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Week in Review

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12/24/2016

For the week 12/19-12/23

[Posted 11:30 p.m. ET, Friday]

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Edition 924

Washington and Wall Street

President-elect Donald Trump is certainly acting like he’s president already, and the Israeli government, long at odds with President Obama, asked Trump to intervene in deliberations at the United Nations focused on passing a new resolution on the Arab-Israeli conflict.

Israel didn’t believe the administration would block a U.N. resolution that seeks to define Israeli construction in disputed territories as “illegal,” so they turned to Trump, who is staking out positions more favorable to the policies of Prime Minister Benjamin Netanyahu over the Palestinians.

Trump then held a phone conversation with Egypt’s President Abdel Fattah el-Sisi, whose government had drafted the U.N. resolution.  Egypt then asked for a delay on the vote Thursday, but Friday the Security Council said it was proceeding anyway and the result was shocking.  The White House allowed the Security Council to adopt the resolution, the U.S. abstaining rather than its traditional veto, breaking a longstanding American policy of serving as Israel’s sturdiest ally at the United Nations.

While the resolution will have no real impact on the ground, it was a major rebuff to Israel, and an unbelievable kick to the groin by Obama on his way out.

The White House has long viewed Israel’s settlement policy as an impediment to a two-state solution to the Israeli-Palestinian conflict, but this was an outrageous move by Obama.  [I’d use stronger language but it’s Christmas.]

I will have far more next week on the topic, but coupled with another big issue, President-elect Trump showed he didn’t want to wait another four weeks to be leader of the Free World.  After the vote he tweeted: “As to the U.N., things will be different after Jan. 20th,” without elaborating.

I do have to add, for now, that Sen. John McCain said the abstention made the United States “complicit in this outrageous attack” on Israel, and predicted the resolution “will serve as yet another roadblock to peace between Israelis and Palestinians, and embolden the enemies of Israel.”

House Speaker Paul Ryan said, “This is absolutely shameful,” promising that next year, “our unified Republican government will work to reverse the damage done by this administration, and rebuild our alliance with Israel.”

As for Israeli Prime Minister Benjamin Netanyahu, he issued the following:

“Israel rejects this shameful anti-Israel resolution at the U.N. and will not abide by its terms.  At a time when the Security Council does nothing to stop the slaughter of half a million people in Syria, it disgracefully gangs up on the one true democracy in the Middle East, Israel, and calls the Western Wall ‘occupied territory.’ The Obama administration not only failed to protect Israel against this gang-up at the U.N., it colluded with it behind the scenes.  Israel looks forward to working with President-elect Trump and with all our friends in Congress, Republicans and Democrats alike, to negate the harmful effects of this absurd resolution.”

Prior to these late developments....

Karen DeYoung / Washington Post

“Before lunchtime Thursday, President-elect Donald Trump said he would expand the U.S. nuclear arsenal, upending a reduction course set by presidents of both parties over the past four decades, and called for the United States to veto a pending U.N. resolution that criticized Israel’s settlements policy.

“The policy prescriptions, communicated in morning tweets, followed calls since last month’s election to reconsider the arms-length U.S. relationship with Taiwan and to let China keep an underwater U.S. vessel seized by its navy.  Trump declared within hours of this week’s Berlin terrorist attack that it was part of a global Islamic State campaign to ‘slaughter Christians’ and later said it reaffirmed the wisdom of his plans to bar Muslim immigrants.

“Late Thursday, Trump suggested in another tweet that the U.S. military’s years-in-the-making plans for a new stealth fighter, Lockheed Martin’s F-35, might be reconsidered, saying he had ‘asked Boeing to price-out a comparable F-18 Super Hornet!’* With weeks to go before he becomes president, Trump has not hesitated to voice his opinions on national security issues of the day and to publicly advise the current president on what to do about them.”

*The F-18 is in no way a comparable aircraft.

David Ignatius / Washington Post

“Bob Gates has worked in senior national security positions for the past five presidents, Republican and Democratic. So it’s noteworthy – and to me, encouraging – that he is advising President-elect Donald Trump, too....

“At the top of Gates’ to-do list is striking the right balance between improving relations with Russia and appearing too cooperative with a belligerent President Vladimir Putin.

“ ‘I think the challenge for any new administration would have been how to thread the needle – between stopping the downward spiral in U.S.-Russian relations, which had real dangers, and pushing back on Putin’s aggressiveness and general thuggery,’ Gates said.

“ ‘If you only want to stop the downward spiral, you empower Putin to feel that he can do whatever he wants.  I worry that if you don’t have pushback – let him know there are limits, and that the U.S. will react, militarily, if necessary – then the chance of being taken advantage of is larger.’....

“If Trump is seen as too eager to cooperate with Russia, Gates cautioned, it will create perceptions in Europe, China, North Korea and Iran that ‘this guy isn’t prepared to back up his words with the tough action that’s necessary.’

“Trump made a surprising, and somewhat ominous, pushback against Moscow on Thursday.  After Putin said he planned to ‘strengthen the military potential of strategic nuclear forces,’ Trump tweeted: ‘The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes.’

“Gates told me Thursday that he wished Trump had used the word ‘modernize,’ rather than ‘expand,’ but that ‘what he said is okay, given Putin’s recent comments.’....

“One issue that worries Gates is the multiplicity of people surrounding Trump in the White House, seeking to influence an undisciplined chief executive.  ‘What happens when someone tries to get in to see the president with a proposal or initiative and is rebuffed by one gatekeeper – and simply goes through another door? It’s a formula for a disjointed process.’....

“Gates credits Trump for choosing strong personalities for the key national security posts: (sec. of State Rex) Tillerson, (ret. Gen. James) Mattis (at Defense) and retired Gen. John F. Kelly at Homeland Security.  ‘He’s willing to surround himself with very strong figures who...will tell the president what he needs to hear.’

“Trump’s insurgent, populist style has worried many foreign governments.  But Gates argues that ‘there is some value in a disruptive approach – in the U.S. not being so reliably passive’ in responding to events as it seemed during the Obama administration.

“Trump, by accident or design, has created a hint of the triangular dynamic among the United States, Russia and China that was a hallmark of Richard Nixon and Henry Kissinger’s diplomacy.  Ideally, said Gates, the United States could play off Russia and China so that ‘they’re both uncertain about where we’re headed.’

“But this subtle play requires a strategic vision and disciplined follow-through – two qualities that Trump has yet to demonstrate.”

Friday morning, after Ignatius had posted his piece, Trump, when asked by MSNBC to clarify his comments about expanding U.S. nuke capabilities, said, “Let it be an arms race,” and that the United States would win it.  I’m guessing not exactly what Robert Gates had in mind.

Finally, Garry Kasparov, former Russian world chess champion living in exile in New York as chairman of the Human Rights Foundation, as well as the author of “Winter Is Coming: Why Vladimir Putin and the Enemies of the Free World Must Be Stopped,” had some of the following thoughts in an op-ed for the Wall Street Journal:

“Ronald Reagan’s warning that ‘freedom is never more than one generation away from extinction’ was never meant to be put to the test, but it is being tested now.  If anything, Reagan’s time frame of a generation was far too generous.  The dramatic expansion of freedom that occurred 25 years ago may be coming undone in 25 months....

“(In 1991), the U.S.S.R. would (vanish) beneath my feet.  Yet 25 years later, the thugs and despots are flourishing once again.  They still reject liberal democracy and the free market – not because of a competing ideology like communism, but because they understand that those things are a threat to their power.

“The internet was going to connect every living soul and shine a light into the dark corners of the world.  Instead, the light has reflected back to illuminate the hypocrisy and apathy of the most powerful nations in the world.  Crimea is annexed, Ukraine is invaded, ISIS is rallying, Aleppo is laid waste, and not a one of us can say that we did not know.  We can say only that we did not care.

“Globalization has made it easy for the enemies of the free world to spread their influence in ways that Soviet leadership couldn’t have imagined, while the West has lost the will to defend itself and its values.  It’s enough to make you afraid to open the window.”

Meanwhile, on Wall Street....

Well-known hedge fund king Ray Dalio of Bridgewater, the world’s largest such operation, wrote that if the incoming Trump administration “can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge.”

The incoming administration “admires strong, can-do, profit makers,” Dalio wrote in a LinkedIn blog post this week, as he compared the shift to Trump from President Obama to that from Jimmy Carter to Ronald Reagan.

But Dalio, in discussing the potential for unleashing “animal spirits,” also cautioned that much will depend on the temperament of Mr. Trump, whose tough talk can at times morph into inflammatory rhetoric. 

“The question is whether this administration will be a) aggressive and thoughtful or b) aggressive and reckless,” said Dalio.  “We are pretty sure that it won’t take long to find out.”

No doubt less than 30 days, by my way of thinking.

There was some important economic data this week.  The positives were on the housing front, with November existing home sales coming in better than expected, an annualized pace of 5.61 million, the best since February 2007, while new home sales for the month, 592,000 (ann.), were not just better than expected but the second-highest of the recovery.  [Homebuilder Lennar, in its most recent quarterly report, said orders rose 9% for the three months ended Nov. 30 and that the housing market continues to make a “slow and steady recovery.”]

But November durable goods fell 4.6%, worse than expected, though ex-autos they were up 0.5%, while personal income last month was flat, below expectations, and consumption was up only 0.2% vs. a consensus estimate of 0.4%, with the personal consumption expenditures index, the Fed’s preferred inflation barometer, coming in at 1.6% on core, down a tick from the prior month’s 1.7%.  [The Fed’s target is 2%.]

The income and consumer spending readings are a little troubling as we try to figure out just how good, or bad, the holiday shopping season has been and how much economic activity has slowed from the third quarter; the final reading of which came in this week at 3.5% (ann.), up 0.3% from the first revision, and far better than the prior three quarters’ readings of 1.4% ann. (Q2), 0.8% (Q1), and 0.9% (Q4 2015).

The Atlanta Fed’s generally reliable GDPNow indicator is pegging fourth-quarter GDP at 2.5%, though most economists are in the 2% range.

But then we have a new, growth-oriented administration coming in Jan. 20 and you’ve seen how high expectations are for tax cuts, infrastructure spending, and regulatory relief. 

Further market strength, however, will bump up against rising interest rates, but we’ll tackle that next week when I issue my forecast for 2017, while looking at where I was wrong, and right, in 2016.

Europe and Asia

--Long-time readers know I began warning of terror attacks on Europe’s Christmas markets years before others were.  The markets were always part of my bucket list and in December 2007, I traveled to Cologne and Berlin to have fun in them (it’s about the hot cider and meeting new friends), and to see for myself what easy targets they were.  But I was focusing on suicide bombers and how there was little security and the markets were surrounded by largely dark side streets without checkpoints, that kind of thing.

Plus I was there before the huge influx of migrants, particularly the one million+ that flooded Germany in 2015, culminating in last New Year’s massive sex attack by Muslims on innocent women around Cologne’s train station.

Well, needless to say I wasn’t in the least bit surprised then at the truck attack on a Berlin Christmas market (I wasn’t at this particular one...the city has several) on Monday that killed 12 and wounded 48, at least 18 with “life-changing” injuries (if they survive).

German officials eventually identified the attacker, who incredibly got away, as a Tunisian, Anis Amri, with a massive manhunt launched across Europe and thankfully he was killed outside Milan, Italy, early Friday, following a routine police check, during which he pulled a gun and police responded.  [Great work by the Italians.]

I have also been writing, as extensively as anyone, about the migrant crisis across Europe and how German intelligence officials, going back to 2014, were particularly concerned over the threat posed by those entering the country from Syria, Iraq, Afghanistan, and Pakistan, among others, because for one thing, they weren’t assimilating in the least, with many having zero desire to do so.  If they weren’t already radicalized, many migrants in Germany are immediately becoming so once they are ‘taken in’ by one of the mosques and their new handlers.

German Chancellor Angela Merkel has been hopelessly naïve in welcoming the hordes, while I’ve been telling you I couldn’t help but support the likes of Hungary for doing all they could to block them.

But now with Merkel running for re-election next fall (the vote probably being held in September), the Christmas market attack puts her really under the gun and her open-door policy is being vilified more than ever.  Hundreds of thousands of asylum seekers are not being properly screened.

In the case of Amri, he was known to authorities for months as someone with ties to Islamic extremists (ISIS on Friday released a video of him pledging allegiance to Islamic State), but he was allowed to stay in the country.

“People are rightly outraged and anxious that such a person can walk around here, keep changing his identity [Amri used at least six different names] and the legal system can’t cope with them,” said Rainer Wendt, the head of a union representing German police.

According to Ralf Jaeger, the interior minister of North Rhine-Westphalia state, Amri arrived in Germany in July 2015 as the influx of asylum-seekers was nearing its peak.  But although he was registered near the Dutch border, he moved around Germany regularly since February, living mostly in Berlin.

Amri’s asylum application, though, was rejected in July.  German authorities prepared to deport him but were not able to do so because he did not have valid identity papers, Jaeger said.  In August they started trying to get him a replacement passport.

“Tunisia at first denied that this person was its citizen, and the papers weren’t issued for a long time,” Jaeger said.  “They arrived today.”

After the attack Merkel said: “This is a very difficult day.  Like millions of people in Germany, I am horrified, shocked and deeply saddened by what happened.”

The co-chairwoman of the far-right, anti-immigration Alternative for Germany party, known as the AfD, Frauke Petry, said in a statement: “Germany is no longer safe.  We must be under no illusions.  The breeding ground in which such acts can flourish has been negligently and systematically imported over the past year and a half.”

Ralph Peters / New York Post

“Angela Merkel is the last man in Europe.

“The German chancellor is also our strongest ally on the continent.  And she made one colossal mistake that the continent’s pro-Putin forces wield against her.

“We shouldn’t help them.

“Merkel’s tragic decision in 2015 to announce that Germany’s borders were open to refugees from the Middle East ended in a swift retraction, but the damage had been done.  Germany and much of northern Europe faced a flood of some genuine refugees, many economic migrants, assorted criminals and an unknown number of terrorist infiltrators who threatened to swamp societies and their legal systems.

“Alarmed by Muslim immigration themselves, many American conservatives vilified Merkel, forgetting that she often has been the sole grown-up in European politics, repeatedly saving the continent from itself, bailing out wastrel states – and leading the free world’s resistance to Russian President Vladimir Putin’s invasions of Ukraine.  Stalwart, she has herded the yowling Euro-cats to keep sanctions in place.

“Now, in the wake of the Berlin Christmas-market attack, we hear gleeful predictions from some American commentators that the Merkel government will fall and she’ll be destroyed.  Ain’t gonna happen.  Germany’s government is far more stable than Italy’s or even the United Kingdom’s.  More vitally, Merkel is the best the Germans have. No other figure on the political scene approaches her stature and gravitas. She has remained – and will remain – the most trusted German pol, despite the immigration mess.

“As for that grave mistake of opening Germany’s borders – however briefly – it has to be understood through the lens of German history and the character of Frau Merkel. Given its hideous past, Germany strives to be a do-gooder nation, ever anxious for a pat on the back.  Thus, in NATO, Germany contributes support troops to off-campus endeavors, but won’t pull triggers.

“Merkel’s background is crucial, too.  She’s the daughter of a Lutheran pastor from the former East Germany, where devout Christianity had a cost, and she manifests the traditional values of Prussian Lutheranism.  We saw that first in her sternness during the Greek financial crisis: A godly household practices thrift and takes responsibility.  So Merkel was reluctant to reward Greek profligacy.

“But as a believing Christian, she also embraced Christ’s message to comfort the distressed and dispossessed.  That announcement of open borders – unusually impulsive for the disciplined chancellor – has to be viewed in the light of internalized Christian doctrine....

“We also get Europe’s far-right parties wrong, focusing exclusively on their anti-immigrant stances.  But France’s National Front, Germany’s Alternative for Deutschland, Austria’s Freedom Party and the rest of them are also fiercely anti-American and pro-Putin.  (The fact that Putin has provided generous funding helps.)

“It’s time we all did our homework.  Before sending Frau Merkel to the stake....

“Chancellor Merkel is our ally and our friend.  She deserves our support, not uninformed insults.  At a time when Vladimir Putin threatens – perhaps assisted by American folly – to break NATO and disrupt the longest period of peace in all of Europe’s history, she really is the last man on the continent.”

Yeah, Mr. Peters, but she could not have screwed up more.  My point has always been Germany will pay a heavy price for letting the migrants in without any serious screening.  The Christmas market massacre is just the start.

As for the coming election, I never said Merkel would lose.  It’s true, there is no apparent alternative politician out there yet that could capture enough votes to win and the far-right in Germany is not only split, in no way could it gain more than about 30%, collectively, and that’s probably a stretch.  I have written endlessly about Marine Le Pen in France and how her National Front may make it into a runoff next spring in their presidential election, but there is no way she could possibly win it either.

But it will be interesting to see how Geert Wilders and his Dutch Freedom Party do this coming March in the Netherlands’ big election.  More on that in coming weeks.

And so the migration issue will continue to dominate discussion as there will be countless terror incidents across the European continent for years to come, which is my way of seguing into a topic I didn’t have time to bring up a week ago.

Two weeks ago I put in a blurb on Finland concerning the murder of a local politician and two journalists.  Some of you, no doubt, such as one reader in Finland, M.N., were curious why I mentioned it when there is awful crime everywhere in the world.

