever-soaring crime.  Last year there were 903 murders in a city of 800,000, more than any other city in Mexico.

Actually, I don’t know why I just stuck this tidbit in here.  Those of us of a certain age remember Acapulco for ABC’s “Wide World of Sports” and the cliff-diving...led by the great Barney Cipriani.

--The feel-good story of the week was courtesy of Hamdi Ulukaya, CEO of Greek yogurt maker Chobani, who told the company’s 2,000 full-time employees at its upstate New York plant Tuesday that they’ll receive shares worth up to 10% of the company’s value when it goes public or is sold.

“This isn’t a gift,” Ulukaya said in a letter to employees.  “It’s a mutual promise to work together with a shared purpose and responsibility. To continue to create something special and of lasting value.”  [USA TODAY]

The average award is estimated to be worth tens of thousands of dollars, but up to a $1 million for some employees.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: As President Obama announced the U.S. will deploy 250 more troops* in Syria to help local militias fight ISIS, there was a devastating series of air strikes in the Syrian city of Aleppo on Thursday, including a hit on a hospital run by Medecins sans Frontieres (Doctors Without Border) that killed 50, including at least three doctors and numerous children.

*Just a day before, Obama told the BBC, “It would be a mistake for the United States, or Great Britain...to send in ground troops and overthrow the Assad regime.”

The U.N. called on Presidents Obama and Vladimir Putin to intervene in the Syrian peace process to keep the talks from collapsing, as Aleppo becomes the epicenter of the military escalation.  Through Friday, seven days of air strikes and rebel shelling of the place, which is split between government forces and rebels, killed well over 200 people, two-thirds of them on the opposition side, according to the Syrian Observatory for Human Rights.  The U.N.’s chairman of the humanitarian task force, Jan Egeland, said there has been a “catastrophic deterioration in Aleppo over the last 24-48 hours” and that aid supply lines are jeopardized.

Understand, as I’ve said since 2012, it was already “over” in Syria...lost.  Valter Gros, who heads the International Committee of the Red Cross’ Aleppo office, said, “There is no neighborhood that hasn’t been hit.”

For his part, Syrian President Bashar Al-Assad, “has essentially shrugged off Moscow’s interests, and he believes that Russia has no choice but to support the regime no matter how intransigent he gets in peace talks,” says Vladimir Frolov, a Russian international affairs expert.  “And he has been proven correct, for the moment.  Moscow is kind of stuck in Syria.”

As Matthew Bodner writes in the Moscow Times: “Assad’s obstinate stance risks creating real dilemmas for Russia.  At times, it appears the embattled leader believes he can once again be ruler of all Syria. He has rejected several proposals calling for the federalization of Syria, or his stepping down as its leader. This position has complicated Moscow’s support for Syrian Kurds, largely proffered to spite Turkey.”

Moscow is being undermined as an invaluable partner in the peace process.  The Foreign Ministry office also offered this week it saw no chance for better relations with Turkey in the foreseeable future, citing “an anti-Russian position” taken by the Turkish leadership.

For their part, the Kurdish rebel PKK movement told the BBC it is ready to intensify its fight against Turkey, with PKK leader Cemil Bayik saying President Erdogan was “escalating this war.”

“The Kurds will defend themselves to the end, so long as this is the Turkish approach – of course the PKK will escalate the war,” he said.

An aide to Erdogan ruled out any negotiations with the PKK.

Separately, Gen. Peter E. Gersten, Deputy Commander for Operations and Intelligence for the U.S.-led campaign against ISIS, said the number of foreign fighters arriving in Iraq and Syria to join Islamic State has declined to about 200 a month from as many as 2,000 a year ago.

During a news conference, Gen. Gersten said, “We’re seeing an increase in the desertion rates of [IS] fighters. We’re seeing a fracture in their morale.”  [Paul Sloane / Wall Street Journal]

Gersten also said the U.S. has repeatedly targeted ISIS’ stores of cash, blowing up an estimated $800m, which is contributing to a jump in defections and a drop in new arrivals.  But the general didn’t specify how he knew how much cash had been destroyed.  Gersten said $150m was blown up in a single house after the U.S. received intelligence.  [Personally, I think you have to treat some of this with skepticism.  Propaganda works both ways, but if potential recruits believe these stories and opt to stay home to play video games, great.]

