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Week in Review

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06/15/2019

For the week 6/10-6/14

[Posted 11:30 PM ET]

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Edition 1,053

I’ve been saying for the last few months that Americans aren’t prepared for what China could throw at us.  So in Tuesday’s Wall Street Journal, Walter Russell Mead had some of the following thoughts on the topic.

“A series of conversations with Trump administration officials at every level as well as leading Democrats points to two clear and disturbing conclusions.  First, the U.S. is increasingly committed to a historic turn in its relations with China as opinion hardens on both sides of the aisle. Second, we aren’t ready for what is coming....

“Today both Washington and Beijing are maneuvering themselves for some kind of long-term competition – but just as few observers in 1946 could imagine a four-decade global standoff, neither we nor the Chinese can predict the scale, scope or consequences of the emerging rivalry.  It is likely both to echo the Cold War in some ways and to diverge radically from it in others....

“It’s difficult to prepare for a contest with so many uncertainties, but the ancient Chinese strategist Sun Tzu offered advice that is still sound: ‘If you know the enemy and know yourself, you need not fear the result of a hundred battles.  If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.  If you know neither the enemy nor yourself, you will succumb in every battle.’

“At the start of the Cold War, U.S. diplomat George Kennan helped Americans understand both their Soviet opponents and themselves.  His famous Long Telegram laid out the complex relationship between the Soviet ideology, Russian culture and Stalinist policy and helped guide two generations of American policy makers.  One key argument: Marxism flourished in the Soviet Union in part because its predictions of inveterate hostility between capitalist and communist countries helped justify the internal controls Stalin’s regime required to hold power.  Kennan also counseled that remaining true to America’s strengths offered a path to success.

“Kennan’s method, which is also Sun Tzu’s, applies today.  Americans should start by deepening our understanding of how Beijing’s policy makers see themselves and the world....

“Kennan and Sun Tzu would counsel Americans to study themselves.  Red America, blue America and establishment America don’t understand one another very well; the resulting division makes stable, long-term foreign policy hard to sustain.  The new consensus over China offers an unexpected but valuable opportunity for patriots in both parties to work together in new ways.  One of Washington’s highest priorities should be creating an approach to China policy that can endure from one administration to the next.

“It’s impossible to know how the marked shift in U.S.-China relations will develop. The clouds now assembling on the horizon could dissipate or build into a storm of historic proportions. Either way, it is past time for Americans to heed Sun Tzu’s advice.  We do not know either China or ourselves as well as we should.”

Needless to say, my attitude concerning China is shaped by personal experience.  There is no reason to be optimistic.  Americans do not know the dangers.  And President Trump needs to stop calling President Xi Jinping his “good friend.”  Hell, he told CNBC on Monday morning that Xi was “an incredible guy, great man....very strong.” 

Xi is no friend. Nor is Kim Jong Un...nor Vladimir Putin.  At least President Trump isn’t calling Ayatollah Khamenei a friend yet...because he hasn’t met him, and if Khamenei has anything to do with it before he dies, he never will.

What was remarkable about this week is that once again Donald Trump was tougher on Angela Merkel than Xi, Kim or Putin, for starters.

Finally, I said at the beginning of the month that June will prove to be critical for the Trump presidency.  There were all sorts of landmines.  We’re just halfway through.  I’m sleeping with one eye open.

Trump World

--President Trump told ABC News this week that if a foreign government offered him information on a political opponent, “I think I’d want to hear it.”

“It’s not an interference; they have information – I think I’d take it,” he continued.  “If I thought there was something wrong, I’d go maybe to the FBI, if I thought there was something wrong.”

Trump added that “the FBI doesn’t have enough agents to take care of it.  When you go and talk, honestly, to congressmen, they all do it, they always have, and that’s the way it is.  It’s called oppo research.”

Not one congressman said he’d ever do such a thing.

During the ABC interview with George Stephanopoulos, Trump was asked whether his son, Don Jr., should have taken the Trump Tower meeting.  “Somebody comes up and says, ‘Hey, I have information on your opponent,’ do you call the FBI?” Trump responded.

“I’ll tell you what, I’ve seen a lot of things over my life.  I don’t think in my whole life I’ve ever called the FBI.  In my whole life.  You don’t call the FBI.  You throw somebody out of your office, you do whatever you do,” Trump said.  “Oh, give me a break – life doesn’t work that way.”

Trump added his own FBI director, Christopher Wray, was “wrong” when he said during congressional testimony that campaign aides should always report offers of assistance from foreign entities to the bureau.

Just recently, Trump adviser and son-in-law, Jared Kushner, said he wasn’t sure if he would report a future offer of foreign assistance to the FBI, and Trump’s personal attorney, Rudy Giuliani, has been openly gathering information from Ukrainian officials that he says he hopes could be used in a 2020 race against Joe Biden, whose son Hunter sat on the board of a Ukrainian gas company, though about two weeks ago, a Ukrainian prosecutor cleared Hunter Biden of any wrongdoing.

Yes, the president is walking a very thin line. It is illegal to accept a campaign contribution from a foreign national, but there is debate over how to count information.  Most importantly, it is illegal to conspire with a foreign government to affect a U.S. election by breaking other laws, such as stealing documents or acting as an agent of a foreign government without registering with the U.S. government.

So President Trump’s comments drew outrage from Democrats, while some Republicans tried to conflate President Trump’s stance with that of Democrats who financed the work of former British intelligence officer Christopher Steele, who compiled a dossier about Trump and his alleged ties to Russia.

George Washington warned of the “insidious wiles of foreign influence” as he left office in 1796.

“The jealously of a free people ought to be constantly awake, since history and experience prove that foreign influence is one of the most baneful foes of republican government.”

Alexander Hamilton warned in the Federalist Papers of “the desire in foreign powers to gain an improper ascendant in our councils.”

Sen. Lindsey Graham (R-S.C.) said he talked to Trump after his comments and told him he couldn’t take help from a foreign government.  But Graham said he thought Trump had no intention of actually accepting foreign help.

Most folks found President Trump’s comments mind-boggling.

--A Democratic-controlled House committee voted to hold Attorney General William Barr and Commerce Secretary Wilbur Ross in contempt of Congress for ignoring its subpoena seeking information about efforts to add a citizenship question to the 2020 census.  The Supreme Court is expected to rule on the census question soon.

The U.S. census traditionally counts all residents and doesn’t distinguish between citizens and noncitizen residents.  Opponents of the question say it would intimidate people who aren’t citizens, or those who live with people who aren’t citizens, from responding, bringing a distorted allocation of federal resources and congressional representation to areas with higher minority concentrations.

--President Trump said today he would not fire White House counselor Kellyanne Conway after a federal watchdog recommended that she be removed for repeatedly violating the Hatch Act by engaging in partisan political activity on behalf of her boss.

“No, I’m not going to fire her,” the president said on Fox News.  “I think she’s a terrific person.  She’s a tremendous spokeswoman.  She’s been loyal. She’s just a great person.”

Trump characterized the finding of the Office of the Special Counsel as an infringement of Conway’s First Amendment rights.

“It looks to me like they’re trying to take away her right of free speech.”

The OSC – unrelated to special counsel Robert Mueller’s office – informed Trump on Thursday that Conway has been a repeat offender of the Hatch Act by disparaging Democratic presidential candidates while speaking in her official capacity on TV and social media.

The White House is not bound by the recommendation of the OSC, which is run by a Trump nominee, Henry Kerner, who said his job is “to make sure the federal workforce stay as depoliticized and as fair as possible.”

--White House Press Secretary Sarah Sanders is leaving her post at the end of June, to return to her home state of Arkansas, President Trump praising Sanders as a “warrior.”

“She’s a warrior, we’re all warriors, we have to be warriors,” Trump said.

I have one word for Ms. Sanders, who they say is eyeing a future run for the governorship in Arkansas...whatever.

--Trump tweets:

“I meet and talk to ‘foreign governments’ every day. I just met with the Queen of England (U.K.), the Prince of Wales, the P.M. of the United Kingdom, the P.M. of Ireland, the President of France and the President of Poland.  We talked about ‘Everything!’  Should I immediately....

“....call the FBI about these calls and meetings?  How ridiculous!  I would never be trusted again.  With that being said, my full answer is rarely played by the Fake News Media.  They purposely leave out the part that matters.”

[This was one of the more embarrassing tweets of the Trump presidency.]

“When Senator @MarkWarnerVA spoke at length, and in great detail, about extremely negative information on me, with a talented entertainer purporting to be a Russian Operative, did he immediately call the FBI? NO, in fact, he didn’t even tell the Senate Intelligence Committee of...

“....which he is a member.  When @RepAdamSchiff took calls from another person, also very successfully purporting to be a Russian Operative, did he call the FBI, or even think to call the FBI?  NO!  The fact is that the phony Witch Hunt is a giant scam where Democrats...

“...and other really bad people, SPIED ON MY CAMPAIGN! They even had an ‘insurance policy’ just in case Crooked Hillary Clinton and the Democrats lost their race for the Presidency!  This is the biggest & worst political scandal in the history of the United States of America. Sad!”

 “The Fake News has never been more dishonest than it is today. Thank goodness we can fight back on Social Media. Their new weapon of choice is Fake Polling, sometimes referred to as Suppression Polls (they suppress the numbers).  Had it in 2016, but this is worse....

“The Fake (Corrupt) News Media said they had a leak into polling done by my campaign which, by the way and despite the phony and never ending Witch Hunt, are the best numbers WE have ever had.  They reported Fake numbers that they made up & don’t even exist.  WE WILL WIN AGAIN!”

“If President Obama made the deals that I have made, both at the Border and for the Economy, the Corrupt Media would be hailing them as Incredible, & a National Holiday would be immediately declared.  With me, despite our record setting Economy and all that I have done, no credit!”

“Wow!  Just got word that our June 18th, Tuesday, ANNOUNCEMENT in Orlando, Florida, already has 74,000 requests for a 20,000 seat Arena.  With all of the big events that we have done, this ticket looks to be the ‘hottest’ of them all.  See you in Florida!”

[This is Trump’s official campaign 2020 kickoff.]

Wall Street and Trade Wars

The big story in the markets is the coming meeting next week of the Federal Reserve’s Open Market Committee, June 18-19, with Wall Street expecting the Fed to lay the predicate for a cut in interest rates at its July meeting, and one other time this year, probably September. At least that is the feeling today.  But the economic data for the past week was solid, and the Atlanta Fed’s GDPNow indicator for the second quarter is up to 2.1%, a big improvement over last Friday’s 1.4% estimate.

Today we had a solid retail sales report for May, up 0.5%, ditto ex-autos, basically in line with expectations, with an upward revision for April.

Industrial production for May, 0.4%, was also good vs. consensus.

Earlier we had good news on inflation for last month, with producer prices 0.1%, ex-food and energy 0.2%; 1.8% and 2.3%, year-over-year, respectively.  Consumer prices for May were 0.1%, ditto core; and 1.8% and 2.0% vs. a year ago for the two. As in zero for the Fed to worry about on this front.

Plus with all the trade tensions and fears of a global, and domestic slowdown, Treasury yields continue to be at cycle lows, with the rate on a 30-year fixed rate mortgage just 3.82% vs. 4.62% a year ago, which is fueling the biggest rise in mortgage applications in four years, according to the Mortgage Bankers’ Association.  It’s as if a switch went off...as in, ‘Hey, rates really have been coming down.’

On the other hand, the second quarter is winding down and soon we’ll have another earnings season and there is no doubt profit growth has been slowing, so we’ll see what kind of expectations have been built in on that front.

And then there is the budget deficit, which for the month of May, as announced by the Treasury Department on Wednesday, was -207.8 billion, worse than expected, bringing the eight-month fiscal 2019 total deficit to $738.6 billion, 38.8 percent larger than in the same period of fiscal 2018 (the fiscal year being Oct. 1 to Sept. 30).

Total receipts for the first eight months of F2019 are up 2.3% to $2.275 trillion, with individual income taxes up 1.5 percent from last year for the period, while corporate taxes were down 8.6 percent.  Reflecting the impact of tariffs imposed on Chinese goods, receipts from customs duties were up 80.8 percent to $44.9 billion.

But outlays for the first eight months totaled $3.014 trillion, 9.3 percent more than a year ago, with spending on defense up 12.4 percent to $461.4 billion, while outlays for Medicare rose 22.7 percent to $462.6 billion and outlays for Social Security rose 5.7 percent to $687.0 billion.  Interest costs rose 15.6 percent from a year ago to $268.8 billion.

So despite the much-ballyhooed take from tariffs, as the president likes to tout, the deficit continues to explode because of spending.  The deficit had been forecast to reach $897 billion this fiscal year, up from $779 billion last year, and while proponents of the cuts can argue, ‘See, revenues are up,’ it’s about entitlement spending, stupid.  And no one has the guts to touch that.

The White House has said the tax cuts would pay for themselves by creating more revenue through faster and sustainable economic growth, but that has hardly been the case thus far.

---

Turning to the trade war....

President Trump said a few times this week he still expected to meet President Xi at the G20 summit in Osaka end of the month, but Trump’s own advisers acknowledge nothing substantive would really come out of such talks if they are even held.  At the same time, Trump is threatening to increase tariffs on the other $300 billion in Chinese goods he is targeting should the two sides not at least agree to move forward.

Top economic adviser Larry Kudlow said Thursday, “President Trump has indicated his strong desire for a meeting, but the meeting is not yet arranged formally.  He’s also indicated that if the meeting doesn’t come to pass, there may be consequences.”

Earlier, Treasury Secretary Steven Mnuchin called on Beijing to return to talks and follow through on its commitments or face more tariffs.

Mnuchin, at a Group of 20 meeting of finance ministers in Japan, declined to say whether China had been negotiating in good faith, but he laid all of the blame for the collapse of the talks on his Chinese counterparts.

“There’s no question where we are now, that this is a result of them backtracking on significant commitments,” Mnuchin said.  “For whatever reasons they decided to do that, I’ll leave to them.”

Mnuchin also said the U.S. government’s steps against Chinese telecommunications giant Huawei Technologies Co. are a national security issue and not related to trade.

China said it would respond firmly if the U.S. insists on escalating tensions, the foreign ministry said on Tuesday.

Foreign Ministry spokesman Geng Shuang said: “China does not want to fight a trade war, but we are not afraid of fighting a trade war.”

The United States continues to seek sweeping changes, including an end to forced technology transfers and theft of U.S. trade secrets.  It also wants curbs on subsidies for Chinese state-owned enterprises and better access for U.S. firms in Chinese markets.

The best hope for Osaka is a potential further truce on future tariffs, coupled with an agreement to resume talks, but that’s all going to depend on what transpires the next few weeks, I suspect, more on the geopolitical scene than anything else, such as a ginned-up crisis in the South China Sea, or an overreaction by Beijing in Hong Kong.  [Much more below on this last one.]

On Thursday, Costco, Target, Walmart and more than 600 companies and trade associations signed a letter to President Trump, Kudlow and other economic officials urging the administration to “get back to the negotiating table” to avoid raising tariffs further on Chinese goods and to work with allies so that U.S. businesses don’t suffer disproportionately.

Plus you have the actions against Huawei.  The Trump administration blacklisted it, barring companies from supplying U.S. technology to Huawei without a license.  And the other action taken enables U.S. officials to ban telecommunications gear and services from “foreign adversaries.”  But in a question earlier this month, Trump indicated Huawei could be a bargaining chip in the trade talks, which is absurd, because they are either a security threat or they aren’t.

Sens. Marco Rubio (R-Fla.) and Mark Warner (D-Va.) send a letter to Secretary of State Pompeo and U.S. Trade Representative Robert Lighthizer, saying Huawei shouldn’t be used that way because it’s products do indeed pose a national security risk.

For its part, Chinese authorities have been calling in some of the world’s largest tech companies to tell them they could face repercussions if they respond too aggressively to U.S. trade restrictions.  Among those summoned were Intel, Qualcomm, Microsoft, Dell, and South Korea’s Samsung Electronics, as well as Nokia and Cisco Systems.

From an editorial for the Global Times, a Chinese Communist Party mouthpiece:

“China cannot accept the bossy U.S. approach.  Washington uses tariffs as a stick, a hegemonic move that threatens China’s national interests.  If the U.S. institutionalizes such an attitude toward China, uses tariffs and cuts off supply of high-tech products like chips as leverage, China will firmly resist U.S. pressure at whatever cost....

“China and the U.S. should avoid the worst-case scenario that will be detrimental to both countries and their peoples. If the U.S. chooses to suppress China, China’s countermeasures will be its strategic choice.”

Meanwhile, on the Mexico front, as part of the deal reached last Friday on border security and illegal immigration that averted the threat of U.S. tariffs, President Trump told his 61 million Twitter followers in an all-caps message that Mexico had agreed to “immediately begin buying large quantities of agricultural product from our great patriot farmers.”

But this just isn’t true.  Any great benefits for the farmers would be in the U.S.-Mexico-Canada agreement (USMCA), or that couldn’t be sold to the public and Congress as a great deal.

But the president said all kinds of things regarding the immigration accord, and it’s true that Mexican officials opened negotiations on some of the issues agreed to months ago, such as the deployment of national guard troops in the south of Mexico, even though the ‘new’ Mexican national guard is just being formed.

And the expansion of a program to allow asylum-seekers to remain in Mexico while their legal cases proceed was first reached in December, after painstaking negotiations between the two countries.  Former Department of Homeland Security Sec. Kirstjen Nielsen announced the Migrant Protection Protocols during a hearing of the House Judiciary Committee before Christmas.

But we’ve learned that using threats of punitive action even against allies has become a staple of President Trump’s diplomatic playbook, much to the chagrin of business leaders and many in his own party, who at least could breathe a sigh of relief when the tariff threat was withdrawn, if but temporarily, last Friday.

For now, it is far too early to tell whether the Mexican government can hold up its end of the bargain when it comes to slowing the migration into the United States.

But even if many of the steps agreed to were already in existence, President Trump likes to declare victories, even if nothing new has really been achieved, and we can all see another declared victory coming down the pike. 

The recent migrant influx – 133,000 detained last month on the U.S. southern border, more than twice as many as December – is going to fall in the coming weeks as searing summer heat kicks in.  It’s like this every year.  But that will be a victory, and even Mexican President Manuel Lopez Obrador can claim his efforts have succeeded as well, at least for a few months.

You can see that Trump could pull the same stunt next spring, heading into the heat of the election campaign.

For now, there is a 45-day window for Mexico to show some progress with its increased enforcement efforts, with the Mexican government needing to show the flow of migrants has been significantly reduced after 90 days.  Mexico will have to adopt safe third country status, which would mean migrants seeking asylum would have to make such a request in the first safe country they crossed.

Under such safe third country status, that country for many Central American migrants fleeing poverty, violence and corruption in their native countries would be Mexico.

But such a change would require legal changes that would take at least 90 days and would need to be ratified by Mexico’s Congress, and this process needs to begin in just 45 days.

If Mexico were to be a safe third country, migrants’ asylum applications would be processed there rather than in the U.S., but there is no border infrastructure for Mexico’s southern border, like there is in the north.

Jose de Cordoba / Wall Street Journal

“President Trump made Mexico a political piñata from the first day of his presidential campaign.  Now, the historically fraught relationship has suffered another major blow.

“A last-minute deal on Friday stopped Mr. Trump from imposing tariffs that would have devastated Mexico’s economy.  But his attacks have changed the atmosphere between the two countries from one of active cooperation and friendship back toward the frosty coexistence that prevailed before the North American Free Trade Agreement went into effect in 1994.

“ ‘It sets us back 25 years and can be seen as an attempt to expel Mexico out of North America to a time when we were neither a business partner nor a strategic ally,’ says Carlos Heredia, a political-science professor at Mexico’s CIDE university.  ‘We are still a neighbor of the U.S. – because we can’t physically go anywhere else.’

“Geography is still destiny.  Mexico shares an almost 2,000-mile-long border with the U.S., the world’s largest economy and the market for 80% of Mexican goods.  Mexico, whose capital was occupied by U.S. troops for nine months and lost more than half its territory in 19th-century wars, has little choice but to get along with its powerful neighbor.

“Mexican President Andres Manuel Lopez Obrador made this clear in a speech he gave in the border city of Tijuana on Saturday.

“ ‘We are not distant neighbors,’ he said at a rally attended by dozens of political, religious and business leaders.  ‘I’m not raising a clenched fist, but an open and frank hand,’ he said, addressing Mr. Trump.

“The U.S. president has a 5% approval rating in Mexico, according to a poll by El Financiero newspaper taken at the beginning of the month....

“According to a separate 2018 Pew Research Center Poll, only 32% of Mexicans hold a positive view of the U.S., compared with 66% near the end of President Obama’s time in office.