But from time to time, given my highly sophisticated base, I feel compelled to highlight an event in a far off land to just give you a sense of the issues facing the place.  As in, I was just imagining how much coverage this situation was getting in Finland, though I added, “Police, however, believe the victims were chosen at random as the killer was a 23-year-old local man with a record of violent crime.”

So M.N., in a very thoughtful note to me expressing his surprise that I brought up the case in light of the scope of my weekly columns, wrote some of the following:

“Being a Finn and having some background data on the incident I would like to share that with you.  The three women were promoting the mass invasion of refugees to the country with very limited resources.  Also the editors’ articles quickly disappeared from the web after the incident. There is strong opposition in the country for this illegal invasion.  The assailant has refused comment and is known to be mentally unstable.

“(But the situation is) there are long lines at private help organizations where the poor Finns get their daily food allowances.  In the meantime these intruders lounge around refurbished spas and hotels with four free meals a day and pocket money.  There are strong tensions under the surface, but the Finns don’t go to the barricades easily.   They just put their hands in their pockets and growl without any real action.  But once pushed to the corner they finally come out and normally the results are less pleasant.

“Without taking sides I feel that this assailant reached his limit and therefore this happened. The official story says the victims were picked at random.  I do not believe that.  It is sad to say that there will be more of these incidents coming.  My countrymen are getting fed up with their dysfunctional government.”

I haven’t seen an update on the story but M.N. has provided terrific insight.  You have similar feelings in Sweden and Denmark in the region, both with rising far-right (conservative) movements.  It’s an awful situation.  There is little, if any, attempt to assimilate in these countries.  The hordes came, wanted free benefits, and now, finally, there is pushback.  I wish all good Europeans well.

And it all, largely, started with inaction on the part of President Obama in Syria in the summer of 2012.  I’ve proved it.

Eurobits

--German producer price growth climbed out of deflation for the first time since June 2013 last month, a sign inflation may be gaining in Europe’s largest economy, which is good.  Consumer inflation is running at an annualized rate of 0.7%, though some are calling for 2% by end of next year.

--France revised third-quarter GDP up to 0.2% over the previous quarter, up 1.0% year over year (according to Insee), while the U.K.’s Office of National Statistics revised Q3 GDP there to 0.6% over Q2, up 2.2% yoy, though this latter number was a tick down from 2.3%.

--In Italy, the government approved a bailout of Monte dei Paschi di Siena bank, the oldest bank in the world and the third largest in the country, after Monte dei Paschi was unable to raise enough capital in the wake of European-wide stress tests published back in July, including a last-ditch effort this week that yielded only about half of the 5bn euro target required.  The government also decreed that retail investors, who stand to take a hit under EU rules on burden sharing, will receive senior debt of the equivalent value of their existing junior holdings.

Italy will plow as much as 20 billion euros into the country’s banks, as more lenders, beset by huge amounts of underperforming loans (360bn worth), seek their own lifelines soon.

--Thursday, Greek Prime Minister Alexis Tsipras said Athens wanted a speedy conclusion to a now-stalled review of bailout reforms, warning delays could hinder economic recovery after years of recession.

Greece’s European lenders last week suspended short-term debt relief after Tsipras’ leftist administration granted a one-off Christmas bonus to pensioners without consulting creditors.

Wednesday, Greece and eurozone negotiators discussed guarantees that Athens could offer to make sure the pensioner payout was a one-off measure not to be replicated.

--A ruling by the EU’s top court in favor of Spain’s borrowers means Spanish lenders may have to give back billions of euros to mortgage customers, which needless to say Spain’s banking sector didn’t respond very well to, shares in the banks falling sharply.

--Poland has a political crisis, though protests have diminished compared to last weekend when it got kind of hairy.

The issue is the loss of media freedom, with the ruling Law & Justice party being accused by the European Commission of eroding the rule of law, while other policies, such as passing new curbs on public gatherings, are adding to concerns over democratic standards 27 years after the collapse of communism.  Poland’s president, Andrzej Duda, said the ruling party will seek a meeting with media representatives.

--Finally, regarding the U.K. and Brexit, I’ll give it a break until January, when things will heat up as Prime Minister Theresa May will soon after have to show her government’s cards, both to parliament and the European Union in terms of Britain’s negotiating positions.

But first, the Supreme Court in London will rule next month on whether May has the power on her own to invoke Article 50 of the EU’s Lisbon Treaty or whether she must first seek the consent of lawmakers.

May said Tuesday she still intends to keep her timetable of invoking Article 50 by end of March.

Meanwhile, Scotland is rattling the cage, with First Minister Nicola Sturgeon saying she will call for a fresh vote on breaking away from England and Wales if the Brexit deal doesn’t meet Scotland’s demands, which essentially allow it to forge its own path with the EU.  That’s if the U.K. opts for what’s become known as a “hard Brexit” and leaves the bloc without access to the single market.

But polls show a majority of Scots still want to remain in the U.K., and going independent is not easy legislatively, let alone the sizable practical hurdles it would entail.

Turning to Asia, there were just a few items of note.  In China, accelerating price growth for new housing in cities across the country continued to lose steam, though price gains from a year earlier are still largely in double digits.

In the 70 major cities index put out by the National Bureau of Statistics, the average price for new residential housing rose 12.6% in November year on year, up just 0.3% from October.  Month-on-month prices rose in 59 out of 70 cities – down from 62.

But in year-on-year terms, Xiamen prices grew at a rate of 43.9%, outdone only by Hefei, capital of Anhui province, which grew 47.6%.

Separately, the Chinese Academy of Social Sciences on Monday forecast China’s economic growth would slow to 6.5% next year, which would be the slowest pace in more than 25 years, down from expected growth of 6.7% this year.  [So you can expect to see quarterly figures of 6.5, 6.5, 6.6, 6.5 in 2017...it’s just that easy.]

In Japan, November imports fell 0.4% year-on-year, but this was a big improvement from October’s 10.3% contraction.

Exports contracted 8.8% yoy, almost half the 16.5% decline in October.

Street Bytes

--It was brutally quiet in the markets with the Dow Jones rising for a seventh straight week, +0.5% to 19933, hitting a new closing high of 19974 in the process, so no 20K cake, while the S&P 500 gained 0.25% to 2263, shy of its all-time high of 2271 set the week before, and Nasdaq rose 0.5% to 5462, having hit a new high of its own, 5483, earlier.

Next week should be quiet as a church mouse, which means it might not be.

--U.S. Treasury Yields

6-mo. 0.65%  2-yr. 1.20%  10-yr. 2.54%  30-yr. 3.11%

Treasuries rallied a bit for the first time in seven weeks.

--There has been a flurry of activity on the banking front at yearend...and not the good kind.

Deutsche Bank has agreed to pay $7.2 billion to resolve the Department of Justice’s probe into the alleged mis-selling of mortgage securities – about half the sum first rumored, with Deutsche insisting it was not expecting to settle for anything near that.

Deutsche said on Friday it would pay a $3.1bn civil penalty and also provide $4.1bn in relief to consumers.

When back in September there was talk of $14bn, that rattled markets for a spell over fears a penalty that size could pose a risk to the global financial system.

Meanwhile, Creidt Suisse agreed to a $5.28bn deal to settle its own dispute with U.S. authorities over its mortgage-backed securities.  [$2.48bn civil penalty, $2.8bn consumer relief.]

Back to Deutsche, while $7.2bn is not $14bn, it’s still a lot of money and will have an adverse impact on its operations for years to come.  Germany’s biggest bank operates in 70 countries with 100,000 employees, but it is shedding about 15% of its workforce, disposing of its retail bank, Postbank, and pulling out of some countries.  That said, it is still near the top 10 biggest banks in the world.

Barclays Plc was sued by the U.S. Justice Department for allegedly deceiving investors who bought mortgage-backed securities; Barclays being one of the few that has yet to settle with the government over the issue.

More than half of the $31 billion in mortgages underlying the Barclays securities ended in default, according to the Justice Department, while Barclays continues to maintain this isn’t the case.  In a written statement, the bank said: “Barclays considers that the claims made in the complaint are disconnected from the facts.  We have an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands.  Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity.”

--Separately, regulators in the U.S. and Europe levied roughly $220 million in fines on Wednesday to settle various rate-rigging probes that looked into bank actions that occurred before, during and – in some cases – after the financial crisis of 2008 and 2009.

The Commodity Futures Trading Commission ordered Goldman Sachs to pay more than half of the total, $120 million, to settle a probe into its manipulation of a benchmark interest rate used in derivatives trading.

Meanwhile, a Swiss regulator fined several U.S. and European banks $97 million for various crisis-era currency rigging activities, with JPMorgan taking a $33 million hit for colluding with Royal Bank of Scotland back in 2008 and ’09 to move the Swiss franc Libor benchmark in their favor.   RBS received full immunity for tipping off the regulator.  [I’m guessing these two didn’t hold a joint Christmas party.]

--Donald Trump said of his meeting with the heads of Boeing and Lockheed Martin, companies with high-dollar government contracts that Trump has criticized, “It’s a little bit of a dance.  We’re trying to get costs down.”  Boeing has a contract to build two new Air Force One planes and Lockheed Martin builds the F-35 fighter jet.

The Pentagon’s F-35 boss, however, said costs are already falling and he anticipates briefing Trump’s transition team soon, but he needs another $532 million to finish flight testing.

Lt. Gen. Chris Bogdan said, “This program is not out of control.”

In the Pentagon’s latest order, its ninth, one Air Force F-35A costs $102.1 million, down from $108 million in the previous batch.

[Separately, Boeing announced that slack demand for its widebody 777 aircraft means production will have to be cut to 5 per month.  The company is looking to reduce about 6,500 commercial aircraft jobs this year, deeper cuts than previously expected.]

--Trump appointed billionaire investor Carl Icahn to a role as special advisor for overhauling federal regulations that both contend are inhibiting business investment and economic growth.

But with Icahn and his estimated $16.7bn net worth, according to Forbes, you have a number of conflicts of interest, to say the least.  However, since he is serving in an “individual capacity,”  and not as a federal employee, Icahn probably does not have to divest any of his holdings, as he otherwise would have had to.

Icahn is not for completely repealing the Dodd-Frank Act that covers banking and other financial-services firms that grew out of the financial crisis.

The issue is he is constantly selling and buying stock in companies that could be impacted by the very regulations he will be recommending changes to.  But in an interview with CNBC, Icahn said he was mystified by the conflict concerns and that he’ll be “more or less doing what I’m doing now, which is talking to Donald from time to time.”

--Trump also named Peter Navarro, a strident China critic, to lead a new White House office overseeing American trade and industrial policy.  Navarro, a professor at Cal-Irvine, who holds a doctorate from Harvard, is the author of “Death by China,” wherein he said China is effectively waging an economic war by subsidizing exports to the United States and impeding imports from it.  [Ed. I agree with that.]  On the campaign trail, Trump, influenced by Navarro’s work, described this as “the greatest theft in the history of the world.”

China, in turn, has warned Trump that “cooperation is the only correct choice” after the U.S. president-elect tapped a China hawk to run a new White House trade policy office.

Cui Fan of the China Society of WTO Studies, a think-tank affiliated with China’s commerce ministry, warned that Beijing would respond to any unilateral action by the incoming Trump administration.  “China is preparing itself for U.S. trade actions,” he told the Financial Times.  “China will respond with counteractions of its own.”

--About 6.4 million Americans signed up for health insurance coverage beginning Jan. 1 on healthcare.gov through the extended Dec. 19 open-enrollment deadline, the Health and Human Services Dept. announced Wednesday, about 400,000 more than last year; this as Republicans gear up to repeal the law.

--President Obama ‘permanently banned’ offshore oil and gas drilling in the “vast majority” of U.S.-owned northern waters, designating areas in the Arctic and Atlantic oceans as “indefinitely off limits” for future leasing; an attempt by the president to protect the region before he leaves office.

Canada also committed to a similar measure in its own Arctic waters, in a joint announcement with Washington.

The decision relies on a 1953 law which allows the president to ban leasing of offshore resources indefinitely. Canada, on the other hand, will review the move every five years.

But for the U.S., Obama’s move will certainly be decided by the federal courts.

Editorial / Wall Street Journal

“The White House is attempting to overload the bandwidth of its successor with a surge of new regulation, and the latest is a ban on oil drilling in much of the Arctic and Atlantic.  This rule even purports to be ‘permanent,’ unchangeable by any future President for all time.  We’ll see about that, but in the meantime spare us the liberal panic about Donald Trump’s supposed authoritarianism.

“The last-gasp executive action prohibits federal offshore drilling and mineral leases on some 3.8 million acres from Virginia to Maine and 115 million acres off the coast of Alaska, including some of the world’s great untapped repositories of hydrocarbons.  President Obama rolled out the rule in concert with Canadian Prime Minister Justin Trudeau, and the greens are cheering that still more fossil-fuel regions will be walled off from exploration....

“So ponder the spectacle of a President claiming his writ will last ‘indefinitely,’ as Mr. Obama’s executive order puts it.  No policy decisions are engraved in stone as if through holy stenography, and they’re definitely not beyond democratic consent on the basis of a 63-year-old law.  In a statement, Oregon Senator Jeff Merkley applauded Mr. Obama for ‘implementing’ sections of the Democrat’s ‘Keep It In the Ground Act.’  Why even have a Congress?

“The environmental lobby has moved on from reducing carbon demand – via subsidies for electric cars and solar panels – to opposing any carbon energy, and this is the opposition Mr. Trump will confront.  Restarting drilling would be a productive start for U.S. energy security and competitiveness.

“In the Arctic in particular, oil-and-gas reserves are beneath relatively shallow waters and obtainable with technology proven safe in the field.  Developing these resources could offset the expected long-term decline of energy production in the lower 48 in the 2030s and 2040s, and realistically the process needs to start now.  Russia is also aggressively expanding exploration wells in the Arctic’s Kara and Pechora seas and adding to its polar navy.

“Meantime, Mr. Obama told National Public Radio this week that ‘my suggestion to the President-elect is, you know, going through the legislative process is always better’ than executive fiat, ‘in part because it’s harder to undo.’ Perhaps he ought to take his own advice instead of issuing ‘permanent’ commands.”

--FedEx missed Wall Street’s expectations with its earnings per share, but still turned a profit of $700 million for the second quarter of fiscal 2017.  Revenue was up to $14.9 billion, inline, versus $12.5 billion the previous year, though this is partially due to the acquisition of TNT Express.

FedEx is now handling more than one million packages a day, driven by e-commerce, but costs are rising to open and staff four new massive distribution hubs, with the operating profit margin falling to 7.8% in the quarter from 9.1% in the same period a year earlier.

--Wells Fargo said the number of customers opening accounts has dropped sharply for a third consecutive month – underlining the scale of the fallout from the recent scandal over its sales tactics.

Customers opened 41 percent fewer Wells Fargo accounts in November than they did a year ago and made 45 percent fewer credit card applications.

--Nike Inc. reported better-than-expected quarterly revenue and profit, indicating a rebound in its basketball category.  “We’re seeing incredible momentum in basketball, to be clear, basketball is back,” said Trevor Edwards, president of the Nike Brand.  Basketball accounted for 5.1% of Nike’s total wholesale revenue of $27.23 billion in its financial year ended May 2016.  The Michael Jordan brand, which also sells items primarily focused on basketball, brought in another 10%.

Sales in North America rose 3% in the second quarter ended Nov. 30.  Nike’s sales in Greater China rose 12%.

The company’s net income rose 7.3% to $842 million, 50 cents a share, vs. the Street’s expectations of 43 cents.  Overall revenue rose 6.4%.

Nike has been aggressively responding to competitors like Under Armour, who is going after the Swoosh with the signing of athletes like Stephen Curry for its shoe line.

--Chinese e-commerce giant Alibaba is back on the U.S.’s “notorious markets” list over counterfeit goods sales.  The company had been taken off it four years ago, but U.S. authorities now say the firm’s online platform Taobao is used to sell “high levels” of fake goods.

Alibaba Group President Michael Evans said he was “disappointed” by the decision and questioned whether it was “based on actual facts or was influenced by the current political climate.”

But the company and Taobao have long been accused of being a platform for counterfeit goods.  [And you know what I think about Alibaba.]

--Shares in Twitter fell anew after the company announced a further executive exodus, with the CTO and a vice president of product joining a string of other high-profile departures from the company this year.

--Bed Bath & Beyond shares fell after the home goods retailer said profits declined in the third quarter, with same-store sales falling 1.4% vs. expectations of a slight gain.  Profits fell to $126 million from $177.8m in the year ago period.  The company also guided lower for the full year.

--Christine Lagarde, managing director of the International Monetary Fund, was found guilty of negligence in public office by a special Paris court on Monday.

But the French tribunal decided not to hand down any sentence to the former French finance minister, and the verdict would not enter into her judicial record.

The court said Lagarde failed to prevent a fraudulent 403m euro payout the French state made to flamboyant entrepreneur Bernard Tapie back in 2008, with the court saying she should have appealed it.

So while Lagarde will not have to serve any prison time, it’s obviously a major stain on her stint at the IMF, though no one believes it is enough to topple her.  She was reappointed to a second five-year term earlier this year.