ISIS does continue to hold large swaths of territory, and it doesn’t appear as if the battle to retake Mosul is going to take place any time soon, as I’ve been noting the past few weeks.  The Iraqi buildup for the offensive has been slow to materialize and they need better equipment and training prior to launching the main assault.

This week the U.S. also acknowledged its airstrikes have left over 40 civilians dead.  James R. Clapper Jr., the director of national intelligence, also said at a conference that Islamic State is operating clandestine terrorist cells in Britain, Germany and Italy, similar to the groups that carried out the attacks in Paris and Brussels.  British counterterrorism officials say they have thwarted seven plots in the past 18 months or so.

Lastly, in a survey by the U.S. State Department Inspector General’s Office, one-third of Iraqis believe the U.S. is secretly supporting ISIS.

40% of Iraqis believe the United States is working to destabilize Iraq and control its natural resources.

50% of Iraqi Sunnis and Shiites say they oppose the American-led coalition conducting airstrikes on ISIS targets and providing train-advise-and-assist support for the Iraqi military.

Only 18% of Iraqis have a favorable view of the U.S., vs. 38% who did in December 2014.

Only 10% of Sunni Arabs have a favorable view, vs. 54% who did in December 2014.  [Andrew Tilghman / Army Times]

Iran: Iranian media reported Monday that President Hassan Rouhani requested the words “Death to Israel” be removed from the nation’s ballistic missiles. Rouhani sent a letter to Supreme Leader Ayatollah Ali Khamenei after Khamenei himself used the line “Death to Israel,” which Rouhani condemned at the time.

As reported by the Jerusalem Post: “Experts on Iranian affairs explained that Rouhani fully understands the influence of the Israel lobby on decisions related to Israel in the European Union and the United States and is concerned that the slogan ‘Death to Israel’ that is written on the missiles will work against the agenda he is trying to promote in his speeches, one of peace and stability in the Middle East.”

Of course at the same time Rouhani is a duplicitous SOB.

Saudi Arabia: Deputy Crown Prince Mohammed bin Salman, the fast-rising 31-year-old said to be at the helm of Saudi economic policy, with the blessing of King Salman, laid out a plan, known as Vision 2030, for moving the kingdom away from its “addiction to oil.”

Mohammed, in an interview with al-Arabiya news channel, said the country will exist “without any dependence on oil” by 2020 and would soon be a “global player” on the world investment stage.

The most immediate action to be taken will be the sale of shares in the state-owned oil giant Aramco.  While only 5% will be sold, Mohammed said the company will be valued at $2.5 trillion.  Some of the money from the sale would be used to help create a $2 trillion sovereign wealth fund that would invest abroad.

Yemen: Agence France Presse reported that Yemeni troops backed by Arab coalition air strikes killed more than 800 members of Al-Qaeda in an attack on a southeastern provincial capital held by the group for the past year.  Pro-government forces also recaptured an oil terminal at the city of Mukalla.

The death toll could not be confirmed, nor was there any talk of civilian casualties in the statement released by Arab coalition commanders.  Mukalla is home to an estimated 200,000 people.  [I don’t believe these figures.]

China: President Xi Jinping said territorial disputes in the South China Sea must be resolved through negotiations between the countries involved.

Speaking at an international security forum in Beijing, Xi also said China was committed to peace and security on the Korean peninsula and would not allow it to fall into war and chaos amid tensions over the North’s weapons tests.

But regarding the South China Sea, China has described U.S. naval and air force patrols in areas being reclaimed by China as an act of provocation.

Meanwhile, legislators passed a law on Thursday granting police sweeping authority to supervise foreign nonprofit groups, as President Xi continues to consolidate government control over all facets of Chinese society, culture and the economy.

The White House said it was “deeply concerned” this new law on NGOs (non-governmental organizations) will narrow the space for civil society in China, urging Beijing to respect the rights and freedoms of human rights defenders, journalists, business groups and others, “including by protecting the ability of foreign NGOs to operate in China,” as put forward by the National Security Council in a statement.  [Reuters]

Finally, Beijing is stepping up pressure on Taiwan ahead of next month’s presidential inauguration of Tsai Ing-wen in an attempt to force her to accept the “one-China” principle.

There have been a series of challenges to Taiwan’s standing on the global stage in the past few weeks, including even the changing of its name from “Chinese Taipei” to “China, Taipei” during the Asian qualifier for the 2018 World Cup.

Applications by mainland tourists for travel to the island have also fallen by about 30 percent from year ago levels.  Local travel agencies believe China is stopping its residents from visiting.