“ ‘The damage has been done, independently of how this turns out,’ said Mr. Heredia.”

Finally, President Trump said on Thursday that Canada and Mexico are completely in line on the new North American trade deal and it is up to the United States to get it passed.  Canada said Prime Minister Justin Trudeau plans to meet Trump on June 20 in Washington to discuss ratification.

It’s up to the House and Nancy Pelosi for their part, with Senate Republicans pushing for a vote before the August recess to avoid budget debates and 2020 presidential campaign activity that will intensify in the fall.

But Pelosi controls the schedule for trade legislation in the House and USMCA does not appear likely to come to a vote in that chamber during the summer.  Expect some very vicious tweets during “executive time” over the coming weeks and months as a result.

Europe and Asia

After last week’s plethora of economic data, little this week for the eurozone, with Eurostat reporting April industrial production declined 0.5% over March, and down 0.4% year-over-year, which is reflective of the poor PMI data on manufacturing these days.

In the UK, GDP for April was down 0.4% month-over-month, with GDP for the three months to April 0.3%, 1.3% annualized, vs. the first quarter’s 0.5%.  [Britain likes to report rolling three-month periods from time to time.]

Auto output in the UK cratered 24% month-over-month in April, the biggest decline on record, due to planned “stoppages” ahead of the original March 29 Brexit date, since extended to Oct. 31.

Manufacturing overall in the UK in April was down 3.9% and the biggest decline since June 2002!  All of this is Brexit-related, and the uncertainty businesses and consumers face.

Brexit: So this week the Conservative Party leadership contest began in earnest to see who would replace Prime Minister Theresa May, who earlier gave up her party leadership but remains PM until the Tories elect a new head.

And in the first round of voting, as expected, former foreign minister Boris Johnson was on top with 114 of 313 votes cast, with current foreign minister Jeremy Hunt at 43 and environment minister Michael Gove at 37.  Former Brexit minister Dominic Raab received 27 of the votes from Conservative lawmakers.

Gove had been expected to do better, until his campaign lost momentum in the wake of his cocaine use confession.

So now we have a second round of voting on Tuesday, June 18, 33 votes needed to pass the threshold for moving on, and then in succeeding days until the Party comes up with two candidates, Johnson most certainly one of them, whereupon a ballot is mailed to the wider Conservative Party membership who will then pick a leader, the whole process expected to be wrapped up by end of July.

Which then leaves a whopping three months before Brexit, October 31...Halloween.

Johnson kicked off his official campaign on Wednesday with a pledge to lead Britain out of the European Union.  “After three years and two missed deadlines, we must leave the EU on October 31.  I am not aiming for a no-deal outcome,” but if need be, no-deal it will be, Johnson is saying.

Johnson told supporters that it was “right for our great country to prepare” for a no-deal outcome.  He said any delay to Brexit would “further alienate not just our natural supporters but anyone who believes that politicians should deliver on their promises.” 

And Johnson warned his party it would “kick the bucket” if it went into the next election having failed to carry out the mandate given to it by the British people.

That said there was zero clarity on just what Johnson’s Brexit plan might be or how he might go about putting together a new deal that the European Union would be prepared to negotiate on.  A European Commission spokesman said on Tuesday that the election of a new British prime minister will not change the accord on Britain’s departure from the bloc agreed to between the EU and Theresa May.

Boris Johnson has pledged to withhold billions in liabilities owed to the EU’s budget, to which the spokesman said: “Everybody knows what’s on the table.  What is on the table has been approved by all member states and the election of a new prime minister will not change the parameters.”

Greece: The country is on track for a general election on July 7, three months ahead of schedule, after the president accepted a request from Prime Minister Alexis Tsipras to dissolve parliament following a heavy defeat in European parliamentary elections.

Tsipras said he wanted to avoid months of campaigning that might have endangered the bailed-out country’s economy.

Last month in the Euro vote, Tsipras’ governing Syriza party lost by more than 9 points to the main opposition, the conservative New Democracy party, with opinion polls now pointing to New Democracy comfortably winning the July vote.

The markets welcomed the announcement of a quick election and the probable ascension of a pro-business government.

But give the socialist Tsipras credit.  He was swept to power in January 2015 amidst the Greek debt crisis, running on a populist platform that resonated with austerity-weary Greeks, who rejected the establishment.

Tsipras at the time pledged to scrap all the painful spending cuts, tax hikes and income reductions demanded by the EU and the International Monetary Fund in return for the rescue loans that protected Greece from bankruptcy.

But then Tsipras saw the light, and bit the bullet, and in order to sign a new multibillion-euro bailout, he had to further upset the people, signing a new agreement that was conditional on further tax hikes and pension cuts.

Greeks had to suffer through further pain, but now they are in better shape, whether they realize it or not, then they would have been had they crashed out.  [Granted, many would beg to differ from this opinion of mine.]

--Speaking of euroskeptics and nationalist politicians, in the wake of the European Parliament elections, it now appears that the nationalist parties of French opposition leader Marine Le Pen and Italy’s Deputy Prime Minister Matteo Salvini fell short of their goal of uniting all euroskeptic factions into one powerful caucus.

Nativist, anti-immigrant and euroskeptic parties gained in the May elections across the European Union, with Le Pen and Salvini seeking to unite them all into a single force to thwart the EU from within.

But disagreements over Russia and personal animosities have scuttled those hopes.  The Le Pen-Salvini alliance that existed prior to the latest vote failed to bring more than a handful of others on board.

So instead of becoming the second-largest voting bloc in the European Parliament, they are only fifth, with pro-European factions holding a two-thirds majority.

Ms. Le Pen’s Russia-friendly stance and the German nativist party Alternative for Germany presented a problem for another sizable flock of euroskeptics: Poland’s ruling Law and Justice party. [Valentina Pop / Wall Street Journal]

Turning to Asia, we had a slew of economic data for the month of May this week out of China.

Exports in the month unexpectedly eked out a gain, 1.1% vs. year ago levels, and vs. a decline of 2.7% in April, with exports to the U.S. down 4.2%, as you’d expect with the trade war, but they were up 6.1% to the European Union. 

Imports fell 8.5%, far worse than expected, which speaks to anemic demand in the domestic economy.

The trade surplus with the U.S. rose in May to $26.9 billion.

The Chinese Association of Automobile Manufacturers reported that overall sales fell 16% in May vs. a year ago, an 11th straight month of declines, with vehicle sales down 13%.  The only bright spot was electric vehicle sales, up 42% for the first five months of the year vs. a year ago, though this segment still just represents 5.4% of the overall market in China. Beijing has been rolling out steps to try to support the auto industry.

Also for May, as released by the National Bureau of Statistics, industrial production hit a 17-year low, up only 5%, the worst since early 2002. 

Fixed-asset investment rose a less than expected 5.6% for the first five months of the year.   Infrastructure spending was up only 4%, all of these representing a further deceleration.

Real estate investment rose 11.2% the first five months as well.

But the only real positive was retail sales, up a better than expected 8.6% in May, bucking a trend, having come off a 16-year low in April.

On the inflation front, the May producer price index was 0.6% year-over-year, according to the NBS, while consumer prices rose 2.7% yoy.

In Japan, first-quarter GDP was revised up a tick to 2.2% annualized, but this decent pace is expected to slow in the coming quarters, especially as a national sales-tax hike is in the offing for October.

Street Bytes

--Stocks finished up a second week, though it was a quiet one in terms of intraday volatility, with the Dow Jones up 0.4% to 26089, the S&P 500 up 0.5% and Nasdaq 0.7%.

--U.S. Treasury Yields

6-mo. 2.17%  2-yr. 1.84%  10-yr. 2.08%  30-yr. 2.59%

Essentially unchanged on the week, ditto the German 10-year (Bund) at -0.26%.

--The price of crude oil fell early in the week, and despite further attacks on tankers near the Strait of Hormuz, stayed that way, weighed down by a weaker oil demand outlook and a rise in U.S. crude inventories despite growing expectations of ongoing OPEC-led supply cuts.  The U.S. Energy Information Administration cut its forecasts for 2019 world oil demand growth and U.S. crude oil production in its monthly report released Tuesday.  A surprise rise in U.S. crude stockpiles also kept oil prices under pressure.

On the week, crude finished down about $1.50 to $52.52.

OPEC announced it had cut its forecast for global oil demand growth and warned of potential further cuts as international trade disputes continue to fester, building a case for prolonged supply restraint over the rest of 2019.  The oil producer group meets in a few weeks to decide whether to maintain supply curbs, and with the decline in prices, and OPEC’s demand forecast, there seems to be little doubt they (including non-member Russia) will stick with the 1.2 million barrels a day cut in output they instituted Jan. 1.

Friday the Paris-based International Energy Agency said the outlook for oil demand growth in 2019 has dimmed due to the worsening prospects for world trade, although stimulus packages and developing countries should boost growth going into 2020.  The IEA is looking at demand growth of 1.2 million barrels per day this year, climbing to 1.4m bpd for 2020.

U.S. sanctions on Iran and Venezuela, an output cut pact by OPEC plus its allies, fighting in Libya and attacks on tankers in the Gulf of Oman added only limited uncertainty to supply, the IEA said.

Surging U.S. supply as well as gains from Brazil, Canada and Norway would contribute to an increase in non-OPEC supply of 1.9 million bpd this year and 2.3m in 2020.

Separately, according to BP’s annual statistical review published Tuesday, world-wide demand for energy grew 2.9% in 2018, its fastest rate since 2010.  The company said much of the growth was due to extreme weather, record hot and cold days that drove up air conditioning and heating use, particularly in China, the U.S. and Russia.

In the U.S. energy consumption rose 3.5% in 2018.  Natural gas accounted for almost half of total demand growth.

The BP report also noted that with the rise in energy demand, carbon emissions from energy use rose by 2%, making it appear increasingly difficult for governments to meet agreed upon targets to reduce global emissions.

--Raytheon and United Technologies have agreed to an all stock “merger of equals” in a deal that if approved creates an aerospace and defense powerhouse with annual sales exceeding $70 billion, second only to Boeing.

The deal would close during the first half of 2020, following the previously announced United Technologies spin-off of its Otis elevator and Carrier building systems units.

The newly-formed company will be known as Raytheon Technologies Corp. and adjusted for the spin-offs will have around $74 billion in pro forma 2019 sales.  It will be headquartered in the greater Boston area.

United Technologies’ Greg Hayes will lead the post-merger company as CEO, with Raytheon’s Tom Kennedy assuming the role of executive chairman.

UTX aerospace products include jet engines manufactured by subsidiary Pratt & Whitney (including for the F-35 fighter jet).  Raytheon produces the Tomahawk and Patriot missiles, among other military weaponry.  But there is little overlap between the two companies, which is critical to gaining regulatory approval.

--In 2018, soybean exports to China totaled $3.1 billion, a drop of nearly 75% from 2017, owing to the trade war.  This is after China had averaged $11.3 billion in sales over the last decade, according to the U.S. Department of Agriculture.

In the first four months of this year, even though there was a tariffs truce between the U.S. and China before trade talks broke down completely in May, U.S. soybean exports to China slid even further, by another 27%, compared to the same period in 2018.

And this week we learned Chinese soybean buyers are asking sellers in the United States to delay cargoes due to be shipped in July until August, as reported by Reuters, raising fears of cancellations like the ones that occurred last year.  This involves shipments that were part of an agreement during the trade truce last winter, with six million tons having already been shipped, but some 7 million tons was still due to be delivered to state-owned firms.

But with each week, we continue talking about the wet weather, the wettest on record in the nine-state Midwest region, going back to 1895, according to the Midwestern Regional Climate Center, as I noted last week.

So the combination of the trade war slashing exports, and then the inability in many parts of the region to plant crops, is leading to escalating financial and mental strains in the farm community, with new evidence suggesting increases in farm-related suicides.  Very sad.

--American Airlines Group Inc. CEO Doug Parker said it is “highly likely” the Boeing 737 MAX will be back in the air by mid-August.  The industry continues to wait for regulatory approval for a software fix and pilot training updates by Boeing that would pave the way for the troubled jet to fly again after the two deadly crashes in Indonesia and Ethiopia within five months.

On Sunday, American extended cancellations of about 115 daily flights until Sept. 3, but Parker said that decision merely reflected monthly scheduling plans for pilots and flight attendants.  “No one should take that as some indication that we don’t think the aircraft will be ready by Aug. 19,” Parker said during the company’s annual shareholders meeting.  “We wouldn’t be selling seats today if we didn’t think it was a highly likely possibility...that we’d be able to provide that service by Sept. 3,” he added.

But Boeing has yet to formally submit its software fix to the Federal Aviation Administration, which has maintained it has no specific timetable on when the 737 MAX would be cleared to return to service. 

Parker said he understood there is an “absolute fix” that will make the jet safe, though he acknowledged it may take time to regain public confidence in the aircraft.

American has 24 MAX jets and dozens more on order.

Today, Norwegian Air’s CEO Bjoern Kjos said he expects the MAX to be out until end of August, thus missing out on the highly profitable European summer season, this being a major discount airline on the continent.

--Tesla CEO Elon Musk said at the company’s annual shareholder meeting Tuesday that the electric carmaker has “a decent shot at a record quarter on every level.”  Musk is trying to soothe concerns about weak demand for the company’s sedans.  He also said Tesla was on track to hit its volume production goal by the end of this year, after deliveries fell 31% in the first quarter, sparking concerns about the company’s ability to make profits and meet its delivery targets.

Tesla previously said it plans to deliver 90,000 to 100,000 vehicles in the current quarter versus 63,000 in the first, and is aiming to deliver 360,000 to 400,000 vehicles in 2019. Musk said the company was hoping to unveil its electric pickup truck this summer, and get into semi-truck production toward the end of next year.

Tesla, with only four profitable quarters in its 16-year history, posted a net loss of $702 million in the first quarter.  Revenue fell to $3.7 billion from $6.3 billion in the previous quarter, the fourth quarter of 2018.

--Foxconn Technology Group said it is ready to shift production for Apple out of China if necessary, as the electronics assembler tried to assuage investors’ concerns over the U.S.-China trade conflict.  In a rare conference call with investors (as in supposedly the first-ever), senior executives at Taiwan-based Foxconn sought to address investor uncertainty amid the company’s succession plan for founder Terry Gou, who is standing down as chairman to focus on his campaign for Taiwan’s presidency.  But most of the discussion was on the trade war and the impact tariffs would have on the core of Foxconn’s business – assembling phones and iPads for Apple in China.

The company said Foxconn has sufficient manufacturing capacity outside of China to supply Apple should that be necessary.  Foxconn does have plants in Brazil, Mexico, Japan, Vietnam, Indonesia, Czech Republic, the U.S. and Australia, according to an investor presentation.

Around 50% of Foxconn’s revenue is related to Apple, but only 25% of its manufacturing lies outside China, according to Foxconn executives.

For its part, China has warned foreign tech companies that there would be unspecified consequences if they pulled out of China.

--Facebook Inc. uncovered emails that seem to show CEO Mark Zuckerberg was aware of potentially problematic privacy practices at the company, the Wall Street Journal first reported, citing people familiar with the matter.

The social media giant discovered the emails in the process of responding to a federal privacy investigation, the Journal reported, raising concerns it would be harmful to the company if the emails became public.  The Journal is saying this is a reason Facebook sought to reach a quick settlement of the investigation by the Federal Trade Commission.

The FTC has been looking into whether Facebook violated the terms of its 2012 consent decree with the agency related to privacy issues, and the emails sent around that time appear to indicate that Zuckerberg and other senior executives didn’t put compliance with the FTC order at the top of their priorities list, according to the Journal.

A Facebook representative responded: “We have fully cooperated with the FTC’s investigation to date and provided tens of thousands of documents, emails and files. At no point did Mark or any other Facebook employee knowingly violate the company’s obligations under the FTC consent order nor do any emails exist that indicate they did.”

But it’s not clear just what the emails say.

Peggy Noonan / Wall Street Journal

“I’ll start with a personal experience and then try to expand into Republicans and big tech.

“In the spring of 2016, Facebook came under pressure, stemming from leaks by its workers, over charges of systematic political bias.  I was not especially interested: a Silicon Valley company that employs thousands of young people to make decisions that are often ideological will tilt left, and conservatives must factor that in, as they’re used to doing.  My concerns about Facebook had to do with its apparently monopolistic nature, slippery ethics and algorithmic threats to serious journalism.

“Soon after, I received an email from Mark Zuckerberg’s office inviting me and other ‘conservative activists’ to attend a meeting with him to discuss the bias charges in an off-the-record conversation.  I responded that I was not an activist but a columnist, for the Journal, and would be happy to attend in that capacity and on the record.  That didn’t go over too well with Mr. Zuckerberg’s office!  I was swiftly told that wouldn’t do.

“What I most remember is that they didn’t mention where his office is.  There was an air of being summoned by the prince.  You know where the prince lives.  In the castle. Who doesn’t know exactly where Facebook is?

“In February 2018 Nicholas Thompson and Fred Vogelstein of Wired wrote a deeply reported piece that mentioned the 2016 meeting.  It was called so that the company could ‘make a show of apologizing for its sins.’  A Facebook employee who helped plan it said part of its goal – they are clever at Facebook and knew their mark! – was to get the conservatives fighting with each other...

“After the meeting, attendees gushed, calling Mr. Zuckerberg and his staffers humble and open.  Glenn Beck praised the CEO’s ‘earnest desire to ‘connect the world.’’

“Never were pawns so happily used.

“I forgot about it until last summer, when Mr. Zuckerberg’s office wrote again.  His problems were mounting.  I was invited now, with an unspecified group of others, to ‘an off the record discussion over dinner at his home in Palo Alto.’ They used that greasy greaseball language Silicon Valley uses: Mr. Zuckerberg is ‘focused on protecting’ users and thinking about ‘the future and how best to serve the Facebook community.’

“I ignored the invitation. They pressed.  Their last note reached me at an irritated moment, so I wrote back a rocket, reminding him of the previous meeting and how it had been revealed to be a mischievous and highly political enacting of faux remorse.  I suggested that though it was an honor to be asked to cross a continent for the privilege of giving him my time, thought and advice, I would not.  I added that I was sorry to say he strikes me in his public, and now semiprivate, presentations as an imperious twerp.

“For the second I actually hesitated: The imperious twerp runs the algorithms, controls the traffic, has all the dark powers!  But I am an American, and one with her Irish up, so I hit send.

“And I’m still here, at least at the moment, so I guess that’s OK.”

I’ve called for Mr. Zuckerberg to be “indicted” on numerous occasions.  You’d think that would hit certain algorithms.

Ms. Noonan continues:

“We’re Americans and we love money and success and the hallowed story of the kid in the garage who invents the beautiful product that changes the world.

“And Republican officials – they can’t help it, they don’t just rightly love business; they love big business, they love titans. It’s almost romantic: Look what people can do in America!  He started it in his dorm room!  And now we’re at lunch!....

“Here’s what they should be thinking: Break them up.  Break them in two, in three; regulate them.  Declare them to be what they’ve so successfully become: once a pleasure, now a utility....

“Why are Republicans so slow to lead?  The Times quoted Republican Sen. Josh Hawley as saying ‘the dominance of big tech’ is a ‘big problem.’  They ‘may be more socially powerful than the trusts of the Roosevelt era, and yet they still operate like a black box.’

“He’s right.

“But I read about lobbyists coming at Republican congressional leaders and I think, it’s going to be like Mr. Zuckerberg’s meeting with the conservatives in 2016.  A tech god will give them some attention, some respect, and they’ll fold like a cheap suit.

“If they are as stupid and unserious as their critics take them to be, they will go to the meeting and be used.

“They should say no and hit send.”

--A group of state attorneys general filed a lawsuit on Tuesday to block the proposed merger of T-Mobile US Inc. and Sprint Corp., which makes zero sense, especially as federal antitrust officials are still reviewing the more than $26 billion deal.

The suit alleges that the union of the third- and fourth-largest wireless carriers in the U.S. would drive up prices for cellphone services.  It was filed in a federal court in New York and was led by the attorneys general of New York and California.

New York AG Letitia James said at a news conference: “The deal is bad for consumers, it’s bad for innovation, it’s bad for workers.”  She added: “There’s no rule or regulation that says we have to wait for the DOJ (Department of Justice)” to rule on the merger.

Most experts say they’ve never seen a situation where state attorneys general challenged a merger of this size and prominence on their own, let alone to take such an action while the Justice Department review was pending.

But what’s stupid is that there is no way Sprint survives as a standalone.  Period.  And how is that good for anyone?

The deal should be approved.