Olivier Blanchard, the IMF’s former chief economist, defended Lagarde, telling the Financial Times: “She is one of the most scrupulous persons I have ever worked with, so any notion that she might have gone along with a deal she thought was legally wrong should be rejected.”

--Evercore ISI has tracked Christmas tree sales since 2003 and this year sales have jumped 10% from a year ago, the biggest increase on record.  So this should be a good indicator for overall retail sales....or maybe not.

--The U.S. population this year grew at its lowest rate since the Great Depression, according to the Census Bureau.  The 0.7% increase, to 323.1 million, was the smallest on record since 1936-37.  Americans continue to leave the North for Western states, like Utah, Nevada and Idaho.  New York, Pennsylvania and Illinois were among eight states that saw their populations drop.  Utah was the fastest growing, up 2%, after adding 61,000 people to lift its population to 3.1 million.  [Aside from Alaska, this is the only state I haven’t been to.]

The Census Bureau also revised downward its estimates of immigration for each year since 2010 an average of 10%. For this year, it estimated that 999,000 immigrants arrived, down 4% from the prior year.

--Katie Couric is returning to the “Today” show for a weeklong fill-in stint next month.  Couric will be back alongside Matt Lauer for the week of Jan. 2; Couric subbing for Savannah Guthrie, who is on maternity leave.

Couric was co-anchor of “Today” from 1991 to 2006, during which time she became the most popular personality in TV news, but then she blew it, opting for an evening anchor slot at CBS.  Then it was Yahoo and oblivion.  But the perky lass has banked a ton of cash and at the end of the day....

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: The Syrian government of Bashar al-Assad announced the evacuation of civilians and fighters from the last rebel-held part of Aleppo was complete after delays because of frigid weather and snow, putting all of Syria’s once formidable industrial capital back in his hands for the first time since 2012.

Tens of thousands of people have been removed from eastern Aleppo since Dec. 15.

The seizure of all of Aleppo marks a turning point in the nearly six-year conflict, with Assad’s army relying on heavy support from Russia, Iran and Shiite militias like Lebanon’s Hizbullah.

Assad, who always characterized the rebels as foreign-backed terrorists, told a visiting group of Iranians: “Liberating Aleppo from terrorism is a victory not only for Syria, but also for those who really contributed to the fight against terrorism, especially Iran and Russia,” as reported by Syria’s state news service, SANA.

But for those who have left, they have gone from one hell to another, most arriving in rebel-held areas outside the city where they were struggling to find shelter.

And then you have the thousands requiring medical care.  Needless to say, few are receiving it.

Charles Krauthammer / Washington Post

“The fall of Aleppo just weeks before Barack Obama leaves office is a fitting stamp on his Middle East policy of retreat and withdrawal.  The pitiable pictures from the devastated city showed the true cost of Obama’s abdication.  For which he seems to have few regrets, however. In his end-of-the-year news conference, Obama defended U.S. inaction with his familiar false choice: It was either stand aside or order a massive Iraq-style ground invasion.

“This is a transparent fiction designed to stifle debate. At the beginning of the civil war, the popular uprising was ascendant. What kept a rough equilibrium was regime control of the skies.  At that point, the United States, at little risk and cost, could have declared Syria a no-fly zone, much as it did in Iraqi Kurdistan for a dozen years after the Gulf War of 1991.

“The U.S. could easily have destroyed the regime’s planes and helicopters on the ground and so cratered its airfields as to make them unusable.  That would have altered the strategic equation for the rest of the war.

“And would have deterred the Russians from injecting their own air force – they would have had to challenge ours for air superiority. Facing no U.S. deterrent, Russia stepped in and decisively altered the balance, pounding the rebels in Aleppo to oblivion.  The Russians were particularly adept at hitting hospitals and other civilian targets, leaving the rebels with the choice between annihilation and surrender.  They surrendered.

“Obama has never appreciated that the role of a superpower in a local conflict is not necessarily to intervene on the ground, but to deter a rival global power from stepping in and altering the course of the war. That’s what we did during the 1973 Yom Kippur War, when Moscow threatened to send troops to support Egypt and President Nixon countered by raising America’s nuclear alert status to Defcon 3. Russia stood down.

“Less dramatically but just as effectively, American threats of retaliation are what kept West Germany, South Korea and Taiwan free and independent through half a century of Cold War.

“It’s called deterrence.  Yet Obama never had the credibility to deter anything or anyone.  In the end, the world’s greatest power was reduced to bitter speeches at the United Nations.  ‘Are you truly incapable of shame?’ thundered U.S. Ambassador Samantha Power at the butchers of Aleppo.  As if we don’t know the answer.  Indeed the shame is on us for terminal naivete, sending our secretary of state chasing the Russians to negotiate one humiliating pretend cease-fire after another....

“In Aleppo, the damage is done, the city destroyed, the inhabitants ethnically cleansed.  For us, there is no post-facto option.  If we are to regain the honor lost in Aleppo, it will have to be on a very different battlefield.”

Sen. John McCain / Washington Post

“The words ‘never again’ ring hollow as the city of Aleppo, Syria, has fallen to regime forces of Bashar al-Assad.  A brutal siege that has ground on for years was finally brought to a bloody end by a surge of Russian airpower, Iranian shock troops and assorted regional militia fighters.  As we eulogize the dead of Aleppo, we must acknowledge the United States’ complicity in this tragedy.

“President Obama speaks of the need to ‘bear witness’ to injustice.  He did little else for Aleppo.  To what have we borne witness?  To the use of smart bombs to target women and children, hospitals and bakeries, aid warehouses and humanitarian convoys.  To the development and popularization of barrel bombs – oil drums packed with shrapnel and explosives, dropped indiscriminately from aircraft to kill and maim as many civilians as possible. To the tactic of follow-on airstrikes designed to kill rescue workers, such as the intrepid White Helmets, who rush to the scene of an attack to save the innocent.  [Ed. Great piece last Sunday on “60 Minutes’ on these heroes.] And now to the busloads of refugees pouring out of Aleppo and the tens of thousands left behind to the tender mercies of the Assad regime and its Russian and Iranian allies.

“Obama has borne witness to all of this, and more, and done nothing to stop it....

“Aleppo may be lost, but the war in Syria is far from over. It will likely get worse as the Assad regime, Iran, Russia, Turkey, the Kurds, the Gulf states and others intensify their fighting over what is left of Syria’s carcass....

“(The United States) must acknowledge that we have a stake in what happens in Syria.  It is not just about the suffering of others, as moving as that is.  It is about the national security of the United States: The resurgence of al-Qaeda in Syria affects us.  The rise of the world’s most advanced terrorist organization affects us, as we saw in Paris and San Bernardino, Calif. A refugee crisis that destabilizes allies such as Israel and Jordan and threatens the foundation of Western democracies affects us....

“The Syrian regime, Russia and Iran are not fighting the Islamic State. Their indiscriminate slaughter of Syrian civilians is what created the conditions for the Islamic State’s emergence.  The bloody siege of Aleppo will be a windfall for terrorist radicalization and recruitment. To think that we can destroy the Islamic State by throwing in our lot with those who are strengthening it every day is a dangerous fantasy....

“Just because America cannot stop every horror in the world does not absolve us of the responsibility of using our great power to end the worst injustices where we can, especially when doing so would benefit our own interests and make the United States and our partners more secure. We do not need to become the world’s policeman to defend our interests.  But we cannot wall ourselves off from the chaos of our dangerous world. And if we try, the instability, terror and destruction at the heart of that chaos will eventually make their way to our shores.”

Elsewhere in the theater, clashes between Turkish-backed Syrian rebels and Islamic State militants raged around the northern Syrian town of al-Bab on Wednesday, killing 14 Turkish soldiers and 138 jihadists, the army said.  [The Turkish soldiers were mostly killed in suicide attacks.]

As for the assassination of the Russian ambassador to Turkey, Andrei Karlov, in Ankara at an art gallery, killed by a former police officer who Turkey claims was involved in FETO, an organization run by Fethullah Gulen, who lives in exile in Pennsylvania....

Yaroslav Trofimov / Wall Street Journal

“Since entering the Syrian war last year, Russia successfully ended America’s status as the Middle East’s sole superpower, an achievement capped by the fall of Aleppo.

“That rise has turned Moscow into the region’s indispensable power broker.  In Europe, too, the migrant wave unleashed by the Syrian war strengthened Moscow’s sway, fueling populist parties friendly to President Vladimir Putin.

“The assassination...however, highlighted the flip side of this dizzying rise. As America’s influence has shrunk, Russia has taken the place the U.S. long occupied in the minds of many people in the Middle East: an alien imperialist power seen as waging war on Muslims and Islam.

“There haven’t been any recent anti-American protests in the region.  But amid the agony of Aleppo, tens of thousands of protesters converged this month outside Russian missions from Istanbul to Beirut to Kuwait City – where the chanting, led by local lawmakers, was clear: ‘Russia is the enemy of Islam.’

“The Turkish policeman who gunned down Ambassador Andrey Karlov on Monday shouted that he was avenging the suffering of Aleppo, which had been subjected to a year of Russian bombing before the Syrian regime and its Shiite allies conquered the rebel-held parts of the city in recent weeks.

“The diplomat’s assassination, while condemned by governments, was greeted with open joy on Arabic social media, and in Palestinian refugee camps.

“ ‘Russia is certainly being perceived as the new bully in the neighborhood,’ said Hassan Hassan, a fellow at the Tahrir Institute for Middle East Policy in Washington.  ‘The way people react to its involvement in the decimation of one of the most revered Sunni cities in the Middle East, Aleppo, is reminiscent of how the U.S. was viewed after its occupation of Iraq.  You only need to follow how the killer of the Russian ambassador was glorified throughout the region to get an idea of how Russia is despised by the populace today.’

“Though Russia has become the immediate focus of this outrage, the fall of Aleppo is also intensifying support in the region for jihadist groups that plot terrorist attacks in the West such as Islamic State and al Qaeda.”

Responding to the Karlov assassination, Vladimir Putin said: “There can be only one response: intensifying our fight against terror.  And the bandits will feel it.”

[Separately, in the Turkish city of Kayseri, 13 soldiers were killed in a car bomb attack on a bus transporting off-duty personnel.  It is assumed this was the work of the Kurdish militant group, the PKK.]

Editorial / Washington Post

“The assassination of Russia’s ambassador to Turkey on Monday might have been expected to derail a fragile détente between the regimes of Vladimir Putin and Recep Tayyip Erdogan.  Instead, it has served to underline a budding alliance that could have the effect of excluding the United States from the endgame of Syria’s civil war and critically weakening U.S. influence across the Middle East.  That, at least, is Mr. Putin’s clear intention.

“The brutal assassination...was a tragic sign that Russia may pay a price in blowback for its intervention in Syria.  The assassin shouted, ‘Don’t forget Aleppo,’ where indiscriminate Russian bombing of hospitals and civilian housing paved the way for the Syrian regime of Bashar al-Assad to recapture the eastern half of the city.

“For now, however, Mr. Putin appears to be reveling in his victory and pressing his political advantage.  On Tuesday, his foreign minister hosted his counterparts from Turkey and Iran for a trilateral meeting that endorsed a road map for peace in Syria called the ‘Moscow declaration.’...

“The Syria trilateral meeting resounded with Russian triumphalism about the exclusion of the United States.  ‘All previous attempts by the United States and its partners to agree on coordinated actions were doomed to failure,’ said Russian Defense Minister Sergei Shoigu after meeting with Turkish and Iranian ministers.  ‘None of them wielded real influence over the situation on the ground.’....

“A president concerned with preserving U.S. leadership in the Middle East would seek to counter Mr. Putin’s maneuvering and reverse Mr. Erdogan’s tilt toward the Kremlin.  Sadly, it seems more likely that Donald Trump will welcome it.  The result could be either the quagmire that President Obama has long predicted – so far wrongly – for Russia in Syria or a peace that will empower a string of anti-U.S. strongmen from Damascus and Tehran to Ankara and Moscow.”

In Iraq, the battle to retake Mosul from ISIS has not only become a tremendous slog, it is leaving a legacy of environmental damage that will pose dangers to people for years to come.

ISIS has been burning oil wells and a sulfur factory, and the United Nations reported that “hundreds of people” have already been treated for exposure to chemicals, while “millions are exposed to soot and gases from the burning oil wells.”

Meanwhile, the misery in Mosul itself is only going to get worse with winter, as hundreds of thousands are struggling to find food and safe drinking water.

Iran: The government is requesting a meeting of the commission that oversees its nuclear deal to complain about the renewing of sanctions by the United States.

But these sanctions mostly seek to limit Iran’s oil and gas trade and the Iran Sanctions Act will have no effect since its measures are suspended as long as the nuclear deal remains in place, though supreme leader Ayatollah Ali Khamenei and President Hassan Rouhani called it a “clear violation.”

It’s the sanctions related to non-nuclear issues that continue to hurt Iran, specifically those targeting the international financial system that have helped deter major Western banks from returning to the country.

Yemen: In an attack identical to one of a week earlier, a suicide bomber killed at least 48 soldiers in the southern Yemeni port city of Aden on Sunday, a week after an attack by ISIS killed 50 troops nearby.  Islamic State is apparently responsible for the second one as well.

The death toll in the war that few are aware of is over 7,000, with 37,000 wounded, according to the U.N.

Jordan: In a disturbing development, four gunmen killed at least 10 people, including a tourist from Canada and at least four police officers, in an attack on a historic hilltop castle in the city of Karak.  The gunmen were then killed by Jordanian security forces.  It’s not known who the four attackers represented.

Russia/Ukraine: Malicious software used in a hack against the Democratic National Committee is similar to that used against the Ukrainian military according to computer-security firm CrowdStrike, which adds further credence to theory the hackers who infiltrated the DNC were working for the Russian government.

CrowdStrike concluded the malware used against Ukraine was designed by the hacker group known as Fancy Bear, which works for the Russian military intelligence agency, GRU, and was one of two hacker outfits that infiltrated the DNC to steal emails.  CrowdStrike said the other is known as Cozy Bear.

In the case of the Ukrainian military, CrowdStrike found the hackers altered a smartphone app that helped better aim ordnance, with the hackers then turning it around so that it could identify the position of the Ukrainian units.

In a separate situation, Russia has been escalating cyberattacks on Ukraine’s power grid, taking out the power in a village near Kiev last Sunday, according to security firm FireEye.

Additionally, there has been an increase in ceasefire violations.  Ukrainian President Petro Poroshenko recently told CNN that Russia has outfitted the pro-Russian fighters in the eastern part of the country with more than 700 tanks, on top of 1,200 armored personnel carriers and 1,000 artillery systems.  [Patrick Tucker / Defense One]

On a different issue, President Putin demanded restrictions on the sale of surrogate alcohol after at least 62 people died in Siberia from drinking bath oil laced with methylated spirit in search of alcoholic highs.   The mass poisoning in Irkutsk is the worst of its kind in recent years and has prompted nationwide soul-searching.

Bootleggers had apparently been selling the product for some time, but in this one particular batch, it was contaminated with the methylated spirit, which is found in cleaning materials and paint stripper, as reported by Reuters.  You may have seen an initial death toll of about 40, but it escalated, with another 30+ still in the hospital.

China: Air pollution in Beijing and surrounding areas has been at awful levels this week.  Schools have been shut, road traffic restricted, and people have been urged to stay indoors as 24 cities across northeast China were put on “red alert” for extreme smog; 460 million people exposed to pollution levels six times higher than the World Health Organization’s daily guidelines, according to calculations by Greenpeace.  It’s so bad, on Tuesday, 217 flights at Beijing Capital Airport were canceled, a third of the schedule for the day.

An academic paper out of Nanjing University, published in the journal the Science of the Total Environment, estimates that smog is related to nearly one third of deaths in China, making it a bigger threat to health than smoking.

The pollution in China is worst in the winter, when households consume more electricity from coal-fired power plants.

On a totally different issue, China returned to the United States an underwater drone taken about a week ago by a Chinese naval vessel in the South China Sea.

“After friendly negotiations between China and the U.S., the handover of the underwater drone has been completed in relevant areas in the South China Sea” on Tuesday, the Chinese defense ministry said.

A statement from the Pentagon noted the seizure was “inconsistent with both international law and standards of professionalism for conduct between navies at sea.”

As to Donald Trump’s tweets regarding U.S.-China relations, a Communist Party mouthpiece, the Global Times, editorialized this week: “China has so far practiced restraint at Trump’s provocations as he’s yet to enter the White House.  But this attitude won’t last too long after he officially becomes the U.S. president, were he still to treat China in the manner he tweeted today [referring to the drone seizure].”

Wang Yi, China’s foreign minister, told the People’s Daily that when it comes to Trump’s commitment to the One-China policy and his phone call with Taiwan’s President Tsai: “We will lead the way amid a shake-up in global governance and take hold of the situation amid international chaos. We will protect our interests amid intense and complex games.”

South Korea: The Constitutional Court has begun hearings on the trial of impeached President Park Geun-hye, though the court has up to six months to decide whether Park should permanently step down or be reinstated.  Park was impeached Dec. 9.

Congo: Security forces killed scores of demonstrators, at least 40 at last report, amid protests against President Joseph Kabila’s attempt to retain power.