Tsai, of the independence-leaning Democratic Progressive Party, takes office on May 20, becoming Taiwan’s first woman leader. Although she has pledged to maintain the cross-strait status quo and pursue peaceful development of ties, she campaigned on a platform of being reluctant to accept the consensus, reached in 1992 as a way for the two sides to temporarily shelve thorny political issues with a tacit understanding there is “one China” and each side can have its own interpretation of what that represents.

North Korea: The regime fired two ballistic missiles on Thursday but both tests appeared to have failed, according to both South Korean and U.S. officials. While this is humiliating for Kim Jong Un and no doubt led to the execution of a scientist or two, with each test Kim and his Orcs learn more.

Last Sunday, for example, North Korea said it had conducted a submarine-launched ballistic missile test and it was a “great success” that gave the country “one more means for powerful nuclear attack.”  The South Korean Defense Ministry said the missile flew about 18 miles, which while not a full success is certainly disturbing.  The U.S., or Japan or South Korea, certainly doesn’t want a nuclear-capable North Korean sub off its shores.

Next week, the regime is holding a congress of its ruling Workers’ party for the first time in 36 years.  It is expected Kim will formally declare the country as a nuclear state, thus the concerns another nuclear test is about to be conducted.

Separately, an American who has been held in North Korea since October, Kim Dong-chul, was sentenced to 10 years of hard labor for spying and other offenses, according to Chinese and Japanese news agencies. This comes six weeks after an American college student, Otto F. Warmbier, was sentenced to 15 years of hard labor for trying to steal a political banner from his hotel in Pyongyang.

Earlier in the week, North Korea’s foreign minister said in an interview with the Associated Press that Pyongyang would halt its nuclear tests if the United States suspends its annual military exercises with South Korea.

Ri Su-yong said the U.S. drove his country to develop nuclear weapons as an act of self-defense.

“If we continue on this path of confrontation, this will lead to very catastrophic results.”

Russia: A Russian SU-27 intercepted a U.S. reconnaissance aircraft in international waters in the Baltic Sea Friday, according to a senior defense official; the latest in a series of incidents with Russian aircraft.

“This unsafe and unprofessional air intercept has the potential to cause serious harm and injury to all aircrews involved,” Navy Cmdr. Bill Urban, who is a Department of Defense spokesman, said in a statement, according to Reuters.  “More importantly, the unsafe and unprofessional actions of a single pilot have the potential to unnecessarily escalate tensions between countries.”

Ukraine: This week marked the 30th anniversary of the Chernobyl nuclear plant disaster, the worst in history.  Back then, the KGB had been secretly warning Soviet leadership about safety breaches and the reactor’s flaws.  An explosion during a test of the plant’s systems blew off the roof of the reactor and set off a graphite fire, leading to the release of 400 times as much radioactive material as the atomic bomb dropped on Hiroshima.

Soviet officials did not report the accident, as the first information came from Sweden, which detected a rise in radioactivity.  Incredibly, while firefighters heroically tried to put out the blaze [in 2006, I went to the Chernobyl museum in Kiev and you wouldn’t believe the “protective gear” the firefighters went in with...just basic raincoats], children were playing in the streets of neighboring Pripyat, a town built next door for the plant’s workers and their families.

Two days later, the Kremlin issued a 15-second statement on the evening news, and on May Day, thousands attended a May Day parade in Kiev, not knowing they were receiving radiation several times higher than normal.

41 died as a result of the explosion, and a World Health Organization study ultimately found that it had caused 4,000 premature deaths.  [With other groups arguing the final Chernobyl-related toll could be as high as 100,000.]  More than 6,300 square miles of land is still classified as unusable.

Years later, Mikhail Gorbachev reflected the meltdown, “even more than my launch of perestroika (restructuring), was perhaps the real cause of the collapse of the Soviet Union.”  It was a catalyst for glasnost, the opening up of the media.

A transcript of a Politburo meeting after the explosion shows that Gorbachev was furious he had limited access to information: “Everything was kept secret from the Central Committee.  The whole system was penetrated by the spirit of boot-licking, persecution of dissidents, window-dressing and nepotism.”

Glasnost would commence shortly thereafter and with the opening of the press, the pillar of lies under which the system existed was exposed.

Venezuela: The country receives 75 percent of its power from the Guri hydroelectric dam and due to the El Nino-related drought, with water levels at record lows the government keeps introducing more drastic measures.