--Atlantic City’s nine casinos saw their gambling revenue increase to nearly $267 million in May, an increase of 22.5% from a year earlier.  Granted, there were two more casinos operating this May than last May, which accounted for much of the increase.

The Golden Nugget had the largest increase, up 10.3% to $31.2 million; Resorts was up 4.1%; and Caesar’s 3%.

Tropicana had the biggest decline, down 14.6% to $29.3 million; Borgata was down 7.1%.

The casinos earned $5.5 million in sports betting revenue.

--We note the passing of economist Martin Feldstein, a top adviser to presidents and one of the most influential academics of his generation.  He was 79.

Harvard University colleague Jeremy Stein, a former member of the Federal Reserve Board of Governors, said in an email to colleagues, that Feldstein was a “world-renowned scholar, teacher and policy-maker, Marty was the pre-eminent bridge-builder in the economics profession, someone who did more to bring people and ideas together in a congenial way than just about anyone else.”

Feldstein was a professor of economics at Harvard since 1969, but he also served as chairman of the White House Council of Economic Advisers from 1982 to 1984 under President Ronald Reagan.  And later he served in advisory positions to President George W. Bush and President Obama.

Feldstein largely focused on unemployment, taxes, inflation and public spending, and did pioneering work in the 1970s on how taxes influence economic behavior by businesses and individuals.  He was an advocate for small government, low taxes and control of the federal budget deficit.

As recently as this March, Feldstein penned commentary for the Wall Street Journal, warning about the rapid growth of the U.S. budget deficit and national debt.

--Shares in Beyond Meat soared from $99 at last Thursday’s (June 6) close to $186 intra-day this Monday, before it lost 25% on Tuesday after a Wall Street analyst said, in essence, ‘Now hold on here...can we get real?’  I mean the company’s shares had soared 570% since their May 2 debut on the Nasdaq.

JPMorgan analyst Ken Goldman wrote, “This downgrade is purely a valuation call.”  He pointed out that to justify a price of $170-$180, investors would have to swallow the belief that Beyond Meat’s revenues would reach $5 billion by 2020, when they logged sales of $100 million in 2018.

You also have the issue of competition, which is growing rapidly in the veggie-burger market.  Just Thursday, Tyson Foods said it was getting into the segment, though the company didn’t give any real details on how it would do so.  Today, Beyond Meat shares rallied back to $150.

--Krispy Kreme announced it will open the “first-of-its-kind flagship” store in Times Square in early 2020, a location expected to serve more guests annually than any other location around the world.

CEO Michael Tattersfield said in a statement: “In the most iconic city in the world, the Krispy Kreme Times Square Flagship will showcase our brand on the global stage and inspire customer wonder. We love making awesome doughnuts – and New Yorkers deserve hot and fresh doughnuts!”

The 4,500-square-foot shop at Broadway and 48th Street will be open 24 hours a day, seven days a week and have stadium-style seating inside the world’s largest Krispy Kreme doughnut box.

It will also feature the world’s largest Hot Light, that signals that hot, fresh doughnuts are available.

But get this; the store will feature a “glaze waterfall.”

I’m drooling and can’t find my bib. And I’m imagining Homer Simpson’s reaction to this exciting news.

Foreign Affairs

Iran:  The U.S. military released a video which it says shows Iran’s Revolutionary Guard removing an unexploded mine from the side of an oil tanker damaged  in an attack in the Gulf of Oman on Thursday.  U.S. officials also shared a photo of the Japanese tanker before the apparent mine was removed. 

A Norwegian tanker was also damaged, the attacks coming a month after four tankers were damaged in an attack off the coast of the United Arab Emirates, also allegedly perpetrated by Iran, according to the U.S., though it did not produce any evidence.

Iran said it “categorically rejects” the allegation it was involved in Thursday’s attacks, let alone the earlier ones.

The Gulf of Oman lies at one end of a vital shipping lane, the Strait of Hormuz, through which 20 to 33 percent of the world’s transported oil passes every year, depending on how you define it.

According to the U.S. account, U.S. naval forces received distress calls from the Norwegian-owned tanker and from the Kokuka Courageous, following near-simultaneous explosions, with the USS Bainbridge observing Iranian naval boats operating in the area in the hours after, and later removing the unexploded mine from the side of the Kokuka Courageous.

The operator of the Courageous said its crew abandoned ship after observing a fire and an unexploded mine.  The tanker was about 20 miles off the Iranian coast when it sent its emergency call.  The two vessels were carrying petrol products and methanol from the UAE and Saudi Arabia, to Taiwan and Singapore.

U.S. Secretary of State Mike Pompeo said at a news conference Thursday in Washington: “It is the assessment of the United States that the Islamic Republic of Iran is responsible for the attacks.

“This assessment is based on intelligence, the weapons used, the level of expertise needed to execute the operation, recent similar Iranian attacks on shipping, and the fact that no proxy group operating in the area has the resources and proficiency to act with such a high degree of sophistication.”

UK Foreign Secretary Jeremy Hunt said his country’s “starting point” was to “believe our U.S. allies.”

“We are taking this extremely seriously and my message to Iran is that if they have been involved it is a deeply unwise escalation which poses a real danger to the prospects of peace and stability in the region,” Hunt said.

The Iranian mission to the United Nations said it called the allegation “unfounded” and “Iranophobic.”

“Iran categorically rejects the U.S.’ unfounded claim with regard to 13 June oil tanker incidents and condemns it in the strongest possible terms,” the statement said.

Iranian Foreign Minister Zarif accused the U.S. of making an allegation “without a shred of factual or circumstantial evidence” and attempting to “sabotage diplomacy.”

The attacks occurred as Japanese Prime Minister Shinzo Abe was meeting with Iran’s Supreme Leader Ayatollah Ali Khamenei during a two-day visit by Abe to Iran.

Today, Iran said it was responsible for maintaining the security of the Strait of Hormuz, adding that blaming Tehran for attacks on two oil tankers in the Gulf of Oman was alarming.

“We are responsible for ensuring the security of the Strait and we have rescued the crew of those attacked tankers in the shortest possible time,” a foreign ministry spokesman was quoted as saying.

“Obviously, accusing Iran for such a suspicious and unfortunate incident is the simplest and the most convenient way for (Secretary of State) Pompeo and other U.S. officials.  These accusations are alarming.”

Iran’s oil exports, its economy’s lifeblood, have dropped to about 400,000 bpd in May from 2.5 million bpd in April last year, before President Trump pulled out of the 2015 nuclear deal between Iran and major powers that aimed to curb Tehran’s nuclear ambitions in exchange for sanctions relief.

This morning, President Trump gave his usual “we will see” when asked on “Fox and Friends” how he would respond to Iran’s latest alleged attack.

David Ignatius / Washington Post

“As Secretary of State Mike Pompeo accused Iran of ‘unprovoked attacks’ near the Strait of Hormuz, video screens behind him showed thick black smoke billowing from the two tankers that were struck Thursday. It was the dramatic imagery that sometimes precedes armed conflict.

“Pompeo didn’t offer hard evidence [Ed. assuming Mr. Ignatius wrote this just prior to the Revolutionary Guards video], and Iran denied the attacks.  The U.S. response in the escalating confrontation with Iran, for now, seems to be continued pressure short of war. ‘Our policy remains an economic and diplomatic effort to bring Iran back to the negotiating table,’ Pompeo said.

“Thursday’s attacks were especially brazen because one of the targeted ships is Japanese-owned, and Prime Minister Shinzo Abe was in Tehran at the time carrying a message from President Trump. As Pompeo put it, Abe’s mission was ‘to ask the regime to de-escalate and enter into talks.’ Abe was rebuffed in person by the supreme leader, Ayatollah Ali Khamenei, and, symbolically, by the attack on the tanker.

“The bottom line is that Trump’s ‘maximum pressure’ campaign has collided head on with Khamenei’s maximum resistance.  Trump’s recent talk about Iran’s supposed eagerness for negotiations has been self-deluding, but so is any hope that Iran will quickly moderate its behavior.  Met by American economic warfare, Iran’s hard-liners are doubling down with their own forms of deniable warfare, with mines, drones and proxy attacks.

“What are the internal dynamics of this escalating crisis, and where is it heading? Conversations with a half-dozen current and former senior U.S. officials and other experts produced some early assessments:

“—Iran is attacking partly because it has been badly hurt by U.S. economic sanctions.  Tehran’s early approach of strategic patience, hoping to wait Trump out, ‘has bled into gradual escalation,’ argues Behnam Ben Taleblu of the Foundation for Defense of Democracies.  ‘Iran is now willing to embrace the dynamic of risk’ to escape the economic straitjacket.

“—Trump has a new opportunity to broaden international support for his Iran policy, after isolating the United States last year by abandoning the Iran nuclear agreement....At a private meeting Thursday (at the UN Security Council), most members condemned the tanker strikes, a U.S. official said.  This coalition-building will increase.

“—Trump’s hopes for a quick win were misplaced....

“—Hard-liners are more ascendant than ever in Tehran.  Pompeo cited a steady escalation of attacks since early May on tankers, a Saudi oil pipeline, the U.S. Embassy compound in Baghdad and a Saudi airport.  Potentially more dangerous are Iran’s moves to escape provisions of the 2015 nuclear agreement.  Yukiya Amano, the head of the International Atomic Energy Agency, reported this week that Iran is increasing its production of enriched uranium, which was capped under the pact.

“Diplomatic feelers from Iran, which raised some hopes in Washington, lack support from the supreme leader’s camp....

“The tableau of recent weeks has been striking. Trump has been a whirling dervish of diplomacy, almost pleading for Iran to come to the negotiating table and discuss a broader, longer-lasting deal that Trump could claim was an improvement over the one negotiated by his predecessor.  Meanwhile, Khamenei has sat implacable, even as President Hassan Rouhani dangled hints that Iran might be willing to talk.

“But as long as Khamenei is alive, his voice is decisive. And it couldn’t have been clearer Thursday, as he rejected Abe’s mediation: ‘I do not consider Trump, as a person, deserving to exchange messages with.   We will not negotiate with the United State.’

“You could almost hear, in the supreme leader’s voice, an echo of Ayatollah Ruhollah Khomenei, who said during the Iran hostage crisis, ‘America can’t do a damn thing against us.’ That Iranian overconfidence is what makes this confrontation so dangerous.”

Editorial / Wall Street Journal

“Secretary of State Mike Pompeo on Thursday charged Iran with responsibility for the attack earlier in the day on two oil tankers in the Gulf of Oman.  Mr. Pompeo cited intelligence reports and the nature of the weapons used, most likely torpedoes, as evidence.  It is almost certainly true that Iran is behind the attacks, which makes it all the more important that the West unite in opposition to Iran’s aggression.

“This was a sophisticated attack that only a nation with a sophisticated military could carry out.  Within about 45 minutes Thursday morning, the two tankers were hit by projectiles at the waterline with sufficient force to set them on fire but not sink them. The Iranians, under intense financial pressure from American sanctions on their oil exports, were sending the world a message: Pressure the U.S. to lift the sanctions or there will be more of this, and worse, to disrupt oil shipments in the Gulf.

“The assault on the tankers validates the U.S. decision the past month, met with skepticism at the time, to send the aircraft carrier USS Lincoln into the Gulf along with destroyers and cruisers, in the expectation that Iran was planning an attack in the region.  Indeed it was.

“Nor were the Iranians subtle about the message sent.  The Japanese-owned Kokuka Courageous was hit even as Prime Minster Shinzo Abe was in Tehran offering himself as a mediator between the U.S. and Iran.  Iran’s strategy is to intimidate Europe and Japan by threatening vital shipments through the Strait of Hormuz and driving up the price of oil.

“It would send the worst possible signal if in the aftermath of these attacks the Europeans buckled to Iran’s military pressure.  The Iranians routinely send out Foreign Minister Mohammad Javad Zarif as the face of sweet reason before the world when their foreign policy, executed by Revolutionary Guards leader Qasem Soleimani, is to hit opponents militarily and repeatedly until they bend.

“It is no coincidence that the day before the tanker attacks, Iran’s Yemeni proxies, the Houthi militias, fired a missile into a Saudi Arabian airport, injuring 26 civilians.  A month earlier the Houthis carried out attacks on Saudi oil installations.

“These accumulating acts of aggression by Iran should make clear that Secretary Pompeo is right to insist that the U.S. proceed with its planned arms sales to Saudi Arabia.  A group of Senators has tried to block the sales, citing the murder of Jamal Khashoggi.  That point has been made, and the Saudis have paid a political and economic price for Khashoggi’s death.

“Lately, some have doubted the importance of the U.S. role in the region. Two oil tankers in flames from torpedo attacks in the Gulf of Oman refute that view. The unavoidable fact is that Iran remains the primary threat to stability in the Middle East.  The U.S. is right to be there, in force and prepared to defend the interests of itself and its allies.”

Meanwhile, with Prime Minster Abe attempting to play mediator, President Trump tweeted:

“While I very much appreciate P.M. Abe going to Iran to meet with Ayatollah Ali Khamenei, I personally feel that it is too soon to even think about making a deal. They are not ready, and neither are we!”

Syria: The Russian military said on Thursday that Syrian rebels had attacked a Turkish observation post in Syria’s Idlib province, which is a version at odds with Ankara’s, which said the attack was mounted by the Syrian army.  Turkey’s Defense Ministry said earlier that Syrian government forces had carried out what it assessed to be a deliberate attack, firing 35 mortar shells at one of its observation posts, wounding three Turkish soldiers.

But, as is their wont, Russia’s Ministry of Defense lied, blaming “terrorists” based in Idlib for the attack.

Turkey: Separately, Turkey was given a deadline of the end of July to choose between buying U.S. fighter jets and Russian anti-aircraft missile systems.  Acting U.S. Defense Secretary Patrick Shanahan set out the ultimatum in a letter to his Turkish counterpart.

Shanahan said Turkey could not have both the F-35 advanced fighter jet and Russia’s S-400 missile system.

The U.S. maintains the S-400 poses a security threat, and wants Turkey to buy its Patriot anti-aircraft systems instead.

Turkey has invested heavily in the F-35 program and has signed to buy 100 of the planes.  Turkish companies produce 937 of the F-35’s parts.

The issue is simple.  The Pentagon believes that if Turkey had both the F-35 and S-400, then Russian technicians would be able to access the plane’s vulnerabilities, putting U.S. pilots at additional risk.

But Turkey is saying it is too late for it to back out after negotiating the deal with the Russians.  Turkish personnel are already in Russia training on the S-400.

Israel: Last weekend, the U.S. ambassador to Israel, David Friedman, did not rule out an Israeli move to annex parts of the occupied West Bank, land that the Palestinians seek for a state, in an interview with the New York Times.  Israeli Prime Minister Netanyahu said in the run-up to an April election that he plans to annex Jewish settlements in the West Bank, a move that would trigger widespread international condemnation and doom any peace efforts.

Palestinian chief negotiator Saeb Erekat tweeted: “Their vision is about annexation of occupied territory, a war crime under international law.”

The Palestinian leadership has refused to deal with the Trump administration since it recognized Jerusalem as Israel’s capital. And then you had the move by Trump to recognize Israeli sovereignty over the Golan Heights, which at the time, Netanyahu said showed it was possible to annex West Bank settlements “within a gradual process and I prefer to do so with American recognition.”

But will Netanyahu remain in office.

China / Hong Kong: As noted above, protests erupted over the weekend in Hong Kong, with organizers claiming over a million people demonstrated last Sunday while calling for the resignation of Hong Kong leader Carrie Lam.  Police put the crowd at 240,000.  It was far more than that.

Hong Kong is allowed to keep its own local institutions under a “one country, two systems” arrangement and protesters see the bill as a whittling away of autonomy.

The proposed law would allow for some criminal suspects to be turned over to Communist Party-controlled courts in mainland China.  Residents in Hong Kong, a Chinese territory, have more freedoms than those in China and opponents fear democracy advocates, journalists and others could be targeted with the proposed law.

But pro-Beijing politicians see the bill as a measure to prevent the city from turning into a safe haven for fugitives of Chinese law.  The U.S. State Department this week stated concerns that a “lack of procedural protection” in the proposal could undermine Hong Kong’s autonomy and damage the territory’s “longstanding protections of human rights, fundamental freedoms and democratic values.”

Chinese state media said the protests are “hammering” the city’s reputation, with outbreaks of “lawlessness” undermining the rule of law.  The Global Times* blamed “radical opposition forces” and “the Western forces behind them” for hyping up and politicizing the amendments.

*I posted on my “Hot Spots” link an editorial from the Global Times so you can see the official government opinion.

Then Wednesday, there was another round of protests which grew into a riot, forcing the government to postpone a vote on the extradition bill.  A reading of it was slated for that day but the Legislative Council (LegCo, largely assembled by Beijing) said it would be postponed to “a later time.”

The violent clashes Wednesday, the worst violence the city has seen in decades, left more than 80 people injured as officers fired tear gas, rubber bullets and beanbag rounds to disperse the crowd, after tens of thousands of protesters – mostly in their 20s – brought part of the city to a standstill by occupying key roads to besiege the legislature and prevent it from holding debate.

In a rare move, prominent business leaders warned that pushing through the extradition law could undermine investor confidence in Hong Kong and erode its competitive advantages.  Not only will foreign investors be afraid to invest, with some CEOs potentially fearing arrest, but tourism would likely plummet.

Hong Kong Chief Executive Carrie Lam insisted there would be no changes to the government’s proposals, but at week’s end, LegCo was working to defuse the crisis by considering options including a pause in bringing forward the extradition bill, rather than a withdrawal, according to the latest gleaned from the South China Morning Post.

But clearly the Executive Council is split, with one side calling for further discussion on the bill, while the other side suggests the government should continue to fast track it through the legislature.

We learned later that as Hong Kong police attempted to disperse Wednesday’s throng, unknown hackers flooded the Telegram encrypted-messaging service with bogus signals, temporarily depriving demonstrators of a key organizing tool.  Company officials say the signals came from inside China.

“We’re currently experiencing a powerful DDoS attack,” short for distributed denial of service, Telegram tweeted.  “Telegram users in the Americas and some users from other countries may experience connection issues.”

Defense One later asked Telegram founder and CEO Pavel Durov where the attacks originated and he responded: ‘IP addresses coming mostly from China...coinciding with protests in Hong Kong.”

An expert told Defense One that such attacks are hard to stop when local authorities, in control of network traffic, want them to proceed.

As I go to post tonight, Hong Kong is preparing for further massive protests this weekend.  At what point does Beijing order something more than tear gas.  Hopefully, cooler heads in Xi Jinping’s inner circle will prevail.

Bret Stephens / New York Times

“Imagine if in 2018 the Trump administration had proposed legislation that would allow the government, on nearly any pretext, to detain, try and imprison Americans accused of wrongdoing at secretive black sites scattered across the country.

“Imagine, further, that 43 million Americans had risen in protest, only to be met by tear gas and rubber bullets while Mitch McConnell and Paul Ryan rushed the bill through a pliant Congress. Finally, imagine that there was no effective judiciary ready to stop the bill and uphold the Constitution.

“That, approximately, is what’s happening this week in Hong Kong.

“An estimated one million people – nearly one in seven city residents – have taken to the streets to protest legislation that would allow local officials to arrest and extradite to the mainland any person accused of one of 37 types of crime.  Political offense are, in theory, excluded from the list, but nobody is fooled: Contriving criminal charges against political opponents is child’s play for Beijing, which can then make its victims disappear indefinitely until they are brought to heel.

“In 2015, mainland authorities abducted five Hong Kong booksellers known for selling politically sensitive titles and held them in solitary confinement for months until they pleaded guilty to various offenses.  In 2017 Chinese billionaire Xiao Jianhua was abducted by Chinese authorities from the Four Seasons in Hong Kong.  He hasn’t been seen publicly since, while his company is being stripped of its holdings.

“The extradition bill is the next evolution in this repressive trend. It probably won’t be the last.

“Hong Kong’s relationship with the mainland is supposed to be governed by the principle of ‘one country, two systems.’  But as with any form of pluralism, it’s a principle that poses inherent dangers to Beijing.  It was little West Berlin that, merely by being free, helped bring down the mighty (as it seemed at the time) Honecker regime in East Germany in 1989.  The Chinese supreme leader, Xi Jinping, isn’t about to let that happen to him via Hong Kong.

“Then again, maybe he shouldn’t be so worried.  Throughout the 1980s the free world was politically united and morally confident: It believed in its liberal-democratic values, in their universality, and in the immorality of those who sought to abridge or deny them.

“It also wasn’t afraid to speak out. When Ronald Reagan called the Soviet Union ‘the focus of evil in the modern world,’ one prominent liberal writer denounced him as ‘primitive.’  But it was such rhetoric that gave courage to dissidents and dreamers on the other side of the wall.  What’s really primitive is to look upon the suppression of others and, whether out of deficient sympathy or excessive sophistication, remain silent.