Kabila, who took office in 2001 after his father’s assassination, is constitutionally barred from seeking another term, but a court has ruled that he can remain in power until elections, which were supposed to be in November, but the ruling party says will now be held in 2018, or later.

As noted in a Bloomberg and Washington Post editorial, Kabila is most concerned with protecting his family’s wealth.  Bloomberg said the Kabilas have built a business network that reaps hundreds of millions of dollars.

But as the Post notes:

“At the same time, Congo is drifting toward an explosion. The nation is vast and only loosely controlled by security forces and armed militias.  Opposition forces have been growing every more restive under Mr. Kabila’s boot.  According to Human Rights Watch, over the past two years, the authorities in Congo have arbitrarily arrested scores of activists and opposition leaders, holding some incommunicado and mistreating or torturing them, while trying others on trumped-up charges....

“There is only one nation that has overwhelming influence as a beacon for democracy, the United States.  But it has not always spoken out as strongly as it should against strongmen in Africa.  Clearly, Mr. Kabila (and Gambia’s President Yahya Jammeh) are calculating that they can hang on, even if they destroy democracy in their countries.  Perhaps they know President-elect Donald Trump has shown little interest in the topic.  ‘Sad,’ as Mr. Trump likes to say, because if the flame of freedom doesn’t burn brightly from the United States, then next year the path for democracy will be darker for millions of people elsewhere.”

But late word has a deal being brokered through the Catholic church, which has been mediating talks between Kabila and the opposition, whereby Kabila would agree to step down at the end of 2017, meaning an election would take place by then.

Evidently, Pope Francis has heaped pressure on Kabila and the opposition to find a solution.  We’ll see.  Kabila has not formally responded to the deal, let alone signed anything as of now.

Random Musings

--The next few weeks will be largely devoted to the Obama legacy (though of course Trump, and potentially world events, will interfere).  In his last press conference, Dec. 16, Obama said the following, which I offer for the record and my archives.

“Typically, I use this yearend press conference to review how far we’ve come over the course of the year.  Today, understandably, I’m going to talk a little bit about how far we’ve come over the past eight years.

“As I was preparing to take office, the unemployment rate was on its way to 10 percent. Today, it’s at 4.6 percent – the lowest in nearly a decade.  We’ve seen the longest streak of job growth on record, and wages have grown faster over the past few years than at any time in the  past 40.

“When I came into office, 44 million people were uninsured. Today, we’ve covered more than 20 million of them.   For the first time in our history, more than 90 percent of Americans are insured. In fact, yesterday was the biggest day ever for HealthCare.gov.  more than 670,000 Americans signed up to get covered, and more are signing up by the day.

“We’ve cut our dependence on foreign oil by more than half, doubled production of renewable energy, enacted the most sweeping reforms since FDR to protect consumers and prevent a crisis on Wall Street from punishing Main Street ever again.  None of these actions stifled growth, as predicted.  Instead, the stock market has nearly tripled. Since I signed ObamaCare into law, our businesses have added more than 15 million new jobs. And the economy is undoubtedly more durable than it was in the days when we relied on oil from unstable nations and banks took risky bets with your money.

“Add it all up, and last year, the poverty rate fell at the fastest rate in almost 50 years, while the median household income grew at the fastest rate on record.  In fact, income gains were actually larger for households at the bottom and the middle than for those at the top. And we’ve done all this while cutting our deficits by nearly two-thirds and protecting vital investments that grow the middle class.

“In foreign policy, when I came into office, we were in the midst of two wars. Now, nearly 180,000 troops are down to 15,000.  Bin Laden, rather than being at large, has been taken off the battlefield, along with thousands of other terrorists.  Over the past eight years, no foreign terrorist organization has successfully executed an attack on our homeland that was directed from overseas.

“Through diplomacy, we’ve ensured that Iran cannot obtain a nuclear weapon – without going to war with Iran.  We opened up a new chapter with the people of Cuba. And we brought nearly 200 nations together around a climate agreement that could very well save this planet for our kids.  And almost every country on Earth sees America as stronger and more respected today than they did eight years ago.

“In other words, by so many measures, our country is stronger and more prosperous than it was when we started. That’s a situation that I’m proud to leave for my successor.  And it’s thanks to the American people – to the hard work that you’ve put in, the sacrifices you’ve made for your families and your communities, the businesses that you started or invested in, the way you looked out for one another.  And I could not be prouder to be your President.

“Of course, to tout this program doesn’t mean that we’re not mindful of how much more there is to do.  In this season in particular, we’re reminded that there are people who are still hungry, people who are still homeless; people who still have trouble paying the bills or finding work after being laid off. There are communities that are still mourning those who have been stolen from us by senseless gun violence, and parents who still are wondering how to protect their kids. And after I leave office, I intend to continue to work with organizations and citizens doing good across the country on these and other pressing issues to build on the progress that we’ve made.

“Around the world, as well, there are hotspots where disputes have been intractable, conflicts have flared up, and people – innocent people are suffering as a result.  And nowhere is this more terribly true than in the city of Aleppo.  For years, we’ve worked to stop the civil war in Syria and alleviate human suffering. It has been one of the hardest issues that I’ve faced as President.

“The world, as we speak, is united in horror at the savage assault by the Syrian regime and its Russian and Iranian allies on the city of Aleppo. We have seen a deliberate strategy of surrounding, besieging, and starving innocent civilians. We’ve seen relentless targeting of humanitarian workers and medical personnel; entire neighborhoods reduced to rubble and dust.  There are continuing reports of civilians being executed. These are all horrific violations of international law. Responsibility for this brutality lies in one place alone – with an Assad regime and its allies Russia and Iran. And this blood and these atrocities are on their hands.

“We all know what needs to happen. There needs to be an impartial international observer force in Aleppo that can help coordinate an orderly evacuation through safe corridors.  There has to be full access for humanitarian aid, even as the United States continues to be the world’s largest donor of humanitarian aid to the Syrian people. And, beyond that, there needs to be a broader ceasefire that can serve as the basis for a political rather than a military solution.

“That’s what the United States is going to continue to push for, both with our partners and through multilateral institutions like the U.N.

“Regretfully, but unsurprisingly, Russia has repeatedly blocked the Security Council from taking action on these issues.  So we’re going to keep pressing the Security Council to help improve the delivery of humanitarian aid to those who are in such desperate need, and to ensure accountability, including continuing to monitor any potential use of chemical weapons in Syria. And we’re going to work in the U.N. General Assembly as well, both on accountability and to advance a political settlement. Because it should be clear that although you may achieve tactical victories, over the long term the Assad regime cannot slaughter its way to legitimacy.

“That’s why we’ll continue to press for a transition to a more representative government. And that’s why the world must not avert our eyes to the terrible events that are unfolding. The Syrian regime and its Russian and Iranian allies are trying to obfuscate the truth. The world should not be fooled. And the world will not forget.

“So even in a season where the incredible blessings that we know as Americans are all around us, even as we enjoy family and friends and are reminded of how lucky we are, we should also be reminded that to be an American involves bearing burdens and meeting obligations to others. American values and American ideals are what will lead the way to a safer and more prosperous 2017, both here and abroad.

“And by the way, few embody those values and ideals like our brave men and women in uniform and their families.  So I just want to close by wishing all of them a very Merry Christmas and a Happy New Year.”

So much of the above is nothing but a pile of garbage, particularly the section on foreign policy.  I will destroy Obama’s pathetic academic treatise over the coming weeks; just as I have the past few years!

--President-elect Donald Trump declared Wednesday that the deadly truck attack in Berlin was “an attack on humanity and it’s got to be stopped.”  He also suggested he might go forward with his campaign pledge to ban Muslim immigrants from coming to the United States.

“You know my plans. All along, I’ve been proven to be right, 100 percent correct,” Trump said when asked if the attack in Berlin had caused him to reevaluate the proposal.  “What’s happening is disgraceful.”

Spokesman Jason Miller said, “President-elect Trump has been clear that we will suspend admission of those from countries with high terrorism rates and apply a strict vetting procedure for those seeking entry in order to protect American lives.”

--Trump had dinner at Mara Lago with Mexican billionaire Carlos Slim.  The two had feuded throughout the election and the dinner was a peacemaking gesture, with Trump describing it in a statement to the Washington Post as “a lovely dinner with a wonderful man.”

--A new Wall Street Journal/NBC News poll found that 75% of Republicans had a positive view of Donald Trump, up from 57% in the weeks before the election.    68% of Republicans believe the economy will improve in the next year, up from only 14% a year ago and far higher than the 19% of Democrats who foresee a stronger economy.

Overall, 41% of voters view Trump positively, up from 29% in mid-October and higher than at any point in the campaign.  But 47% view him unfavorably.  42% say the economy will get better and 19% said worse, the highest level of economic optimism since October 2012.

--Rich Lowry / New York Post

“The Democrats have a simple explanation for Hillary Clinton’s loss – the Russians did it.

“The party that has had a decades-long soft spot toward Moscow and has been reluctant to believe the Kremlin might have aggressive intentions or, say, cheat on an arms-control agreement, is in a frenzy over Russian hacking that supposedly denied Hillary the victory that was rightfully hers.

“John Podesta, the chairman of a Hillary campaign that considered accepting the results of an election part of American writ as of about two months ago, refused several times on ‘Meet the Press’ Sunday to say the presidential election was ‘free and fair.’

“In a contest this narrow, anything might have been decisive.  But the monocausal Russian explanation for Hillary’s defeat ignores her myriad political and ethical vulnerabilities that the Democrats were determined to ignore, despite the obvious evidence of them for years.

“Vladimir Putin couldn’t have hand-picked a worse champion for them this year.  There was no reason to believe Hillary Clinton was a good politician who could deliver a compelling message, since she had never done it before.

“What she lacked in raw political skill, she made up with dubious practices. She and her husband hadn’t anticipated her second run for the presidency by staying squeaky clean, but by buckraking from every corporate or foreign interest possible on the promise of a return to power.  They were happy to, at the very least, skirt the rules, with Hillary’s homebrew e-mail arrangement – concocted to hide her correspondence from legitimate media and congressional inquiries – exemplifying the M.O.

“In other words, the Democratic establishment rushed into the arms of a candidate who it was clear from the beginning could well lose to Donald Trump, especially if a few things bounced the wrong way – and is now shocked and outraged that she indeed lost when a few things bounced the wrong way....

“Democrats are calling for an investigation to get to the bottom of the Russian interference in the election.  This is entirely appropriate.

“But everything points to the Democrats not being able to handle the fundamental truth of what happened on Nov. 8 – they took a flier on a historically weak candidate out of a misbegotten attachment to the Clinton dynasty, and paid a grave price for their foolish mistake.”

--After more than nine hours of closed-door meetings, North Carolina legislators failed to repeal the state law that has prompted economic boycotts, lawsuits, political acrimony and contributed to the defeat of the Republican governor.

Republicans, who control both houses of the legislature, could not agree on a  way to repeal House Bill 2, the “bathroom bill,” that requires transgender people in public buildings to use the bathroom that corresponds with the gender on their birth certificate.

This comes after Charlotte fully repealed the ordinance that set the law in motion.  And it comes days after Republicans stripped significant powers from Governor-elect Roy Cooper, a Democrat, who is to be sworn in on New Year’s Day.

North Carolina has paid a dear price from the law, but this was to be the day, the week, when lawmakers would put it all in the past.

But then Charlotte leaders didn’t stick to their end of a bargain worked out with Republicans in the legislature and Republicans seized on a new talking point, or as Dallas Woodhouse, the executive director of the North Carolina Republican Party, said in a statement posted on Facebook, “The H.B. 2 blood is now a stain soaked on their hands and theirs alone.  What a dishonest, disgraceful shame by Roy Cooper and Charlotte Democrats.”

What a pathetic state, mused the editor, who hails from an equally pathetic one.

Editorial / Wall Street Journal

“You may have noticed stories from North Carolina this week that make Raleigh sound like a cross between Venezuela and Saudi Arabia.  The progressive eruption over minor changes to executive power is overwrought, but the state’s Republicans are managing to make themselves look worse than they really are.

“Over the past week Republican Governor Pat McCrory signed a set of bills that require Senate approval of his Democratic successor Roy Cooper’s cabinet nominees. The laws would also rearrange the state board of education; merge the state’s elections and ethics boards; and move university trustee appointments from the governor to the legislature.  The bills were passed in a special legislative session convened by Republican leaders.

“The press has called the moves ‘dangerous,’ a ‘coup’ and every other word in the thesaurus entry for ‘scary.’  Dozens of protesters have been arrested at the capitol.  Republicans say that Democrats passed limits on incoming GOP governors in the 1970s and ‘80s, and Senate advice and consent is the norm in the U.S. Congress, not banana republics.  Other parts of the law like partisan affiliations for judges are debatable, but this is not a threat to democracy.

“Yet Gov. McCrory lost re-election by 5,000 votes after a recount, and the GOP’s timing looks vindictive. There’s no reason to ram through changes in a lame-duck session: Republicans wield a supermajority in the state House and Senate. The GOP will have no trouble reining in a Democratic Governor next year.

“The episode also shows Republicans haven’t absorbed the lessons of Gov. McCrory’s loss, and one is overplaying a fight on transgender bathrooms....

“On Monday Charlotte agreed to drop the ordinance if the state nixed its pre-emption bill, which the legislature was debating behind closed doors as we went to press on Wednesday.  Gov. McCrory continued his farewell tour by suggesting that Charlotte ginned up the ordinance to defeat him for re-election.  The left is not above exploiting the LGBT community for political power, but that is beside the point: A shrewder Governor might have kept a retaliation bill from reaching his desk and defused the bathroom brouhaha before statewide escalation....

“Donald Trump won the Presidency in part because voters were tired of assaults on every pizza shop owner who dissents from progressive cultural dictates.  It turns out voters are no warmer to impositions from Republicans, who can learn from this episode that modesty in governing is always a virtue – whether on bathrooms or how to finish up your last month in office.”

--Opponents of Rep. Keith Ellison’s bid to be the next Democratic National Committee chairman are raising new questions about the Minnesota Democrat’s past, in making a case he’s not fit to be the party’s next leader.

Ellison has had past tax troubles, campaign finance violations and minor legal issues that once led to his driver’s license being suspended, so some say he’s ill-equipped to lead the DNC. 

All of the issues have been rectified and some date back to the 1990s.

But more importantly, as a young man he supported the Nation of Islam, though he has since rejected it, as well as past comments about U.S. foreign policy being beholden to Israel.

--President Obama shortened the prison sentences for another 153 convicts, mainly low-level drug offenders, and pardoned 78 others, the White House said on Monday.  Overall, he has commuted the sentences of 1,176 federal prisoners as part of a push to reduce the number of people serving long sentences for non-violent drug offenses.

--In one 24-hour period in Vancouver this week, nine people died from an overdose of the painkiller fentanyl opiod.  The city has seen an average of 15 drug overdoses a month.

Drug abuse in Canada claimed the lives of 2,000 people in 2015.

--According to a Wall Street Journal survey, homicides rose in 16 of the 20 largest American cities in 2016, continuing a trend that began last year, though murder rates are generally nowhere near what they were two decades ago.

Chicago has seen one of the most dramatic jumps, with more than 720 murders – up 56% from 2015.  [The total is greater than Los Angeles and New York, combined.]

--Sean Spicer was named White House spokesman for Donald Trump.  This is without question the worst job in the world. 

--We note the passing last weekend of Dr. Henry J. Heimlich, 96, whose Heimlich maneuver – saving a choking victim with a bear hug and abdominal thrusts to eject a throat obstruction – is credited with saving an estimated 100,000 lives in the more than four decades since its inception in 1974.  The American Medical Association, which endorsed the technique in 1975, says it saves unknown thousands annually.

It was just last May 23 that Dr. Heimlich used the maneuver himself to save the life of an 87-year-old woman choking of a morsel of meat at their senior residence in Cincinnati.

Heimlich also developed and held patents on a score of medical innovations and devices.

--The temperature at the North Pole this week was nearly freezing, or 30 degrees above average for this time of year, as 2016 is set to become the hottest year on record, going back to the 1880s, eclipsing both 2015 and 2014.

Actually, as reported in the Sydney Morning Herald, around the North Pole, temps were predicted to soar between 40 and 50 degrees above normal, despite this being the coldest time of the year.  Arctic sea ice was 17.7 percent below the 1981-2010 average in November.

A similar retreat is underway at the other end of the planet.  But in Antarctica the story often involves wind strengths as a key contributing factor in shifting sea-ice totals.

--I asked Santa for a 12-pack of domestic this Christmas...Coors Light.  I’m pretty easy to shop for.

---

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

God bless America.

---

Gold $1135...down a seventh straight week
Oil $53.25...highest weekly close since July 2015

Returns for the week 12/19-12/23

Dow Jones  +0.5%  [19933]
S&P 500  +0.25%  [2263]
S&P MidCap  +0.4%
Russell 2000  +0.5%
Nasdaq  +0.5%  [5462]

Returns for the period 1/1/16-12/23/16

Dow Jones  +14.4%
S&P 500  +10.8%
S&P MidCap  +19.7%
Russell 2000  +20.7%
Nasdaq  +9.1%

Bulls 59.8
Bears 19.6  [Source: Investors Intelligence...Bulls don’t want to crack 60.]

Merry Christmas and Happy Hanukkah!

Brian Trumbore



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-12/24/2016-      
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Week in Review

12/24/2016

For the week 12/19-12/23

[Posted 11:30 p.m. ET, Friday]

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

Edition 924

Washington and Wall Street

President-elect Donald Trump is certainly acting like he’s president already, and the Israeli government, long at odds with President Obama, asked Trump to intervene in deliberations at the United Nations focused on passing a new resolution on the Arab-Israeli conflict.

Israel didn’t believe the administration would block a U.N. resolution that seeks to define Israeli construction in disputed territories as “illegal,” so they turned to Trump, who is staking out positions more favorable to the policies of Prime Minister Benjamin Netanyahu over the Palestinians.

Trump then held a phone conversation with Egypt’s President Abdel Fattah el-Sisi, whose government had drafted the U.N. resolution.  Egypt then asked for a delay on the vote Thursday, but Friday the Security Council said it was proceeding anyway and the result was shocking.  The White House allowed the Security Council to adopt the resolution, the U.S. abstaining rather than its traditional veto, breaking a longstanding American policy of serving as Israel’s sturdiest ally at the United Nations.

While the resolution will have no real impact on the ground, it was a major rebuff to Israel, and an unbelievable kick to the groin by Obama on his way out.

The White House has long viewed Israel’s settlement policy as an impediment to a two-state solution to the Israeli-Palestinian conflict, but this was an outrageous move by Obama.  [I’d use stronger language but it’s Christmas.]

I will have far more next week on the topic, but coupled with another big issue, President-elect Trump showed he didn’t want to wait another four weeks to be leader of the Free World.  After the vote he tweeted: “As to the U.N., things will be different after Jan. 20th,” without elaborating.

I do have to add, for now, that Sen. John McCain said the abstention made the United States “complicit in this outrageous attack” on Israel, and predicted the resolution “will serve as yet another roadblock to peace between Israelis and Palestinians, and embolden the enemies of Israel.”

House Speaker Paul Ryan said, “This is absolutely shameful,” promising that next year, “our unified Republican government will work to reverse the damage done by this administration, and rebuild our alliance with Israel.”

As for Israeli Prime Minister Benjamin Netanyahu, he issued the following:

“Israel rejects this shameful anti-Israel resolution at the U.N. and will not abide by its terms.  At a time when the Security Council does nothing to stop the slaughter of half a million people in Syria, it disgracefully gangs up on the one true democracy in the Middle East, Israel, and calls the Western Wall ‘occupied territory.’ The Obama administration not only failed to protect Israel against this gang-up at the U.N., it colluded with it behind the scenes.  Israel looks forward to working with President-elect Trump and with all our friends in Congress, Republicans and Democrats alike, to negate the harmful effects of this absurd resolution.”

Prior to these late developments....

Karen DeYoung / Washington Post

“Before lunchtime Thursday, President-elect Donald Trump said he would expand the U.S. nuclear arsenal, upending a reduction course set by presidents of both parties over the past four decades, and called for the United States to veto a pending U.N. resolution that criticized Israel’s settlements policy.

“The policy prescriptions, communicated in morning tweets, followed calls since last month’s election to reconsider the arms-length U.S. relationship with Taiwan and to let China keep an underwater U.S. vessel seized by its navy.  Trump declared within hours of this week’s Berlin terrorist attack that it was part of a global Islamic State campaign to ‘slaughter Christians’ and later said it reaffirmed the wisdom of his plans to bar Muslim immigrants.

“Late Thursday, Trump suggested in another tweet that the U.S. military’s years-in-the-making plans for a new stealth fighter, Lockheed Martin’s F-35, might be reconsidered, saying he had ‘asked Boeing to price-out a comparable F-18 Super Hornet!’* With weeks to go before he becomes president, Trump has not hesitated to voice his opinions on national security issues of the day and to publicly advise the current president on what to do about them.”

*The F-18 is in no way a comparable aircraft.

David Ignatius / Washington Post

“Bob Gates has worked in senior national security positions for the past five presidents, Republican and Democratic. So it’s noteworthy – and to me, encouraging – that he is advising President-elect Donald Trump, too....

“At the top of Gates’ to-do list is striking the right balance between improving relations with Russia and appearing too cooperative with a belligerent President Vladimir Putin.

“ ‘I think the challenge for any new administration would have been how to thread the needle – between stopping the downward spiral in U.S.-Russian relations, which had real dangers, and pushing back on Putin’s aggressiveness and general thuggery,’ Gates said.

“ ‘If you only want to stop the downward spiral, you empower Putin to feel that he can do whatever he wants.  I worry that if you don’t have pushback – let him know there are limits, and that the U.S. will react, militarily, if necessary – then the chance of being taken advantage of is larger.’....

“If Trump is seen as too eager to cooperate with Russia, Gates cautioned, it will create perceptions in Europe, China, North Korea and Iran that ‘this guy isn’t prepared to back up his words with the tough action that’s necessary.’

“Trump made a surprising, and somewhat ominous, pushback against Moscow on Thursday.  After Putin said he planned to ‘strengthen the military potential of strategic nuclear forces,’ Trump tweeted: ‘The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes.’

“Gates told me Thursday that he wished Trump had used the word ‘modernize,’ rather than ‘expand,’ but that ‘what he said is okay, given Putin’s recent comments.’....

“One issue that worries Gates is the multiplicity of people surrounding Trump in the White House, seeking to influence an undisciplined chief executive.  ‘What happens when someone tries to get in to see the president with a proposal or initiative and is rebuffed by one gatekeeper – and simply goes through another door? It’s a formula for a disjointed process.’....

“Gates credits Trump for choosing strong personalities for the key national security posts: (sec. of State Rex) Tillerson, (ret. Gen. James) Mattis (at Defense) and retired Gen. John F. Kelly at Homeland Security.  ‘He’s willing to surround himself with very strong figures who...will tell the president what he needs to hear.’

“Trump’s insurgent, populist style has worried many foreign governments.  But Gates argues that ‘there is some value in a disruptive approach – in the U.S. not being so reliably passive’ in responding to events as it seemed during the Obama administration.

“Trump, by accident or design, has created a hint of the triangular dynamic among the United States, Russia and China that was a hallmark of Richard Nixon and Henry Kissinger’s diplomacy.  Ideally, said Gates, the United States could play off Russia and China so that ‘they’re both uncertain about where we’re headed.’

“But this subtle play requires a strategic vision and disciplined follow-through – two qualities that Trump has yet to demonstrate.”

Friday morning, after Ignatius had posted his piece, Trump, when asked by MSNBC to clarify his comments about expanding U.S. nuke capabilities, said, “Let it be an arms race,” and that the United States would win it.  I’m guessing not exactly what Robert Gates had in mind.

Finally, Garry Kasparov, former Russian world chess champion living in exile in New York as chairman of the Human Rights Foundation, as well as the author of “Winter Is Coming: Why Vladimir Putin and the Enemies of the Free World Must Be Stopped,” had some of the following thoughts in an op-ed for the Wall Street Journal:

“Ronald Reagan’s warning that ‘freedom is never more than one generation away from extinction’ was never meant to be put to the test, but it is being tested now.  If anything, Reagan’s time frame of a generation was far too generous.  The dramatic expansion of freedom that occurred 25 years ago may be coming undone in 25 months....

“(In 1991), the U.S.S.R. would (vanish) beneath my feet.  Yet 25 years later, the thugs and despots are flourishing once again.  They still reject liberal democracy and the free market – not because of a competing ideology like communism, but because they understand that those things are a threat to their power.

“The internet was going to connect every living soul and shine a light into the dark corners of the world.  Instead, the light has reflected back to illuminate the hypocrisy and apathy of the most powerful nations in the world.  Crimea is annexed, Ukraine is invaded, ISIS is rallying, Aleppo is laid waste, and not a one of us can say that we did not know.  We can say only that we did not care.

“Globalization has made it easy for the enemies of the free world to spread their influence in ways that Soviet leadership couldn’t have imagined, while the West has lost the will to defend itself and its values.  It’s enough to make you afraid to open the window.”

Meanwhile, on Wall Street....

Well-known hedge fund king Ray Dalio of Bridgewater, the world’s largest such operation, wrote that if the incoming Trump administration “can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge.”

The incoming administration “admires strong, can-do, profit makers,” Dalio wrote in a LinkedIn blog post this week, as he compared the shift to Trump from President Obama to that from Jimmy Carter to Ronald Reagan.

But Dalio, in discussing the potential for unleashing “animal spirits,” also cautioned that much will depend on the temperament of Mr. Trump, whose tough talk can at times morph into inflammatory rhetoric. 

“The question is whether this administration will be a) aggressive and thoughtful or b) aggressive and reckless,” said Dalio.  “We are pretty sure that it won’t take long to find out.”

No doubt less than 30 days, by my way of thinking.

There was some important economic data this week.  The positives were on the housing front, with November existing home sales coming in better than expected, an annualized pace of 5.61 million, the best since February 2007, while new home sales for the month, 592,000 (ann.), were not just better than expected but the second-highest of the recovery.  [Homebuilder Lennar, in its most recent quarterly report, said orders rose 9% for the three months ended Nov. 30 and that the housing market continues to make a “slow and steady recovery.”]

But November durable goods fell 4.6%, worse than expected, though ex-autos they were up 0.5%, while personal income last month was flat, below expectations, and consumption was up only 0.2% vs. a consensus estimate of 0.4%, with the personal consumption expenditures index, the Fed’s preferred inflation barometer, coming in at 1.6% on core, down a tick from the prior month’s 1.7%.  [The Fed’s target is 2%.]

The income and consumer spending readings are a little troubling as we try to figure out just how good, or bad, the holiday shopping season has been and how much economic activity has slowed from the third quarter; the final reading of which came in this week at 3.5% (ann.), up 0.3% from the first revision, and far better than the prior three quarters’ readings of 1.4% ann. (Q2), 0.8% (Q1), and 0.9% (Q4 2015).

The Atlanta Fed’s generally reliable GDPNow indicator is pegging fourth-quarter GDP at 2.5%, though most economists are in the 2% range.

But then we have a new, growth-oriented administration coming in Jan. 20 and you’ve seen how high expectations are for tax cuts, infrastructure spending, and regulatory relief. 

Further market strength, however, will bump up against rising interest rates, but we’ll tackle that next week when I issue my forecast for 2017, while looking at where I was wrong, and right, in 2016.

Europe and Asia

--Long-time readers know I began warning of terror attacks on Europe’s Christmas markets years before others were.  The markets were always part of my bucket list and in December 2007, I traveled to Cologne and Berlin to have fun in them (it’s about the hot cider and meeting new friends), and to see for myself what easy targets they were.  But I was focusing on suicide bombers and how there was little security and the markets were surrounded by largely dark side streets without checkpoints, that kind of thing.

Plus I was there before the huge influx of migrants, particularly the one million+ that flooded Germany in 2015, culminating in last New Year’s massive sex attack by Muslims on innocent women around Cologne’s train station.

Well, needless to say I wasn’t in the least bit surprised then at the truck attack on a Berlin Christmas market (I wasn’t at this particular one...the city has several) on Monday that killed 12 and wounded 48, at least 18 with “life-changing” injuries (if they survive).

German officials eventually identified the attacker, who incredibly got away, as a Tunisian, Anis Amri, with a massive manhunt launched across Europe and thankfully he was killed outside Milan, Italy, early Friday, following a routine police check, during which he pulled a gun and police responded.  [Great work by the Italians.]

I have also been writing, as extensively as anyone, about the migrant crisis across Europe and how German intelligence officials, going back to 2014, were particularly concerned over the threat posed by those entering the country from Syria, Iraq, Afghanistan, and Pakistan, among others, because for one thing, they weren’t assimilating in the least, with many having zero desire to do so.  If they weren’t already radicalized, many migrants in Germany are immediately becoming so once they are ‘taken in’ by one of the mosques and their new handlers.

German Chancellor Angela Merkel has been hopelessly naïve in welcoming the hordes, while I’ve been telling you I couldn’t help but support the likes of Hungary for doing all they could to block them.

But now with Merkel running for re-election next fall (the vote probably being held in September), the Christmas market attack puts her really under the gun and her open-door policy is being vilified more than ever.  Hundreds of thousands of asylum seekers are not being properly screened.

In the case of Amri, he was known to authorities for months as someone with ties to Islamic extremists (ISIS on Friday released a video of him pledging allegiance to Islamic State), but he was allowed to stay in the country.

“People are rightly outraged and anxious that such a person can walk around here, keep changing his identity [Amri used at least six different names] and the legal system can’t cope with them,” said Rainer Wendt, the head of a union representing German police.

According to Ralf Jaeger, the interior minister of North Rhine-Westphalia state, Amri arrived in Germany in July 2015 as the influx of asylum-seekers was nearing its peak.  But although he was registered near the Dutch border, he moved around Germany regularly since February, living mostly in Berlin.

Amri’s asylum application, though, was rejected in July.  German authorities prepared to deport him but were not able to do so because he did not have valid identity papers, Jaeger said.  In August they started trying to get him a replacement passport.

“Tunisia at first denied that this person was its citizen, and the papers weren’t issued for a long time,” Jaeger said.  “They arrived today.”

After the attack Merkel said: “This is a very difficult day.  Like millions of people in Germany, I am horrified, shocked and deeply saddened by what happened.”

The co-chairwoman of the far-right, anti-immigration Alternative for Germany party, known as the AfD, Frauke Petry, said in a statement: “Germany is no longer safe.  We must be under no illusions.  The breeding ground in which such acts can flourish has been negligently and systematically imported over the past year and a half.”

Ralph Peters / New York Post

“Angela Merkel is the last man in Europe.

“The German chancellor is also our strongest ally on the continent.  And she made one colossal mistake that the continent’s pro-Putin forces wield against her.

“We shouldn’t help them.

“Merkel’s tragic decision in 2015 to announce that Germany’s borders were open to refugees from the Middle East ended in a swift retraction, but the damage had been done.  Germany and much of northern Europe faced a flood of some genuine refugees, many economic migrants, assorted criminals and an unknown number of terrorist infiltrators who threatened to swamp societies and their legal systems.

“Alarmed by Muslim immigration themselves, many American conservatives vilified Merkel, forgetting that she often has been the sole grown-up in European politics, repeatedly saving the continent from itself, bailing out wastrel states – and leading the free world’s resistance to Russian President Vladimir Putin’s invasions of Ukraine.  Stalwart, she has herded the yowling Euro-cats to keep sanctions in place.

“Now, in the wake of the Berlin Christmas-market attack, we hear gleeful predictions from some American commentators that the Merkel government will fall and she’ll be destroyed.  Ain’t gonna happen.  Germany’s government is far more stable than Italy’s or even the United Kingdom’s.  More vitally, Merkel is the best the Germans have. No other figure on the political scene approaches her stature and gravitas. She has remained – and will remain – the most trusted German pol, despite the immigration mess.

“As for that grave mistake of opening Germany’s borders – however briefly – it has to be understood through the lens of German history and the character of Frau Merkel. Given its hideous past, Germany strives to be a do-gooder nation, ever anxious for a pat on the back.  Thus, in NATO, Germany contributes support troops to off-campus endeavors, but won’t pull triggers.

“Merkel’s background is crucial, too.  She’s the daughter of a Lutheran pastor from the former East Germany, where devout Christianity had a cost, and she manifests the traditional values of Prussian Lutheranism.  We saw that first in her sternness during the Greek financial crisis: A godly household practices thrift and takes responsibility.  So Merkel was reluctant to reward Greek profligacy.

“But as a believing Christian, she also embraced Christ’s message to comfort the distressed and dispossessed.  That announcement of open borders – unusually impulsive for the disciplined chancellor – has to be viewed in the light of internalized Christian doctrine....

“We also get Europe’s far-right parties wrong, focusing exclusively on their anti-immigrant stances.  But France’s National Front, Germany’s Alternative for Deutschland, Austria’s Freedom Party and the rest of them are also fiercely anti-American and pro-Putin.  (The fact that Putin has provided generous funding helps.)

“It’s time we all did our homework.  Before sending Frau Merkel to the stake....

“Chancellor Merkel is our ally and our friend.  She deserves our support, not uninformed insults.  At a time when Vladimir Putin threatens – perhaps assisted by American folly – to break NATO and disrupt the longest period of peace in all of Europe’s history, she really is the last man on the continent.”

Yeah, Mr. Peters, but she could not have screwed up more.  My point has always been Germany will pay a heavy price for letting the migrants in without any serious screening.  The Christmas market massacre is just the start.

As for the coming election, I never said Merkel would lose.  It’s true, there is no apparent alternative politician out there yet that could capture enough votes to win and the far-right in Germany is not only split, in no way could it gain more than about 30%, collectively, and that’s probably a stretch.  I have written endlessly about Marine Le Pen in France and how her National Front may make it into a runoff next spring in their presidential election, but there is no way she could possibly win it either.

But it will be interesting to see how Geert Wilders and his Dutch Freedom Party do this coming March in the Netherlands’ big election.  More on that in coming weeks.

And so the migration issue will continue to dominate discussion as there will be countless terror incidents across the European continent for years to come, which is my way of seguing into a topic I didn’t have time to bring up a week ago.

Two weeks ago I put in a blurb on Finland concerning the murder of a local politician and two journalists.  Some of you, no doubt, such as one reader in Finland, M.N., were curious why I mentioned it when there is awful crime everywhere in the world.

But from time to time, given my highly sophisticated base, I feel compelled to highlight an event in a far off land to just give you a sense of the issues facing the place.  As in, I was just imagining how much coverage this situation was getting in Finland, though I added, “Police, however, believe the victims were chosen at random as the killer was a 23-year-old local man with a record of violent crime.”

So M.N., in a very thoughtful note to me expressing his surprise that I brought up the case in light of the scope of my weekly columns, wrote some of the following:

“Being a Finn and having some background data on the incident I would like to share that with you.  The three women were promoting the mass invasion of refugees to the country with very limited resources.  Also the editors’ articles quickly disappeared from the web after the incident. There is strong opposition in the country for this illegal invasion.  The assailant has refused comment and is known to be mentally unstable.

“(But the situation is) there are long lines at private help organizations where the poor Finns get their daily food allowances.  In the meantime these intruders lounge around refurbished spas and hotels with four free meals a day and pocket money.  There are strong tensions under the surface, but the Finns don’t go to the barricades easily.   They just put their hands in their pockets and growl without any real action.  But once pushed to the corner they finally come out and normally the results are less pleasant.

“Without taking sides I feel that this assailant reached his limit and therefore this happened. The official story says the victims were picked at random.  I do not believe that.  It is sad to say that there will be more of these incidents coming.  My countrymen are getting fed up with their dysfunctional government.”

I haven’t seen an update on the story but M.N. has provided terrific insight.  You have similar feelings in Sweden and Denmark in the region, both with rising far-right (conservative) movements.  It’s an awful situation.  There is little, if any, attempt to assimilate in these countries.  The hordes came, wanted free benefits, and now, finally, there is pushback.  I wish all good Europeans well.

And it all, largely, started with inaction on the part of President Obama in Syria in the summer of 2012.  I’ve proved it.

Eurobits

--German producer price growth climbed out of deflation for the first time since June 2013 last month, a sign inflation may be gaining in Europe’s largest economy, which is good.  Consumer inflation is running at an annualized rate of 0.7%, though some are calling for 2% by end of next year.

--France revised third-quarter GDP up to 0.2% over the previous quarter, up 1.0% year over year (according to Insee), while the U.K.’s Office of National Statistics revised Q3 GDP there to 0.6% over Q2, up 2.2% yoy, though this latter number was a tick down from 2.3%.

--In Italy, the government approved a bailout of Monte dei Paschi di Siena bank, the oldest bank in the world and the third largest in the country, after Monte dei Paschi was unable to raise enough capital in the wake of European-wide stress tests published back in July, including a last-ditch effort this week that yielded only about half of the 5bn euro target required.  The government also decreed that retail investors, who stand to take a hit under EU rules on burden sharing, will receive senior debt of the equivalent value of their existing junior holdings.

Italy will plow as much as 20 billion euros into the country’s banks, as more lenders, beset by huge amounts of underperforming loans (360bn worth), seek their own lifelines soon.

--Thursday, Greek Prime Minister Alexis Tsipras said Athens wanted a speedy conclusion to a now-stalled review of bailout reforms, warning delays could hinder economic recovery after years of recession.

Greece’s European lenders last week suspended short-term debt relief after Tsipras’ leftist administration granted a one-off Christmas bonus to pensioners without consulting creditors.

Wednesday, Greece and eurozone negotiators discussed guarantees that Athens could offer to make sure the pensioner payout was a one-off measure not to be replicated.

--A ruling by the EU’s top court in favor of Spain’s borrowers means Spanish lenders may have to give back billions of euros to mortgage customers, which needless to say Spain’s banking sector didn’t respond very well to, shares in the banks falling sharply.

--Poland has a political crisis, though protests have diminished compared to last weekend when it got kind of hairy.

The issue is the loss of media freedom, with the ruling Law & Justice party being accused by the European Commission of eroding the rule of law, while other policies, such as passing new curbs on public gatherings, are adding to concerns over democratic standards 27 years after the collapse of communism.  Poland’s president, Andrzej Duda, said the ruling party will seek a meeting with media representatives.

--Finally, regarding the U.K. and Brexit, I’ll give it a break until January, when things will heat up as Prime Minister Theresa May will soon after have to show her government’s cards, both to parliament and the European Union in terms of Britain’s negotiating positions.

But first, the Supreme Court in London will rule next month on whether May has the power on her own to invoke Article 50 of the EU’s Lisbon Treaty or whether she must first seek the consent of lawmakers.

May said Tuesday she still intends to keep her timetable of invoking Article 50 by end of March.

Meanwhile, Scotland is rattling the cage, with First Minister Nicola Sturgeon saying she will call for a fresh vote on breaking away from England and Wales if the Brexit deal doesn’t meet Scotland’s demands, which essentially allow it to forge its own path with the EU.  That’s if the U.K. opts for what’s become known as a “hard Brexit” and leaves the bloc without access to the single market.

But polls show a majority of Scots still want to remain in the U.K., and going independent is not easy legislatively, let alone the sizable practical hurdles it would entail.

Turning to Asia, there were just a few items of note.  In China, accelerating price growth for new housing in cities across the country continued to lose steam, though price gains from a year earlier are still largely in double digits.

In the 70 major cities index put out by the National Bureau of Statistics, the average price for new residential housing rose 12.6% in November year on year, up just 0.3% from October.  Month-on-month prices rose in 59 out of 70 cities – down from 62.

But in year-on-year terms, Xiamen prices grew at a rate of 43.9%, outdone only by Hefei, capital of Anhui province, which grew 47.6%.

Separately, the Chinese Academy of Social Sciences on Monday forecast China’s economic growth would slow to 6.5% next year, which would be the slowest pace in more than 25 years, down from expected growth of 6.7% this year.  [So you can expect to see quarterly figures of 6.5, 6.5, 6.6, 6.5 in 2017...it’s just that easy.]

In Japan, November imports fell 0.4% year-on-year, but this was a big improvement from October’s 10.3% contraction.

Exports contracted 8.8% yoy, almost half the 16.5% decline in October.

Street Bytes

--It was brutally quiet in the markets with the Dow Jones rising for a seventh straight week, +0.5% to 19933, hitting a new closing high of 19974 in the process, so no 20K cake, while the S&P 500 gained 0.25% to 2263, shy of its all-time high of 2271 set the week before, and Nasdaq rose 0.5% to 5462, having hit a new high of its own, 5483, earlier.

Next week should be quiet as a church mouse, which means it might not be.

--U.S. Treasury Yields

6-mo. 0.65%  2-yr. 1.20%  10-yr. 2.54%  30-yr. 3.11%

Treasuries rallied a bit for the first time in seven weeks.

--There has been a flurry of activity on the banking front at yearend...and not the good kind.

Deutsche Bank has agreed to pay $7.2 billion to resolve the Department of Justice’s probe into the alleged mis-selling of mortgage securities – about half the sum first rumored, with Deutsche insisting it was not expecting to settle for anything near that.

Deutsche said on Friday it would pay a $3.1bn civil penalty and also provide $4.1bn in relief to consumers.

When back in September there was talk of $14bn, that rattled markets for a spell over fears a penalty that size could pose a risk to the global financial system.

Meanwhile, Creidt Suisse agreed to a $5.28bn deal to settle its own dispute with U.S. authorities over its mortgage-backed securities.  [$2.48bn civil penalty, $2.8bn consumer relief.]

Back to Deutsche, while $7.2bn is not $14bn, it’s still a lot of money and will have an adverse impact on its operations for years to come.  Germany’s biggest bank operates in 70 countries with 100,000 employees, but it is shedding about 15% of its workforce, disposing of its retail bank, Postbank, and pulling out of some countries.  That said, it is still near the top 10 biggest banks in the world.

Barclays Plc was sued by the U.S. Justice Department for allegedly deceiving investors who bought mortgage-backed securities; Barclays being one of the few that has yet to settle with the government over the issue.

More than half of the $31 billion in mortgages underlying the Barclays securities ended in default, according to the Justice Department, while Barclays continues to maintain this isn’t the case.  In a written statement, the bank said: “Barclays considers that the claims made in the complaint are disconnected from the facts.  We have an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands.  Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity.”

--Separately, regulators in the U.S. and Europe levied roughly $220 million in fines on Wednesday to settle various rate-rigging probes that looked into bank actions that occurred before, during and – in some cases – after the financial crisis of 2008 and 2009.

The Commodity Futures Trading Commission ordered Goldman Sachs to pay more than half of the total, $120 million, to settle a probe into its manipulation of a benchmark interest rate used in derivatives trading.

Meanwhile, a Swiss regulator fined several U.S. and European banks $97 million for various crisis-era currency rigging activities, with JPMorgan taking a $33 million hit for colluding with Royal Bank of Scotland back in 2008 and ’09 to move the Swiss franc Libor benchmark in their favor.   RBS received full immunity for tipping off the regulator.  [I’m guessing these two didn’t hold a joint Christmas party.]

--Donald Trump said of his meeting with the heads of Boeing and Lockheed Martin, companies with high-dollar government contracts that Trump has criticized, “It’s a little bit of a dance.  We’re trying to get costs down.”  Boeing has a contract to build two new Air Force One planes and Lockheed Martin builds the F-35 fighter jet.

The Pentagon’s F-35 boss, however, said costs are already falling and he anticipates briefing Trump’s transition team soon, but he needs another $532 million to finish flight testing.

Lt. Gen. Chris Bogdan said, “This program is not out of control.”

In the Pentagon’s latest order, its ninth, one Air Force F-35A costs $102.1 million, down from $108 million in the previous batch.

[Separately, Boeing announced that slack demand for its widebody 777 aircraft means production will have to be cut to 5 per month.  The company is looking to reduce about 6,500 commercial aircraft jobs this year, deeper cuts than previously expected.]

--Trump appointed billionaire investor Carl Icahn to a role as special advisor for overhauling federal regulations that both contend are inhibiting business investment and economic growth.

But with Icahn and his estimated $16.7bn net worth, according to Forbes, you have a number of conflicts of interest, to say the least.  However, since he is serving in an “individual capacity,”  and not as a federal employee, Icahn probably does not have to divest any of his holdings, as he otherwise would have had to.

Icahn is not for completely repealing the Dodd-Frank Act that covers banking and other financial-services firms that grew out of the financial crisis.

The issue is he is constantly selling and buying stock in companies that could be impacted by the very regulations he will be recommending changes to.  But in an interview with CNBC, Icahn said he was mystified by the conflict concerns and that he’ll be “more or less doing what I’m doing now, which is talking to Donald from time to time.”

--Trump also named Peter Navarro, a strident China critic, to lead a new White House office overseeing American trade and industrial policy.  Navarro, a professor at Cal-Irvine, who holds a doctorate from Harvard, is the author of “Death by China,” wherein he said China is effectively waging an economic war by subsidizing exports to the United States and impeding imports from it.  [Ed. I agree with that.]  On the campaign trail, Trump, influenced by Navarro’s work, described this as “the greatest theft in the history of the world.”

China, in turn, has warned Trump that “cooperation is the only correct choice” after the U.S. president-elect tapped a China hawk to run a new White House trade policy office.

Cui Fan of the China Society of WTO Studies, a think-tank affiliated with China’s commerce ministry, warned that Beijing would respond to any unilateral action by the incoming Trump administration.  “China is preparing itself for U.S. trade actions,” he told the Financial Times.  “China will respond with counteractions of its own.”

--About 6.4 million Americans signed up for health insurance coverage beginning Jan. 1 on healthcare.gov through the extended Dec. 19 open-enrollment deadline, the Health and Human Services Dept. announced Wednesday, about 400,000 more than last year; this as Republicans gear up to repeal the law.

--President Obama ‘permanently banned’ offshore oil and gas drilling in the “vast majority” of U.S.-owned northern waters, designating areas in the Arctic and Atlantic oceans as “indefinitely off limits” for future leasing; an attempt by the president to protect the region before he leaves office.

Canada also committed to a similar measure in its own Arctic waters, in a joint announcement with Washington.

The decision relies on a 1953 law which allows the president to ban leasing of offshore resources indefinitely. Canada, on the other hand, will review the move every five years.

But for the U.S., Obama’s move will certainly be decided by the federal courts.

Editorial / Wall Street Journal

“The White House is attempting to overload the bandwidth of its successor with a surge of new regulation, and the latest is a ban on oil drilling in much of the Arctic and Atlantic.  This rule even purports to be ‘permanent,’ unchangeable by any future President for all time.  We’ll see about that, but in the meantime spare us the liberal panic about Donald Trump’s supposed authoritarianism.

“The last-gasp executive action prohibits federal offshore drilling and mineral leases on some 3.8 million acres from Virginia to Maine and 115 million acres off the coast of Alaska, including some of the world’s great untapped repositories of hydrocarbons.  President Obama rolled out the rule in concert with Canadian Prime Minister Justin Trudeau, and the greens are cheering that still more fossil-fuel regions will be walled off from exploration....

“So ponder the spectacle of a President claiming his writ will last ‘indefinitely,’ as Mr. Obama’s executive order puts it.  No policy decisions are engraved in stone as if through holy stenography, and they’re definitely not beyond democratic consent on the basis of a 63-year-old law.  In a statement, Oregon Senator Jeff Merkley applauded Mr. Obama for ‘implementing’ sections of the Democrat’s ‘Keep It In the Ground Act.’  Why even have a Congress?

“The environmental lobby has moved on from reducing carbon demand – via subsidies for electric cars and solar panels – to opposing any carbon energy, and this is the opposition Mr. Trump will confront.  Restarting drilling would be a productive start for U.S. energy security and competitiveness.

“In the Arctic in particular, oil-and-gas reserves are beneath relatively shallow waters and obtainable with technology proven safe in the field.  Developing these resources could offset the expected long-term decline of energy production in the lower 48 in the 2030s and 2040s, and realistically the process needs to start now.  Russia is also aggressively expanding exploration wells in the Arctic’s Kara and Pechora seas and adding to its polar navy.

“Meantime, Mr. Obama told National Public Radio this week that ‘my suggestion to the President-elect is, you know, going through the legislative process is always better’ than executive fiat, ‘in part because it’s harder to undo.’ Perhaps he ought to take his own advice instead of issuing ‘permanent’ commands.”

--FedEx missed Wall Street’s expectations with its earnings per share, but still turned a profit of $700 million for the second quarter of fiscal 2017.  Revenue was up to $14.9 billion, inline, versus $12.5 billion the previous year, though this is partially due to the acquisition of TNT Express.

FedEx is now handling more than one million packages a day, driven by e-commerce, but costs are rising to open and staff four new massive distribution hubs, with the operating profit margin falling to 7.8% in the quarter from 9.1% in the same period a year earlier.

--Wells Fargo said the number of customers opening accounts has dropped sharply for a third consecutive month – underlining the scale of the fallout from the recent scandal over its sales tactics.

Customers opened 41 percent fewer Wells Fargo accounts in November than they did a year ago and made 45 percent fewer credit card applications.

--Nike Inc. reported better-than-expected quarterly revenue and profit, indicating a rebound in its basketball category.  “We’re seeing incredible momentum in basketball, to be clear, basketball is back,” said Trevor Edwards, president of the Nike Brand.  Basketball accounted for 5.1% of Nike’s total wholesale revenue of $27.23 billion in its financial year ended May 2016.  The Michael Jordan brand, which also sells items primarily focused on basketball, brought in another 10%.

Sales in North America rose 3% in the second quarter ended Nov. 30.  Nike’s sales in Greater China rose 12%.

The company’s net income rose 7.3% to $842 million, 50 cents a share, vs. the Street’s expectations of 43 cents.  Overall revenue rose 6.4%.

Nike has been aggressively responding to competitors like Under Armour, who is going after the Swoosh with the signing of athletes like Stephen Curry for its shoe line.

--Chinese e-commerce giant Alibaba is back on the U.S.’s “notorious markets” list over counterfeit goods sales.  The company had been taken off it four years ago, but U.S. authorities now say the firm’s online platform Taobao is used to sell “high levels” of fake goods.

Alibaba Group President Michael Evans said he was “disappointed” by the decision and questioned whether it was “based on actual facts or was influenced by the current political climate.”

But the company and Taobao have long been accused of being a platform for counterfeit goods.  [And you know what I think about Alibaba.]

--Shares in Twitter fell anew after the company announced a further executive exodus, with the CTO and a vice president of product joining a string of other high-profile departures from the company this year.

--Bed Bath & Beyond shares fell after the home goods retailer said profits declined in the third quarter, with same-store sales falling 1.4% vs. expectations of a slight gain.  Profits fell to $126 million from $177.8m in the year ago period.  The company also guided lower for the full year.

--Christine Lagarde, managing director of the International Monetary Fund, was found guilty of negligence in public office by a special Paris court on Monday.

But the French tribunal decided not to hand down any sentence to the former French finance minister, and the verdict would not enter into her judicial record.

The court said Lagarde failed to prevent a fraudulent 403m euro payout the French state made to flamboyant entrepreneur Bernard Tapie back in 2008, with the court saying she should have appealed it.

So while Lagarde will not have to serve any prison time, it’s obviously a major stain on her stint at the IMF, though no one believes it is enough to topple her.  She was reappointed to a second five-year term earlier this year.

Olivier Blanchard, the IMF’s former chief economist, defended Lagarde, telling the Financial Times: “She is one of the most scrupulous persons I have ever worked with, so any notion that she might have gone along with a deal she thought was legally wrong should be rejected.”

--Evercore ISI has tracked Christmas tree sales since 2003 and this year sales have jumped 10% from a year ago, the biggest increase on record.  So this should be a good indicator for overall retail sales....or maybe not.

--The U.S. population this year grew at its lowest rate since the Great Depression, according to the Census Bureau.  The 0.7% increase, to 323.1 million, was the smallest on record since 1936-37.  Americans continue to leave the North for Western states, like Utah, Nevada and Idaho.  New York, Pennsylvania and Illinois were among eight states that saw their populations drop.  Utah was the fastest growing, up 2%, after adding 61,000 people to lift its population to 3.1 million.  [Aside from Alaska, this is the only state I haven’t been to.]

The Census Bureau also revised downward its estimates of immigration for each year since 2010 an average of 10%. For this year, it estimated that 999,000 immigrants arrived, down 4% from the prior year.

--Katie Couric is returning to the “Today” show for a weeklong fill-in stint next month.  Couric will be back alongside Matt Lauer for the week of Jan. 2; Couric subbing for Savannah Guthrie, who is on maternity leave.

Couric was co-anchor of “Today” from 1991 to 2006, during which time she became the most popular personality in TV news, but then she blew it, opting for an evening anchor slot at CBS.  Then it was Yahoo and oblivion.  But the perky lass has banked a ton of cash and at the end of the day....

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: The Syrian government of Bashar al-Assad announced the evacuation of civilians and fighters from the last rebel-held part of Aleppo was complete after delays because of frigid weather and snow, putting all of Syria’s once formidable industrial capital back in his hands for the first time since 2012.

Tens of thousands of people have been removed from eastern Aleppo since Dec. 15.

The seizure of all of Aleppo marks a turning point in the nearly six-year conflict, with Assad’s army relying on heavy support from Russia, Iran and Shiite militias like Lebanon’s Hizbullah.

Assad, who always characterized the rebels as foreign-backed terrorists, told a visiting group of Iranians: “Liberating Aleppo from terrorism is a victory not only for Syria, but also for those who really contributed to the fight against terrorism, especially Iran and Russia,” as reported by Syria’s state news service, SANA.

But for those who have left, they have gone from one hell to another, most arriving in rebel-held areas outside the city where they were struggling to find shelter.

And then you have the thousands requiring medical care.  Needless to say, few are receiving it.

Charles Krauthammer / Washington Post

“The fall of Aleppo just weeks before Barack Obama leaves office is a fitting stamp on his Middle East policy of retreat and withdrawal.  The pitiable pictures from the devastated city showed the true cost of Obama’s abdication.  For which he seems to have few regrets, however. In his end-of-the-year news conference, Obama defended U.S. inaction with his familiar false choice: It was either stand aside or order a massive Iraq-style ground invasion.

“This is a transparent fiction designed to stifle debate. At the beginning of the civil war, the popular uprising was ascendant. What kept a rough equilibrium was regime control of the skies.  At that point, the United States, at little risk and cost, could have declared Syria a no-fly zone, much as it did in Iraqi Kurdistan for a dozen years after the Gulf War of 1991.

“The U.S. could easily have destroyed the regime’s planes and helicopters on the ground and so cratered its airfields as to make them unusable.  That would have altered the strategic equation for the rest of the war.

“And would have deterred the Russians from injecting their own air force – they would have had to challenge ours for air superiority. Facing no U.S. deterrent, Russia stepped in and decisively altered the balance, pounding the rebels in Aleppo to oblivion.  The Russians were particularly adept at hitting hospitals and other civilian targets, leaving the rebels with the choice between annihilation and surrender.  They surrendered.

“Obama has never appreciated that the role of a superpower in a local conflict is not necessarily to intervene on the ground, but to deter a rival global power from stepping in and altering the course of the war. That’s what we did during the 1973 Yom Kippur War, when Moscow threatened to send troops to support Egypt and President Nixon countered by raising America’s nuclear alert status to Defcon 3. Russia stood down.

“Less dramatically but just as effectively, American threats of retaliation are what kept West Germany, South Korea and Taiwan free and independent through half a century of Cold War.

“It’s called deterrence.  Yet Obama never had the credibility to deter anything or anyone.  In the end, the world’s greatest power was reduced to bitter speeches at the United Nations.  ‘Are you truly incapable of shame?’ thundered U.S. Ambassador Samantha Power at the butchers of Aleppo.  As if we don’t know the answer.  Indeed the shame is on us for terminal naivete, sending our secretary of state chasing the Russians to negotiate one humiliating pretend cease-fire after another....

“In Aleppo, the damage is done, the city destroyed, the inhabitants ethnically cleansed.  For us, there is no post-facto option.  If we are to regain the honor lost in Aleppo, it will have to be on a very different battlefield.”

Sen. John McCain / Washington Post

“The words ‘never again’ ring hollow as the city of Aleppo, Syria, has fallen to regime forces of Bashar al-Assad.  A brutal siege that has ground on for years was finally brought to a bloody end by a surge of Russian airpower, Iranian shock troops and assorted regional militia fighters.  As we eulogize the dead of Aleppo, we must acknowledge the United States’ complicity in this tragedy.

“President Obama speaks of the need to ‘bear witness’ to injustice.  He did little else for Aleppo.  To what have we borne witness?  To the use of smart bombs to target women and children, hospitals and bakeries, aid warehouses and humanitarian convoys.  To the development and popularization of barrel bombs – oil drums packed with shrapnel and explosives, dropped indiscriminately from aircraft to kill and maim as many civilians as possible. To the tactic of follow-on airstrikes designed to kill rescue workers, such as the intrepid White Helmets, who rush to the scene of an attack to save the innocent.  [Ed. Great piece last Sunday on “60 Minutes’ on these heroes.] And now to the busloads of refugees pouring out of Aleppo and the tens of thousands left behind to the tender mercies of the Assad regime and its Russian and Iranian allies.

“Obama has borne witness to all of this, and more, and done nothing to stop it....

“Aleppo may be lost, but the war in Syria is far from over. It will likely get worse as the Assad regime, Iran, Russia, Turkey, the Kurds, the Gulf states and others intensify their fighting over what is left of Syria’s carcass....

“(The United States) must acknowledge that we have a stake in what happens in Syria.  It is not just about the suffering of others, as moving as that is.  It is about the national security of the United States: The resurgence of al-Qaeda in Syria affects us.  The rise of the world’s most advanced terrorist organization affects us, as we saw in Paris and San Bernardino, Calif. A refugee crisis that destabilizes allies such as Israel and Jordan and threatens the foundation of Western democracies affects us....

“The Syrian regime, Russia and Iran are not fighting the Islamic State. Their indiscriminate slaughter of Syrian civilians is what created the conditions for the Islamic State’s emergence.  The bloody siege of Aleppo will be a windfall for terrorist radicalization and recruitment. To think that we can destroy the Islamic State by throwing in our lot with those who are strengthening it every day is a dangerous fantasy....

“Just because America cannot stop every horror in the world does not absolve us of the responsibility of using our great power to end the worst injustices where we can, especially when doing so would benefit our own interests and make the United States and our partners more secure. We do not need to become the world’s policeman to defend our interests.  But we cannot wall ourselves off from the chaos of our dangerous world. And if we try, the instability, terror and destruction at the heart of that chaos will eventually make their way to our shores.”

Elsewhere in the theater, clashes between Turkish-backed Syrian rebels and Islamic State militants raged around the northern Syrian town of al-Bab on Wednesday, killing 14 Turkish soldiers and 138 jihadists, the army said.  [The Turkish soldiers were mostly killed in suicide attacks.]

As for the assassination of the Russian ambassador to Turkey, Andrei Karlov, in Ankara at an art gallery, killed by a former police officer who Turkey claims was involved in FETO, an organization run by Fethullah Gulen, who lives in exile in Pennsylvania....

Yaroslav Trofimov / Wall Street Journal

“Since entering the Syrian war last year, Russia successfully ended America’s status as the Middle East’s sole superpower, an achievement capped by the fall of Aleppo.

“That rise has turned Moscow into the region’s indispensable power broker.  In Europe, too, the migrant wave unleashed by the Syrian war strengthened Moscow’s sway, fueling populist parties friendly to President Vladimir Putin.

“The assassination...however, highlighted the flip side of this dizzying rise. As America’s influence has shrunk, Russia has taken the place the U.S. long occupied in the minds of many people in the Middle East: an alien imperialist power seen as waging war on Muslims and Islam.

“There haven’t been any recent anti-American protests in the region.  But amid the agony of Aleppo, tens of thousands of protesters converged this month outside Russian missions from Istanbul to Beirut to Kuwait City – where the chanting, led by local lawmakers, was clear: ‘Russia is the enemy of Islam.’

“The Turkish policeman who gunned down Ambassador Andrey Karlov on Monday shouted that he was avenging the suffering of Aleppo, which had been subjected to a year of Russian bombing before the Syrian regime and its Shiite allies conquered the rebel-held parts of the city in recent weeks.

“The diplomat’s assassination, while condemned by governments, was greeted with open joy on Arabic social media, and in Palestinian refugee camps.

“ ‘Russia is certainly being perceived as the new bully in the neighborhood,’ said Hassan Hassan, a fellow at the Tahrir Institute for Middle East Policy in Washington.  ‘The way people react to its involvement in the decimation of one of the most revered Sunni cities in the Middle East, Aleppo, is reminiscent of how the U.S. was viewed after its occupation of Iraq.  You only need to follow how the killer of the Russian ambassador was glorified throughout the region to get an idea of how Russia is despised by the populace today.’

“Though Russia has become the immediate focus of this outrage, the fall of Aleppo is also intensifying support in the region for jihadist groups that plot terrorist attacks in the West such as Islamic State and al Qaeda.”

Responding to the Karlov assassination, Vladimir Putin said: “There can be only one response: intensifying our fight against terror.  And the bandits will feel it.”

[Separately, in the Turkish city of Kayseri, 13 soldiers were killed in a car bomb attack on a bus transporting off-duty personnel.  It is assumed this was the work of the Kurdish militant group, the PKK.]

Editorial / Washington Post

“The assassination of Russia’s ambassador to Turkey on Monday might have been expected to derail a fragile détente between the regimes of Vladimir Putin and Recep Tayyip Erdogan.  Instead, it has served to underline a budding alliance that could have the effect of excluding the United States from the endgame of Syria’s civil war and critically weakening U.S. influence across the Middle East.  That, at least, is Mr. Putin’s clear intention.

“The brutal assassination...was a tragic sign that Russia may pay a price in blowback for its intervention in Syria.  The assassin shouted, ‘Don’t forget Aleppo,’ where indiscriminate Russian bombing of hospitals and civilian housing paved the way for the Syrian regime of Bashar al-Assad to recapture the eastern half of the city.

“For now, however, Mr. Putin appears to be reveling in his victory and pressing his political advantage.  On Tuesday, his foreign minister hosted his counterparts from Turkey and Iran for a trilateral meeting that endorsed a road map for peace in Syria called the ‘Moscow declaration.’...

“The Syria trilateral meeting resounded with Russian triumphalism about the exclusion of the United States.  ‘All previous attempts by the United States and its partners to agree on coordinated actions were doomed to failure,’ said Russian Defense Minister Sergei Shoigu after meeting with Turkish and Iranian ministers.  ‘None of them wielded real influence over the situation on the ground.’....

“A president concerned with preserving U.S. leadership in the Middle East would seek to counter Mr. Putin’s maneuvering and reverse Mr. Erdogan’s tilt toward the Kremlin.  Sadly, it seems more likely that Donald Trump will welcome it.  The result could be either the quagmire that President Obama has long predicted – so far wrongly – for Russia in Syria or a peace that will empower a string of anti-U.S. strongmen from Damascus and Tehran to Ankara and Moscow.”

In Iraq, the battle to retake Mosul from ISIS has not only become a tremendous slog, it is leaving a legacy of environmental damage that will pose dangers to people for years to come.

ISIS has been burning oil wells and a sulfur factory, and the United Nations reported that “hundreds of people” have already been treated for exposure to chemicals, while “millions are exposed to soot and gases from the burning oil wells.”

Meanwhile, the misery in Mosul itself is only going to get worse with winter, as hundreds of thousands are struggling to find food and safe drinking water.

Iran: The government is requesting a meeting of the commission that oversees its nuclear deal to complain about the renewing of sanctions by the United States.

But these sanctions mostly seek to limit Iran’s oil and gas trade and the Iran Sanctions Act will have no effect since its measures are suspended as long as the nuclear deal remains in place, though supreme leader Ayatollah Ali Khamenei and President Hassan Rouhani called it a “clear violation.”

It’s the sanctions related to non-nuclear issues that continue to hurt Iran, specifically those targeting the international financial system that have helped deter major Western banks from returning to the country.

Yemen: In an attack identical to one of a week earlier, a suicide bomber killed at least 48 soldiers in the southern Yemeni port city of Aden on Sunday, a week after an attack by ISIS killed 50 troops nearby.  Islamic State is apparently responsible for the second one as well.

The death toll in the war that few are aware of is over 7,000, with 37,000 wounded, according to the U.N.

Jordan: In a disturbing development, four gunmen killed at least 10 people, including a tourist from Canada and at least four police officers, in an attack on a historic hilltop castle in the city of Karak.  The gunmen were then killed by Jordanian security forces.  It’s not known who the four attackers represented.

Russia/Ukraine: Malicious software used in a hack against the Democratic National Committee is similar to that used against the Ukrainian military according to computer-security firm CrowdStrike, which adds further credence to theory the hackers who infiltrated the DNC were working for the Russian government.

CrowdStrike concluded the malware used against Ukraine was designed by the hacker group known as Fancy Bear, which works for the Russian military intelligence agency, GRU, and was one of two hacker outfits that infiltrated the DNC to steal emails.  CrowdStrike said the other is known as Cozy Bear.

In the case of the Ukrainian military, CrowdStrike found the hackers altered a smartphone app that helped better aim ordnance, with the hackers then turning it around so that it could identify the position of the Ukrainian units.

In a separate situation, Russia has been escalating cyberattacks on Ukraine’s power grid, taking out the power in a village near Kiev last Sunday, according to security firm FireEye.

Additionally, there has been an increase in ceasefire violations.  Ukrainian President Petro Poroshenko recently told CNN that Russia has outfitted the pro-Russian fighters in the eastern part of the country with more than 700 tanks, on top of 1,200 armored personnel carriers and 1,000 artillery systems.  [Patrick Tucker / Defense One]

On a different issue, President Putin demanded restrictions on the sale of surrogate alcohol after at least 62 people died in Siberia from drinking bath oil laced with methylated spirit in search of alcoholic highs.   The mass poisoning in Irkutsk is the worst of its kind in recent years and has prompted nationwide soul-searching.

Bootleggers had apparently been selling the product for some time, but in this one particular batch, it was contaminated with the methylated spirit, which is found in cleaning materials and paint stripper, as reported by Reuters.  You may have seen an initial death toll of about 40, but it escalated, with another 30+ still in the hospital.

China: Air pollution in Beijing and surrounding areas has been at awful levels this week.  Schools have been shut, road traffic restricted, and people have been urged to stay indoors as 24 cities across northeast China were put on “red alert” for extreme smog; 460 million people exposed to pollution levels six times higher than the World Health Organization’s daily guidelines, according to calculations by Greenpeace.  It’s so bad, on Tuesday, 217 flights at Beijing Capital Airport were canceled, a third of the schedule for the day.

An academic paper out of Nanjing University, published in the journal the Science of the Total Environment, estimates that smog is related to nearly one third of deaths in China, making it a bigger threat to health than smoking.

The pollution in China is worst in the winter, when households consume more electricity from coal-fired power plants.

On a totally different issue, China returned to the United States an underwater drone taken about a week ago by a Chinese naval vessel in the South China Sea.

“After friendly negotiations between China and the U.S., the handover of the underwater drone has been completed in relevant areas in the South China Sea” on Tuesday, the Chinese defense ministry said.

A statement from the Pentagon noted the seizure was “inconsistent with both international law and standards of professionalism for conduct between navies at sea.”

As to Donald Trump’s tweets regarding U.S.-China relations, a Communist Party mouthpiece, the Global Times, editorialized this week: “China has so far practiced restraint at Trump’s provocations as he’s yet to enter the White House.  But this attitude won’t last too long after he officially becomes the U.S. president, were he still to treat China in the manner he tweeted today [referring to the drone seizure].”

Wang Yi, China’s foreign minister, told the People’s Daily that when it comes to Trump’s commitment to the One-China policy and his phone call with Taiwan’s President Tsai: “We will lead the way amid a shake-up in global governance and take hold of the situation amid international chaos. We will protect our interests amid intense and complex games.”

South Korea: The Constitutional Court has begun hearings on the trial of impeached President Park Geun-hye, though the court has up to six months to decide whether Park should permanently step down or be reinstated.  Park was impeached Dec. 9.

Congo: Security forces killed scores of demonstrators, at least 40 at last report, amid protests against President Joseph Kabila’s attempt to retain power.

Kabila, who took office in 2001 after his father’s assassination, is constitutionally barred from seeking another term, but a court has ruled that he can remain in power until elections, which were supposed to be in November, but the ruling party says will now be held in 2018, or later.

As noted in a Bloomberg and Washington Post editorial, Kabila is most concerned with protecting his family’s wealth.  Bloomberg said the Kabilas have built a business network that reaps hundreds of millions of dollars.

But as the Post notes:

“At the same time, Congo is drifting toward an explosion. The nation is vast and only loosely controlled by security forces and armed militias.  Opposition forces have been growing every more restive under Mr. Kabila’s boot.  According to Human Rights Watch, over the past two years, the authorities in Congo have arbitrarily arrested scores of activists and opposition leaders, holding some incommunicado and mistreating or torturing them, while trying others on trumped-up charges....

“There is only one nation that has overwhelming influence as a beacon for democracy, the United States.  But it has not always spoken out as strongly as it should against strongmen in Africa.  Clearly, Mr. Kabila (and Gambia’s President Yahya Jammeh) are calculating that they can hang on, even if they destroy democracy in their countries.  Perhaps they know President-elect Donald Trump has shown little interest in the topic.  ‘Sad,’ as Mr. Trump likes to say, because if the flame of freedom doesn’t burn brightly from the United States, then next year the path for democracy will be darker for millions of people elsewhere.”

But late word has a deal being brokered through the Catholic church, which has been mediating talks between Kabila and the opposition, whereby Kabila would agree to step down at the end of 2017, meaning an election would take place by then.

Evidently, Pope Francis has heaped pressure on Kabila and the opposition to find a solution.  We’ll see.  Kabila has not formally responded to the deal, let alone signed anything as of now.

Random Musings

--The next few weeks will be largely devoted to the Obama legacy (though of course Trump, and potentially world events, will interfere).  In his last press conference, Dec. 16, Obama said the following, which I offer for the record and my archives.

“Typically, I use this yearend press conference to review how far we’ve come over the course of the year.  Today, understandably, I’m going to talk a little bit about how far we’ve come over the past eight years.

“As I was preparing to take office, the unemployment rate was on its way to 10 percent. Today, it’s at 4.6 percent – the lowest in nearly a decade.  We’ve seen the longest streak of job growth on record, and wages have grown faster over the past few years than at any time in the  past 40.

“When I came into office, 44 million people were uninsured. Today, we’ve covered more than 20 million of them.   For the first time in our history, more than 90 percent of Americans are insured. In fact, yesterday was the biggest day ever for HealthCare.gov.  more than 670,000 Americans signed up to get covered, and more are signing up by the day.

“We’ve cut our dependence on foreign oil by more than half, doubled production of renewable energy, enacted the most sweeping reforms since FDR to protect consumers and prevent a crisis on Wall Street from punishing Main Street ever again.  None of these actions stifled growth, as predicted.  Instead, the stock market has nearly tripled. Since I signed ObamaCare into law, our businesses have added more than 15 million new jobs. And the economy is undoubtedly more durable than it was in the days when we relied on oil from unstable nations and banks took risky bets with your money.

“Add it all up, and last year, the poverty rate fell at the fastest rate in almost 50 years, while the median household income grew at the fastest rate on record.  In fact, income gains were actually larger for households at the bottom and the middle than for those at the top. And we’ve done all this while cutting our deficits by nearly two-thirds and protecting vital investments that grow the middle class.

“In foreign policy, when I came into office, we were in the midst of two wars. Now, nearly 180,000 troops are down to 15,000.  Bin Laden, rather than being at large, has been taken off the battlefield, along with thousands of other terrorists.  Over the past eight years, no foreign terrorist organization has successfully executed an attack on our homeland that was directed from overseas.

“Through diplomacy, we’ve ensured that Iran cannot obtain a nuclear weapon – without going to war with Iran.  We opened up a new chapter with the people of Cuba. And we brought nearly 200 nations together around a climate agreement that could very well save this planet for our kids.  And almost every country on Earth sees America as stronger and more respected today than they did eight years ago.

“In other words, by so many measures, our country is stronger and more prosperous than it was when we started. That’s a situation that I’m proud to leave for my successor.  And it’s thanks to the American people – to the hard work that you’ve put in, the sacrifices you’ve made for your families and your communities, the businesses that you started or invested in, the way you looked out for one another.  And I could not be prouder to be your President.

“Of course, to tout this program doesn’t mean that we’re not mindful of how much more there is to do.  In this season in particular, we’re reminded that there are people who are still hungry, people who are still homeless; people who still have trouble paying the bills or finding work after being laid off. There are communities that are still mourning those who have been stolen from us by senseless gun violence, and parents who still are wondering how to protect their kids. And after I leave office, I intend to continue to work with organizations and citizens doing good across the country on these and other pressing issues to build on the progress that we’ve made.

“Around the world, as well, there are hotspots where disputes have been intractable, conflicts have flared up, and people – innocent people are suffering as a result.  And nowhere is this more terribly true than in the city of Aleppo.  For years, we’ve worked to stop the civil war in Syria and alleviate human suffering. It has been one of the hardest issues that I’ve faced as President.

“The world, as we speak, is united in horror at the savage assault by the Syrian regime and its Russian and Iranian allies on the city of Aleppo. We have seen a deliberate strategy of surrounding, besieging, and starving innocent civilians. We’ve seen relentless targeting of humanitarian workers and medical personnel; entire neighborhoods reduced to rubble and dust.  There are continuing reports of civilians being executed. These are all horrific violations of international law. Responsibility for this brutality lies in one place alone – with an Assad regime and its allies Russia and Iran. And this blood and these atrocities are on their hands.

“We all know what needs to happen. There needs to be an impartial international observer force in Aleppo that can help coordinate an orderly evacuation through safe corridors.  There has to be full access for humanitarian aid, even as the United States continues to be the world’s largest donor of humanitarian aid to the Syrian people. And, beyond that, there needs to be a broader ceasefire that can serve as the basis for a political rather than a military solution.

“That’s what the United States is going to continue to push for, both with our partners and through multilateral institutions like the U.N.

“Regretfully, but unsurprisingly, Russia has repeatedly blocked the Security Council from taking action on these issues.  So we’re going to keep pressing the Security Council to help improve the delivery of humanitarian aid to those who are in such desperate need, and to ensure accountability, including continuing to monitor any potential use of chemical weapons in Syria. And we’re going to work in the U.N. General Assembly as well, both on accountability and to advance a political settlement. Because it should be clear that although you may achieve tactical victories, over the long term the Assad regime cannot slaughter its way to legitimacy.

“That’s why we’ll continue to press for a transition to a more representative government. And that’s why the world must not avert our eyes to the terrible events that are unfolding. The Syrian regime and its Russian and Iranian allies are trying to obfuscate the truth. The world should not be fooled. And the world will not forget.

“So even in a season where the incredible blessings that we know as Americans are all around us, even as we enjoy family and friends and are reminded of how lucky we are, we should also be reminded that to be an American involves bearing burdens and meeting obligations to others. American values and American ideals are what will lead the way to a safer and more prosperous 2017, both here and abroad.

“And by the way, few embody those values and ideals like our brave men and women in uniform and their families.  So I just want to close by wishing all of them a very Merry Christmas and a Happy New Year.”

So much of the above is nothing but a pile of garbage, particularly the section on foreign policy.  I will destroy Obama’s pathetic academic treatise over the coming weeks; just as I have the past few years!

--President-elect Donald Trump declared Wednesday that the deadly truck attack in Berlin was “an attack on humanity and it’s got to be stopped.”  He also suggested he might go forward with his campaign pledge to ban Muslim immigrants from coming to the United States.

“You know my plans. All along, I’ve been proven to be right, 100 percent correct,” Trump said when asked if the attack in Berlin had caused him to reevaluate the proposal.  “What’s happening is disgraceful.”

Spokesman Jason Miller said, “President-elect Trump has been clear that we will suspend admission of those from countries with high terrorism rates and apply a strict vetting procedure for those seeking entry in order to protect American lives.”

--Trump had dinner at Mara Lago with Mexican billionaire Carlos Slim.  The two had feuded throughout the election and the dinner was a peacemaking gesture, with Trump describing it in a statement to the Washington Post as “a lovely dinner with a wonderful man.”

--A new Wall Street Journal/NBC News poll found that 75% of Republicans had a positive view of Donald Trump, up from 57% in the weeks before the election.    68% of Republicans believe the economy will improve in the next year, up from only 14% a year ago and far higher than the 19% of Democrats who foresee a stronger economy.

Overall, 41% of voters view Trump positively, up from 29% in mid-October and higher than at any point in the campaign.  But 47% view him unfavorably.  42% say the economy will get better and 19% said worse, the highest level of economic optimism since October 2012.

--Rich Lowry / New York Post

“The Democrats have a simple explanation for Hillary Clinton’s loss – the Russians did it.

“The party that has had a decades-long soft spot toward Moscow and has been reluctant to believe the Kremlin might have aggressive intentions or, say, cheat on an arms-control agreement, is in a frenzy over Russian hacking that supposedly denied Hillary the victory that was rightfully hers.

“John Podesta, the chairman of a Hillary campaign that considered accepting the results of an election part of American writ as of about two months ago, refused several times on ‘Meet the Press’ Sunday to say the presidential election was ‘free and fair.’

“In a contest this narrow, anything might have been decisive.  But the monocausal Russian explanation for Hillary’s defeat ignores her myriad political and ethical vulnerabilities that the Democrats were determined to ignore, despite the obvious evidence of them for years.

“Vladimir Putin couldn’t have hand-picked a worse champion for them this year.  There was no reason to believe Hillary Clinton was a good politician who could deliver a compelling message, since she had never done it before.

“What she lacked in raw political skill, she made up with dubious practices. She and her husband hadn’t anticipated her second run for the presidency by staying squeaky clean, but by buckraking from every corporate or foreign interest possible on the promise of a return to power.  They were happy to, at the very least, skirt the rules, with Hillary’s homebrew e-mail arrangement – concocted to hide her correspondence from legitimate media and congressional inquiries – exemplifying the M.O.

“In other words, the Democratic establishment rushed into the arms of a candidate who it was clear from the beginning could well lose to Donald Trump, especially if a few things bounced the wrong way – and is now shocked and outraged that she indeed lost when a few things bounced the wrong way....

“Democrats are calling for an investigation to get to the bottom of the Russian interference in the election.  This is entirely appropriate.

“But everything points to the Democrats not being able to handle the fundamental truth of what happened on Nov. 8 – they took a flier on a historically weak candidate out of a misbegotten attachment to the Clinton dynasty, and paid a grave price for their foolish mistake.”

--After more than nine hours of closed-door meetings, North Carolina legislators failed to repeal the state law that has prompted economic boycotts, lawsuits, political acrimony and contributed to the defeat of the Republican governor.

Republicans, who control both houses of the legislature, could not agree on a  way to repeal House Bill 2, the “bathroom bill,” that requires transgender people in public buildings to use the bathroom that corresponds with the gender on their birth certificate.

This comes after Charlotte fully repealed the ordinance that set the law in motion.  And it comes days after Republicans stripped significant powers from Governor-elect Roy Cooper, a Democrat, who is to be sworn in on New Year’s Day.

North Carolina has paid a dear price from the law, but this was to be the day, the week, when lawmakers would put it all in the past.

But then Charlotte leaders didn’t stick to their end of a bargain worked out with Republicans in the legislature and Republicans seized on a new talking point, or as Dallas Woodhouse, the executive director of the North Carolina Republican Party, said in a statement posted on Facebook, “The H.B. 2 blood is now a stain soaked on their hands and theirs alone.  What a dishonest, disgraceful shame by Roy Cooper and Charlotte Democrats.”

What a pathetic state, mused the editor, who hails from an equally pathetic one.

Editorial / Wall Street Journal

“You may have noticed stories from North Carolina this week that make Raleigh sound like a cross between Venezuela and Saudi Arabia.  The progressive eruption over minor changes to executive power is overwrought, but the state’s Republicans are managing to make themselves look worse than they really are.

“Over the past week Republican Governor Pat McCrory signed a set of bills that require Senate approval of his Democratic successor Roy Cooper’s cabinet nominees. The laws would also rearrange the state board of education; merge the state’s elections and ethics boards; and move university trustee appointments from the governor to the legislature.  The bills were passed in a special legislative session convened by Republican leaders.

“The press has called the moves ‘dangerous,’ a ‘coup’ and every other word in the thesaurus entry for ‘scary.’  Dozens of protesters have been arrested at the capitol.  Republicans say that Democrats passed limits on incoming GOP governors in the 1970s and ‘80s, and Senate advice and consent is the norm in the U.S. Congress, not banana republics.  Other parts of the law like partisan affiliations for judges are debatable, but this is not a threat to democracy.

“Yet Gov. McCrory lost re-election by 5,000 votes after a recount, and the GOP’s timing looks vindictive. There’s no reason to ram through changes in a lame-duck session: Republicans wield a supermajority in the state House and Senate. The GOP will have no trouble reining in a Democratic Governor next year.

“The episode also shows Republicans haven’t absorbed the lessons of Gov. McCrory’s loss, and one is overplaying a fight on transgender bathrooms....

“On Monday Charlotte agreed to drop the ordinance if the state nixed its pre-emption bill, which the legislature was debating behind closed doors as we went to press on Wednesday.  Gov. McCrory continued his farewell tour by suggesting that Charlotte ginned up the ordinance to defeat him for re-election.  The left is not above exploiting the LGBT community for political power, but that is beside the point: A shrewder Governor might have kept a retaliation bill from reaching his desk and defused the bathroom brouhaha before statewide escalation....

“Donald Trump won the Presidency in part because voters were tired of assaults on every pizza shop owner who dissents from progressive cultural dictates.  It turns out voters are no warmer to impositions from Republicans, who can learn from this episode that modesty in governing is always a virtue – whether on bathrooms or how to finish up your last month in office.”

--Opponents of Rep. Keith Ellison’s bid to be the next Democratic National Committee chairman are raising new questions about the Minnesota Democrat’s past, in making a case he’s not fit to be the party’s next leader.

Ellison has had past tax troubles, campaign finance violations and minor legal issues that once led to his driver’s license being suspended, so some say he’s ill-equipped to lead the DNC. 

All of the issues have been rectified and some date back to the 1990s.

But more importantly, as a young man he supported the Nation of Islam, though he has since rejected it, as well as past comments about U.S. foreign policy being beholden to Israel.

--President Obama shortened the prison sentences for another 153 convicts, mainly low-level drug offenders, and pardoned 78 others, the White House said on Monday.  Overall, he has commuted the sentences of 1,176 federal prisoners as part of a push to reduce the number of people serving long sentences for non-violent drug offenses.

--In one 24-hour period in Vancouver this week, nine people died from an overdose of the painkiller fentanyl opiod.  The city has seen an average of 15 drug overdoses a month.

Drug abuse in Canada claimed the lives of 2,000 people in 2015.

--According to a Wall Street Journal survey, homicides rose in 16 of the 20 largest American cities in 2016, continuing a trend that began last year, though murder rates are generally nowhere near what they were two decades ago.

Chicago has seen one of the most dramatic jumps, with more than 720 murders – up 56% from 2015.  [The total is greater than Los Angeles and New York, combined.]

--Sean Spicer was named White House spokesman for Donald Trump.  This is without question the worst job in the world. 

--We note the passing last weekend of Dr. Henry J. Heimlich, 96, whose Heimlich maneuver – saving a choking victim with a bear hug and abdominal thrusts to eject a throat obstruction – is credited with saving an estimated 100,000 lives in the more than four decades since its inception in 1974.  The American Medical Association, which endorsed the technique in 1975, says it saves unknown thousands annually.

It was just last May 23 that Dr. Heimlich used the maneuver himself to save the life of an 87-year-old woman choking of a morsel of meat at their senior residence in Cincinnati.

Heimlich also developed and held patents on a score of medical innovations and devices.

--The temperature at the North Pole this week was nearly freezing, or 30 degrees above average for this time of year, as 2016 is set to become the hottest year on record, going back to the 1880s, eclipsing both 2015 and 2014.

Actually, as reported in the Sydney Morning Herald, around the North Pole, temps were predicted to soar between 40 and 50 degrees above normal, despite this being the coldest time of the year.  Arctic sea ice was 17.7 percent below the 1981-2010 average in November.

A similar retreat is underway at the other end of the planet.  But in Antarctica the story often involves wind strengths as a key contributing factor in shifting sea-ice totals.

--I asked Santa for a 12-pack of domestic this Christmas...Coors Light.  I’m pretty easy to shop for.

---

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

God bless America.

---

Gold $1135...down a seventh straight week
Oil $53.25...highest weekly close since July 2015

Returns for the week 12/19-12/23

Dow Jones  +0.5%  [19933]
S&P 500  +0.25%  [2263]
S&P MidCap  +0.4%
Russell 2000  +0.5%
Nasdaq  +0.5%  [5462]

Returns for the period 1/1/16-12/23/16

Dow Jones  +14.4%
S&P 500  +10.8%
S&P MidCap  +19.7%
Russell 2000  +20.7%
Nasdaq  +9.1%

Bulls 59.8
Bears 19.6  [Source: Investors Intelligence...Bulls don’t want to crack 60.]

Merry Christmas and Happy Hanukkah!

Brian Trumbore