First it announced a four-day work week to save power, then the government moved the clocks forward 30 minutes to increase daylight hours.

Now it’s imposed a two-day week for public sector workers; mandatory leave Wednesdays through Fridays until further notice.

After falling 5.7 percent last year, the IMF sees the nation’s GDP cratering another 8 percent this year.

Random Musings

Tuesday, April 26, Primary Results

Republicans

CT: Donald Trump 58%, John Kasich 28%, Ted Cruz 12%
DE: Trump 61%, Kasich 20%, Cruz 16%
MD: Trump 54%, Kasich 23%, Cruz 19%
PA: Trump 57%, Cruz 22%, Kasich 19%
RI: Trump 64%, Kasich 24%, Cruz 10%

Delegates (1,237 needed for the nomination)

Trump 996
Cruz 565
Kasich 153

[USA TODAY]

Democrats

CT: Hillary Clinton 52%, Bernie Sanders 47%
DE: Clinton 60%, Sanders 39%
MD: Clinton 63%, Sanders 33%
PA: Clinton 56%, Sanders 44%
RI: Sanders 55%, Clinton 43%

Delegates (2,383 needed for the nomination)

Clinton 2,165 (including superdelegates)
Sanders 1,357

For good reason after Tuesday night’s results, Trump declared himself the “presumptive nominee,” while Hillary Clinton doesn’t want to call the race over just yet for fear of alienating Sanders supporters.

In her victory speech, Clinton praised Sanders and his flock, while saying Republicans were deeply out of touch with the needs of middle class Americans.

--John Kasich’s campaign said he would clear a path for Ted Cruz in next week’s Indiana primary, while Cruz will back off in Oregon and New Mexico.

“Donald Trump doesn’t have the support of a majority of Republicans – not even close, but he currently does have almost half the delegates because he’s benefited from the existing primary system,” Kasich chief strategist John Weaver said in a statement.

“Our goal is to have an open convention in Cleveland, where we are confident a candidate capable of uniting the Party and winning in November will emerge as a the nominee.”

Cruz’s campaign manager echoed Weaver’s criticism of Trump.

Trump called the collusion “sad,” adding, “Collusion is often illegal in many other industries and yet these two Washington insiders have had to revert to collusion in order to stay alive.”

Friday, Gov. Mike Pence endorsed Cruz, but also praised Trump; Pence facing re-election.

--In his first major foreign-policy address, Donald Trump on Wednesday called for the U.S. to pull back from global engagements, while outlining a set of principles, some of which were contradictory, and excoriating both the vision of President George W. Bush as well as Barack Obama.

In a rather somber speech delivered a few blocks from the White House, Trump said the U.S. must reset its relations with other countries, including with Russia and China, saying, “We are not bound to be adversaries.”

He was also unambiguous in saying he would demand allies pay their fair share for any bills incurred in defending them, or else they’d have to defend themselves.

“My foreign policy will always put the interests of the American people and American security above all else.  It has to be first.  Has to be.”

Editorial / Wall Street Journal

“(Donald Trump’s) maiden policy speech on Wednesday, devoted to foreign affairs, earns an ‘incomplete’ at Trump University.  ‘America First will be the major and overriding theme of my Administration,’ Mr. Trump said.  He called for ‘a new foreign-policy direction for our country – one that replaces randomness with purpose, ideology with strategy and chaos with peace.’...

“The 5,000-word speech lacked specifics by normal political standards, if not his own.  The central motif, like all of Mr. Trump’s political thought, is that the businessman has the brains and strength to solve a given problem, and everybody else is a pathetic loser, so trust his instincts and temperament.  ‘I’m the only one – believe me, I know them all – I’m the only one who knows how to fix it,’ he said.

“Mr. Trump’s intuition does sometimes lead in constructive directions.  He is right to identify rising world disorder as the pre-eminent threat to American security and interests.  He said President Obama ‘dislikes our friends and bows to our enemies,’ which is an overstatement that nonetheless captures the reality.

“Mr. Obama’s leadership-from-behind philosophy has confused allies, and many have decided that they can’t depend on U.S. commitments.  Adversaries like China, Russia and Iran are testing the limits of his resolve as they push for hegemony in their regions.

“Mr. Trump is also correct that if he rebuilds alliances he ought to expect more from U.S. partners....