“Compare the free world then with what it is today.  ‘I’m sure they’ll be able to work it out,’ was just about all Donald Trump could bring himself to say about the Hong Kong protests during a press conference on Wednesday with the Polish president, Andrzej Duda.  As clarion moments in U.S. moral leadership go, ‘Ich bin ein Berliner’ it was not....

“Why does Trump have next to nothing to say about the robbery of rights in Hong Kong?  Because, as far as he’s concerned, it’s a domestic Chinese affair.  Why does he seem to be indifferent to the act that Beijing’s behavior violates the 1984 Sino-British Joint Declaration?  Because that’s someone else’s business, too, concerning a treaty signed a long time ago by people who are now dead.

“All this means that Xi can dispose of the Hong Kong demonstrators as he likes without fear of outside consequences.  Under Trump, Uncle Sam might be happy to threaten tariffs one day and promise to make a deal the next.  But he no longer puts up his fists in defense of Lady Liberty....

“The world continues to endure a democratic recession, made worse by the surly ignorance of an American president.  It won’t last forever.  The efficient authoritarianism that is supposed to be the secret to China’s global ascendancy is being exposed for what it is – a state whose greatest fear is the conscience of those marching in Hong Kong’s streets.”

Editorial / Wall Street Journal

“The young demonstrators in Hong Kong this week have done the world a favor. In calling attention to their plight, they are educating the rest of us in the nature of President Xi Jinping’s Communist Party rule in Beijing.  Donald Trump in particular should be listening – and speaking up.

“The demonstrators – and the millions of Hong Kongers who marched peacefully Sunday – object specifically to a pending law that would allow extradition from the territory to the Mainland. The people know this will put anyone who criticizes China in jeopardy of being sent to the Mainland for almost certain conviction and punishment.  Hong Kong’s legacy of British law will still control – except in cases where China decides otherwise.

“The official disclaimers from Hong Kong chief executive Carrie Lam that China has no such intentions are meaningless. She was appointed by Beijing and takes her orders accordingly. She is insisting on moving ahead with the law despite the mass protests because China has demanded it.  Her job, and perhaps her own future freedom, would be jeopardized if she dared to resist.

“The new law is itself a violation of China’s promise to Hong Kong that it could continue to control its legal system for 50 years after its handover from the British in 1997.  As these columns wrote in 1984 after Margaret Thatcher struck here deal with Deng Xiaoping, ‘the essence of the [joint] declaration is that five million largely free people will soon have their futures determined by a totalitarian government not known for tolerance or stability.’   We urged Britain to amend its Nationality Act to admit to England all Hong Kongers who wanted to leave.

“China has been stable in the 35 years since, and for much of that time it was reforming economically and even easing up its political controls. But in the last decade, and especially in the Xi era, the Party has reasserted unbending control over Chinese politics and much of private Chinese life.

“It has herded a million Uighurs into re-education camps, arrested lawyers defending dissenters, harassed Christians in the underground church, and by next year will use facial-recognition surveillance to assign citizens a ‘social credit’ score that rates them on good or bad behavior.

“The slow asphyxiation of Hong Kong’s freedom is part of this trend, and it shows how the Xi regime will also abandon its international pledges.  Hong Kong has assisted China’s economic rise as an entrepot to the world and legal safe harbor.  Yet Beijing fears the territory because it is an example of how free Chinese can govern themselves.

“Mr. Xi is squeezing Hong Kong because he can and because he thinks he will pay no price for it.  If Ms. Lam jams the extradition law through the Legislative Council, the public will have no recourse beyond more protests or fleeing the territory.  The anger in the streets is the despair of people who know they will soon be unable to escape Beijing’s arbitrary justice.

“The world owes these people its attention.  The State Department and some in Congress have spoken up. But Donald Trump has so far said nothing, though the U.S. has considerable investment in Hong Kong.  Speaking the truth about Hong Kong won’t jeopardize a trade deal with Mr. Xi, who will only sign something in his own interests.  Mr. Trump might even improve the chances of a good deal by calling out China’s failure to keep its commitment to Britain and Hong Kong.

“Mr. Xi wants to expand China’s influence by narrowing the space for democratic self-government across the globe.  An American President’s duty is to push back and expand the scope for liberty.”

North Korea: President Trump said he received a “beautiful” letter from Kim Jong Un, which we later learned was to congratulate him on his birthday. Speaking to reporters at the White House, Trump said, “I think that something will happen that’s going to be very positive,” but gave no details.

Washington is seeking to rebuild momentum in stalled talks with Pyongyang.  Trump and Kim last met early this year in Hanoi but failed to reach any kind of agreement.

But Trump was speaking of the letter a day after the Wall Street Journal reported that Kim’s slain half-brother, Kim Jong Nam, was a source for the CIA.

The beautiful letter came after North Korean state media called on the United States on Tuesday to “withdraw its hostile policy” towards Pyongyang or agreements made at the Singapore summit a year ago might become a “blank sheet of paper.”

“I did receive a beautiful letter from Kim Jong Un... I appreciated the letter.  I saw the information about CIA with respect to his brother, or half-brother.  And I will tell him that will not happen under my auspices....I wouldn’t let that happen.”

A disgraceful statement, once again undercutting our intelligence apparatus.

Separately, a report from the Seoul-based Transitional Justice Working Group identified at least 323 sites used by Pyongyang for public executions, the result of four years of research and interviews with more than 600 North Korean defectors living outside the country.

“Public executions are to remind people of particular policy positions that the state has,” said the research director for the project.  The TJWG said 83 percent of a sample of 84 surveyed peple had witnessed a public execution at some time.

Japan: The government said Tuesday its imposing new restrictions for foreign students, after it lost track of more than 1,600 who were in the country to study.

Japan’s education ministry and immigration agency said they will stop approving any new applications from prospective research students, after it was discovered 1,610 skipped out of Tokyo University of Social Welfare.  The action marks the first time the Japanese government has placed restrictions on foreign students.

Russia: Russian police detained at least 400 people in central Moscow on Wednesday for taking part in a peaceful but unsanctioned demonstration protesting impunity and corruption in law enforcement agencies.  The protest came a day after police released prominent Russian investigative journalist Ivan Golunov, who had been arrested last week on drug-dealing charges that he said were fabricated by police in retaliation for his anti-corruption reports.

The arrest sparked a wave of protests and demands for his release from celebrities, journalists and civil society members that lasted several days.  Moscow’s police chief dismissed the case on Tuesday, citing a lack of evidence.  The dismissal was unprecedented in recent Russian history.  The protesters know this can happen to anyone.  [Similarly, Hong Kongers fear this will happen to them as well.]

But then President Putin on Thursday fired two police generals involved in the discredited criminal case against Golunov, a rare U-turn by the authorities in the face of anger from his supporters.

Poland: President Trump signed an agreement to send 1,000 additional U.S. troops to Poland while treating his visiting Polish counterpart to a military flyover at the White House as thanks for a commitment to buy F-35 fighter jets.

“It moves us to another era,” Polish President Andrzej Duda said Wednesday.

Since 2017, the U.S. has kept a steady rotation of about 4,000 troops in the Polish countryside.  The new force wouldn’t be combat troops but rather “enabling forces” with jobs such as manning drones, a U.S. official said.  No timetable was announced, with the expectation that the troops will come from other bases in Europe, specifically Germany.

President Trump said: “As you know, we have 52,000 troops in Germany, and Germany is not living up to what they’re supposed to be doing with respect to NATO, and Poland is,” referring to the 2% target of military spending vs. GDP.

Congo: Ebola has spread beyond the Democratic Republic of Congo to Uganda, where there have now been two deaths, which infectious disease experts say represents a “truly frightening” phase that could kill many more.

Venezuela: Jackson Diehl / Washington Post

“Is there still a crisis in Venezuela?  Judging from President Trump, you wouldn’t think so.  Back in January, the president and his top aides were seized with the cause of ousting the corrupt and autocratic regime in Caracas.  The White House delivered what it thought would be a decisive blow by blocking U.S. purchases of Venezuelan oil and hinted that a military intervention was under consideration.

“Five months later, President Nicolas Maduro is still in office – and U.S. policy is dormant. There has been no intervention, and after a couple of failed attempts to force the regime’s collapse, the Venezuelan opposition has gone back to negotiating with Maduro, with the help of Latin American and European governments.

“The U.S. is not participating.  Instead, The Post reported last month that Trump had taken to ‘complaining he was misled about how easy it would be to replace the socialist strongman.’”

So Trump picked a new target, Mexico.

Meanwhile, four million Venezuelan refugees and migrants have fled the crisis in their homeland, UN aid agencies reported this week.  Colombia is home to 1.3 million of them.

Random Musings

--Presidential tracking polls....

Gallup: 40% approval rating for President Trump, 55% disapproval (June 5, May 15-31), 87% Republicans, 33% Independents.
Rasmussen: 51% approval, 47% disapproval (Jun. 14).

In a new Quinnipiac University national poll of registered voters, President Trump has a 42% approval rating, 53% disapproval, which is good for this survey, one point shy of his best.

--In a Des Moines Register/Mediacom/CNN Iowa Poll of likely Democratic caucusgoers, former Vice President Joe Biden leads with 24%, followed by Bernie Sander at 16%, with Elizabeth Warren and Pete Buttigieg at 15% and 14%, respectively. Next is Kamala Harris at 7%.

--In a Quinnipiac survey of the Democrats field overall, Biden leads with 30% among Democrats and voters leaning Democrat.  This compares to his 35% standing May 21, and his 38% standing in an April 30 Quinnipiac poll.

Bernie Sanders is next at 19%, compared to 16% last month. Elizabeth Warren has 15%, compared to 13% on May 21, and Mayor Pete is at 8 percent.  [Kamala Harris 7 percent.]

--In a Quinnipiac poll of Texas voters, Biden has 48% to President Trump’s 44% in a head-to-head.  [Trump won the state in 2016, 52-43 over Hillary Clinton.]

Trump bests Elizabeth Warren 46-45, and Bernie Sanders 47-44 in Texas.  But it’s way too early.

But in head-to-head nationwide matchups, Biden leads Trump 53-40, according to a separate Quinnipiac poll, with Bernie Sanders beating the president 51-42.  Even Sen. Cory Booker leads Trump 47-42.

In the Trump-Biden matchup, women back Biden 60-34 percent, with men divided 47 percent for Biden and 46 percent for Trump.  White voters are divided with 47 percent for Trump and 46 percent for Biden.  Biden leads among black voters 85-12 and 58-33 among Hispanic voters.

Republicans go to Trump 91-6, while Biden leads 95-3 among Democrats and 58-28 among independent voters.

Importantly in this poll, 70 percent of voters say the nation’s economy is “excellent” or “good,” but only 41 percent of voters say Trump deserves credit for it.

--In a Monmouth University poll of likely Nevada caucusgoers (February), Biden leads with 36%, to Warren’s 19% and Sanders’ 13%.  [Buttigieg 7%, Harris 6%.]

Among very liberal potential Democrats and unaffiliated voters likely to attend the caucus, it’s Warren 27%, Sanders 26% and Biden 19%, with very liberal voters making up about one-quarter of likely caucusgoers.

The top issue of Nevada Democrats is health care (41%), followed by environmental concerns (17% climate change and 7% environment in general), and immigration (19%), per the Monmouth survey.

--The first debates among the Democratic presidential candidates are set for June 26 and 27 in Miami, 20 candidates that qualified, two groups of ten, one each night.

The first night features Elizabeth Warren, Beto O’Rourke, Amy Klobuchar and Cory Booker. 

The second night is the more interesting with Joe Biden, Bernie Sanders, Mayor Pete and Kamala Harris among the ten.

--Editorial / New York Post

“Suddenly, Joe Biden says it’s time for us ‘to get tough with China’ – as if that’s not exactly what President Trump has been doing.

“And the reverse of where Biden’s stood for his entire career.

“ ‘China poses a serious challenge to us, and in some areas are a real threat,’ the ex-veep announced Tuesday in Iowa.

“But just last month, also in Iowa, he laughed at the idea.  ‘China is going to eat our lunch? Come on, man...They’re not bad folks, folks....they’re not competition for us.’  More: ‘No other nation can catch us, including China. I got criticized for saying that.’

“Last week in New Hampshire, he wailed, ‘What are we worried about?’

“All that fit with the policies he supported for eight years as No. 2 to President Barack Obama, who responded to China’s theft of intellectual property and other clear violations of World Trade Organization rules by...asking President Xi Jinping to stop.  As if.

“Trump has been doing what Team Obama never dared: Calling China to account, and putting all its trade privileges at risk if it doesn’t change.  And he’s standing firm: When Beijing reneged on trade concessions last month, he broke off talks and imposed tougher tariffs.  He also blacklisted tech giant Huawei as a risk to U.S. national security.

“Even as Biden finally is admitting that Trump was right about the problem, he still claims he’s ‘worried about China...if we keep following Trump’s path.’  So even while pretending to turn hawkish, he’s still a dove.

“This is Biden’s second major flip-flop in a week, after abandoning a career-long position on abortion.  He’s been shifting left on a host of other issues, such as climate change, too.  Who will Uncle Joe even be by the end of the campaign?”

--Richard Cohen / Washington Post

“One day last week, Joe Biden reaffirmed his support for the Hyde Amendment, which prohibits the federal funding of most abortions.  A day later, the presidential candidate and former vice president reversed himself, giving as a reason the recent spate of draconian antiabortion laws enacted in several states. Surely, however, Biden was pushed by Democratic Party activists.  At this rate, he’ll be a socialist by Labor Day.

“Biden had been a longtime supporter of the Hyde Amendment....

“I am an ardent supporter of abortion rights and have long been opposed to the Hyde Amendment, but I am less than thrilled at Biden’s sudden conversion.  It reeks of insincerity and of a decision made simply for political reasons.  He was under intense pressure from the party’s liberal wing, particularly the suddenly accelerating Sen. Elizabeth Warren, whose authenticity is not in doubt.  He also heard from the actress Alyssa Milano. She called Biden’s campaign manager, urging that Biden reconsider his support of Hyde....

“It’s troubling that Biden should so easily abandon what, until the other day, seemed a deeply held position. It is also troubling that a major element of the Democratic Party is so intolerant of an opposing idea that it would doom a candidacy on that basis alone.  This lockstep abortion platform seeks to impose a simplistic position on a morally vexing issue and is reminiscent of 1992, when at the Democratic National Convention, the party denied a pro-life Democrat, Gov. Robert P. Casey Jr. of Pennsylvania, a speaking slot.  Most Democrats support abortion rights and most Republicans do not, but both parties contain significant minorities of dissenters.  Uniformity is nice, but not when it is coerced....

“Better a Joe Biden who is wrong, but authentic, on some issues than one who is right only out of political expediency.

“This will be an arduous and painful campaign for Biden if he is willing to betray his beliefs.  Soon enough, it will be bitterly cold in Iowa – and he will be ideologically naked to the world, not the man he used to be and not, either, the man he wants to be.”

--President Trump and Joe Biden traded harsh insults Tuesday as they crisscrossed Iowa, but in Trump’s main speech in the state he did not mention his potential rival.

Earlier, Trump had called Biden “weak mentally,” while Biden described Trump as an “existential threat to America.”

“Only I can fix it,” Biden said mocking Trump during his main Davenport rally, before adding: “Fix yourself first, Donald Trump.”

Trump, speaking to reporters on the South Lawn of the White House before heading to Iowa that day said: “When a man has to mention my name 76 times in a speech, that means he’s in trouble.”

--The bill that permanently authorizes the 9/11 Victim Compensation Fund passed out of the House Judiciary Committee unanimously on Wednesday.

The move came a day after former “The Daily Show” star Jon Stewart shamed members of a Judiciary subcommittee, as only Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) and four subcommittee members were present for testimony from 9/11 first responders.

“It’s an embarrassment to the country and a stain on the institution and you should be ashamed of yourselves, for those who aren’t here, but you won’t be because accountability doesn’t appear to be something that occurs in this chamber,” Stewart said Tuesday.

The bill is expected to pass the full House in the future.

--At least six American tourists have died under mysterious circumstances in the Dominican Republic in the past year, and that doesn’t include another now suspicious death, the brother of real estate maven Barbara Corcoran, who died of a reported heart attack while on vacation in April, but in light of the other deaths is being reexamined as there are similarities.  [Ms. Corcoran says her brother should not be linked to the others.]

Some of the deaths occurred after the victims had a drink from the hotel minibar.

Dominican Republic authorities have been less than cooperative, insisting all the deaths were isolated incidents.  But today there is a report police there are investigating whether the deaths are linked to counterfeit booze, as officials try to find those who supplied the alcoholic beverages the victims drank before they died.  The FBI is involved and taking blood samples of the victims back to its research center in Quantico, Va.

And then we had the attempted assassination (that’s what it appeared to be) of former Boston Red Sox star, and D.R. native David Ortiz.

I’ve talked of crime in the Caribbean for years and years in these pages.  Because of better reporting, we are now receiving more horrifying tales, normally of a ‘home invasion’ type nature, robbery the prime motive.

But when it comes to the D.R., why go?  There are a helluva lot of other great spots of this kind where safety isn’t such a concern. 

Yes, this is a sad commentary.  The D.R. relies on tourism, but there is clearly something wrong.

It’s also sad for all the Major League ballplayers and their families who call the D.R. home.  MLB has a major investment in developing players from the island.  But is it safe for them to go home a couple times a year?  [Ditto Venezuela, another base for current and future ballplayers, but there, these days, if you’re a player, it hurts but you need to stay away from home.]

Can the D.R. get its reputation back?  Yes, but it will take time and a visible commitment from the government to ensure the public its resorts and main tourist spots are safe.

--John Vandemoer, the former head sailing coach at Stanford who was the first person to be sentenced in the college admissions bribery scandal, surprisingly avoided prison time, instead receiving two years of supervised release, including six months of home confinement with electronic monitoring, as well as a $10,000 fine.

U.S. District Court Judge Rya Zobel said she believed it was important that Vandemoer be punished because “it’s too easy to do this kind of thing.”  But she said she didn’t believe he needed to serve time behind bars, noting the powerful letters of support he received and calling him probably the “least culpable” of those charged in the case because he didn’t take any of the money for himself.

--The movement to ban single-use plastics has been gaining speed around the world, and there is no doubt we will be living in a different world come 2021.  I choose that date because this week Canadian Prime Minister Justin Trudeau announced his country will ban single-use plastics as early as 2021.  While the specific items to be banned will be determined based on a science-based review, the government is considering items such as water bottles, plastic bags and straws.

Well, all three of those should be banned, period.  I’ve stopped buying big packs of bottled water.  I’m using my old bottles and filling them up with the water from the refrigerator, which is filtered.  It’s idiotic to think I never thought to do this before.  And the service organization I belong to has now been collecting plastic before each meeting and through a program we have, we make park benches out of them....which we will place throughout the community.

I know every one of you has similar stories, or at least thoughts of  doing so.  It’s like a switch was flipped.  That’s how national, and global, movements begin.  We should have had this moment decades ago, but hopefully it’s not too late.  Certainly from the looks of the reports on ocean plastic, including the beyond massive swirling Great Pacific Garbage Patch, it is too late.  But that doesn’t mean you don’t try.

--Meanwhile, the annual Gulf of Mexico “dead zone” – a region of oxygen-depleted water off Louisiana and Texas that does a number on sea life – will be the second-largest on record this summer, scientists announced Monday.

This year’s zone should be about 8.717 square miles, an area roughly the size of New Hampshire, according to researchers at LSU.  The average Gulf dead zone is about 5,309 square miles; the record is 8,776 square miles set in 2017.

Dead zones are created by nutrient runoff, mostly from over-application of fertilizer on agricultural fields during the spring, from North America’s corn belt through streams and rivers before ending up in the Gulf.  Plus this year, heavy rains fueled near-record flooding along the Mississippi River.

And then the low oxygen impacts organisms that are the lifeblood for fish, shrimp and crab caught there.

What a great species we are.

---

Gold $1345...unchanged on the week
Oil $52.52

Returns for the week 6/10-6/14

Dow Jones  +0.4%  [26089]
S&P 500  +0.5%  [2886]
S&P MidCap  +0.4%  [1899]
Russell 2000  +0.5%
Nasdaq  +0.7%  [7796]

Returns for the period 1/1/19-6/14/19

Dow Jones +11.8%
S&P 500  +15.2%
S&P MidCap  +14.2%
Russell 2000  +12.9%
Nasdaq  +17.5%

Bulls  48.1
Bears  18.3

Have a great week.  Happy Father’s Day!

Brian Trumbore



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Week in Review

06/15/2019

For the week 6/10-6/14

[Posted 11:30 PM ET]

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

Edition 1,053

I’ve been saying for the last few months that Americans aren’t prepared for what China could throw at us.  So in Tuesday’s Wall Street Journal, Walter Russell Mead had some of the following thoughts on the topic.

“A series of conversations with Trump administration officials at every level as well as leading Democrats points to two clear and disturbing conclusions.  First, the U.S. is increasingly committed to a historic turn in its relations with China as opinion hardens on both sides of the aisle. Second, we aren’t ready for what is coming....

“Today both Washington and Beijing are maneuvering themselves for some kind of long-term competition – but just as few observers in 1946 could imagine a four-decade global standoff, neither we nor the Chinese can predict the scale, scope or consequences of the emerging rivalry.  It is likely both to echo the Cold War in some ways and to diverge radically from it in others....

“It’s difficult to prepare for a contest with so many uncertainties, but the ancient Chinese strategist Sun Tzu offered advice that is still sound: ‘If you know the enemy and know yourself, you need not fear the result of a hundred battles.  If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.  If you know neither the enemy nor yourself, you will succumb in every battle.’

“At the start of the Cold War, U.S. diplomat George Kennan helped Americans understand both their Soviet opponents and themselves.  His famous Long Telegram laid out the complex relationship between the Soviet ideology, Russian culture and Stalinist policy and helped guide two generations of American policy makers.  One key argument: Marxism flourished in the Soviet Union in part because its predictions of inveterate hostility between capitalist and communist countries helped justify the internal controls Stalin’s regime required to hold power.  Kennan also counseled that remaining true to America’s strengths offered a path to success.

“Kennan’s method, which is also Sun Tzu’s, applies today.  Americans should start by deepening our understanding of how Beijing’s policy makers see themselves and the world....

“Kennan and Sun Tzu would counsel Americans to study themselves.  Red America, blue America and establishment America don’t understand one another very well; the resulting division makes stable, long-term foreign policy hard to sustain.  The new consensus over China offers an unexpected but valuable opportunity for patriots in both parties to work together in new ways.  One of Washington’s highest priorities should be creating an approach to China policy that can endure from one administration to the next.

“It’s impossible to know how the marked shift in U.S.-China relations will develop. The clouds now assembling on the horizon could dissipate or build into a storm of historic proportions. Either way, it is past time for Americans to heed Sun Tzu’s advice.  We do not know either China or ourselves as well as we should.”

Needless to say, my attitude concerning China is shaped by personal experience.  There is no reason to be optimistic.  Americans do not know the dangers.  And President Trump needs to stop calling President Xi Jinping his “good friend.”  Hell, he told CNBC on Monday morning that Xi was “an incredible guy, great man....very strong.” 

Xi is no friend. Nor is Kim Jong Un...nor Vladimir Putin.  At least President Trump isn’t calling Ayatollah Khamenei a friend yet...because he hasn’t met him, and if Khamenei has anything to do with it before he dies, he never will.

What was remarkable about this week is that once again Donald Trump was tougher on Angela Merkel than Xi, Kim or Putin, for starters.

Finally, I said at the beginning of the month that June will prove to be critical for the Trump presidency.  There were all sorts of landmines.  We’re just halfway through.  I’m sleeping with one eye open.

Trump World

--President Trump told ABC News this week that if a foreign government offered him information on a political opponent, “I think I’d want to hear it.”

“It’s not an interference; they have information – I think I’d take it,” he continued.  “If I thought there was something wrong, I’d go maybe to the FBI, if I thought there was something wrong.”

Trump added that “the FBI doesn’t have enough agents to take care of it.  When you go and talk, honestly, to congressmen, they all do it, they always have, and that’s the way it is.  It’s called oppo research.”

Not one congressman said he’d ever do such a thing.

During the ABC interview with George Stephanopoulos, Trump was asked whether his son, Don Jr., should have taken the Trump Tower meeting.  “Somebody comes up and says, ‘Hey, I have information on your opponent,’ do you call the FBI?” Trump responded.

“I’ll tell you what, I’ve seen a lot of things over my life.  I don’t think in my whole life I’ve ever called the FBI.  In my whole life.  You don’t call the FBI.  You throw somebody out of your office, you do whatever you do,” Trump said.  “Oh, give me a break – life doesn’t work that way.”

Trump added his own FBI director, Christopher Wray, was “wrong” when he said during congressional testimony that campaign aides should always report offers of assistance from foreign entities to the bureau.

Just recently, Trump adviser and son-in-law, Jared Kushner, said he wasn’t sure if he would report a future offer of foreign assistance to the FBI, and Trump’s personal attorney, Rudy Giuliani, has been openly gathering information from Ukrainian officials that he says he hopes could be used in a 2020 race against Joe Biden, whose son Hunter sat on the board of a Ukrainian gas company, though about two weeks ago, a Ukrainian prosecutor cleared Hunter Biden of any wrongdoing.

Yes, the president is walking a very thin line. It is illegal to accept a campaign contribution from a foreign national, but there is debate over how to count information.  Most importantly, it is illegal to conspire with a foreign government to affect a U.S. election by breaking other laws, such as stealing documents or acting as an agent of a foreign government without registering with the U.S. government.

So President Trump’s comments drew outrage from Democrats, while some Republicans tried to conflate President Trump’s stance with that of Democrats who financed the work of former British intelligence officer Christopher Steele, who compiled a dossier about Trump and his alleged ties to Russia.

George Washington warned of the “insidious wiles of foreign influence” as he left office in 1796.

“The jealously of a free people ought to be constantly awake, since history and experience prove that foreign influence is one of the most baneful foes of republican government.”

Alexander Hamilton warned in the Federalist Papers of “the desire in foreign powers to gain an improper ascendant in our councils.”

Sen. Lindsey Graham (R-S.C.) said he talked to Trump after his comments and told him he couldn’t take help from a foreign government.  But Graham said he thought Trump had no intention of actually accepting foreign help.

Most folks found President Trump’s comments mind-boggling.

--A Democratic-controlled House committee voted to hold Attorney General William Barr and Commerce Secretary Wilbur Ross in contempt of Congress for ignoring its subpoena seeking information about efforts to add a citizenship question to the 2020 census.  The Supreme Court is expected to rule on the census question soon.

The U.S. census traditionally counts all residents and doesn’t distinguish between citizens and noncitizen residents.  Opponents of the question say it would intimidate people who aren’t citizens, or those who live with people who aren’t citizens, from responding, bringing a distorted allocation of federal resources and congressional representation to areas with higher minority concentrations.

--President Trump said today he would not fire White House counselor Kellyanne Conway after a federal watchdog recommended that she be removed for repeatedly violating the Hatch Act by engaging in partisan political activity on behalf of her boss.

“No, I’m not going to fire her,” the president said on Fox News.  “I think she’s a terrific person.  She’s a tremendous spokeswoman.  She’s been loyal. She’s just a great person.”

Trump characterized the finding of the Office of the Special Counsel as an infringement of Conway’s First Amendment rights.

“It looks to me like they’re trying to take away her right of free speech.”

The OSC – unrelated to special counsel Robert Mueller’s office – informed Trump on Thursday that Conway has been a repeat offender of the Hatch Act by disparaging Democratic presidential candidates while speaking in her official capacity on TV and social media.

The White House is not bound by the recommendation of the OSC, which is run by a Trump nominee, Henry Kerner, who said his job is “to make sure the federal workforce stay as depoliticized and as fair as possible.”

--White House Press Secretary Sarah Sanders is leaving her post at the end of June, to return to her home state of Arkansas, President Trump praising Sanders as a “warrior.”

“She’s a warrior, we’re all warriors, we have to be warriors,” Trump said.

I have one word for Ms. Sanders, who they say is eyeing a future run for the governorship in Arkansas...whatever.

--Trump tweets:

“I meet and talk to ‘foreign governments’ every day. I just met with the Queen of England (U.K.), the Prince of Wales, the P.M. of the United Kingdom, the P.M. of Ireland, the President of France and the President of Poland.  We talked about ‘Everything!’  Should I immediately....

“....call the FBI about these calls and meetings?  How ridiculous!  I would never be trusted again.  With that being said, my full answer is rarely played by the Fake News Media.  They purposely leave out the part that matters.”

[This was one of the more embarrassing tweets of the Trump presidency.]

“When Senator @MarkWarnerVA spoke at length, and in great detail, about extremely negative information on me, with a talented entertainer purporting to be a Russian Operative, did he immediately call the FBI? NO, in fact, he didn’t even tell the Senate Intelligence Committee of...

“....which he is a member.  When @RepAdamSchiff took calls from another person, also very successfully purporting to be a Russian Operative, did he call the FBI, or even think to call the FBI?  NO!  The fact is that the phony Witch Hunt is a giant scam where Democrats...

“...and other really bad people, SPIED ON MY CAMPAIGN! They even had an ‘insurance policy’ just in case Crooked Hillary Clinton and the Democrats lost their race for the Presidency!  This is the biggest & worst political scandal in the history of the United States of America. Sad!”

 “The Fake News has never been more dishonest than it is today. Thank goodness we can fight back on Social Media. Their new weapon of choice is Fake Polling, sometimes referred to as Suppression Polls (they suppress the numbers).  Had it in 2016, but this is worse....

“The Fake (Corrupt) News Media said they had a leak into polling done by my campaign which, by the way and despite the phony and never ending Witch Hunt, are the best numbers WE have ever had.  They reported Fake numbers that they made up & don’t even exist.  WE WILL WIN AGAIN!”

“If President Obama made the deals that I have made, both at the Border and for the Economy, the Corrupt Media would be hailing them as Incredible, & a National Holiday would be immediately declared.  With me, despite our record setting Economy and all that I have done, no credit!”

“Wow!  Just got word that our June 18th, Tuesday, ANNOUNCEMENT in Orlando, Florida, already has 74,000 requests for a 20,000 seat Arena.  With all of the big events that we have done, this ticket looks to be the ‘hottest’ of them all.  See you in Florida!”

[This is Trump’s official campaign 2020 kickoff.]

Wall Street and Trade Wars

The big story in the markets is the coming meeting next week of the Federal Reserve’s Open Market Committee, June 18-19, with Wall Street expecting the Fed to lay the predicate for a cut in interest rates at its July meeting, and one other time this year, probably September. At least that is the feeling today.  But the economic data for the past week was solid, and the Atlanta Fed’s GDPNow indicator for the second quarter is up to 2.1%, a big improvement over last Friday’s 1.4% estimate.

Today we had a solid retail sales report for May, up 0.5%, ditto ex-autos, basically in line with expectations, with an upward revision for April.

Industrial production for May, 0.4%, was also good vs. consensus.

Earlier we had good news on inflation for last month, with producer prices 0.1%, ex-food and energy 0.2%; 1.8% and 2.3%, year-over-year, respectively.  Consumer prices for May were 0.1%, ditto core; and 1.8% and 2.0% vs. a year ago for the two. As in zero for the Fed to worry about on this front.

Plus with all the trade tensions and fears of a global, and domestic slowdown, Treasury yields continue to be at cycle lows, with the rate on a 30-year fixed rate mortgage just 3.82% vs. 4.62% a year ago, which is fueling the biggest rise in mortgage applications in four years, according to the Mortgage Bankers’ Association.  It’s as if a switch went off...as in, ‘Hey, rates really have been coming down.’

On the other hand, the second quarter is winding down and soon we’ll have another earnings season and there is no doubt profit growth has been slowing, so we’ll see what kind of expectations have been built in on that front.

And then there is the budget deficit, which for the month of May, as announced by the Treasury Department on Wednesday, was -207.8 billion, worse than expected, bringing the eight-month fiscal 2019 total deficit to $738.6 billion, 38.8 percent larger than in the same period of fiscal 2018 (the fiscal year being Oct. 1 to Sept. 30).

Total receipts for the first eight months of F2019 are up 2.3% to $2.275 trillion, with individual income taxes up 1.5 percent from last year for the period, while corporate taxes were down 8.6 percent.  Reflecting the impact of tariffs imposed on Chinese goods, receipts from customs duties were up 80.8 percent to $44.9 billion.

But outlays for the first eight months totaled $3.014 trillion, 9.3 percent more than a year ago, with spending on defense up 12.4 percent to $461.4 billion, while outlays for Medicare rose 22.7 percent to $462.6 billion and outlays for Social Security rose 5.7 percent to $687.0 billion.  Interest costs rose 15.6 percent from a year ago to $268.8 billion.

So despite the much-ballyhooed take from tariffs, as the president likes to tout, the deficit continues to explode because of spending.  The deficit had been forecast to reach $897 billion this fiscal year, up from $779 billion last year, and while proponents of the cuts can argue, ‘See, revenues are up,’ it’s about entitlement spending, stupid.  And no one has the guts to touch that.

The White House has said the tax cuts would pay for themselves by creating more revenue through faster and sustainable economic growth, but that has hardly been the case thus far.

---

Turning to the trade war....

President Trump said a few times this week he still expected to meet President Xi at the G20 summit in Osaka end of the month, but Trump’s own advisers acknowledge nothing substantive would really come out of such talks if they are even held.  At the same time, Trump is threatening to increase tariffs on the other $300 billion in Chinese goods he is targeting should the two sides not at least agree to move forward.

Top economic adviser Larry Kudlow said Thursday, “President Trump has indicated his strong desire for a meeting, but the meeting is not yet arranged formally.  He’s also indicated that if the meeting doesn’t come to pass, there may be consequences.”

Earlier, Treasury Secretary Steven Mnuchin called on Beijing to return to talks and follow through on its commitments or face more tariffs.

Mnuchin, at a Group of 20 meeting of finance ministers in Japan, declined to say whether China had been negotiating in good faith, but he laid all of the blame for the collapse of the talks on his Chinese counterparts.

“There’s no question where we are now, that this is a result of them backtracking on significant commitments,” Mnuchin said.  “For whatever reasons they decided to do that, I’ll leave to them.”

Mnuchin also said the U.S. government’s steps against Chinese telecommunications giant Huawei Technologies Co. are a national security issue and not related to trade.

China said it would respond firmly if the U.S. insists on escalating tensions, the foreign ministry said on Tuesday.

Foreign Ministry spokesman Geng Shuang said: “China does not want to fight a trade war, but we are not afraid of fighting a trade war.”

The United States continues to seek sweeping changes, including an end to forced technology transfers and theft of U.S. trade secrets.  It also wants curbs on subsidies for Chinese state-owned enterprises and better access for U.S. firms in Chinese markets.

The best hope for Osaka is a potential further truce on future tariffs, coupled with an agreement to resume talks, but that’s all going to depend on what transpires the next few weeks, I suspect, more on the geopolitical scene than anything else, such as a ginned-up crisis in the South China Sea, or an overreaction by Beijing in Hong Kong.  [Much more below on this last one.]

On Thursday, Costco, Target, Walmart and more than 600 companies and trade associations signed a letter to President Trump, Kudlow and other economic officials urging the administration to “get back to the negotiating table” to avoid raising tariffs further on Chinese goods and to work with allies so that U.S. businesses don’t suffer disproportionately.

Plus you have the actions against Huawei.  The Trump administration blacklisted it, barring companies from supplying U.S. technology to Huawei without a license.  And the other action taken enables U.S. officials to ban telecommunications gear and services from “foreign adversaries.”  But in a question earlier this month, Trump indicated Huawei could be a bargaining chip in the trade talks, which is absurd, because they are either a security threat or they aren’t.

Sens. Marco Rubio (R-Fla.) and Mark Warner (D-Va.) send a letter to Secretary of State Pompeo and U.S. Trade Representative Robert Lighthizer, saying Huawei shouldn’t be used that way because it’s products do indeed pose a national security risk.

For its part, Chinese authorities have been calling in some of the world’s largest tech companies to tell them they could face repercussions if they respond too aggressively to U.S. trade restrictions.  Among those summoned were Intel, Qualcomm, Microsoft, Dell, and South Korea’s Samsung Electronics, as well as Nokia and Cisco Systems.

From an editorial for the Global Times, a Chinese Communist Party mouthpiece:

“China cannot accept the bossy U.S. approach.  Washington uses tariffs as a stick, a hegemonic move that threatens China’s national interests.  If the U.S. institutionalizes such an attitude toward China, uses tariffs and cuts off supply of high-tech products like chips as leverage, China will firmly resist U.S. pressure at whatever cost....

“China and the U.S. should avoid the worst-case scenario that will be detrimental to both countries and their peoples. If the U.S. chooses to suppress China, China’s countermeasures will be its strategic choice.”

Meanwhile, on the Mexico front, as part of the deal reached last Friday on border security and illegal immigration that averted the threat of U.S. tariffs, President Trump told his 61 million Twitter followers in an all-caps message that Mexico had agreed to “immediately begin buying large quantities of agricultural product from our great patriot farmers.”

But this just isn’t true.  Any great benefits for the farmers would be in the U.S.-Mexico-Canada agreement (USMCA), or that couldn’t be sold to the public and Congress as a great deal.

But the president said all kinds of things regarding the immigration accord, and it’s true that Mexican officials opened negotiations on some of the issues agreed to months ago, such as the deployment of national guard troops in the south of Mexico, even though the ‘new’ Mexican national guard is just being formed.

And the expansion of a program to allow asylum-seekers to remain in Mexico while their legal cases proceed was first reached in December, after painstaking negotiations between the two countries.  Former Department of Homeland Security Sec. Kirstjen Nielsen announced the Migrant Protection Protocols during a hearing of the House Judiciary Committee before Christmas.

But we’ve learned that using threats of punitive action even against allies has become a staple of President Trump’s diplomatic playbook, much to the chagrin of business leaders and many in his own party, who at least could breathe a sigh of relief when the tariff threat was withdrawn, if but temporarily, last Friday.

For now, it is far too early to tell whether the Mexican government can hold up its end of the bargain when it comes to slowing the migration into the United States.

But even if many of the steps agreed to were already in existence, President Trump likes to declare victories, even if nothing new has really been achieved, and we can all see another declared victory coming down the pike. 

The recent migrant influx – 133,000 detained last month on the U.S. southern border, more than twice as many as December – is going to fall in the coming weeks as searing summer heat kicks in.  It’s like this every year.  But that will be a victory, and even Mexican President Manuel Lopez Obrador can claim his efforts have succeeded as well, at least for a few months.

You can see that Trump could pull the same stunt next spring, heading into the heat of the election campaign.

For now, there is a 45-day window for Mexico to show some progress with its increased enforcement efforts, with the Mexican government needing to show the flow of migrants has been significantly reduced after 90 days.  Mexico will have to adopt safe third country status, which would mean migrants seeking asylum would have to make such a request in the first safe country they crossed.

Under such safe third country status, that country for many Central American migrants fleeing poverty, violence and corruption in their native countries would be Mexico.

But such a change would require legal changes that would take at least 90 days and would need to be ratified by Mexico’s Congress, and this process needs to begin in just 45 days.

If Mexico were to be a safe third country, migrants’ asylum applications would be processed there rather than in the U.S., but there is no border infrastructure for Mexico’s southern border, like there is in the north.

Jose de Cordoba / Wall Street Journal

“President Trump made Mexico a political piñata from the first day of his presidential campaign.  Now, the historically fraught relationship has suffered another major blow.

“A last-minute deal on Friday stopped Mr. Trump from imposing tariffs that would have devastated Mexico’s economy.  But his attacks have changed the atmosphere between the two countries from one of active cooperation and friendship back toward the frosty coexistence that prevailed before the North American Free Trade Agreement went into effect in 1994.

“ ‘It sets us back 25 years and can be seen as an attempt to expel Mexico out of North America to a time when we were neither a business partner nor a strategic ally,’ says Carlos Heredia, a political-science professor at Mexico’s CIDE university.  ‘We are still a neighbor of the U.S. – because we can’t physically go anywhere else.’

“Geography is still destiny.  Mexico shares an almost 2,000-mile-long border with the U.S., the world’s largest economy and the market for 80% of Mexican goods.  Mexico, whose capital was occupied by U.S. troops for nine months and lost more than half its territory in 19th-century wars, has little choice but to get along with its powerful neighbor.

“Mexican President Andres Manuel Lopez Obrador made this clear in a speech he gave in the border city of Tijuana on Saturday.

“ ‘We are not distant neighbors,’ he said at a rally attended by dozens of political, religious and business leaders.  ‘I’m not raising a clenched fist, but an open and frank hand,’ he said, addressing Mr. Trump.

“The U.S. president has a 5% approval rating in Mexico, according to a poll by El Financiero newspaper taken at the beginning of the month....

“According to a separate 2018 Pew Research Center Poll, only 32% of Mexicans hold a positive view of the U.S., compared with 66% near the end of President Obama’s time in office.

“ ‘The damage has been done, independently of how this turns out,’ said Mr. Heredia.”

Finally, President Trump said on Thursday that Canada and Mexico are completely in line on the new North American trade deal and it is up to the United States to get it passed.  Canada said Prime Minister Justin Trudeau plans to meet Trump on June 20 in Washington to discuss ratification.

It’s up to the House and Nancy Pelosi for their part, with Senate Republicans pushing for a vote before the August recess to avoid budget debates and 2020 presidential campaign activity that will intensify in the fall.

But Pelosi controls the schedule for trade legislation in the House and USMCA does not appear likely to come to a vote in that chamber during the summer.  Expect some very vicious tweets during “executive time” over the coming weeks and months as a result.

Europe and Asia

After last week’s plethora of economic data, little this week for the eurozone, with Eurostat reporting April industrial production declined 0.5% over March, and down 0.4% year-over-year, which is reflective of the poor PMI data on manufacturing these days.

In the UK, GDP for April was down 0.4% month-over-month, with GDP for the three months to April 0.3%, 1.3% annualized, vs. the first quarter’s 0.5%.  [Britain likes to report rolling three-month periods from time to time.]

Auto output in the UK cratered 24% month-over-month in April, the biggest decline on record, due to planned “stoppages” ahead of the original March 29 Brexit date, since extended to Oct. 31.

Manufacturing overall in the UK in April was down 3.9% and the biggest decline since June 2002!  All of this is Brexit-related, and the uncertainty businesses and consumers face.

Brexit: So this week the Conservative Party leadership contest began in earnest to see who would replace Prime Minister Theresa May, who earlier gave up her party leadership but remains PM until the Tories elect a new head.

And in the first round of voting, as expected, former foreign minister Boris Johnson was on top with 114 of 313 votes cast, with current foreign minister Jeremy Hunt at 43 and environment minister Michael Gove at 37.  Former Brexit minister Dominic Raab received 27 of the votes from Conservative lawmakers.

Gove had been expected to do better, until his campaign lost momentum in the wake of his cocaine use confession.

So now we have a second round of voting on Tuesday, June 18, 33 votes needed to pass the threshold for moving on, and then in succeeding days until the Party comes up with two candidates, Johnson most certainly one of them, whereupon a ballot is mailed to the wider Conservative Party membership who will then pick a leader, the whole process expected to be wrapped up by end of July.

Which then leaves a whopping three months before Brexit, October 31...Halloween.

Johnson kicked off his official campaign on Wednesday with a pledge to lead Britain out of the European Union.  “After three years and two missed deadlines, we must leave the EU on October 31.  I am not aiming for a no-deal outcome,” but if need be, no-deal it will be, Johnson is saying.

Johnson told supporters that it was “right for our great country to prepare” for a no-deal outcome.  He said any delay to Brexit would “further alienate not just our natural supporters but anyone who believes that politicians should deliver on their promises.” 

And Johnson warned his party it would “kick the bucket” if it went into the next election having failed to carry out the mandate given to it by the British people.

That said there was zero clarity on just what Johnson’s Brexit plan might be or how he might go about putting together a new deal that the European Union would be prepared to negotiate on.  A European Commission spokesman said on Tuesday that the election of a new British prime minister will not change the accord on Britain’s departure from the bloc agreed to between the EU and Theresa May.

Boris Johnson has pledged to withhold billions in liabilities owed to the EU’s budget, to which the spokesman said: “Everybody knows what’s on the table.  What is on the table has been approved by all member states and the election of a new prime minister will not change the parameters.”

Greece: The country is on track for a general election on July 7, three months ahead of schedule, after the president accepted a request from Prime Minister Alexis Tsipras to dissolve parliament following a heavy defeat in European parliamentary elections.

Tsipras said he wanted to avoid months of campaigning that might have endangered the bailed-out country’s economy.

Last month in the Euro vote, Tsipras’ governing Syriza party lost by more than 9 points to the main opposition, the conservative New Democracy party, with opinion polls now pointing to New Democracy comfortably winning the July vote.

The markets welcomed the announcement of a quick election and the probable ascension of a pro-business government.

But give the socialist Tsipras credit.  He was swept to power in January 2015 amidst the Greek debt crisis, running on a populist platform that resonated with austerity-weary Greeks, who rejected the establishment.

Tsipras at the time pledged to scrap all the painful spending cuts, tax hikes and income reductions demanded by the EU and the International Monetary Fund in return for the rescue loans that protected Greece from bankruptcy.

But then Tsipras saw the light, and bit the bullet, and in order to sign a new multibillion-euro bailout, he had to further upset the people, signing a new agreement that was conditional on further tax hikes and pension cuts.

Greeks had to suffer through further pain, but now they are in better shape, whether they realize it or not, then they would have been had they crashed out.  [Granted, many would beg to differ from this opinion of mine.]

--Speaking of euroskeptics and nationalist politicians, in the wake of the European Parliament elections, it now appears that the nationalist parties of French opposition leader Marine Le Pen and Italy’s Deputy Prime Minister Matteo Salvini fell short of their goal of uniting all euroskeptic factions into one powerful caucus.

Nativist, anti-immigrant and euroskeptic parties gained in the May elections across the European Union, with Le Pen and Salvini seeking to unite them all into a single force to thwart the EU from within.

But disagreements over Russia and personal animosities have scuttled those hopes.  The Le Pen-Salvini alliance that existed prior to the latest vote failed to bring more than a handful of others on board.

So instead of becoming the second-largest voting bloc in the European Parliament, they are only fifth, with pro-European factions holding a two-thirds majority.

Ms. Le Pen’s Russia-friendly stance and the German nativist party Alternative for Germany presented a problem for another sizable flock of euroskeptics: Poland’s ruling Law and Justice party. [Valentina Pop / Wall Street Journal]

Turning to Asia, we had a slew of economic data for the month of May this week out of China.

Exports in the month unexpectedly eked out a gain, 1.1% vs. year ago levels, and vs. a decline of 2.7% in April, with exports to the U.S. down 4.2%, as you’d expect with the trade war, but they were up 6.1% to the European Union. 

Imports fell 8.5%, far worse than expected, which speaks to anemic demand in the domestic economy.

The trade surplus with the U.S. rose in May to $26.9 billion.

The Chinese Association of Automobile Manufacturers reported that overall sales fell 16% in May vs. a year ago, an 11th straight month of declines, with vehicle sales down 13%.  The only bright spot was electric vehicle sales, up 42% for the first five months of the year vs. a year ago, though this segment still just represents 5.4% of the overall market in China. Beijing has been rolling out steps to try to support the auto industry.

Also for May, as released by the National Bureau of Statistics, industrial production hit a 17-year low, up only 5%, the worst since early 2002. 

Fixed-asset investment rose a less than expected 5.6% for the first five months of the year.   Infrastructure spending was up only 4%, all of these representing a further deceleration.

Real estate investment rose 11.2% the first five months as well.

But the only real positive was retail sales, up a better than expected 8.6% in May, bucking a trend, having come off a 16-year low in April.

On the inflation front, the May producer price index was 0.6% year-over-year, according to the NBS, while consumer prices rose 2.7% yoy.

In Japan, first-quarter GDP was revised up a tick to 2.2% annualized, but this decent pace is expected to slow in the coming quarters, especially as a national sales-tax hike is in the offing for October.

Street Bytes

--Stocks finished up a second week, though it was a quiet one in terms of intraday volatility, with the Dow Jones up 0.4% to 26089, the S&P 500 up 0.5% and Nasdaq 0.7%.

--U.S. Treasury Yields

6-mo. 2.17%  2-yr. 1.84%  10-yr. 2.08%  30-yr. 2.59%

Essentially unchanged on the week, ditto the German 10-year (Bund) at -0.26%.

--The price of crude oil fell early in the week, and despite further attacks on tankers near the Strait of Hormuz, stayed that way, weighed down by a weaker oil demand outlook and a rise in U.S. crude inventories despite growing expectations of ongoing OPEC-led supply cuts.  The U.S. Energy Information Administration cut its forecasts for 2019 world oil demand growth and U.S. crude oil production in its monthly report released Tuesday.  A surprise rise in U.S. crude stockpiles also kept oil prices under pressure.

On the week, crude finished down about $1.50 to $52.52.

OPEC announced it had cut its forecast for global oil demand growth and warned of potential further cuts as international trade disputes continue to fester, building a case for prolonged supply restraint over the rest of 2019.  The oil producer group meets in a few weeks to decide whether to maintain supply curbs, and with the decline in prices, and OPEC’s demand forecast, there seems to be little doubt they (including non-member Russia) will stick with the 1.2 million barrels a day cut in output they instituted Jan. 1.

Friday the Paris-based International Energy Agency said the outlook for oil demand growth in 2019 has dimmed due to the worsening prospects for world trade, although stimulus packages and developing countries should boost growth going into 2020.  The IEA is looking at demand growth of 1.2 million barrels per day this year, climbing to 1.4m bpd for 2020.

U.S. sanctions on Iran and Venezuela, an output cut pact by OPEC plus its allies, fighting in Libya and attacks on tankers in the Gulf of Oman added only limited uncertainty to supply, the IEA said.

Surging U.S. supply as well as gains from Brazil, Canada and Norway would contribute to an increase in non-OPEC supply of 1.9 million bpd this year and 2.3m in 2020.

Separately, according to BP’s annual statistical review published Tuesday, world-wide demand for energy grew 2.9% in 2018, its fastest rate since 2010.  The company said much of the growth was due to extreme weather, record hot and cold days that drove up air conditioning and heating use, particularly in China, the U.S. and Russia.

In the U.S. energy consumption rose 3.5% in 2018.  Natural gas accounted for almost half of total demand growth.

The BP report also noted that with the rise in energy demand, carbon emissions from energy use rose by 2%, making it appear increasingly difficult for governments to meet agreed upon targets to reduce global emissions.

--Raytheon and United Technologies have agreed to an all stock “merger of equals” in a deal that if approved creates an aerospace and defense powerhouse with annual sales exceeding $70 billion, second only to Boeing.

The deal would close during the first half of 2020, following the previously announced United Technologies spin-off of its Otis elevator and Carrier building systems units.

The newly-formed company will be known as Raytheon Technologies Corp. and adjusted for the spin-offs will have around $74 billion in pro forma 2019 sales.  It will be headquartered in the greater Boston area.

United Technologies’ Greg Hayes will lead the post-merger company as CEO, with Raytheon’s Tom Kennedy assuming the role of executive chairman.

UTX aerospace products include jet engines manufactured by subsidiary Pratt & Whitney (including for the F-35 fighter jet).  Raytheon produces the Tomahawk and Patriot missiles, among other military weaponry.  But there is little overlap between the two companies, which is critical to gaining regulatory approval.

--In 2018, soybean exports to China totaled $3.1 billion, a drop of nearly 75% from 2017, owing to the trade war.  This is after China had averaged $11.3 billion in sales over the last decade, according to the U.S. Department of Agriculture.

In the first four months of this year, even though there was a tariffs truce between the U.S. and China before trade talks broke down completely in May, U.S. soybean exports to China slid even further, by another 27%, compared to the same period in 2018.

And this week we learned Chinese soybean buyers are asking sellers in the United States to delay cargoes due to be shipped in July until August, as reported by Reuters, raising fears of cancellations like the ones that occurred last year.  This involves shipments that were part of an agreement during the trade truce last winter, with six million tons having already been shipped, but some 7 million tons was still due to be delivered to state-owned firms.

But with each week, we continue talking about the wet weather, the wettest on record in the nine-state Midwest region, going back to 1895, according to the Midwestern Regional Climate Center, as I noted last week.

So the combination of the trade war slashing exports, and then the inability in many parts of the region to plant crops, is leading to escalating financial and mental strains in the farm community, with new evidence suggesting increases in farm-related suicides.  Very sad.

--American Airlines Group Inc. CEO Doug Parker said it is “highly likely” the Boeing 737 MAX will be back in the air by mid-August.  The industry continues to wait for regulatory approval for a software fix and pilot training updates by Boeing that would pave the way for the troubled jet to fly again after the two deadly crashes in Indonesia and Ethiopia within five months.

On Sunday, American extended cancellations of about 115 daily flights until Sept. 3, but Parker said that decision merely reflected monthly scheduling plans for pilots and flight attendants.  “No one should take that as some indication that we don’t think the aircraft will be ready by Aug. 19,” Parker said during the company’s annual shareholders meeting.  “We wouldn’t be selling seats today if we didn’t think it was a highly likely possibility...that we’d be able to provide that service by Sept. 3,” he added.

But Boeing has yet to formally submit its software fix to the Federal Aviation Administration, which has maintained it has no specific timetable on when the 737 MAX would be cleared to return to service. 

Parker said he understood there is an “absolute fix” that will make the jet safe, though he acknowledged it may take time to regain public confidence in the aircraft.

American has 24 MAX jets and dozens more on order.

Today, Norwegian Air’s CEO Bjoern Kjos said he expects the MAX to be out until end of August, thus missing out on the highly profitable European summer season, this being a major discount airline on the continent.

--Tesla CEO Elon Musk said at the company’s annual shareholder meeting Tuesday that the electric carmaker has “a decent shot at a record quarter on every level.”  Musk is trying to soothe concerns about weak demand for the company’s sedans.  He also said Tesla was on track to hit its volume production goal by the end of this year, after deliveries fell 31% in the first quarter, sparking concerns about the company’s ability to make profits and meet its delivery targets.

Tesla previously said it plans to deliver 90,000 to 100,000 vehicles in the current quarter versus 63,000 in the first, and is aiming to deliver 360,000 to 400,000 vehicles in 2019. Musk said the company was hoping to unveil its electric pickup truck this summer, and get into semi-truck production toward the end of next year.

Tesla, with only four profitable quarters in its 16-year history, posted a net loss of $702 million in the first quarter.  Revenue fell to $3.7 billion from $6.3 billion in the previous quarter, the fourth quarter of 2018.

--Foxconn Technology Group said it is ready to shift production for Apple out of China if necessary, as the electronics assembler tried to assuage investors’ concerns over the U.S.-China trade conflict.  In a rare conference call with investors (as in supposedly the first-ever), senior executives at Taiwan-based Foxconn sought to address investor uncertainty amid the company’s succession plan for founder Terry Gou, who is standing down as chairman to focus on his campaign for Taiwan’s presidency.  But most of the discussion was on the trade war and the impact tariffs would have on the core of Foxconn’s business – assembling phones and iPads for Apple in China.

The company said Foxconn has sufficient manufacturing capacity outside of China to supply Apple should that be necessary.  Foxconn does have plants in Brazil, Mexico, Japan, Vietnam, Indonesia, Czech Republic, the U.S. and Australia, according to an investor presentation.

Around 50% of Foxconn’s revenue is related to Apple, but only 25% of its manufacturing lies outside China, according to Foxconn executives.

For its part, China has warned foreign tech companies that there would be unspecified consequences if they pulled out of China.

--Facebook Inc. uncovered emails that seem to show CEO Mark Zuckerberg was aware of potentially problematic privacy practices at the company, the Wall Street Journal first reported, citing people familiar with the matter.

The social media giant discovered the emails in the process of responding to a federal privacy investigation, the Journal reported, raising concerns it would be harmful to the company if the emails became public.  The Journal is saying this is a reason Facebook sought to reach a quick settlement of the investigation by the Federal Trade Commission.

The FTC has been looking into whether Facebook violated the terms of its 2012 consent decree with the agency related to privacy issues, and the emails sent around that time appear to indicate that Zuckerberg and other senior executives didn’t put compliance with the FTC order at the top of their priorities list, according to the Journal.

A Facebook representative responded: “We have fully cooperated with the FTC’s investigation to date and provided tens of thousands of documents, emails and files. At no point did Mark or any other Facebook employee knowingly violate the company’s obligations under the FTC consent order nor do any emails exist that indicate they did.”

But it’s not clear just what the emails say.

Peggy Noonan / Wall Street Journal

“I’ll start with a personal experience and then try to expand into Republicans and big tech.

“In the spring of 2016, Facebook came under pressure, stemming from leaks by its workers, over charges of systematic political bias.  I was not especially interested: a Silicon Valley company that employs thousands of young people to make decisions that are often ideological will tilt left, and conservatives must factor that in, as they’re used to doing.  My concerns about Facebook had to do with its apparently monopolistic nature, slippery ethics and algorithmic threats to serious journalism.

“Soon after, I received an email from Mark Zuckerberg’s office inviting me and other ‘conservative activists’ to attend a meeting with him to discuss the bias charges in an off-the-record conversation.  I responded that I was not an activist but a columnist, for the Journal, and would be happy to attend in that capacity and on the record.  That didn’t go over too well with Mr. Zuckerberg’s office!  I was swiftly told that wouldn’t do.

“What I most remember is that they didn’t mention where his office is.  There was an air of being summoned by the prince.  You know where the prince lives.  In the castle. Who doesn’t know exactly where Facebook is?

“In February 2018 Nicholas Thompson and Fred Vogelstein of Wired wrote a deeply reported piece that mentioned the 2016 meeting.  It was called so that the company could ‘make a show of apologizing for its sins.’  A Facebook employee who helped plan it said part of its goal – they are clever at Facebook and knew their mark! – was to get the conservatives fighting with each other...

“After the meeting, attendees gushed, calling Mr. Zuckerberg and his staffers humble and open.  Glenn Beck praised the CEO’s ‘earnest desire to ‘connect the world.’’

“Never were pawns so happily used.

“I forgot about it until last summer, when Mr. Zuckerberg’s office wrote again.  His problems were mounting.  I was invited now, with an unspecified group of others, to ‘an off the record discussion over dinner at his home in Palo Alto.’ They used that greasy greaseball language Silicon Valley uses: Mr. Zuckerberg is ‘focused on protecting’ users and thinking about ‘the future and how best to serve the Facebook community.’

“I ignored the invitation. They pressed.  Their last note reached me at an irritated moment, so I wrote back a rocket, reminding him of the previous meeting and how it had been revealed to be a mischievous and highly political enacting of faux remorse.  I suggested that though it was an honor to be asked to cross a continent for the privilege of giving him my time, thought and advice, I would not.  I added that I was sorry to say he strikes me in his public, and now semiprivate, presentations as an imperious twerp.

“For the second I actually hesitated: The imperious twerp runs the algorithms, controls the traffic, has all the dark powers!  But I am an American, and one with her Irish up, so I hit send.

“And I’m still here, at least at the moment, so I guess that’s OK.”

I’ve called for Mr. Zuckerberg to be “indicted” on numerous occasions.  You’d think that would hit certain algorithms.

Ms. Noonan continues:

“We’re Americans and we love money and success and the hallowed story of the kid in the garage who invents the beautiful product that changes the world.

“And Republican officials – they can’t help it, they don’t just rightly love business; they love big business, they love titans. It’s almost romantic: Look what people can do in America!  He started it in his dorm room!  And now we’re at lunch!....

“Here’s what they should be thinking: Break them up.  Break them in two, in three; regulate them.  Declare them to be what they’ve so successfully become: once a pleasure, now a utility....

“Why are Republicans so slow to lead?  The Times quoted Republican Sen. Josh Hawley as saying ‘the dominance of big tech’ is a ‘big problem.’  They ‘may be more socially powerful than the trusts of the Roosevelt era, and yet they still operate like a black box.’

“He’s right.

“But I read about lobbyists coming at Republican congressional leaders and I think, it’s going to be like Mr. Zuckerberg’s meeting with the conservatives in 2016.  A tech god will give them some attention, some respect, and they’ll fold like a cheap suit.

“If they are as stupid and unserious as their critics take them to be, they will go to the meeting and be used.

“They should say no and hit send.”

--A group of state attorneys general filed a lawsuit on Tuesday to block the proposed merger of T-Mobile US Inc. and Sprint Corp., which makes zero sense, especially as federal antitrust officials are still reviewing the more than $26 billion deal.

The suit alleges that the union of the third- and fourth-largest wireless carriers in the U.S. would drive up prices for cellphone services.  It was filed in a federal court in New York and was led by the attorneys general of New York and California.

New York AG Letitia James said at a news conference: “The deal is bad for consumers, it’s bad for innovation, it’s bad for workers.”  She added: “There’s no rule or regulation that says we have to wait for the DOJ (Department of Justice)” to rule on the merger.

Most experts say they’ve never seen a situation where state attorneys general challenged a merger of this size and prominence on their own, let alone to take such an action while the Justice Department review was pending.

But what’s stupid is that there is no way Sprint survives as a standalone.  Period.  And how is that good for anyone?

The deal should be approved.

--Atlantic City’s nine casinos saw their gambling revenue increase to nearly $267 million in May, an increase of 22.5% from a year earlier.  Granted, there were two more casinos operating this May than last May, which accounted for much of the increase.

The Golden Nugget had the largest increase, up 10.3% to $31.2 million; Resorts was up 4.1%; and Caesar’s 3%.

Tropicana had the biggest decline, down 14.6% to $29.3 million; Borgata was down 7.1%.

The casinos earned $5.5 million in sports betting revenue.

--We note the passing of economist Martin Feldstein, a top adviser to presidents and one of the most influential academics of his generation.  He was 79.

Harvard University colleague Jeremy Stein, a former member of the Federal Reserve Board of Governors, said in an email to colleagues, that Feldstein was a “world-renowned scholar, teacher and policy-maker, Marty was the pre-eminent bridge-builder in the economics profession, someone who did more to bring people and ideas together in a congenial way than just about anyone else.”

Feldstein was a professor of economics at Harvard since 1969, but he also served as chairman of the White House Council of Economic Advisers from 1982 to 1984 under President Ronald Reagan.  And later he served in advisory positions to President George W. Bush and President Obama.

Feldstein largely focused on unemployment, taxes, inflation and public spending, and did pioneering work in the 1970s on how taxes influence economic behavior by businesses and individuals.  He was an advocate for small government, low taxes and control of the federal budget deficit.

As recently as this March, Feldstein penned commentary for the Wall Street Journal, warning about the rapid growth of the U.S. budget deficit and national debt.

--Shares in Beyond Meat soared from $99 at last Thursday’s (June 6) close to $186 intra-day this Monday, before it lost 25% on Tuesday after a Wall Street analyst said, in essence, ‘Now hold on here...can we get real?’  I mean the company’s shares had soared 570% since their May 2 debut on the Nasdaq.

JPMorgan analyst Ken Goldman wrote, “This downgrade is purely a valuation call.”  He pointed out that to justify a price of $170-$180, investors would have to swallow the belief that Beyond Meat’s revenues would reach $5 billion by 2020, when they logged sales of $100 million in 2018.

You also have the issue of competition, which is growing rapidly in the veggie-burger market.  Just Thursday, Tyson Foods said it was getting into the segment, though the company didn’t give any real details on how it would do so.  Today, Beyond Meat shares rallied back to $150.

--Krispy Kreme announced it will open the “first-of-its-kind flagship” store in Times Square in early 2020, a location expected to serve more guests annually than any other location around the world.

CEO Michael Tattersfield said in a statement: “In the most iconic city in the world, the Krispy Kreme Times Square Flagship will showcase our brand on the global stage and inspire customer wonder. We love making awesome doughnuts – and New Yorkers deserve hot and fresh doughnuts!”

The 4,500-square-foot shop at Broadway and 48th Street will be open 24 hours a day, seven days a week and have stadium-style seating inside the world’s largest Krispy Kreme doughnut box.

It will also feature the world’s largest Hot Light, that signals that hot, fresh doughnuts are available.

But get this; the store will feature a “glaze waterfall.”

I’m drooling and can’t find my bib. And I’m imagining Homer Simpson’s reaction to this exciting news.

Foreign Affairs

Iran:  The U.S. military released a video which it says shows Iran’s Revolutionary Guard removing an unexploded mine from the side of an oil tanker damaged  in an attack in the Gulf of Oman on Thursday.  U.S. officials also shared a photo of the Japanese tanker before the apparent mine was removed. 

A Norwegian tanker was also damaged, the attacks coming a month after four tankers were damaged in an attack off the coast of the United Arab Emirates, also allegedly perpetrated by Iran, according to the U.S., though it did not produce any evidence.

Iran said it “categorically rejects” the allegation it was involved in Thursday’s attacks, let alone the earlier ones.

The Gulf of Oman lies at one end of a vital shipping lane, the Strait of Hormuz, through which 20 to 33 percent of the world’s transported oil passes every year, depending on how you define it.

According to the U.S. account, U.S. naval forces received distress calls from the Norwegian-owned tanker and from the Kokuka Courageous, following near-simultaneous explosions, with the USS Bainbridge observing Iranian naval boats operating in the area in the hours after, and later removing the unexploded mine from the side of the Kokuka Courageous.

The operator of the Courageous said its crew abandoned ship after observing a fire and an unexploded mine.  The tanker was about 20 miles off the Iranian coast when it sent its emergency call.  The two vessels were carrying petrol products and methanol from the UAE and Saudi Arabia, to Taiwan and Singapore.

U.S. Secretary of State Mike Pompeo said at a news conference Thursday in Washington: “It is the assessment of the United States that the Islamic Republic of Iran is responsible for the attacks.

“This assessment is based on intelligence, the weapons used, the level of expertise needed to execute the operation, recent similar Iranian attacks on shipping, and the fact that no proxy group operating in the area has the resources and proficiency to act with such a high degree of sophistication.”

UK Foreign Secretary Jeremy Hunt said his country’s “starting point” was to “believe our U.S. allies.”

“We are taking this extremely seriously and my message to Iran is that if they have been involved it is a deeply unwise escalation which poses a real danger to the prospects of peace and stability in the region,” Hunt said.

The Iranian mission to the United Nations said it called the allegation “unfounded” and “Iranophobic.”

“Iran categorically rejects the U.S.’ unfounded claim with regard to 13 June oil tanker incidents and condemns it in the strongest possible terms,” the statement said.

Iranian Foreign Minister Zarif accused the U.S. of making an allegation “without a shred of factual or circumstantial evidence” and attempting to “sabotage diplomacy.”

The attacks occurred as Japanese Prime Minister Shinzo Abe was meeting with Iran’s Supreme Leader Ayatollah Ali Khamenei during a two-day visit by Abe to Iran.

Today, Iran said it was responsible for maintaining the security of the Strait of Hormuz, adding that blaming Tehran for attacks on two oil tankers in the Gulf of Oman was alarming.

“We are responsible for ensuring the security of the Strait and we have rescued the crew of those attacked tankers in the shortest possible time,” a foreign ministry spokesman was quoted as saying.

“Obviously, accusing Iran for such a suspicious and unfortunate incident is the simplest and the most convenient way for (Secretary of State) Pompeo and other U.S. officials.  These accusations are alarming.”

Iran’s oil exports, its economy’s lifeblood, have dropped to about 400,000 bpd in May from 2.5 million bpd in April last year, before President Trump pulled out of the 2015 nuclear deal between Iran and major powers that aimed to curb Tehran’s nuclear ambitions in exchange for sanctions relief.

This morning, President Trump gave his usual “we will see” when asked on “Fox and Friends” how he would respond to Iran’s latest alleged attack.

David Ignatius / Washington Post

“As Secretary of State Mike Pompeo accused Iran of ‘unprovoked attacks’ near the Strait of Hormuz, video screens behind him showed thick black smoke billowing from the two tankers that were struck Thursday. It was the dramatic imagery that sometimes precedes armed conflict.

“Pompeo didn’t offer hard evidence [Ed. assuming Mr. Ignatius wrote this just prior to the Revolutionary Guards video], and Iran denied the attacks.  The U.S. response in the escalating confrontation with Iran, for now, seems to be continued pressure short of war. ‘Our policy remains an economic and diplomatic effort to bring Iran back to the negotiating table,’ Pompeo said.

“Thursday’s attacks were especially brazen because one of the targeted ships is Japanese-owned, and Prime Minister Shinzo Abe was in Tehran at the time carrying a message from President Trump. As Pompeo put it, Abe’s mission was ‘to ask the regime to de-escalate and enter into talks.’ Abe was rebuffed in person by the supreme leader, Ayatollah Ali Khamenei, and, symbolically, by the attack on the tanker.

“The bottom line is that Trump’s ‘maximum pressure’ campaign has collided head on with Khamenei’s maximum resistance.  Trump’s recent talk about Iran’s supposed eagerness for negotiations has been self-deluding, but so is any hope that Iran will quickly moderate its behavior.  Met by American economic warfare, Iran’s hard-liners are doubling down with their own forms of deniable warfare, with mines, drones and proxy attacks.

“What are the internal dynamics of this escalating crisis, and where is it heading? Conversations with a half-dozen current and former senior U.S. officials and other experts produced some early assessments:

“—Iran is attacking partly because it has been badly hurt by U.S. economic sanctions.  Tehran’s early approach of strategic patience, hoping to wait Trump out, ‘has bled into gradual escalation,’ argues Behnam Ben Taleblu of the Foundation for Defense of Democracies.  ‘Iran is now willing to embrace the dynamic of risk’ to escape the economic straitjacket.

“—Trump has a new opportunity to broaden international support for his Iran policy, after isolating the United States last year by abandoning the Iran nuclear agreement....At a private meeting Thursday (at the UN Security Council), most members condemned the tanker strikes, a U.S. official said.  This coalition-building will increase.

“—Trump’s hopes for a quick win were misplaced....

“—Hard-liners are more ascendant than ever in Tehran.  Pompeo cited a steady escalation of attacks since early May on tankers, a Saudi oil pipeline, the U.S. Embassy compound in Baghdad and a Saudi airport.  Potentially more dangerous are Iran’s moves to escape provisions of the 2015 nuclear agreement.  Yukiya Amano, the head of the International Atomic Energy Agency, reported this week that Iran is increasing its production of enriched uranium, which was capped under the pact.

“Diplomatic feelers from Iran, which raised some hopes in Washington, lack support from the supreme leader’s camp....

“The tableau of recent weeks has been striking. Trump has been a whirling dervish of diplomacy, almost pleading for Iran to come to the negotiating table and discuss a broader, longer-lasting deal that Trump could claim was an improvement over the one negotiated by his predecessor.  Meanwhile, Khamenei has sat implacable, even as President Hassan Rouhani dangled hints that Iran might be willing to talk.

“But as long as Khamenei is alive, his voice is decisive. And it couldn’t have been clearer Thursday, as he rejected Abe’s mediation: ‘I do not consider Trump, as a person, deserving to exchange messages with.   We will not negotiate with the United State.’

“You could almost hear, in the supreme leader’s voice, an echo of Ayatollah Ruhollah Khomenei, who said during the Iran hostage crisis, ‘America can’t do a damn thing against us.’ That Iranian overconfidence is what makes this confrontation so dangerous.”

Editorial / Wall Street Journal

“Secretary of State Mike Pompeo on Thursday charged Iran with responsibility for the attack earlier in the day on two oil tankers in the Gulf of Oman.  Mr. Pompeo cited intelligence reports and the nature of the weapons used, most likely torpedoes, as evidence.  It is almost certainly true that Iran is behind the attacks, which makes it all the more important that the West unite in opposition to Iran’s aggression.

“This was a sophisticated attack that only a nation with a sophisticated military could carry out.  Within about 45 minutes Thursday morning, the two tankers were hit by projectiles at the waterline with sufficient force to set them on fire but not sink them. The Iranians, under intense financial pressure from American sanctions on their oil exports, were sending the world a message: Pressure the U.S. to lift the sanctions or there will be more of this, and worse, to disrupt oil shipments in the Gulf.

“The assault on the tankers validates the U.S. decision the past month, met with skepticism at the time, to send the aircraft carrier USS Lincoln into the Gulf along with destroyers and cruisers, in the expectation that Iran was planning an attack in the region.  Indeed it was.

“Nor were the Iranians subtle about the message sent.  The Japanese-owned Kokuka Courageous was hit even as Prime Minster Shinzo Abe was in Tehran offering himself as a mediator between the U.S. and Iran.  Iran’s strategy is to intimidate Europe and Japan by threatening vital shipments through the Strait of Hormuz and driving up the price of oil.

“It would send the worst possible signal if in the aftermath of these attacks the Europeans buckled to Iran’s military pressure.  The Iranians routinely send out Foreign Minister Mohammad Javad Zarif as the face of sweet reason before the world when their foreign policy, executed by Revolutionary Guards leader Qasem Soleimani, is to hit opponents militarily and repeatedly until they bend.

“It is no coincidence that the day before the tanker attacks, Iran’s Yemeni proxies, the Houthi militias, fired a missile into a Saudi Arabian airport, injuring 26 civilians.  A month earlier the Houthis carried out attacks on Saudi oil installations.

“These accumulating acts of aggression by Iran should make clear that Secretary Pompeo is right to insist that the U.S. proceed with its planned arms sales to Saudi Arabia.  A group of Senators has tried to block the sales, citing the murder of Jamal Khashoggi.  That point has been made, and the Saudis have paid a political and economic price for Khashoggi’s death.

“Lately, some have doubted the importance of the U.S. role in the region. Two oil tankers in flames from torpedo attacks in the Gulf of Oman refute that view. The unavoidable fact is that Iran remains the primary threat to stability in the Middle East.  The U.S. is right to be there, in force and prepared to defend the interests of itself and its allies.”

Meanwhile, with Prime Minster Abe attempting to play mediator, President Trump tweeted:

“While I very much appreciate P.M. Abe going to Iran to meet with Ayatollah Ali Khamenei, I personally feel that it is too soon to even think about making a deal. They are not ready, and neither are we!”

Syria: The Russian military said on Thursday that Syrian rebels had attacked a Turkish observation post in Syria’s Idlib province, which is a version at odds with Ankara’s, which said the attack was mounted by the Syrian army.  Turkey’s Defense Ministry said earlier that Syrian government forces had carried out what it assessed to be a deliberate attack, firing 35 mortar shells at one of its observation posts, wounding three Turkish soldiers.

But, as is their wont, Russia’s Ministry of Defense lied, blaming “terrorists” based in Idlib for the attack.

Turkey: Separately, Turkey was given a deadline of the end of July to choose between buying U.S. fighter jets and Russian anti-aircraft missile systems.  Acting U.S. Defense Secretary Patrick Shanahan set out the ultimatum in a letter to his Turkish counterpart.

Shanahan said Turkey could not have both the F-35 advanced fighter jet and Russia’s S-400 missile system.

The U.S. maintains the S-400 poses a security threat, and wants Turkey to buy its Patriot anti-aircraft systems instead.

Turkey has invested heavily in the F-35 program and has signed to buy 100 of the planes.  Turkish companies produce 937 of the F-35’s parts.

The issue is simple.  The Pentagon believes that if Turkey had both the F-35 and S-400, then Russian technicians would be able to access the plane’s vulnerabilities, putting U.S. pilots at additional risk.

But Turkey is saying it is too late for it to back out after negotiating the deal with the Russians.  Turkish personnel are already in Russia training on the S-400.

Israel: Last weekend, the U.S. ambassador to Israel, David Friedman, did not rule out an Israeli move to annex parts of the occupied West Bank, land that the Palestinians seek for a state, in an interview with the New York Times.  Israeli Prime Minister Netanyahu said in the run-up to an April election that he plans to annex Jewish settlements in the West Bank, a move that would trigger widespread international condemnation and doom any peace efforts.

Palestinian chief negotiator Saeb Erekat tweeted: “Their vision is about annexation of occupied territory, a war crime under international law.”

The Palestinian leadership has refused to deal with the Trump administration since it recognized Jerusalem as Israel’s capital. And then you had the move by Trump to recognize Israeli sovereignty over the Golan Heights, which at the time, Netanyahu said showed it was possible to annex West Bank settlements “within a gradual process and I prefer to do so with American recognition.”

But will Netanyahu remain in office.

China / Hong Kong: As noted above, protests erupted over the weekend in Hong Kong, with organizers claiming over a million people demonstrated last Sunday while calling for the resignation of Hong Kong leader Carrie Lam.  Police put the crowd at 240,000.  It was far more than that.

Hong Kong is allowed to keep its own local institutions under a “one country, two systems” arrangement and protesters see the bill as a whittling away of autonomy.

The proposed law would allow for some criminal suspects to be turned over to Communist Party-controlled courts in mainland China.  Residents in Hong Kong, a Chinese territory, have more freedoms than those in China and opponents fear democracy advocates, journalists and others could be targeted with the proposed law.

But pro-Beijing politicians see the bill as a measure to prevent the city from turning into a safe haven for fugitives of Chinese law.  The U.S. State Department this week stated concerns that a “lack of procedural protection” in the proposal could undermine Hong Kong’s autonomy and damage the territory’s “longstanding protections of human rights, fundamental freedoms and democratic values.”

Chinese state media said the protests are “hammering” the city’s reputation, with outbreaks of “lawlessness” undermining the rule of law.  The Global Times* blamed “radical opposition forces” and “the Western forces behind them” for hyping up and politicizing the amendments.

*I posted on my “Hot Spots” link an editorial from the Global Times so you can see the official government opinion.

Then Wednesday, there was another round of protests which grew into a riot, forcing the government to postpone a vote on the extradition bill.  A reading of it was slated for that day but the Legislative Council (LegCo, largely assembled by Beijing) said it would be postponed to “a later time.”

The violent clashes Wednesday, the worst violence the city has seen in decades, left more than 80 people injured as officers fired tear gas, rubber bullets and beanbag rounds to disperse the crowd, after tens of thousands of protesters – mostly in their 20s – brought part of the city to a standstill by occupying key roads to besiege the legislature and prevent it from holding debate.

In a rare move, prominent business leaders warned that pushing through the extradition law could undermine investor confidence in Hong Kong and erode its competitive advantages.  Not only will foreign investors be afraid to invest, with some CEOs potentially fearing arrest, but tourism would likely plummet.

Hong Kong Chief Executive Carrie Lam insisted there would be no changes to the government’s proposals, but at week’s end, LegCo was working to defuse the crisis by considering options including a pause in bringing forward the extradition bill, rather than a withdrawal, according to the latest gleaned from the South China Morning Post.

But clearly the Executive Council is split, with one side calling for further discussion on the bill, while the other side suggests the government should continue to fast track it through the legislature.

We learned later that as Hong Kong police attempted to disperse Wednesday’s throng, unknown hackers flooded the Telegram encrypted-messaging service with bogus signals, temporarily depriving demonstrators of a key organizing tool.  Company officials say the signals came from inside China.

“We’re currently experiencing a powerful DDoS attack,” short for distributed denial of service, Telegram tweeted.  “Telegram users in the Americas and some users from other countries may experience connection issues.”

Defense One later asked Telegram founder and CEO Pavel Durov where the attacks originated and he responded: ‘IP addresses coming mostly from China...coinciding with protests in Hong Kong.”

An expert told Defense One that such attacks are hard to stop when local authorities, in control of network traffic, want them to proceed.

As I go to post tonight, Hong Kong is preparing for further massive protests this weekend.  At what point does Beijing order something more than tear gas.  Hopefully, cooler heads in Xi Jinping’s inner circle will prevail.

Bret Stephens / New York Times

“Imagine if in 2018 the Trump administration had proposed legislation that would allow the government, on nearly any pretext, to detain, try and imprison Americans accused of wrongdoing at secretive black sites scattered across the country.

“Imagine, further, that 43 million Americans had risen in protest, only to be met by tear gas and rubber bullets while Mitch McConnell and Paul Ryan rushed the bill through a pliant Congress. Finally, imagine that there was no effective judiciary ready to stop the bill and uphold the Constitution.

“That, approximately, is what’s happening this week in Hong Kong.

“An estimated one million people – nearly one in seven city residents – have taken to the streets to protest legislation that would allow local officials to arrest and extradite to the mainland any person accused of one of 37 types of crime.  Political offense are, in theory, excluded from the list, but nobody is fooled: Contriving criminal charges against political opponents is child’s play for Beijing, which can then make its victims disappear indefinitely until they are brought to heel.

“In 2015, mainland authorities abducted five Hong Kong booksellers known for selling politically sensitive titles and held them in solitary confinement for months until they pleaded guilty to various offenses.  In 2017 Chinese billionaire Xiao Jianhua was abducted by Chinese authorities from the Four Seasons in Hong Kong.  He hasn’t been seen publicly since, while his company is being stripped of its holdings.

“The extradition bill is the next evolution in this repressive trend. It probably won’t be the last.

“Hong Kong’s relationship with the mainland is supposed to be governed by the principle of ‘one country, two systems.’  But as with any form of pluralism, it’s a principle that poses inherent dangers to Beijing.  It was little West Berlin that, merely by being free, helped bring down the mighty (as it seemed at the time) Honecker regime in East Germany in 1989.  The Chinese supreme leader, Xi Jinping, isn’t about to let that happen to him via Hong Kong.

“Then again, maybe he shouldn’t be so worried.  Throughout the 1980s the free world was politically united and morally confident: It believed in its liberal-democratic values, in their universality, and in the immorality of those who sought to abridge or deny them.

“It also wasn’t afraid to speak out. When Ronald Reagan called the Soviet Union ‘the focus of evil in the modern world,’ one prominent liberal writer denounced him as ‘primitive.’  But it was such rhetoric that gave courage to dissidents and dreamers on the other side of the wall.  What’s really primitive is to look upon the suppression of others and, whether out of deficient sympathy or excessive sophistication, remain silent.

“Compare the free world then with what it is today.  ‘I’m sure they’ll be able to work it out,’ was just about all Donald Trump could bring himself to say about the Hong Kong protests during a press conference on Wednesday with the Polish president, Andrzej Duda.  As clarion moments in U.S. moral leadership go, ‘Ich bin ein Berliner’ it was not....

“Why does Trump have next to nothing to say about the robbery of rights in Hong Kong?  Because, as far as he’s concerned, it’s a domestic Chinese affair.  Why does he seem to be indifferent to the act that Beijing’s behavior violates the 1984 Sino-British Joint Declaration?  Because that’s someone else’s business, too, concerning a treaty signed a long time ago by people who are now dead.

“All this means that Xi can dispose of the Hong Kong demonstrators as he likes without fear of outside consequences.  Under Trump, Uncle Sam might be happy to threaten tariffs one day and promise to make a deal the next.  But he no longer puts up his fists in defense of Lady Liberty....

“The world continues to endure a democratic recession, made worse by the surly ignorance of an American president.  It won’t last forever.  The efficient authoritarianism that is supposed to be the secret to China’s global ascendancy is being exposed for what it is – a state whose greatest fear is the conscience of those marching in Hong Kong’s streets.”

Editorial / Wall Street Journal

“The young demonstrators in Hong Kong this week have done the world a favor. In calling attention to their plight, they are educating the rest of us in the nature of President Xi Jinping’s Communist Party rule in Beijing.  Donald Trump in particular should be listening – and speaking up.

“The demonstrators – and the millions of Hong Kongers who marched peacefully Sunday – object specifically to a pending law that would allow extradition from the territory to the Mainland. The people know this will put anyone who criticizes China in jeopardy of being sent to the Mainland for almost certain conviction and punishment.  Hong Kong’s legacy of British law will still control – except in cases where China decides otherwise.

“The official disclaimers from Hong Kong chief executive Carrie Lam that China has no such intentions are meaningless. She was appointed by Beijing and takes her orders accordingly. She is insisting on moving ahead with the law despite the mass protests because China has demanded it.  Her job, and perhaps her own future freedom, would be jeopardized if she dared to resist.

“The new law is itself a violation of China’s promise to Hong Kong that it could continue to control its legal system for 50 years after its handover from the British in 1997.  As these columns wrote in 1984 after Margaret Thatcher struck here deal with Deng Xiaoping, ‘the essence of the [joint] declaration is that five million largely free people will soon have their futures determined by a totalitarian government not known for tolerance or stability.’   We urged Britain to amend its Nationality Act to admit to England all Hong Kongers who wanted to leave.

“China has been stable in the 35 years since, and for much of that time it was reforming economically and even easing up its political controls. But in the last decade, and especially in the Xi era, the Party has reasserted unbending control over Chinese politics and much of private Chinese life.

“It has herded a million Uighurs into re-education camps, arrested lawyers defending dissenters, harassed Christians in the underground church, and by next year will use facial-recognition surveillance to assign citizens a ‘social credit’ score that rates them on good or bad behavior.

“The slow asphyxiation of Hong Kong’s freedom is part of this trend, and it shows how the Xi regime will also abandon its international pledges.  Hong Kong has assisted China’s economic rise as an entrepot to the world and legal safe harbor.  Yet Beijing fears the territory because it is an example of how free Chinese can govern themselves.

“Mr. Xi is squeezing Hong Kong because he can and because he thinks he will pay no price for it.  If Ms. Lam jams the extradition law through the Legislative Council, the public will have no recourse beyond more protests or fleeing the territory.  The anger in the streets is the despair of people who know they will soon be unable to escape Beijing’s arbitrary justice.

“The world owes these people its attention.  The State Department and some in Congress have spoken up. But Donald Trump has so far said nothing, though the U.S. has considerable investment in Hong Kong.  Speaking the truth about Hong Kong won’t jeopardize a trade deal with Mr. Xi, who will only sign something in his own interests.  Mr. Trump might even improve the chances of a good deal by calling out China’s failure to keep its commitment to Britain and Hong Kong.

“Mr. Xi wants to expand China’s influence by narrowing the space for democratic self-government across the globe.  An American President’s duty is to push back and expand the scope for liberty.”

North Korea: President Trump said he received a “beautiful” letter from Kim Jong Un, which we later learned was to congratulate him on his birthday. Speaking to reporters at the White House, Trump said, “I think that something will happen that’s going to be very positive,” but gave no details.

Washington is seeking to rebuild momentum in stalled talks with Pyongyang.  Trump and Kim last met early this year in Hanoi but failed to reach any kind of agreement.

But Trump was speaking of the letter a day after the Wall Street Journal reported that Kim’s slain half-brother, Kim Jong Nam, was a source for the CIA.

The beautiful letter came after North Korean state media called on the United States on Tuesday to “withdraw its hostile policy” towards Pyongyang or agreements made at the Singapore summit a year ago might become a “blank sheet of paper.”

“I did receive a beautiful letter from Kim Jong Un... I appreciated the letter.  I saw the information about CIA with respect to his brother, or half-brother.  And I will tell him that will not happen under my auspices....I wouldn’t let that happen.”

A disgraceful statement, once again undercutting our intelligence apparatus.

Separately, a report from the Seoul-based Transitional Justice Working Group identified at least 323 sites used by Pyongyang for public executions, the result of four years of research and interviews with more than 600 North Korean defectors living outside the country.

“Public executions are to remind people of particular policy positions that the state has,” said the research director for the project.  The TJWG said 83 percent of a sample of 84 surveyed peple had witnessed a public execution at some time.

Japan: The government said Tuesday its imposing new restrictions for foreign students, after it lost track of more than 1,600 who were in the country to study.

Japan’s education ministry and immigration agency said they will stop approving any new applications from prospective research students, after it was discovered 1,610 skipped out of Tokyo University of Social Welfare.  The action marks the first time the Japanese government has placed restrictions on foreign students.

Russia: Russian police detained at least 400 people in central Moscow on Wednesday for taking part in a peaceful but unsanctioned demonstration protesting impunity and corruption in law enforcement agencies.  The protest came a day after police released prominent Russian investigative journalist Ivan Golunov, who had been arrested last week on drug-dealing charges that he said were fabricated by police in retaliation for his anti-corruption reports.

The arrest sparked a wave of protests and demands for his release from celebrities, journalists and civil society members that lasted several days.  Moscow’s police chief dismissed the case on Tuesday, citing a lack of evidence.  The dismissal was unprecedented in recent Russian history.  The protesters know this can happen to anyone.  [Similarly, Hong Kongers fear this will happen to them as well.]

But then President Putin on Thursday fired two police generals involved in the discredited criminal case against Golunov, a rare U-turn by the authorities in the face of anger from his supporters.

Poland: President Trump signed an agreement to send 1,000 additional U.S. troops to Poland while treating his visiting Polish counterpart to a military flyover at the White House as thanks for a commitment to buy F-35 fighter jets.

“It moves us to another era,” Polish President Andrzej Duda said Wednesday.

Since 2017, the U.S. has kept a steady rotation of about 4,000 troops in the Polish countryside.  The new force wouldn’t be combat troops but rather “enabling forces” with jobs such as manning drones, a U.S. official said.  No timetable was announced, with the expectation that the troops will come from other bases in Europe, specifically Germany.

President Trump said: “As you know, we have 52,000 troops in Germany, and Germany is not living up to what they’re supposed to be doing with respect to NATO, and Poland is,” referring to the 2% target of military spending vs. GDP.

Congo: Ebola has spread beyond the Democratic Republic of Congo to Uganda, where there have now been two deaths, which infectious disease experts say represents a “truly frightening” phase that could kill many more.

Venezuela: Jackson Diehl / Washington Post

“Is there still a crisis in Venezuela?  Judging from President Trump, you wouldn’t think so.  Back in January, the president and his top aides were seized with the cause of ousting the corrupt and autocratic regime in Caracas.  The White House delivered what it thought would be a decisive blow by blocking U.S. purchases of Venezuelan oil and hinted that a military intervention was under consideration.

“Five months later, President Nicolas Maduro is still in office – and U.S. policy is dormant. There has been no intervention, and after a couple of failed attempts to force the regime’s collapse, the Venezuelan opposition has gone back to negotiating with Maduro, with the help of Latin American and European governments.

“The U.S. is not participating.  Instead, The Post reported last month that Trump had taken to ‘complaining he was misled about how easy it would be to replace the socialist strongman.’”

So Trump picked a new target, Mexico.

Meanwhile, four million Venezuelan refugees and migrants have fled the crisis in their homeland, UN aid agencies reported this week.  Colombia is home to 1.3 million of them.

Random Musings

--Presidential tracking polls....

Gallup: 40% approval rating for President Trump, 55% disapproval (June 5, May 15-31), 87% Republicans, 33% Independents.
Rasmussen: 51% approval, 47% disapproval (Jun. 14).

In a new Quinnipiac University national poll of registered voters, President Trump has a 42% approval rating, 53% disapproval, which is good for this survey, one point shy of his best.

--In a Des Moines Register/Mediacom/CNN Iowa Poll of likely Democratic caucusgoers, former Vice President Joe Biden leads with 24%, followed by Bernie Sander at 16%, with Elizabeth Warren and Pete Buttigieg at 15% and 14%, respectively. Next is Kamala Harris at 7%.

--In a Quinnipiac survey of the Democrats field overall, Biden leads with 30% among Democrats and voters leaning Democrat.  This compares to his 35% standing May 21, and his 38% standing in an April 30 Quinnipiac poll.

Bernie Sanders is next at 19%, compared to 16% last month. Elizabeth Warren has 15%, compared to 13% on May 21, and Mayor Pete is at 8 percent.  [Kamala Harris 7 percent.]

--In a Quinnipiac poll of Texas voters, Biden has 48% to President Trump’s 44% in a head-to-head.  [Trump won the state in 2016, 52-43 over Hillary Clinton.]

Trump bests Elizabeth Warren 46-45, and Bernie Sanders 47-44 in Texas.  But it’s way too early.

But in head-to-head nationwide matchups, Biden leads Trump 53-40, according to a separate Quinnipiac poll, with Bernie Sanders beating the president 51-42.  Even Sen. Cory Booker leads Trump 47-42.

In the Trump-Biden matchup, women back Biden 60-34 percent, with men divided 47 percent for Biden and 46 percent for Trump.  White voters are divided with 47 percent for Trump and 46 percent for Biden.  Biden leads among black voters 85-12 and 58-33 among Hispanic voters.

Republicans go to Trump 91-6, while Biden leads 95-3 among Democrats and 58-28 among independent voters.

Importantly in this poll, 70 percent of voters say the nation’s economy is “excellent” or “good,” but only 41 percent of voters say Trump deserves credit for it.

--In a Monmouth University poll of likely Nevada caucusgoers (February), Biden leads with 36%, to Warren’s 19% and Sanders’ 13%.  [Buttigieg 7%, Harris 6%.]

Among very liberal potential Democrats and unaffiliated voters likely to attend the caucus, it’s Warren 27%, Sanders 26% and Biden 19%, with very liberal voters making up about one-quarter of likely caucusgoers.

The top issue of Nevada Democrats is health care (41%), followed by environmental concerns (17% climate change and 7% environment in general), and immigration (19%), per the Monmouth survey.

--The first debates among the Democratic presidential candidates are set for June 26 and 27 in Miami, 20 candidates that qualified, two groups of ten, one each night.

The first night features Elizabeth Warren, Beto O’Rourke, Amy Klobuchar and Cory Booker. 

The second night is the more interesting with Joe Biden, Bernie Sanders, Mayor Pete and Kamala Harris among the ten.

--Editorial / New York Post

“Suddenly, Joe Biden says it’s time for us ‘to get tough with China’ – as if that’s not exactly what President Trump has been doing.

“And the reverse of where Biden’s stood for his entire career.

“ ‘China poses a serious challenge to us, and in some areas are a real threat,’ the ex-veep announced Tuesday in Iowa.

“But just last month, also in Iowa, he laughed at the idea.  ‘China is going to eat our lunch? Come on, man...They’re not bad folks, folks....they’re not competition for us.’  More: ‘No other nation can catch us, including China. I got criticized for saying that.’

“Last week in New Hampshire, he wailed, ‘What are we worried about?’

“All that fit with the policies he supported for eight years as No. 2 to President Barack Obama, who responded to China’s theft of intellectual property and other clear violations of World Trade Organization rules by...asking President Xi Jinping to stop.  As if.

“Trump has been doing what Team Obama never dared: Calling China to account, and putting all its trade privileges at risk if it doesn’t change.  And he’s standing firm: When Beijing reneged on trade concessions last month, he broke off talks and imposed tougher tariffs.  He also blacklisted tech giant Huawei as a risk to U.S. national security.

“Even as Biden finally is admitting that Trump was right about the problem, he still claims he’s ‘worried about China...if we keep following Trump’s path.’  So even while pretending to turn hawkish, he’s still a dove.

“This is Biden’s second major flip-flop in a week, after abandoning a career-long position on abortion.  He’s been shifting left on a host of other issues, such as climate change, too.  Who will Uncle Joe even be by the end of the campaign?”

--Richard Cohen / Washington Post

“One day last week, Joe Biden reaffirmed his support for the Hyde Amendment, which prohibits the federal funding of most abortions.  A day later, the presidential candidate and former vice president reversed himself, giving as a reason the recent spate of draconian antiabortion laws enacted in several states. Surely, however, Biden was pushed by Democratic Party activists.  At this rate, he’ll be a socialist by Labor Day.

“Biden had been a longtime supporter of the Hyde Amendment....

“I am an ardent supporter of abortion rights and have long been opposed to the Hyde Amendment, but I am less than thrilled at Biden’s sudden conversion.  It reeks of insincerity and of a decision made simply for political reasons.  He was under intense pressure from the party’s liberal wing, particularly the suddenly accelerating Sen. Elizabeth Warren, whose authenticity is not in doubt.  He also heard from the actress Alyssa Milano. She called Biden’s campaign manager, urging that Biden reconsider his support of Hyde....

“It’s troubling that Biden should so easily abandon what, until the other day, seemed a deeply held position. It is also troubling that a major element of the Democratic Party is so intolerant of an opposing idea that it would doom a candidacy on that basis alone.  This lockstep abortion platform seeks to impose a simplistic position on a morally vexing issue and is reminiscent of 1992, when at the Democratic National Convention, the party denied a pro-life Democrat, Gov. Robert P. Casey Jr. of Pennsylvania, a speaking slot.  Most Democrats support abortion rights and most Republicans do not, but both parties contain significant minorities of dissenters.  Uniformity is nice, but not when it is coerced....

“Better a Joe Biden who is wrong, but authentic, on some issues than one who is right only out of political expediency.

“This will be an arduous and painful campaign for Biden if he is willing to betray his beliefs.  Soon enough, it will be bitterly cold in Iowa – and he will be ideologically naked to the world, not the man he used to be and not, either, the man he wants to be.”

--President Trump and Joe Biden traded harsh insults Tuesday as they crisscrossed Iowa, but in Trump’s main speech in the state he did not mention his potential rival.

Earlier, Trump had called Biden “weak mentally,” while Biden described Trump as an “existential threat to America.”

“Only I can fix it,” Biden said mocking Trump during his main Davenport rally, before adding: “Fix yourself first, Donald Trump.”

Trump, speaking to reporters on the South Lawn of the White House before heading to Iowa that day said: “When a man has to mention my name 76 times in a speech, that means he’s in trouble.”

--The bill that permanently authorizes the 9/11 Victim Compensation Fund passed out of the House Judiciary Committee unanimously on Wednesday.

The move came a day after former “The Daily Show” star Jon Stewart shamed members of a Judiciary subcommittee, as only Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) and four subcommittee members were present for testimony from 9/11 first responders.

“It’s an embarrassment to the country and a stain on the institution and you should be ashamed of yourselves, for those who aren’t here, but you won’t be because accountability doesn’t appear to be something that occurs in this chamber,” Stewart said Tuesday.

The bill is expected to pass the full House in the future.

--At least six American tourists have died under mysterious circumstances in the Dominican Republic in the past year, and that doesn’t include another now suspicious death, the brother of real estate maven Barbara Corcoran, who died of a reported heart attack while on vacation in April, but in light of the other deaths is being reexamined as there are similarities.  [Ms. Corcoran says her brother should not be linked to the others.]

Some of the deaths occurred after the victims had a drink from the hotel minibar.

Dominican Republic authorities have been less than cooperative, insisting all the deaths were isolated incidents.  But today there is a report police there are investigating whether the deaths are linked to counterfeit booze, as officials try to find those who supplied the alcoholic beverages the victims drank before they died.  The FBI is involved and taking blood samples of the victims back to its research center in Quantico, Va.

And then we had the attempted assassination (that’s what it appeared to be) of former Boston Red Sox star, and D.R. native David Ortiz.

I’ve talked of crime in the Caribbean for years and years in these pages.  Because of better reporting, we are now receiving more horrifying tales, normally of a ‘home invasion’ type nature, robbery the prime motive.

But when it comes to the D.R., why go?  There are a helluva lot of other great spots of this kind where safety isn’t such a concern. 

Yes, this is a sad commentary.  The D.R. relies on tourism, but there is clearly something wrong.

It’s also sad for all the Major League ballplayers and their families who call the D.R. home.  MLB has a major investment in developing players from the island.  But is it safe for them to go home a couple times a year?  [Ditto Venezuela, another base for current and future ballplayers, but there, these days, if you’re a player, it hurts but you need to stay away from home.]

Can the D.R. get its reputation back?  Yes, but it will take time and a visible commitment from the government to ensure the public its resorts and main tourist spots are safe.

--John Vandemoer, the former head sailing coach at Stanford who was the first person to be sentenced in the college admissions bribery scandal, surprisingly avoided prison time, instead receiving two years of supervised release, including six months of home confinement with electronic monitoring, as well as a $10,000 fine.

U.S. District Court Judge Rya Zobel said she believed it was important that Vandemoer be punished because “it’s too easy to do this kind of thing.”  But she said she didn’t believe he needed to serve time behind bars, noting the powerful letters of support he received and calling him probably the “least culpable” of those charged in the case because he didn’t take any of the money for himself.

--The movement to ban single-use plastics has been gaining speed around the world, and there is no doubt we will be living in a different world come 2021.  I choose that date because this week Canadian Prime Minister Justin Trudeau announced his country will ban single-use plastics as early as 2021.  While the specific items to be banned will be determined based on a science-based review, the government is considering items such as water bottles, plastic bags and straws.

Well, all three of those should be banned, period.  I’ve stopped buying big packs of bottled water.  I’m using my old bottles and filling them up with the water from the refrigerator, which is filtered.  It’s idiotic to think I never thought to do this before.  And the service organization I belong to has now been collecting plastic before each meeting and through a program we have, we make park benches out of them....which we will place throughout the community.

I know every one of you has similar stories, or at least thoughts of  doing so.  It’s like a switch was flipped.  That’s how national, and global, movements begin.  We should have had this moment decades ago, but hopefully it’s not too late.  Certainly from the looks of the reports on ocean plastic, including the beyond massive swirling Great Pacific Garbage Patch, it is too late.  But that doesn’t mean you don’t try.

--Meanwhile, the annual Gulf of Mexico “dead zone” – a region of oxygen-depleted water off Louisiana and Texas that does a number on sea life – will be the second-largest on record this summer, scientists announced Monday.

This year’s zone should be about 8.717 square miles, an area roughly the size of New Hampshire, according to researchers at LSU.  The average Gulf dead zone is about 5,309 square miles; the record is 8,776 square miles set in 2017.

Dead zones are created by nutrient runoff, mostly from over-application of fertilizer on agricultural fields during the spring, from North America’s corn belt through streams and rivers before ending up in the Gulf.  Plus this year, heavy rains fueled near-record flooding along the Mississippi River.

And then the low oxygen impacts organisms that are the lifeblood for fish, shrimp and crab caught there.

What a great species we are.

---

Gold $1345...unchanged on the week
Oil $52.52

Returns for the week 6/10-6/14

Dow Jones  +0.4%  [26089]
S&P 500  +0.5%  [2886]
S&P MidCap  +0.4%  [1899]
Russell 2000  +0.5%
Nasdaq  +0.7%  [7796]

Returns for the period 1/1/19-6/14/19

Dow Jones +11.8%
S&P 500  +15.2%
S&P MidCap  +14.2%
Russell 2000  +12.9%
Nasdaq  +17.5%

Bulls  48.1
Bears  18.3

Have a great week.  Happy Father’s Day!

Brian Trumbore