“Yet as Mr. Trump critiqued the results of Mr. Obama’s withdrawal from the world, he also assailed the international engagement that could lead to better outcomes.  ‘We need a long-term plan to halt the spread and reach of radical Islam,’ he said, without saying what that plan is, though he did note that ‘our actions in Iraq, Libya and Syria have helped unleash ISIS.’....

“Mr. Trump isn’t known for close readings of his briefing books, if such documents exist, and deep policy knowledge is obviously not the source of his political appeal.  But Americans typically prefer Presidents who are conversant about the world’s biggest problems beyond a sound bite or two, and Hillary Clinton will aggressively litigate the businessman’s Commander in Chief credentials, to put it mildly.”

Editorial / Washington Post

“What was supposed to be a rare set-piece speech by Donald Trump on foreign policy Wednesday resembled a pastiche of his off-the-cuff postulations from the campaign trail, cobbled together under the slogan ‘America First.’  Like the previous rhetoric, his proposals were loose, frequently contradictory and embedded in a bucket of falsehoods.  Of these, the biggest was Mr. Trump’s claim that he could somehow reverse the historical tides that have created a globalized economy and remedy the complex security challenges of the 21st century with a simple ‘plan for victory with a capital V.’”

--Joe Scarborough / Washington Post

“In his book ‘Coming Apart: The State of White America, 1960-2010,’ Charles Murray wrote about the rise of a new American upper class and the ‘narrow elites’ who shape America’s economy, culture and government.  The number of players who dominate the direction of media, politics and finance is surprisingly concentrated for a country as sprawling and diverse as the United States.  And yet almost all of these ‘influencers’ across Manhattan and Washington were incapable of blunting Trump’s meteoric rise.  Time and again over the past year, Washington insiders and media moguls misread the mood of working-class voters and their attraction to the populist message championed by Trump....

“So why did these ‘narrow elites’ miss the mark so badly...?  Because most of them are hopelessly isolated from the other 300 million or so Americans who inconveniently share their country.

“Murray writes that most members of the narrow elite don’t watch much television.  If they watch any news programs, it is probably the PBS NewsHour (or Morning Joe!).  Powerful influencers have also watched other television shows over the past decade like ‘Mad Men,’ ‘House of Cards,’ ‘Breaking Bad,’ ‘Game of Thrones’ and ‘Curb Your Enthusiasm.’  [Ed. I watched Mad Men, GoT and Curb Your Enthusiasm.  Just wish I was a powerful influencer.]  While such critically acclaimed shows are often consumed by narrow elites in frantic fits of binge watching, the other 300 million Americans view television a bit differently.

“Murray reports that the average American watches about 35 hours of television a week. Since 2004, Trump has starred in 14 seasons of ‘The Apprentice.’  And if you’re a member of the narrow elite that holds sway over media coverage or government policy, chances are good that you saw few episodes of ‘The Apprentice’ or ‘Survivor.’  [Ed. this is funny.  I maybe watched one episode of these two, combined!]

“But millions of Americans did, and perhaps that kind of mass consumption is why Trump will beat Don Draper at the polls every time.”

Scarborough goes on to note how Ronald Reagan built his national audience through years of hosting General Electric Theater (1956-62), with his “image beamed into more than 20 million homes every week.  The successful run on TV gave Reagan a connection with American voters that his movie career never could.  By the time Reagan ran for governor of California in 1966, the GE host was a household name.  Reagan’s landslide victory shocked elites in and out of the political class and launched a conservative revolution that would last a generation.

“50 years later, that revolution is being undone by another TV star who has been underestimated by elites while being elevated by working-class voters....The odds may be long for the New York developer and reality star, but no longer than the ones he faced last June when he first sought the GOP nomination.”

--Meanwhile, Ted Cruz, trying desperately to remain relevant, selected Carly Fiorina to be his running mate, months before the Republican convention and with zero shot at winning the nomination unless through a brokered contest.

John Podhoretz / New York Post

“For the past few weeks, Republican campaign professionals and conservatives who are seeing the GOP nomination heading into Donald Trump’s hands have been counseling anti-Trump voters not to panic and consoling themselves with the notion that things will turn around for Ted Cruz when the final weeks of the campaign shift to the Midwest and mountain states.

After Trump’s astounding five-for-five primary night, by margins that were likely surprising even for Trump fans, it’s now Indiana or bust.  If Trump wins the primary next week in the Hoosier state, Cruz is toast and Trump will almost certainly be the Republican nominee.

“There’s no putting lipstick on this pig.  Cruz’s numbers Tuesday night, like his numbers in New York last week, were beyond horrible....

“It isn’t only that the not-Trump vote is failing to coalesce around Cruz; he’s going backwards.

“And people are kidding themselves if they think Tuesday night’s results won’t have an effect on voters in Indiana and elsewhere.”

--Former House speaker John Boehner, speaking at Stanford University, described Ted Cruz as “Lucifer in the flesh,” adding “I have never worked with a more miserable son of a bitch in my life.”

Boehner said he is a golf and texting buddy of Donald Trump’s and that he would vote for him this fall.

--Bernie Sanders said he’s laying off hundreds of field staff, but is not pulling out and, instead, will focus on California.  It’s about ensuring he has as strong a voice as possible in shaping the platform at the Democratic convention.  [Which he won’t be able to do...but he’ll get his primetime speaking slot.]

It also just makes sense that, as he put it, the race is over in Connecticut so he doesn’t need people there.

--Among those Hillary Clinton is beginning to vet, at least informally, in terms of a running mate is Sen. Mark Warner (Va.), who I’d have zero problem with.  Another said to be on the list is current labor secretary Thomas Perez.  Ughh.

--Trump should go with Florida Gov. Rick Scott.  Kasich seemed like a natural, given Ohio’s importance, but some of us, even when we were supporting the guy, knew of his prickly, preachy side.  Let’s face it he has been a prickly jerk the last few weeks in particular.  He’s off my list.

--Registration among Hispanic voters is skyrocketing. Arturo Vargas, executive director of the National Association of Elected and Appointed Officials, projects 13.1 million Hispanics will vote nationwide in 2016, compared to 11.2 million in 2012 and 9.7 million in 2008.

Many of these voters are of course expected to vote against Trump in a general election.

80% of respondents in a poll of registered Hispanic voters in Colorado and Nevada said Trump’s views on immigration made them less likely to vote for Republicans in November.  In Florida, that number was 68 percent.

Obama won 51.5% of the vote in Colorado in 2012, and 52% in Nevada, compared to Mitt Romney’s 46% in both.

According to exit polls, Obama won 74% of the overall Hispanic vote in 2012.

--In the latest USA TODAY/Suffolk University Poll, Hillary Clinton had an unfavorable rating of 54% and Trump 61%.  37% of likely voters had a positive view of Clinton, 28% had a favorable view of Trump.

Clinton’s net negative rating is a dismal 17 points, but Trump’s a catastrophic 33 points.

The thing is, when Trump talks about changing things around during the general election campaign, in this USA TODAY poll, fewer than one in 10 didn’t already have an opinion about Clinton and Trump.

In the survey of 1,000 likely voters nationwide, only five hadn’t heard of Trump, and seven hadn’t heard of Clinton.  That’s pretty remarkable, and speaks to Scarborough’s earlier point.

--Former House speaker Dennis Hastert was sentenced to 15 months in prison for paying $1.7 million in hush money to cover up sexual abuse from his days as a teacher and wrestling coach.  U.S. District Judge Thomas Durkin said Hastert’s sentence would have been harsher were it not for his age, 74, and health.

The sentence was handed down after Hastert admitted for the first time that he sexually abused athletes while he was wrestling coach at Yorkville High School.  Also, for the first time, two accusers took the stand and described how Hastert sexually abused them.

--New York City Mayor Bill de Blasio is under fire as his office has received subpoenas from federal and state prosecutors in connection with a series of overlapping investigations into his campaign fund-raising activities.

De Blasio’s counsel, Maya Wiley, conceded, “City Hall has been subpoenaed.  We are fully cooperating with the investigation.  The mayor has not been personally served.”

One of his top aides, Emma Wolfe, was subpoenaed, as well as Ross A. Offinger, his campaign finance director.

While details have not been forthcoming as yet, the New York Times and others believe the authorities are delving into aspects of de Blasio’s fundraising on behalf of State Senate Democrats in 2014.

“In the case of the 2014 election, they are looking to see whether donations to candidates were funneled through county party committees to evade contribution limits, a violation of state law and a possible felony.”

Greg David / Crain’s New York Business

“Now that the presidential campaign has moved on from New York, the spotlight will focus brightly on Mayor Bill de Blasio’s new biggest problem: corruption investigations. Start with the gifts to top-ranking NYPD officers, possible illegal fundraising in the mayor’s various campaign efforts and the inexplicable success of a developer in persuading city officials to allow the conversion of a Lower East Side nursing home into luxury condos, creating a financial bonanza....

“What is already known is damaging to the mayor. The most charitable explanation for the nursing home arrangement is that the developer bamboozled city officials, increasing the perception that the mayor isn’t interested in or capable of running the government.

“And de Blasio has made the situation worse.  On the fundraising investigation, he has changed his story numerous times, sometimes within the same day.  On the nursing home controversy, he has said he was out of the loop and uninformed.  No one seems to have been held accountable for that either.”

Editorial / New York Daily News

“While disputing not a single fact in a report that damningly detailed his elaborate scheme to evade New York campaign finance laws, Mayor de Blasio proclaimed Monday that he is nonetheless a victim of political persecution.

“The mayor’s lawyer also let stand the machinations revealed by the state Board of Elections enforcement counsel. Instead, the attorney raged that the counsel’s rather convincing finding of criminality was leaked to the public – and more important that de Blasio was merely conducting business as usual in New York.

“Good luck with that, Mr. Mayor. See the convictions of Sheldon Silver and Dean Skelos, who sang the same New York-way song to their juries.”

Editorial / New York Post

“What had been a drip, drip, drip of de Blasio scandal over the weekend became a torrent – exposing not just arrogance, recklessness and dishonesty, but profound corruption....

“It seems City Hall ordered donations to upstate party committees in order for the cash to be handed on to its favored candidates – and some checks even had ‘donation per Mayor’ in the memo line.

“On Sunday, The Post’s Isabel Vincent and Melissa Klein caught Mayor de Blasio himself in a lie. When news of the rancid Rivington nursing-home real-estate flip broke in March, the mayor claimed he’d learned of it from the press.  But The Post has evidence that Deputy Mayor Alicia Glen’s chief of staff, James Patchett, in fact desperately tried to undo the deal in late February.

“Patchett told the developer the reversal was ‘what the Mayor’s Office wants’ and called the situation ‘important to us.’ He plainly knew the flip would be trouble for de Blasio – the city charged $16.1 million to lift deed restrictions that wound up letting the developer make a $72 million profit, while robbing the neighborhood of a nursing facility.

“How could word of the coming public-relations nightmare not make it back to de Blasio?  Unless his minions are simply afraid to bring him bad news, the mayor lied about when he learned of the mess....

“Even at this early stage of the investigations, Team de Blasio stands exposed as corrupt.  Private firms don’t make six-figure gifts to upstate political committees (or to pet mayoral nonprofits) for nothing.

“At a minimum, they plainly understood it was the price of having any hope of city action on their business – which means that anyone who won’t pay up never gets action.

“And other de Blasio priorities – his war on Uber, his drive to kill the tiny carriage-horse industry – make sense only as making good on ironclad promises to donors.

“The mayor will surely deny it all, just as he denied knowing about the nursing-home flip.  Yet it’s plain that the mayor and his minions in and out of government are selling public policy for cash to boost his political power.

“Bill de Blasio’s city is for sale.”

Michael Goodwin / New York Post...the man I noted a while ago who nailed this topic very early on.

“The veneer of business as usual is shredded. Never again can de Blasio wave off questions about the mushrooming investigations of his administration. As revelations pile up day after day, allies will desert him and the Putz will find himself a very lonely man.

“There is no way to sugarcoat the facts: de Blasio is in trouble.  Maybe very big trouble.

“His City Hall is being depicted as the seat of a criminal enterprise. And so far, he offers nothing resembling a convincing denial....

“He raised as much as $40 million and deposited it in various slush funds he formed, including the Campaign for One New York, which he started before he even took the oath of office....

“The money would come from real-estate developers, yellow-taxi medallion owners, teachers unions and anybody else willing to play ball in hopes the mayor would return the favors....

“It can be no comfort to him that Bharara, who brought down former Albany kingpins Sheldon Silver and Dean Skelos, is on the case. If the mayor knows a good defense lawyer, he ought to hire him immediately.”

Personally, what pisses me off is the story that one group that was formed, NYCLASS, spent nearly $1 million destroying de Blasio rival Christine Quinn in the 2013 Democratic primary.  I supported Quinn in these pages.  The leaders of the group aligned against her, “wanted to ban carriage horses, and when de Blasio promised he would after Quinn refused, a barrage of ads against Quinn helped demolish her.”

At least de Blasio has been unable to shut down the horse-carriage industry.  NYCLASS received a subpoena. 

[And why did your editor like the Democrat Quinn?  The Republican candidates for mayor were awful and Quinn is a classic, feisty New Yorker who you’d like to drink a beer with, plus she had extensive city government experience and could reach across the aisle.]

--As alluded to above, the NYPD has had a tough stretch with some of the corruption allegations, but on Wednesday, federal prosecutors charged 120 members of two rival street gangs in the Bronx in what most agree was the biggest takedown in city history.

Law-enforcement officials said the gangs – 2Fly YGz and Big Money Bosses – have terrorized a segment of the north Bronx for years, particularly around public-housing complexes.

U.S. Attorney Preet Bharara said the charges (which include everything from shootings and robberies to murder) and arrests dismantle both gangs “from top to bottom.” 

--Former Democratic U.S. senator Jim Webb (Va.) / Washington Post

“One would think we could celebrate the recognition that Harriet Tubman will be given on future $20 bills without demeaning former president Andrew Jackson as a ‘monster,’ as a recent Huffington Post headline did. And summarizing his legendary tenure as being ‘known primarily for a brutal genocidal campaign against native Americans,’ as reported in The Post, offers an indication of how far political correctness has invaded our educational system and skewed our national consciousness.

“This dismissive characterization of one of our great presidents is not occurring in a vacuum. Any white person whose ancestral relations trace to the American South now risks being characterized as having roots based on bigotry and undeserved privilege.  Meanwhile, race relations are at their worst point in decades.

“Far too many of our most important discussions are being debated emotionally, without full regard for historical facts. The myth of universal white privilege and universal disadvantage among racial minorities has become a mantra, even though white and minority cultures alike vary greatly in their ethnic and geographic origins, in their experiences in the United States and in their educational and financial well-being.

“Into this uninformed debate come the libels of ‘Old Hickory.’  Not unlike the recently lionized Alexander Hamilton, Jackson was himself a ‘brilliant orphan.’  A product of the Scots-Irish migration from war-torn Ulster into the Appalachian Mountains, his father died before he was born. His mother and born brothers died in the Revolutionary War, where he himself became a wounded combat veteran by age 13. Self-made and aggressive, he found wealth in the wilds of Tennessee and, like other plantation owners such as George Washington, Thomas Jefferson and James Madison, owned slaves.  He was a transformational president, hated by the reigning English American elites as he brought populist, frontier-style democracy to our political system....

“Mark Twain once commented that ‘to arrive at a just estimate of a renowned man’s character one must judge it by the standards of his time, not ours.’ By any standard we should respect both Jackson’s and Tubman’s contributions.  And our national leaders should put aside their deliberate divisiveness and encourage that we do so.”

--Interesting piece in the current issue of Rolling Stone magazine by Kyle Dickman on where the “worst wildfire disaster in U.S. history” might happen.  Not out West, but here in New Jersey!

Mr. Dickman is talking about the dangers in the Pine Barrens, or as he calls it, the Pinelands, a 1.1-million-acre tract in the southern part of the state that is home to 500,000 people. The height of the danger is late April to May and the scenario he lays out makes perfect sense.  Flames fueled by the pine needles could overcome an area loaded with retirement communities, a military base and a nuclear plant.

Large swaths of the Pinelands have remained relatively untouched for decades, making it a giant tinderbox of untended woods that’s surrounded by 100,000-person suburbs.

The last bad Pinelands blaze was in 1963, devouring 190,000 acres from Long Beach Island to Atlantic City, killing seven and destroying 400 buildings.  The damage was ‘light’ because there just weren’t that many buildings in the area back then.  That is no longer the case.

Today, a fast-moving fire, especially over, say, Memorial Day weekend with hundreds of thousands in the area and on the main roads (which go through the Pinelands), would be catastrophic.    

---

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

God bless America.

---

Gold $1293...up $60 and the highest weekly close since Aug. 2014
Oil $45.92...highest since last Oct. 30

Returns for the week 4/25-4/29

Dow Jones  -1.3%  [17773]
S&P 500  -1.3%  [2065]
S&P MidCap  -1.0%
Russell 2000  -1.4%
Nasdaq  -2.7%  [4775]

Returns for the period 1/1/16-4/29/16

Dow Jones  +2.0%
S&P 500  +1.1%
S&P MidCap  +4.5%
Russell 2000  -0.4%
Nasdaq  -4.6%

Bulls  44.3
Bears  20.6  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore