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Week in Review

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12/22/2018

For the week 12/17-12/21

[Posted 11:30 PM ET, Friday]

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*Special thanks to Jeff B. for his ongoing support.

Edition 1,028

Over the weekend, I saw a piece on the wires that read as follows, from Reuters: “U.S. President Donald Trump has told his Turkish counterpart Tayyip Erdogan that Washington is working on extraditing a U.S.-based Muslim cleric accused of orchestrating a failed Turkish coup in 2016, Turkey’s foreign minister said on Sunday.  ‘In Argentina, Trump told Erdogan they were working on extraditing (Fethullah) Gulen and other people,’ Mevlut Cavusoglu said, referring to the G20 summit where the leaders met two weeks ago.  Turkey has long sought the extradition of Gulen, who has lived in self-imposed U.S. exile for nearly two decades.  A former ally of Erdogan, he is blamed by Turkish authorities for the failed coup when rogue soldiers commandeered tanks and helicopters, attacked parliament and shot unarmed civilians.  Gulen denies any involvement in the failed putsch.  Trump said last month he was not considering extraditing the preacher as part of efforts to ease Turkish pressure on Saudi Arabia over the killing of Saudi journalist Jamal Khashoggi in Istanbul.”

Well, I have written extensively on Gulen.  I know where he lives.  I’ve wanted to drive out there.  I’ve tried to contact the Turkish consulate on an unrelated matter and they’ve ignored my request.  After the New Year...we’ll see.

But I read this piece and thought I didn’t see Trump negotiating the extradition of Gulen before.  The subject has been broached, but, wow, this is incredibly reckless.  Congress would flat-out impeach Trump if he ever did something like this, clearly intended without congressional approval.  The U.S. government has found zero...zero...proof Gulen had anything to do with the failed coup.

So this was my mindset on Monday.  Little did I know, the above is nothing compared to what then transpired.  Here we go....

President Trump ordered a rapid withdrawal of all 2,000 United States ground troops from Syria within 30 days, declaring the four-year American-led war against the Islamic State as largely won.

“We have defeated ISIS in Syria, my only reason for being there during the Trump Presidency,” Trump tweeted Wednesday morning, seemingly out of nowhere.  He offered no details, nor word on a larger strategy, in Syria.

White House press secretary, Sarah Huckabee Sanders, said in a statement that “we have started returning United States troops home as we transition to the next phase of this campaign.”

But we are betraying our Kurdish allies who have fought alongside American troops in Syria and who could find themselves under attack in a military offensive now threatened by Turkey.

Pentagon officials first said the American-led airstrike campaign on Islamic State would continue, but subsequent reports said otherwise.

Defense Secretary Jim Mattis and other senior national security officials failed to dissuade Trump from a wholesale troop withdrawal, arguing that the significant national security policy shift would essentially cede foreign influence in Syria to Russia and Iran at a time when American policy calls for challenging both countries.

Trump promised during his presidential campaign to withdraw American troops from Syria, and reluctantly agreed in April to give the Defense Department more time to finish the mission.  But the president has been looking for a way out, and Turkish President Erdogan, in his call with Trump, told him that Turkey is launching its offensive against the Kurds inside northeast Syria; forces Turkey considers to be a terrorist group, as I explained last week. The Syrian Kurds control around 30 percent of Syria’s territory and hope to create an autonomous region, similar to the one in neighboring Iraq.

But Turkey has been accusing the U.S. of failing to tackle security threats in the region.

Estimates vary as to how many ISIS fighters remain in Syria. In the town of Hajin, which the coalition is attempting to retake from the militants, the estimate is 2,000, but the total number of ISIS in Syria and Iraq is as high as 30,000.

By withdrawing, there is no way the U.S. can ensure ISIS doesn’t return, which has been Sec. Mattis’ argument for maintaining a presence.

In April, Mattis said: “We do not want to simply pull out before the diplomats have won the peace.  You win the fight – and then you win the peace.”

Earlier this month, the U.S.-led coalition denied any change to the U.S. presence in a statement:

“Any reports indicating a change in the U.S. position with respect” to the military presence in Syria “are false and designed to sow confusion and chaos.”

Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, said  this month the U.S. needed to train thousands of local forces to ensure a lasting defeat of ISIS.

The Pentagon said Wednesday, after the president’s tweet: “The Coalition has liberated the ISIS-held territory, but the campaign against ISIS is not over,” said spokeswoman Dana White in a statement.  “We have started the process of returning U.S. troops home from Syria as we transition to the next phase of the campaign.  For force protection and operational security reasons we will not provide further details.  We will continue working with our partners and allies to defeat ISIS wherever it operates.”

The thing is, the president has previously slammed his predecessor, Barack Obama, for the withdrawal of American forces from Iraq that preceded an unraveling of the Iraqi armed forces.  This led to ISIS’ advance into the country in 2014.

And I have maintained for years now that Obama’s 2012 move not to work with Turkey on a no-fly zone for Syria will prove to be the critical decision of the century...the result of the inaction being the mass migration to Europe of millions of refugees, the emergence of ISIS, and the entry of Russia to the theater.

Now I may be adding President Trump’s decision to this loop.

Major allies of the president were harshly critical.  Republican Senator Lindsey Graham, who has been carrying Trump’s water, called the withdrawal decision a “huge Obama-like mistake,” warning it would have “devastating consequences” both in Syria and beyond.

“An American withdrawal at this time would be a big win for ISIS, Iran, Bashar al-Assad of Syria, and Russia,” he said in a statement.

Sen Bob Corker (R-Tenn.), chairman of the Foreign Relations Committee, said he was shocked that Trump would “wake up and make this kind of decision” to pull out of Syria “with this little communication, with this little preparation.  My understanding is we are beginning to move out right now...entirely,” he said.

“This is chaos.  I can only imagine how it’s playing in Syria,” Sen. Graham said.  “I have the same feeling about this as I did in Iraq: Over time, this is not going to play well.”

Graham, in a late-night speech on the Senate floor on Wednesday, then railed against Trump’s decision to withdraw even more, calling it a “stain on the honor” of the U.S.   Graham also said that Trump’s claim ISIS had been defeated was “fake news.”  Graham said he’d just gotten back from a trip to the Middle East and knew for a fact that it was “inaccurate.”

Graham said he was introducing a resolution that would condemn Trump’s decision.

Other GOP senators excoriated Vice President Mike Pence when he went to Capitol Hill to try to explain the president’s decision.

“There was a great deal of concern expressed...what is going to happen to the Kurds, who have fought by our side and helped defeat ISIS and probably need our protection?” said Senate Homeland Security and Government Affairs Committee Chairman Ron Johnson (R-Wis.).  “I asked the vice president, ‘Who are going to be the members of the coalition to prevent ISIS from reconstituting and keep Iran from completely taking over, Iran and Russia, from completely taking over Syria?’”

A statement from the Kurdish-led alliance, the Syria Democratic Forces (SDF), warned of a military vacuum that would leave the alliance trapped between “hostile parties.”

The SDF statement warned that the withdrawal would “negatively impact” the anti-IS campaign and allow the group “to revive itself again.”

It said the U.S. move would have “dangerous implications” for regional stability and “create a political and military vacuum...leaving its people between the claws of hostile parties.”

Not surprisingly, Russian foreign ministry spokeswoman Maria Zakharova said the U.S. decision could result in “genuine, real prospects for a political settlement” in Syria.

Then Thursday, as part of his annual yearend press conference, President Putin said he agreed with Trump’s decision that ISIS has been defeated, while calling the U.S. military presence in Syria illegitimate.

“If the U.S. has decided to withdraw its contingent – that is the right move.... We’ve delivered a serious blow against [Islamic State] in Syria... In that regard, Donald is right.”

But Putin added, “We don’t see any signs yet of the withdrawal of U.S. troops.  How long has the United States been in Afghanistan?  Seventeen years?  And almost every year they say they’re pulling out their troops.”

Israeli Prime Minister Benjamin Netanyahu, no doubt deeply upset, said Thursday that Israel will “continue to act aggressively against Iran’s attempt to entrench itself in Syria.”

Netanyahu added that Israel continues its efforts to thwart the terror tunnels on the Israel-Lebanon border.  “At this moment, we are employing special means to...neutralize these tunnels,” Netanyahu said, adding that “we do not intend to reduce our efforts on either of these fronts, we will escalate them, and I know that we do so with the full support and backing of the U.S.”

France’s defense minister, Florence Parly, said on Twitter Thursday: “Islamic State has been weakened more than ever. But Islamic State has not been wiped from the map nor has its roots.  It is necessary that the last pockets of this terrorist organization be definitively defeated militarily.”

Iranian President Hassan Rouhani traveled to Ankara on Wednesday and lavished praise on Turkey.  [Your editor once gave the bird to the security camera outside the Iranian embassy there, more than once.]

If Iran fills the vacuum that a U.S. withdrawal would leave, Tehran would have its pathway to the sea.  And Vladimir Putin will have his foothold in the Middle East.  Turkey will be appeased.  And the Kurds, trained by and fighting alongside the Americans, will have been abandoned once more.

Washington will have zero leverage in Syria, which weakens its hand in other Middle East negotiations and trouble spots – particularly Iran, which we’ve been led to believe by President Trump is a top priority.

This is nonsensical.

Thursday afternoon, Sec. Mattis then resigned...quitting in protest of Trump’s declaration.

Dear Mr. President:

I have been privileged to serve as our country’s 26th Secretary of Defense which has allowed me to serve alongside our men and women of the Department in defense of our citizens and our ideals.

I am proud of the progress that has been made over the past two years on some of the key goals articulated in our National Defense Strategy: putting the Department on a more sound budgetary footing, improving readiness and lethality in our forces, and reforming the Department’s business practices for greater performance.  Our troops continue to provide the capabilities needed to prevail in conflict and sustain strong U.S. global influence.

One core belief I have always held is that our strength as a nation is inextricably linked to the strength of our unique and comprehensive system of alliances and partnerships. While the U.S. remains the indispensable nation in the free world, we cannot protect our interests or serve that role effectively without maintaining strong alliances and showing respect to those allies.  Like you, I have said from the beginning that the armed forces of the United States should not be the policeman of the world.  Instead, we must use all tools of American power to provide for the common defense, including providing effective leadership to our alliances.  NATO’s 29 democracies demonstrated that strength in their commitment to fighting alongside us following the 9-11 attack on America. The Defeat-ISIS coalition of 74 nations is further proof.

Similarly, I believe we must be resolute and unambiguous in our approach to those countries whose strategic interests are increasingly in tension with ours.  It is clear that China and Russia, for example, want to shape a world consistent with their authoritarian model – gaining veto authority over other nations’ economic, diplomatic, and security decisions – to promote their own interests at the expense of their neighbors, America and our allies. That is why we must use all the tools of American power to provide for the common defense.

My views on treating allies with respect and also being clear-eyed about both malign actors and strategic competitors are strongly held and informed by over four decades of immersion in these issues.  We must do everything possible to advance an international order that is most conducive to our security, prosperity and values, and we are strengthened in this effort by the solidarity of our alliances.

Because you have the right to have a Secretary of Defense whose views are better aligned with ours on these and other subjects, I believe it is right for me to step down from my position. The end date for my tenure is February 28, 2019, a date that should allow sufficient time for a successor to be nominated and confirmed as well as to make sure the Department’s interests are properly articulated and protected at upcoming events to include Congressional posture hearings and the NATO Defense Ministerial meeting in February. Further, that a full transition to a new Secretary of Defense occurs well in advance of the transition of Chairman of the Joint Chiefs of Staff in September in order to ensure stability within the Department.

I pledge my full effort to a smooth transition that ensures the needs and interests of the 2.15 million Service Members and 732,079 DoD civilians receive undistracted attention of the Department at all times so that they can fulfill their critical, round-the-clock mission to protect the American people.

I very much appreciate this opportunity to serve the nation and our men and women in uniform.

James N. Mattis

Not one word of praise or thanks for President Trump directly.  That says it all.

Florida Republican Senator Marco Rubio tweeted after:

“Just read Gen. Mattis resignation letter.  It makes it abundantly clear that we are headed towards a series of grave policy errors which will endanger our nation, damage our alliances & empower our adversaries.

“I hope we who have supported this administration’s initiatives over the last two years can persuade the President to choose a different direction. But we must also fulfill our constitutional duty to conduct oversight over the policies of the executive branch.”

Thursday, Senate Majority Leader Mitch McConnell (R-Ky.) weighed in, saying he was “distressed” by Mattis’ resignation.

“I believe it’s essential that the United States maintain and strengthen the post-World War II alliances that have been carefully built by leaders in both parties,” McConnell said in a statement.  “We must also maintain a clear-eyed understanding of our friends and foes, and recognize that nations like Russia are among the latter....

“So I was sorry to learn that Secretary Mattis, who shares those clear principles, will soon depart the administration. But I am particularly distressed that he is resigning due to sharp differences with the president on these and other key aspects of America’s global leadership.”

*Friday, the following came from Haaretz:

“Islamic State launched an attack on Syrian Democratic Forces’ positions in Hajin region in southeastern Syria, Mustafa Bali, the head of the SDF media office said.

“ ‘ISIS is launching a huge attack, heavy clashes are taking place there,’ he tweeted.  ‘Only 35 percent from Hajin is liberated by our forces.’

“The attack comes just two days after U.S. President Donald Trump announced he was withdrawing troops from Syria.”

---

The Mattis departure and Syrian withdrawal was one of many chaotic developments this week.  President Trump and House Republicans upended a bipartisan effort to fund the government until February on Thursday, which left lawmakers no clear path to avoid a partial shutdown this weekend.

Just two days earlier, the president signaled he was backing off his demand that Congress include $5 billion to fund a southern border wall in any year-end spending bill, the president changed course and told House GOP leaders that he would veto the short-term spending bill approved by the Senate because it didn’t contain wall funding.

The House, which had been expected to pass the Senate version of the bill, instead passed a measure on Thursday night with $5.7 billion in funding for the wall.    The 217-185 vote along party lines sent the bill back to the Senate, where it was certain to be blocked by Democrats.

This all came about because Wednesday, conservatives such as Rush Limbaugh and Anne Coulter excoriated the president for not standing firm on funding of the wall.  Trump then switched gears.

Rep. Mark Meadows (R-N.C.), chairman of the conservative House Freedom Caucus, said forgoing a fight on the wall now would be a blow to Trump’s most faithful supporters.  “To suggest that something is going to improve when the Democrats are in control defies history and defies logic....It would have a devastating impact.  It was the center of his campaign.”

As I go to post, the government is about to shut down we’ll see what Saturday brings.

Wall Street and Trade

The Federal Reserve’s Open Market Committee met Tuesday and Wednesday and, as expected, hiked interest rates a fourth time this year, ninth time since December 2015, nudging the benchmark funds rate to a range between 2.25% and 2.5%.  But what was surprising to many market participants, and scribes such as myself, was that the Fed didn’t announce it would then ‘pause,’ and instead indicated another two rate hikes in 2019, rather than the prior forecast of three. 

“We have seen developments that may signal some softening, relative to what we were expecting a few months ago,” said Chairman Jerome Powell, pointing to the slowing global economy and increased market volatility that is less supportive of growth.  “In our view, these developments have not fundamentally altered the outlook.”

The FOMC did acknowledge recent market pressure, noting in its statement that it “will continue to monitor global economic and financial developments and assess their implications for the economic outlook.”

But in his press conference, Chairman Powell came off as unconcerned about the state of the economy, despite the deepening worries on Wall Street.

Powell did acknowledge the Fed’s job has become tougher because future rate decisions need the most up-to-date figures on jobs, inflation and economic growth.  Powell was hinting it won’t be as easy for the Fed to telegraph future actions as it has been in the past.

Michael Mackenzie / Financial Times

“The final Federal Reserve policy meeting of the year has delivered a message that Wall Street was never going to enjoy hearing.

“Jay Powell and the Federal Open Market Committee had to strike a balance between slowing down the pace of interest rate tightening in 2019 while not unduly alarming an already febrile market with a downbeat assessment of the economy.

“Their attempt landed with a thud, sending the S&P 500 below 2,500 for the first time since September 2017. The market was looking for a stronger sign of a pause to rate hikes by the FOMC in 2019 and was duly disappointed, exacerbating the current brittle mood.

“Hardly helping sentiment was Mr. Powell’s remark during his press conference: ‘There’s a mood of concern, or a mood of angst about growth going forward.’

“The bottom line for the stock market is that a reduction in the economic outlook by the FOMC casts doubt over the pace of corporate profit growth in the coming year – a key driver of equity valuations over the long haul. The prospect has been driving the market’s abject performance of late....

“Given there is no sign of the Fed’s balance sheet contraction – running at $50bn a month – ending soon, we are left with a market twisting in the wind.  Questions about the balance sheet to Mr. Powell during his press conference triggered further selling pressure in equities.”

Editorial / Wall Street Journal

“The Federal Reserve on Wednesday told financial markets that they don’t matter all that much to the real American economy, and the markets barked right back that the Fed doesn’t appreciate the current signs of financial stress that could become economic trouble in 2019.

“That’s the hawkish message from the Federal Open Market Committee’s decision to raise its benchmark interest rate another 0.25% to 2.5%, and especially from Chairman Jay Powell’s press conference. The central banker asserted that the economy is so strong, and labor markets are so robust, that the Fed can afford to raise rates for the fourth time this year, plus two more times next year.

“Sure, said Mr. Powell, ‘some cross-currents have emerged’ in markets, inflation is below the Fed’s 2% target and falling, global growth is slowing, and even U.S. growth will slow next year to between 2% and 2.5% from at least 3% this year, but no matter.  Nothing will keep the Fed from its self-appointed rounds back to ‘a neutral’ rate of interest, as if anyone knows what this is in this brave new world of post-crisis monetary policy.

“The markets reacted with a clenched fist of their own in real time  Equity markets held up well enough until Mr. Powell was asked if the Fed has considered altering the pace of its balance-sheet reduction, known as quantitative tightening, or QT.  Mr. Powell essentially said no, and in any case it doesn’t matter because the Fed’s bond sales aren’t having much of an impact on credit conditions.

“That’s when equity prices took another header, compounding their autumn swoon.  More important, five- and 10-year Treasury bond yields fell sharply before recovering, and were still down on the day. In other words, Mr. Powell and the Fed staff may think they are setting interest rates, but the markets are saying, sorry, we are.

“Markets also seem to be saying they’re not sure Mr. Powell and the Fed appreciate the economic risks ahead from tightening financial conditions.  The high-yield corporate debt market is dead in the water, and the leverage loan market isn’t much better.

“The Fed shouldn’t overreact to a stock-market correction, but you’d think evident stress in credit markets would rouse Mr. Powell from his seeming insouciance.  Or at least motivate him to offer a better explanation than that financial markets and the Fed’s balance sheet don’t matter.

“Though Mr. Powell denied any such thing, as he should, it’s likely the Fed’s robust hawkishness was also a deliberate riposte to Donald Trump’s public pleas not to raise rates.  The FOMC statement was unanimous and barely changed from the one in November despite the growing market anxiety.  We said Mr. Trump’s bullying tweets on interest rates would be counterproductive, and so they were....

“In the last two years the Fed has underestimated growth as it missed the supply-side impact of deregulation and tax cuts on capital and business.  Now the Fed thinks the economy is robust enough to absorb the double monetary whammy of higher interest rates and QT. We’d feel more confident if the experiment they’re undertaking had been attempted before....

“The market test isn’t only when rates were zero and the balance sheet was ballooning to $4.5 trillion. The real measure of success or failure is what happens at the end of the monetary cycle, when the central bank has to unwind the extraordinary measures it said were necessary for so long.  The Ben Bernanke-Janet Yellen-Jerome Powell-Fed staff monetary experiment is only now facing its own stress test.”

Today, New York Fed President John Williams, in an interview with CNBC, attempted to calm the markets, noting he saw a strong economy in 2019, and that two more rate hikes wasn’t necessarily baked in, and, overall, he sought to reassure the Street that the Fed would show flexibility in its policy.  The market loved it for about 30 minutes, then it swooned anew and by the end of the day, we had another 400-point decline in the Dow Jones.

Overall, the major indices suffered through their worst week since the financial crisis, in terms of the Dow Jones and Nasdaq.  [More details to follow.]

On Trade....

Amid the trade war, which is technically supposed to be in a 90-day truce, President Xi Jinping gave an important policy speech in Beijing that I cover in depth down below, but for the purposes of this section, it was disappointing for those expecting some kind of olive branch.

And then on Thursday, the United States accused China of sustained efforts to steal trade secrets and technologies from at least 12 countries in an enormous hacking campaign – a move that deals a blow to Beijing during negotiations to ease trade tensions.

The U.S. Justice Department announced criminal indictments against two accused hackers associated with the Chinese government. Zhu Hua and Zhang Shilong, who the U.S. say acted on behalf of the Chinese Ministry of State Security (MSS), were charged with conspiracy to hack into a dozen companies and government agencies in the U.S. and around the world.

According to the indictment, a group of hackers known as APT10, said to stand for Advanced Persistent Threat 10, conducted extensive campaigns of global intrusions into computer systems since at least 2006.

Friday, China accused Washington of “fabricating facts” and urged the U.S. to “stop smearing the Chinese side of cybersecurity issues,” the foreign ministry in Beijing said in a statement, adding that it had lodged an official protest.

Separately, China arrested a third Canadian in China amid a diplomatic dispute over the arrest of Huawei’s chief financial officer, Meng Wanzhou in Vancouver, at the behest of the United States. Canadian Prime Minister Justin Trudeau has been under fire for his seemingly mild response, saying it was not the time to be “stomping on a table” over the arrests.

Meanwhile, the European Union launched a challenge at the World Trade Organization also on Thursday over forced technology transfer by China, its second such move this year.  The European Commission, which oversees trade policy in the 28-member European Union, said in a statement that it was significantly broadening and deepening the scope of its WTO action against China.

Editorial / Wall Street Journal

“The indictment says APT 10 targeted Managed Service Providers (MSPs), which are firms other companies use to store intellectual property and business data.  MSPs also perform IT services from patches to cloud services, making them an ideal target for espionage.

“The hackers stole hundreds of gigabytes of sensitive data from 45 technology companies in ‘at least a dozen U.S. states.’ The unnamed firms run the gamut from aviation to space technology to oil and gas exploration.

“U.S. agencies were also compromised, including NASA’s Goddard Space Center and Jet Propulsion Laboratory.  Justice further cites pilfering of U.S. Navy data, including information on more than 100,000 personnel. This is after last week’s Journal report on the alleged theft of U.S. Navy contractor data on antiship missiles and more. Deputy Attorney General Rod Rosenstein said the group also pilfered data from companies ‘in at least a dozen countries,’ including Brazil, Canada, France, Germany, India, and the U.K....

“FBI Director Christopher Wray said Thursday that hackers aren’t ‘just Chinese officials with epaulettes on their uniforms. These are state-owned enterprises, ostensibly private companies, hackers of all shapes and sizes, researchers, businessmen’ working ‘on behalf of the Chinese government.’

“This is a crucial point. These aren’t rogue hackers.  They are part of a systematic Chinese effort to rob the West’s technological secrets, military and economic.  Like the global shunning of Huawei, the charges mean the U.S. is starting to get serious about showing Beijing there is a price to be paid for refusing to obey the rules of free global commerce.  Don’t stop until the Chinese behavior stops.”

Editorial / Wall Street Journal, Part II

“It is well known that President Trump invests fervent belief in the stock market as a performance measure. When it’s rising, as it often has during his Presidency, he says that his policies are responsible. But what about a week like this with markets in decline, including a steep two-day drop in the Dow Jones average?  No logic exists that will allow Mr. Trump to take responsibility only for sunny days.

“The President is right to believe in market signals.  More than any individual can do, markets absorb material events occurring in the world and make financial bets on the future. This week they have had to absorb three major events: The Federal Reserve’s decision to raise interest rates after public pressure from the President not to do so; Mr. Trump’s abrupt and unilateral decision to pull U.S. troops out of Syria; and Mr. Trump’s 11th-hour threat Thursday not to sign a budget bill that would prevent a Friday night government shutdown.

“Mr. Trump entered the Presidency as a disrupter of the status quo, for which he has many fans. We include ourselves among those who believe the political status quo – here and abroad – was overdue for challenge.  He has provided that with a sharp cut in the U.S. corporate tax rate, economy-wide deregulation and U.S. withdrawal from the Obama Iran nuclear deal and the Paris climate accord.

“The execution of those decisions, however, is a far cry from what is happening now.  Mr. Trump crossed over this week from considered disruption into a degree of political volatility that has the potential to raise the political risks for himself and U.S. interests.

“Fed Chairman Jerome Powell was at pains during his press conference to make the economic case for raising rates now, but the overhang from Mr. Trump’s threats against Mr. Powell and the Fed were impossible to dismiss. And then as if markets and the world didn’t have enough to absorb from the Fed’s decision, Mr. Trump made his Syria pullout call the same day.

“On Thursday, Mr. Trump tweeted that ‘Getting out of Syria was no surprise’ because he campaigned on it. But the abruptness of the announcement did catch his own advisers and the world by surprise. The Chairman of the Joint Chiefs, General Joseph Dunford, is widely reported to have not been consulted.

“Withdrawing those 2,000 American troops from the Middle East is a significant act for which allies in the region and elsewhere needed a decent interval to prepare.  Mr. Trump gave them none. The decision, which emerged after Mr. Trump’s phone call with Turkish dictator Recep Tayyip Erdogan, did earn public praise from one big beneficiary – Russia’s Vladimir Putin.

“Then on Thursday Mr. Trump tweeted that Defense Secretary Jim Mattis, one of his strongest appointees, ‘will be retiring’ in February. This landed shortly after the Journal reported that Mr. Trump may withdraw most U.S. troops from Afghanistan within weeks.  Mr. Mattis’ resignation letter makes clear he is leaving because he disagrees with Mr. Trump’s treatment of allies and his impulsive decision making.

“Meanwhile, the Thursday threat to shut down the government over funding for the wall comes amid no strategy for prevailing in this fight.  Most Senators have left town after voting to fund the government until February.  Any new spending patch needs 60 Senate votes, meaning Democratic Leader Chuck Schumer’s blessing for what surely would be a bottom-dollar fig leaf of wall funding.

“Mr. Trump should take this week’s big market selloff seriously as a useful warning.  The successful disruptions of the President’s first year emerged from planned strategies executed by allies in the government and Congress.  His erratic actions this week are different.  Heading into 2019 and divided government, Mr. Trump is acting less like a confident disturber of the status quo and more like a raging bull.”

---

In terms of U.S. economic data this week, we had a final look at third-quarter GDP and it ticked down to 3.4%.

2018 (annualized GDP)

Q3... 3.4%
Q2... 4.2%
Q1... 2.2%

2017

Q4... 2.3%
Q3... 2.8%
Q2... 3.0%
Q1... 1.8%

Separately, there was a slight improvement in the housing picture for November, with housing starts a little better than expected, while existing home sales also came in above forecast, though in terms of a 3-month average, they were down a seventh consecutive month, and down 7% over year ago levels.  That said the sudden drop in the 10-year Treasury yield, to its lowest weekly close since March 30, is undoubtedly spurring a little activity.

We also had figures on November personal income, up 0.2%, and consumption, up 0.4% (solid), while durable goods rose a less than expected 0.8%.

The Fed’s preferred inflation barometer, the PCE, or personal consumption expenditures index, rose 1.9% on core for the 12 months in November.  So this remains no issue.

Overall, the Atlanta Fed’s GDPNow barometer for the fourth quarter fell a bit to 2.7%.

According to a new Wall Street Journal/NBC News poll, one-third of Americans say the economy will get worse in 2019, the highest level of wariness in five years.  [28% say they believe the economy will get better.]

56% of respondents said the nation was on the wrong track despite a strong economy, which is kind of staggering.

Europe and Asia

Just one piece of Eurozone economic news on the week...euro area annual inflation came in at a 1.9% rate in November, down from 2.2% in October.  A year earlier the rate was 1.5%.  [Eurostat]

Brexit:  The vote in Parliament on Prime Minister Theresa May’s Brexit proposal, which she was forced to pull out of on Dec. 11, has been rescheduled for the week of Jan. 14, so we are sort of catching a little break in terms of news flow during the holidays.  But come Jan. 2, all hell is going to break loose again.

In under 100 days, the U.K. is due to leave the European Union, but now the options include postponing the divorce, calling another referendum or even announcing fresh national elections.

The thing is, Parliament will not go along with the terms Mrs. May negotiated with the EU.  May and all her ministers publicly say her exit deal is the only option available to avoid potential economic and social chaos.  But behind closed doors, the inner circle is considering dire options for when she fails.

According to some officials, the issue of a second referendum is gaining ground, an idea gaining traction in mainstream U.K. politics, but one that Mrs. May vehemently rejects – or there could be a new election to choose a government.

In either case, Brexit would have to be delayed.

It is also possible that after Parliament rejects the bill, the British electorate could be asked to decide.  The prime minister says the will of the people must be adhered to.

And then you have players such as Northern Ireland’s Democratic Unionist Party, whose support May depends on to stay in power. The DUP says it is ready to vote against the prime minister and bring down her government unless major changes can be made to the Brexit deal.

Meanwhile, both the European Union and the U.K. need to prepare for Britain exiting the EU without a withdrawal agreement, with the government putting 3,500 military personnel on standby  to assist government agencies.  A no-deal exit would jam ports, threatening manufacturing supply chains and food and medicine supplies.

European Commission President Jean-Claude Juncker said the risks of a no-deal Brexit “are obvious, it would be an absolute catastrophe.”

The Bank of England in November said its worst-case analysis suggests a crash-out Brexit could leave the economy 10% smaller after four years than it would have been had the U.K. never voted to leave.

Britain’s five major business groups warned, “There is simply not enough time to prevent severe dislocation and disruption in just 100 days.”

The most significant arrangements being worked out involve the residency rights of U.K. citizens living in EU countries, and vice versa, and items such as air travel, which could continue as is for a year after a no deal; and in financial services, with the EU allowing EU financial firms to continue using U.K. clearing houses for derivatives for 12 months.

But the plans between the two sides say nothing about the island of Ireland, which is headed to a restoration of a physical border that the U.K. and the EU are both trying to avoid.  This would not be good.

Italy: The European Commission, the EU’s executive arm, has decided not to press Italy over its revised 2019 budget that Brussels says will result in a budget deficit of 3% of GDP, while the Italian government says it will be closer to 2%.

With the economic outlook worsening, though, both Rome and Brussels lost their appetites for a confrontation.  France’s fiscal giveaways to appease the street protesters against President Emmanuel Macros also weakened the EU’s budget hawks when it came to Italy.

The Commission is still expressing doubts Italy can reach its growth targets, and as European Commissioner Valdis Dombrovskis put it: “Italy urgently needs to restore confidence in its economy to ease financial conditions and support investment.”

Italy today is on the verge of a shallow recession, and the government is now forecasting growth of just 1% next year.  But many believe even this is too optimistic.

France: There were far fewer Yellow Vest protesters last weekend in Paris and other French cities, but thousands still marched against the policies of President Emmanuel Macron.

The ranks of protesters dwindled after Mr. Macron promised tax cuts and wage increases to mollify the Yellow Vests, who are demonstrating over the cost of living and high taxes.

But now Macron’s government has shot a hole in the budget owing to the promises made.

Hopefully, Paris has a peaceful holiday week. 

Hungary: Thousands of Hungarians thronged the streets of Budapest on Sunday in the fourth and largest protest in a week against what they see as the increasingly authoritarian rule of right-wing nationalist Viktor Orban.  About 10,000 demonstrators braved freezing temperatures in a march dubbed “Merry Xmas Mr. Prime Minister.”

The demonstration was organized by opposition parties, students, and trade unions to demand a free media, withdrawal of a labor law increasing overtime (which I covered last week), and an independent judiciary.

Orban’s ruling party Fidesz said “criminals” were behind the “street riots” and accused Hungarian-born U.S. billionaire George Soros of stoking the protests. [Of course.]

Soros is a strong critic of Orban but denies claims against him as lies to create a false external enemy.

I am on record for years now as supporting Orban’s hard-line stance on the Muslim migration issue, but I made it clear I was dead-set against his anti-media, authoritarian policies.

Editorial / Wall Street Journal

“Hungary has moved in an anti-democratic direction since Viktor Orban returned to power in 2010. But the protests in Budapest in recent days are a reminder that he hasn’t dragged all of his countrymen along with his program.

“The demonstrations began Wednesday (Dec. 12) after the National Assembly, where Mr. Orban’s Fidesz Party has a two-thirds majority, passed labor legislation that critics call the ‘slave law.’ It lets businesses ask employees to work up to 400 overtime hours annually, up from 250.  The legislation also gives employers more time to settle overtime payments.

“Hungary isn’t welcoming to immigrants, many of its most-qualified workers leave for better-paying work elsewhere in Europe, and its roughly 1.5 births per woman is one of the lowest fertility rates in the world.  All of this has led to a severe labor shortage, and liberalizing overtime laws is a good economic idea. But the measure is opposed even by nearly two-thirds of Mr. Orban’s supporters.

“The Assembly also created new administrative courts to handle government matters like taxes and elections. The government says the courts will be independent, but Mr. Orban’s Justice Minister oversees them.

“Freezing temperatures haven’t been enough to deter thousands of Hungarians from marching against these measures. They see a threat to their democracy, especially given Mr. Orban’s bad record on press freedom and the rule of law.  Mr. Orban effectively has forced Central European University, an American institution founded by financier George Soros, to leave the country by next year. The ruling party has also dealt harshly with media critics while overseeing free but unfair elections.

“Like the Yellow Vest protests in France, the demonstrations in Budapest started over a particular policy. But they’ve unified a disparate opposition and become a broader critique of Mr. Orban’s heavy-handed rule....

“Mr. Orban isn’t bending on the policies.  His bet may be that he can ride out the protesters the way he has the objections from the European Union to his limits on press freedom.  The protests are a  signal that Hungary’s voters don’t want their country to follow the authoritarian path of Vladimir Putin’s Russia.”

As I go to post, the protests continue.  This is an important story, in the broader context of Europe and the EU.  More next time.

Belgium: Prime Minister Charles Michel resigned following a failed attempt to win parliamentary backing for his minority administration, deepening the country’s political crisis.

The Flemish nationalist N-VA party quit Michel’s government earlier this month over its opposition to a UN migration pact.

Michel’s decision marks the bitter end of a government that represented a political experiment for the linguistically divided country.

In 2014, Michel teamed up with the N-VA, the most popular party in Dutch-speaking Flanders but one committed to the eventual break-up of Belgium.

The UN migration pact seeks to make legal migration easier, providing services to migrants and toughening laws against anti-migrant hate crimes as a potential catalyst for changes to national laws, but it is not legally binding.

France’s far-right leader Marine Le Pen, and Steve Bannon, former adviser to President Trump, denounced the UN pact at an event in Brussels last weekend.

“The country that signs the pact obviously signs a pact with the devil,” Ms. Le Pen said.

Critics say the deal could increase immigration to Europe.

Early elections are now likely, though the country was set to go to the polls in May.

Turning to Asia....

I’ve been writing that China’s central government wants better control of economic data and this week Beijing ordered authorities in the country’s export hub, Guangdong province, to stop producing a regional purchasing managers’ index for the manufacturing sector.

The order by the National Bureau of Statistics means the province will no longer be allowed to release monthly purchasing managers’ index (PMI) data...at least that is my understanding.

This would be like the U.S. government telling the popular Chicago Purchasing Managers Index folks to stop releasing their data, which is sometimes market moving.

The Bank of Japan has again kept interest rates on hold, as Tokyo continues to move out of step with central bankers around the world moving toward tighter monetary policy.

The BoJ kept its short-term interest rate target at minus 0.1 percent, in a seven to two vote, and said it will purchase Japanese government bonds to maintain the yield on the 10-year note at around zero percent.

Trump World

--Appearing on ABC’s “This Week” with George Stephanopoulos, Illinois Democratic Sen. Dick Durbin had an interesting observation on border security.

DURBIN: George, we ought to pay attention to something else that came out last week, the Centers for Disease Control said the most deadly narcotic in America today is fentanyl. Fentanyl is flowing across that border from Mexico into the United States and killing thousands of innocent people.

STEPHANOPOULOS: The president says that’s why we need a wall.

DURBIN: What will the wall do to stop it?  Virtually nothing.  Pardon me?

STEPHANOPOULOS: That’s as I said, the president says that’s why we need a wall.

DURBIN: 80 percent of the narcotics coming into the United States are coming through ports of entry, official openings in the so-called barrier or wall between the United States and Mexico.  What we could do came out in testimony this week.  We could be scanning the vehicles coming into the United States to see if they contain contraband, narcotics, firearms, even victims of human trafficking.  Fewer than 1 out of 5 vehicles are being scanned now.

I asked the people at Customs and Border Protection what would it cost to have scanners scan all the vehicles coming in?  They said $300 million.  That’s a far cry from $5 billion, and a much more effective way to have a secure border.

--Editorial / Washington Post

“Two reports prepared for the Senate on Russian disinformation unfold a now-indisputable narrative; The Kremlin engaged in a coordinated campaign to elevate Donald Trump to the presidency, and this country’s technology companies were central to its strategy.

“The Russia operation is staggering in its scale, precision and deceptiveness.  Pages generated by the Kremlin-linked Internet Research Agency elicited nearly 40 million likes and more than 30 million shares on Facebook alone, reeling in susceptible users with provocative advertisements and then giving them propaganda to spread far and wide. The aim was not to toss the country into tumult, but to put the preferred candidate of a foreign adversary in the Oval Office.  All the while, Americans were entirely unaware of what was happening: What seemed like local Black Lives Matter activists were actually Russian trolls well-versed in the buzzwords of social justice.  Ostensible patriots for Second Amendment rights were broadcasting from St. Petersburg.

“Republicans have protested over the past year that election interference is neither unusual nor important. This week’s reports comprehensively put both arguments to rest. Russia waged an unprecedented campaign, targeting Americans across all segments of society, on platforms large and small. The studies do not even cover the entirety of Russia’s online tampering: The hack-and-leak operation that led to the release of Hillary Clinton campaign chairman John Podesta’s private emails, orchestrated by the GRU, Russia’s military intelligence agency, was another crucial salvo in a pro-Trump onslaught.”

--Acting U.S. Attorney General Matthew Whitaker has decided not to recuse himself from overseeing the investigation into Russian meddling in the 2016 presidential election, disregarding advice from his own ethics officials.

The decision by Whitaker, known for making comments critical of Special Counsel Robert Mueller’s Russia probe before being appointed last month by President Trump, was conveyed in a letter to congressional leaders by Assistant Attorney General Stephen Boyd.

Boyd said in the three-page letter department ethics officials determined that Whitaker lacked any personal, political or business conflicts that would disqualify him from supervision of Mueller’s investigation.

Ethics officials concluded, however, that if their recommendation were sought ‘they would advise that the acting attorney general should recuse himself’ because ‘a reasonable person with knowledge of the relevant facts likely would question’ Whitaker’s impartiality, Boyd wrote. 

--A federal judge on Tuesday postponed  the sentencing of Michael Flynn, President Trump’s first national security adviser, after warning Flynn that he could face prison time for lying to federal investigators about his conversations with the Russian ambassador during the presidential transition and hiding his role lobbying for Turkey.

At Flynn’s sentencing hearing in Federal District Court in Washington, Judge Emmet G. Sullivan called Flynn’s crimes “a very serious offense” and said he was not hiding his “disgust” at what Flynn had done.

“All along you were an unregistered agent of a foreign country while serving as the national security adviser,” the judge told Flynn.*  “Arguably that undermines everything that this flag over here stands for.  Arguably you sold your country out.”

*But Flynn left the employ of Turkey when he became NSA.

Federal prosecutors have recommended a lenient sentence, or probation, rather than the up to six months Flynn could receive, because Flynn has provided “substantial help” with multiple criminal inquiries.

Earlier, President Trump tweeted:

“Good luck today in court to General Michael Flynn.  Will be interesting to see what he has to say, despite tremendous pressure being put on him, about Russian Collusion in our great and, obviously, highly successful political campaign. There was no Collusion!”

--The president signed a criminal justice reform bill today; The First Step Act, which sailed through the Senate 87 to 12, before passage in the House.

Trump tweeted:

“America is the greatest Country in the world and my job is to fight for ALL citizens, even those who have made mistakes. Congratulations to the Senate on the bi-partisan passing of a historic Criminal Justice Reform Bill...

“...This will keep our communities safer, and provide hope and a second chance, to those who earn it.  In addition to everything else, billions of dollars will be saved.”

The bill makes sweeping changes to the criminal justice system, including making it easier for some prisoners to earn early release to halfway houses and protecting first-time offenders from mandatory minimum sentences.

--Yet another cabinet member, Interior Secretary Ryan Zinke is leaving under a cloud; the target of multiple federal ethics investigations into his political activity and travel.

Congressional Democrats plan to launch multiple probes of the administration come January, so Zinke at least dodges them.  

--Someone please tell the president that his chief domestic adviser, Stephen Miller, is killing him.  He was also the worst possible surrogate to throw out there Thursday night.  I wanted to reach through the television and strangle him.  He’s a punk.  He also clearly has hair issues, as anyone who saw him over the weekend, and then last night, can attest to.  [Think Chia pet.]

Trump tweets:

“So hard to believe that Lindsey Graham would be against saving soldier lives & billions of $$$. Why are we fighting for our enemy, Syria, by staying & killing ISIS for them, Russia, Iran & other locals? Time to focus on our Country & bring our youth back home where they belong!”

“Does the USA want to be the Policemen of the Middle East, getting NOTHING but spending precious lives and trillions of dollars protecting others who, in almost all cases, do not appreciate what we are doing?  Do we want to be there forever? Time for others to finally fight....

“....Russia, Iran, Syria & many others are not happy about the U.S. leaving, despite what the Fake News says, because now they will have to fight ISIS and others, who they hate, without us.  I am building by far the most powerful military in the world.  ISIS hits us they are doomed!”

[Ed. this particular tweet sums up the president’s mindset.  First we are told ISIS is destroyed.  Then, above, he talks of them continuing the fight.]

“When I begrudgingly signed the Omnibus Bill, I was promised the Wall and Border Security by leadership. Would be done by end of year (NOW). It didn’t happen!  We foolishly fight for Border Security for other countries – but not for our beloved U.S.A.  Not good!”

“The Democrats, whose votes we need in the Senate, will probably vote against Border Security and the Wall even though they know it is DESPERATELY NEEDED.  If the Dems vote no, there will be a shutdown that will last for a very long time.  People don’t want Open Borders and Crime!”

“Senator Mitch McConnell should fight for the Wall and Border Security as hard as he fought for anything.  He will need Democrat votes, but as shown in the House, good things happen.  If enough Dems don’t vote, it will be a Democrat Shutdown!  House Republicans were great yesterday!

“There has never been a president who has been tougher (but fair) on China or Russia – Never, just look at the facts.  The Fake News tries so hard to paint the opposite picture.”

“Mexico is paying (indirectly) for the Wall through the new USMCA, the replacement for NAFTA!  Far more money coming to the U.S.  Because of the tremendous dangers at the Border, including large scale criminal and drug inflow, the United States Military will build the Wall!”

“Never in the history of our Country has the ‘press’ been more dishonest than it is today. Stories that should be good, are bad. Stories that should be bad, are horrible.  Many stories, like with the REAL story on Russia, Clinton & the DNC, seldom get reported. Too bad!”

“A REAL scandal is the one sided coverage, hour by hour, of networks like NBC & Democrat spin machines like Saturday Night Live. It is all nothing less than unfair news coverage and Dem commercials.  Should be tested in courts, can’t be legal?  Only defame & belittle! Collusion?”

“The Trump Foundation has done great work and given away lots of money, both mine and others, to great charities over the years – with me taking NO fees, rent, salaries, etc. Now, as usual, I am getting slammed by Cuomo and the Dems in a long running civil lawsuit started by....

“...sleazebag AG Eric Schneiderman, who has since resigned over horrific women abuse, when I wanted to close the Foundation so as not to be in conflict with politics.  Shady Eric was head of New Yorkers for Clinton, and refused to even look at the corrupt Clinton Foundation....

“...In any event, it goes on and one & the new AG, who is now being replaced by yet another AG (who openly campaigned on a GET TRUMP agenda), does little else but rant, rave & politic against me. Will never be treated fairly by these people – a total double standard of ‘justice.’”

Trump’s charitable foundation, which prosecutors allege served mainly to further his interests, is to be dissolved.

It shelled out thousands of dollars for sports memorabilia and appeared to steer donations to causes in Iowa to boost Mr. Trump’s fortunes ahead of the state’s pivotal caucuses in the 2016 election.

New York Attorney General Barbara Underwood said in a statement: “Our petition detailed a  shocking pattern of illegality involving the Trump Foundation – including unlawful coordination with the Trump presidential campaign, repeated and willful self-dealing and much more.”

Street Bytes

--As alluded to above, it was an absolutely awful week on the Street with the Dow Jones losing 6.9% to 22445, the S&P 500 7.1%, and Nasdaq 8.4%.  It was the worst week since 2008 for the Dow and Nasdaq, the worst in seven years for the S&P.

Nasdaq is now in bear market territory, down 21.5% from its Aug. 29 high, while the Dow is off 16%, and the S&P 18% from their respective all-time marks, just short of the 20% ‘bear market’ level.

Meanwhile, the FAANG trade is over.  Facebook, Amazon, Apple, Netflix and Google parent Alphabet have all dropped between 20 and 35 percent since the Nasdaq peaked in late August; $1.2 trillion in combined market value between the five.

Apple, for example, is down to $150 from a high of $233.50.  Facebook is now $124.50, down from $218.50.  Amazon is at $1,377, off its $2,050 high.

Also, more than $80.7 billion poured out of U.S.-based stock funds during the 14 days through Wednesday, according to Lipper.

--U.S. Treasury Yields

6-mo. 2.53%  2-yr. 2.64%  10-yr. 2.78%  30-yr. 3.02%

Take advantage of this if you’re a homebuyer.                               

--Oil continued to tumble (collapse) on signs that economic growth, and thus demand for energy, is slowing.  Consumption in the likes of China, India and across emerging Asia – the source of two-thirds of global oil-demand growth – is slowing.  There are fears that the U.S. economy is slowing as well.

And while OPEC and other oil producers including Russia agreed to curb output at their latest meeting, the cuts don’t happen until next month and production has been at or near record highs in the U.S., Russia and Saudi Arabia.

The U.S. announced that shale production should climb to over 8 million bpd for the first time by the end of December.  Compare this to Russian output just hitting a record 11.42 million bpd this month, according to industry sources.

So today, crude oil closed the week at $45.42 on WTI, the lowest since July 2017.

Meanwhile, the national gas price average continues to drive toward the cheapest pump prices seen during the month of December since 2016, six cents less than a year ago, according to AAA, at $2.37 for a national average.

--Johnson & Johnson Chairman and CEO Alex Gorsky on Monday issued a video statement defending the company’s talc in its baby powder product, following a Reuters examination of thousands of pages of company memos, internal reports and other confidential documents with lawyers for some of the 11,700 plaintiffs now claiming that the company’s talc caused their cancers – including thousands of women with ovarian cancer.

In 1976, as the U.S. Food and Drug Administration (FDA) was weighing limits on asbestos in cosmetic talc products, J&J assured the regulator that no asbestos was “detected in any sample” of talc produced between December 1972 and October 1975.  It didn’t tell the agency that at least three tests by three different labs from 1972 to 1975 had found asbestos in its talc – in one case at levels reported as “rather high.”

“J’s baby powder is safe and does not cause cancer.  Studies of tens of thousands of women and thousands of men show that talc does not cause cancer or asbestos-related disease,” Gorsky said.

“If we believe our products weren’t safe, they would be off the shelves and out of the market immediately.” J&J executives and lawyers have long insisted the signature powder is safe and asbestos-free.  Settling would set a “really bad precedent when the science and facts [are] on our side,” said Chief Financial Officer Joseph Wolk on Monday.

Johnson’s franchise of soaps, shampoos and powders is one of the few brands to use the company’s name.

Baby Powder is just $420 million of J&J’s $76.5 billion in revenue last year.  But its considered an essential facet of the health care products maker’s carefully tended image as a caring company – a “sacred cow,” as one 2003 internal email put it.

Analysts, for the most part, have minimized concerns about the lawsuits’ potential financial impact.  But J&J’s defense still goes up against countless legal and public-relations hits.

--Juul Labs Inc. sold a 35% stake to tobacco giant Altria Group Inc. in a $12.8 billion deal that turns the e-cigarette maker into one of Silicon Valley’s most valuable privately held companies and makes the tobacco giant relevant again for Americans who are averse to traditional smoking.

So Juul is now valued at $38 billion and you’ll see its vaping products next to Marlboro cigarettes on retail shelves.  Altria, which is focused on the U.S. market after spinning off Philip Morris International Inc. in 2008, will get one-third of the board seats upon antitrust clearance.

Altria has been diversifying away from cigarettes, with investments such as its 45% stake in Canadian cannabis company Cronos Group Inc., which Altria can take majority control of in the future.

Just a few months ago, Juul was valued at $16 billion after Tiger Global Management led a $1.2bn investment.

So among private companies, Juul, at $38bn, is ahead of Airbnb ($31bn) and trails only Uber ($76bn).

Juul just launched in 2015, quickly gaining the ire of parents and regulators who say the company’s devices hook teenagers.  Juul’s U.S. market share of the vaping market has soared to 53% from 16% a year ago, according to market research firm IRI.

Food and Drug Administration Commissioner Scott Gottlieb has called youth use of of e-cigarettes an epidemic, Gottlieb saying last month that e-cig use had soared 78% this year among high school kids and 48% among middle school students.

Juul, in turn, is positioning itself as a technology company on a mission to help addicted smokers quit tar-burning cigarettes.

--From the Wall Street Journal: “Goldman Sachs Group Inc.’s push for Asian business and lax oversight of partners led the bank to dismiss warning signs in its dealings with a corrupt Malaysian investment fund, internal documents and interviews with people involved in the transactions show.

“When the fund, 1 Malaysia Development Bhd., first sought Goldman’s help raising money, the bond deal came before a committee of senior bankers in Hong Kong in 2012 for a key round of vetting.  Among the concerns sketched out in the meeting’s agenda: ‘potential media and political scrutiny,’ Goldman’s unusual role as both financier and adviser, the colossal profit earned on what should have been a modest transaction – and how much of that haul would need to be disclosed. Not up for discussion: the young fund’s scant track record.

“The deal happened anyway.  It has ensnared Goldman in one of the largest financial frauds in history and darkened the early days of its new chief executive, David Solomon.

“On Monday, Malaysia lodged criminal charges against the bank.  The country’s attorney general said he would seek a fine well above the $2.7 billion allegedly stolen by two former Goldman bankers and a Malaysian financier named Jho Low, whom U.S. prosecutors accuse of conspiring to loot the fund.”

It’s possible the Justice Department could levy a fine itself of as much as $2 billion.

Former CEO Lloyd Blankfein (still chairman) is very much under scrutiny.  His wife, while chowing down on halibut during lunch at the Four Seasons, told her girlfriend vipers, “My Lloyd did nothing wrong.”

Goldman Sachs’ shares finished the week at $160, off another 5% today, and down from a 52-week high of $275.

--Here we go again...Facebook gave some of the world’s largest technology companies more intrusive access to users’ personal data than it has disclosed, thus exempting those business partners, including Microsoft’s Bing search engine, Yahoo, Netflix and Spotify, from the ability to see the names of virtually all Facebook users’ friends without consent, in the case of the first two, and the ability to read Facebook users’ private message for the latter two.

Facebook also permitted Amazon to obtain users’ names and contact information through their friends.

This went on for years, and comes on top of all the other privacy scandals Facebook faces, first set off by revelations last spring that a political consulting firm, Cambridge Analytica, improperly used Facebook data to build tools that aided President Trump’s campaign.

It was back in April that CEO Mark Zuckerberg insisted his company had instituted stricter privacy protections long ago, assuring lawmakers that people “have complete control” over everything they share on Facebook.

It was a total crock of s---.  We now know Facebook allowed certain companies access to data despite those protections.  And we still have the issue from 2011, when Facebook reached an agreement with the Federal Trade Commission that barred the social network from sharing user data without explicit permission, an agreement FB has obviously run afoul of.

I noted a while ago that Zuckerberg and chief operating officer Sheryl Sandberg should be indicted.  It’s absolutely nuts they haven’t been.

Headline on the front cover of Thursday’s New York Daily News:

“Hey, Facebook...

“Stop playing us for suckerbergs

“...Sniveling social slimeball slammed for sharing users’ info with media giants”

--Former Nissan chairman Carlos Ghosn was re-arrested on fresh charges, Japanese media reported, dashing any hopes he could be released on bail.

Ghosn has spent the last month in prison, accused of misusing funds and hiding $80m of income.

Thursday, a court rejected a request for the prosecution to extend his detention, so it was assumed he would be released on bail, but then today, he was re-arrested, with prosecutors now accusing Ghosn of shifting a private investment loss of over $16m onto Nissan in the wake of the 2008 financial crisis.

--FedEx Corp. said on Tuesday it was starting a voluntary buyout program for some U.S. workers after troubles in its express delivery business and a European acquisition have hurt profits.  The company declined to say how many jobs it is targeting.

Today, FedEx employs more than 450,000 people globally, with the vast majority of its buyout offers being made to workers at the FedEx Express unit, which has 227,000 employees, and at FedEx Services, which provides back-office functions and employs another 30,000 people.

The shares cratered nearly 13% in response, taking its loss for the year to 26%.

After last year’s tax overhaul that dropped the corporate rate, FedEx was one of the first companies to commit to new spending and wage increases.  In January, the company said it would spend $200 million on raises, mostly for hourly workers, and put $1.5 billion into pension plans.

But now there is weakness in Europe stemming from ongoing Brexit talks and protests in France.  Tariffs and trade disputes are also raising concerns in Asia.  FedEx Chief Marketing Officer Raj Subramaniam said on a conference call, “The peak for global economic growth now appears to be behind us.”

Yup, that statement alone will tank a stock.

FedEx said Tuesday that it was offering four weeks of pay for every year of service, up to a maximum of two years of pay, as well as funding to healthcare accounts.

The carrier said the buyout program should result in a $450 million to $575 million pre-tax charge in the quarter ending May 31.

FedEx has also struggled since acquiring European rival TNT Express for $4.8 billion in 2016.

For the quarter ended Nov. 30, FedEx reported a profit of $935 million, compared with $866 million a year ago. Revenue was $17.8 billion.  For the full year, FedEx lowered its per-share earnings forecast for the current fiscal year to $12.65 to $13.40 a share from $15.50 to $16.60. 

--Nike sales rose 10% in the latest quarter as the apparel and footwear seller continued to ride strong demand worldwide, weathering a backlash for an ad campaign featuring Colin Kaepernick.

Revenue in Nike’s North American market rose 9% to $3.78 billion (8% increase in footwear, 10% in apparel). Equipment sales fell 3% from a year ago.

Sales in China rose 26% to $1.54 billion.

Total sales for the quarter ended Nov. 30 reached $9.37bn, ahead of expectations.

Nike’s profit was $847 million, compared with $767 million a year ago.

The stock bucked the overall market on Friday, advancing 7%.

--Oracle Corp. reported flat revenue for its latest quarter, a result better than what the Street had been expecting, with the software giant making progress in its struggling cloud business.

Revenue in the cloud services and license support segment, the company’s largest, rose to a stronger-than-projected $6.64 billion in the quarter ended Nov. 30.  Overall, Oracle reported revenue of $9.56 billion, just shy of $9.59 billion from a year earlier.

But Oracle changed how it reports its quarterly results, mixing the cloud business with its licensing support business, thus clouding, err, making it more difficult to track how the cloud biz is actually doing.

The company also expects revenue in its fiscal third quarter to essentially be flat, when you factor the impact from currency conversion.

Oracle sought to reassure investors about the cloud business during a conference call with analysts.

“We need more than just a great database,” said Larry Ellison, co-founder, chairman and chief technology officer.  “We also need first-class infrastructure to run the database on, and we now finally have that.”

--What a total disaster at Gatwick Airport Wednesday night into Thursday, as tens of thousands of passengers suffered flight chaos after the lone runway at the airport was closed due to drones being flown nearby.

The runway was closed from 9 p.m. Wed. until 3 a.m. Thursday, and then again for a time later on as the drone(s) kept reappearing.

--Charter Communications has been forced to pay consumers back to the tune of $62.5 million in direct refunds for unreliable internet services, part of a $174.2 million deal with New York Attorney General Barbara Underwood to settle claims by her office that Charter fraudulently advertised internet speeds it lacked capacity to deliver, and rented modems and routers slower than customers paid for.

“This settlement should serve as a wakeup call to any company serving New York consumers: fulfill your promises, or pay the price,” Underwood wrote in Tuesday’s release.

Not only will the company have to directly repay 700,000 of its active subscribers $75 to $150, but it will have to provide 2.2 million households with free streaming and premium channels – a $100 million value, according to Underwood. The $62.5 million in direct refunds is believed to be the largest payout to consumers by an internet provider in the nation’s history.

--From the Wall Street Journal: “About 1.4 billion pounds of American, cheddar and other kinds of cheese is socked away at cold-storage warehouses across the country, the biggest stockpile since federal record-keeping began a century ago.

“Driving the glut are cheese makers who ramped up production before trade tensions abroad tamped down demand for many of their products.  Shifting tastes at home have further changed the outlook for traditional cheese makers.  Many are paying to store their excess cheese in hopes demand and prices will improve....

“Cheese exports have suffered since Mexico and China, major dairy buyers, instituted retaliatory tariffs on U.S. cheese and whey.  Cheese shipments to Mexico in September were down more than 10% annually, according to the U.S. Dairy Export Council trade group, and shipments to China were down 63% annually.”

But it’s also true that American tastes are changing.  Consumption of mozzarella has topped cheddar since 2010, and consumption of processed cheese spreads per capita is about half what it was in 2006.

--Fox News host Tucker Carlson is standing firm on his immigration position even as his primetime show continues to lose advertisers for his anti-immigrant comments.  A spokeswoman for IHOP told HuffPost Tuesday that the pancake house stands for “welcoming folks from all backgrounds and beliefs into our restaurants and continually evaluate ad placements to ensure they align with our values.  In this case, we will no longer be advertising on this show.”

Carlson’s initial remarks that got the conservative talk show host into trouble last Thursday were: “Our country’s economy is becoming more automated and tech-centered by the day.  It’s obvious that we need more scientists and skilled engineers. But that’s not what we’re getting.  Instead, we’re getting waves of people with high school educations or less.  Nice people, no one doubts that but as an economic matter, this is insane.  It’s indefensible, so nobody even tries to defend it. Instead, our leaders demand that you shut up and accept this. We have a moral obligation to admit the world’s poor, they tell us, even if it makes our own country poorer and dirtier and more divided.”

I’m biting my tongue.

--CBS said it will deny Les Moonves a $120 million severance package, saying the former CEO tried to conceal evidence and misled the company during the months-long investigation into sexual misconduct accusations against him.

The board said in a statement Monday: “With regard to Mr. Moonves, we have determined that there are grounds to terminate for cause, including his willful and material misfeasance, violation of company policies and breach of his employment contract, as well as his willful failure to cooperate fully with the company’s investigation, Mr. Moonves will not receive any severance payment from the company.”

According to the investigation, Moonves received oral sex from at least four CBS employees in an arrangement that appeared “transactional” in nature.  One of the women appeared to be “on call” to perform oral sex on him, according to the New York Times.

“A number of employees were aware of this and believed that the woman was protected from discipline or termination as a result of it,” the lawyers wrote in their report.  “Moonves admitted to receiving oral sex from the woman, his subordinate, in his office, but described it as consensual.” [New York Post / New York Times]

Foreign Affairs

Syria: Opinion on the withdrawal...for the archives....

Gayle Tzemach Lemmon / Defense One

“Last week in Northeast Syria, one thought struck me when it came to the battle against the so-called Islamic State: If the ISIS fight is over, no one has told ISIS.

“I have been watching Raqqa closely since April, including from the ground.  A shift in U.S. policy that would remove American troops from Northeast Syria would jeopardize the gains U.S. troops and their partner Syrian Democratic Forces, or SDF, have fought – and sacrificed – to achieve.

“Raqqa’s stability exists because of that partnership, but it remains extremely fragile. ISIS sleeper cells are trying to find footholds, take advantage of Raqqa’s shortage of services, and make it harder for the U.S.-backed coalition to stop their reemergence. So far, U.S.-backed forces have been able to keep the pressure on enough to allow moms and dads I have met to push forward with their lives.  If Raqqa is not to become Baghdad in its worst moments, the pressure must be continued.  If those U.S.-backed forces are forced to go it alone, there will be four winners: ISIS, the Syrian regime, Russia and Iran.

“I have had the privilege of traveling to Northeast Syria five times since August 2017. And what you see on the ground is a story of fragile gains and forward momentum amid great challenge.  It is one of the few stories of significant, one-directional progress created by U.S. policy and executed by U.S.-backed forces in the post-9/11 conflicts.  Because of those U.S.-backed forces, where ISIS once ruled a level of stability now allows beauty shop owners, perfume entrepreneurs, civil society leaders and teachers to get back to work rebuilding their city and escaping extremism.

“That few Americans know fully the positive dividends of a policy executed in their names is a testament to this moment’s lack of attention on all things international.  It is also a reflection of the Trump administration’s understandable desire to assuage the concerns of NATO ally Turkey, which views the Kurds who have risked their lives to lead the fight against ISIS as terrorists.

“No one would argue that ignoring Turkey’s security concerns is the correct path for U.S. policy.  But neither is abandoning the troops whose young generation has laid down its life – over and over again, in city after city, in the ISIS fight.

“Walk through cemeteries in Kobani and Qamishil and see the white marble rows remembering daughters and sons killed battling ISIS.  Photos of young women and young men whose parents will never greet them or hug them again are pasted against the headstones.  These are the young people who have sacrificed all to free territory from ISIS control.  And these are the people who still today are fighting ISIS and seeking to bring real stability for the women and men who survived the horror of ISIS.  Little ones I’ve met who witnessed beheadings.  Moms who shielded their children’s eyes from hangings.    These forces risk their lives every day in the ISIS fight. And their work has allowed visitors to drive across the region for hours without getting shaken down or ripped off, or far worse, because of the security they have brought to the ground.  This is the tempered victory against ISIS that will be jeopardized if U.S. troops leave the region.”

Benny Avni / New York Post

“In what will likely mark the worst foreign-policy decision of his presidency to date, President Trump on Wednesday announced that he is ceding Syria to the jackals....

“Trump’s closest Washington allies panned the decision almost immediately.  ‘Withdrawal of this small American force in Syria would be a huge Obama-like mistake,” Sen. Lindsey Graham tweeted.

“Remember President Obama’s fateful 2013 decision to forgo enforcement of that infamous ‘red line’ against use of chemical weapons by the Damascus regime?  Just as then, leaving Syria now would mark a turning point in the war – for the worse – while delivering another blow to America’s prestige and global power.

“Wednesday’s decision contradicts numerous previous administration statements.  ‘We’re not going to leave (Syria) as long as Iranian troops are outside Iranian borders, and that includes Iranian proxies and militias,’ National Security Advisor John Bolton said in September.

“Last week, the president’s special envoy to the anti-ISIS coalition, Brett McGurk, told State Department reporters that ‘it would be reckless if we were just to say, well, the physical caliphate is defeated, so we can just leave now.  I think anyone who’s looked at a conflict like this would agree with that.’

“Well, apparently not everyone. So what made Trump decide, against all advice, to turn away from America’s Syrian commitments?

“Earlier this week, Trump was on the phone with Turkey’s president, Recep Tayyip Erdogan, who recently threatened to invade northern Syria to fight Kurds controlling large swaths of the Turkish-Syrian border. That phone call may well have triggered Trump’s decision.

“Turkey and America have a lot to discuss. Ankara, a partner in a project that created the world’s most formidable fighter jet, the F-35, made a deal with Russia to buy S-400 anti-aircraft missiles.  America wants the Turks to instead buy U.S.-made air-defense systems, and this week approved a $3.5 billion Patriot missile sale to Turkey.

“Ankara, meanwhile, wants Washington to extradite Erdogan’s bogeyman, Fethullah Gulen, an Islamic preacher who resides in Pennsylvania.  The U.S. has long resisted extradition, arguing that Turkey has no credible evidence for Gulen’s responsibility for a failed coup attempt against Erdogan in 2016.  Yet on Tuesday, Trump’s press secretary, Sarah Sanders, said America will ‘take a look at’ coughing up Gulen.

“Trump’s decision to leave Syria, then, could be one component in a complex deal with Erdogan. Without U.S. troops in the area, the Turks get a freer hand in dealing with the Kurds, while America gets – what exactly? It seems ‘The Art of the Deal’ writer blundered in making major concessions to Ankara upfront without getting enough concrete commitments in return.

“Meanwhile, the Kurdish fighters, who were America’s most reliable allies in chasing ISIS from Syrian territory, are left to the whims of Erdogan, who considers them anti-Turkish terrorists and who isn’t known for meting out mercy....

“Mostly, the implication is the removal of a major military bulwark against Iran and Hezbollah, which are trying to make permanent their presence in Syria, right on Israel’s border – a problem Bolton acknowledged in the recent past. Israel can’t be happy.

“Earlier in the week, Netanyahu touted Israel’s successes against Iran in Syria, adding, ‘We’re striking Iran [militarily] in Syria and of course the U.S. struck them economically.’  He may have stumbled on a top Trump foreign-policy principle: America will fight in the economic arena, leaving physical combat to allies and partners.

“But when we abdicate military responsibilities, as Trump has decided to do in Syria, the world’s most nefarious powers – in this case, Russia, Iran, the butcher Bashar al-Assad and Erdogan – take the spoils.

“And yes, as numerous members of Trump’s administration have warned, ISIS could soon follow in one form or another, as well. This time, Trump won’t be able to blame his predecessor.”

Tony Badran / USA TODAY

“The Iranians have been working to establish a so-called ‘land bridge’ or territorial continuum stretching from Tehran to the Mediterranean via Iraq and Syria. At present, the U.S.-controlled zone in eastern Syria poses a major obstacle to this objective. Already, Iranian-led Shiite militias are operating at the edges of the U.S. zone and could move in swiftly and connect the Iraqi and Syrian terrains. This would provide Iran with overland routes to deliver advanced weapons to Hezbollah in Lebanon, while building up offensive capabilities in Syria, including in the south, along the country’s border with Israel.

“In his remarks announcing America’s withdrawal from the Iran nuclear deal in May, Trump confirmed his administration would work to ‘block [Iran’s] menacing activity across the Middle East.’  In April, the president spoke of not wanting ‘to give Iran open season to the Mediterranean.’  It’s unclear what steps the administration now intends to take to make good on this stated objective. Although the withdrawal from Syria doesn’t eliminate all U.S. options, it does cede critical terrain to Iran.

“The withdrawal from Syria will also affect the administration’s economic pressure campaign against Iran and its regional assets. The U.S.-controlled zone in eastern Syria is home to the bulk of the country’s gas and oil fields, currently off limits to Assad.  Thus, for years, Iran has been subsidizing its Syrian ally’s energy needs, costing Tehran billions. The Assad regime, with Russian and Iranian support, will now prepare to retake these oil and gas fields....

“The Trump administration’s withdrawal from the Iran deal and announced campaign of maximum pressure on Tehran were important strategic moves to roll back Iran’s expansion in the Middle East.  But a precipitous U.S. withdrawal from Syria – giving Iran’s clients control of Syria’s energy resources and its forces freedom of movement across the region – poses a serious challenge to President Trump’s strategy.”

Editorial / Washington Post

“President Trump’s sudden move to yank U.S. troops out of Syria undermined at a stroke several foreign policy goals he has championed. The president promised to finish the job of destroying the Islamic State, but the withdrawal will leave thousands of its fighters still in place. He vowed to roll back Iran’s aggression across the Middle East, but his decision will allow its forces to entrench in the country that is the keystone of Tehran’s ambitions.  He promised to protect Israel, but that nation will now be left to face alone the buildup by Iran and its proxies along its northern border.

“The president’s top national security advisers had carefully developed and articulated a strategy of maintaining a U.S. presence in Syria until the Islamic State was beyond revival and Iran withdrew its forces – a plan they were defending up until this week.  Mr. Trump has again demonstrated, to them and to the world, that no U.S. policy or foreign commitment is immune to his whims....

“Mr. Trump has justified some of his most controversial decisions, including his continued support for Saudi Arabia’s Crown Prince Mohammed bin Salman, as needed to contain Iran’s threat to the United States and its allies. But the Syria withdrawal hands Tehran and its ally Russia a windfall. Iran has deployed thousands of fighters and allied militiamen to Syria and aspires to create a corridor to Lebanon and the Mediterranean, as well as a new front against Israel along the Golan Heights.  In reaction to that threat, Mr. Trump’s national security adviser, John Bolton, announced Sept. 24 that ‘We’re not going to leave [Syria] as long as Iranian troops are outside Iranian borders, and that includes Iranian proxies and militias.’

“U.S. ambitions in Syria have never been backed by adequate resources, and a case could be made that neither Congress nor the American public were prepared to support the mission suggested by Mr. Bolton. But Mr. Trump’s decision appears to have been precipitated by the bellicose rhetoric of Turkey’s Recep Tayypi Erdogan, who last week threatened – not for the first time – a military operation against Syrian Kurds, even though U.S. troops are positioned around them.  The autocratic Turkish ruler appears to have extracted favors from Mr. Trump in recent days, including the sale of U.S. Patriot missiles and a promise to reexamine the possible extradition of his rival, Fethullah Gulen, from Pennsylvania. If Mr. Trump received anything in return, he hasn’t disclosed it.

“The Syrian Kurdish forces, which have fought alongside the United States and played a crucial role in liberating most of eastern Syria from the jihadists, will be perhaps the foremost victims of Mr. Trump’s decision. Betrayed by Washington, they will now be subject to a military offensive by Turkey.  The stab in the back will send an unforgettable message to all who are asked to cooperate with the United States in the fight against terrorism: Washington is an unreliable and dangerous partner.”

Victoria Nuland / Washington Post

“With his decision to withdraw all U.S. forces about Syria, President Trump hands a huge New Year’s gift to President Bashar al-Assad, the Islamic State, the Kremlin and Tehran.  He also guarantees the reversal of U.S. military gains there and extinguishes any leverage Secretary of State Mike Pompeo and his special envoy for Syria, James Jeffrey, may have to drive a diplomatic settlement that meets the administration’s own goals of keeping and Islamic State and Iran out.  Most important, Trump falls into the same trap that President Barack Obama did when he withdrew all U.S. forces from Iraq in 2011.  Trump’s decision virtually ensures that security will disintegrate further, that the Islamic State and Iran will surge again, and that the United States will be compelled to come back into Syria at even greater military cost and in more adverse conditions that if we had stayed....

“U.S. diplomacy also died another sad death with Trump’s tweet. Special envoy Jeffrey has had some quiet successes in recent months, including helping to de-escalate tensions between Turkey and Russia over Idlib in September.  Jeffrey had been poised to take on the job of midwifing a new political path for Syria, anticipating the likely failure of Russian efforts to negotiate a new constitution by Dec. 31.  If the United States withdraws, not even Washington’s Syrian friends will participate in a U.S.-led diplomatic push. They’ll be too busy defending themselves from the Islamic State and Iran.

“A few thousand tweets ago, Trump criticized his predecessor for leaving Iraq to the Islamic  State in 2011, then having to return in force in 2014. The United States currently has 5,200 troops deployed to Iraq and spends $13.6 million-per-day on military operations there. By that measure, the president should consider our 2,000 troops in Syria a bargain, an insurance policy and vital leverage against far worse outcomes for us, for Syria and for the global balance of power.”

David Ignatius / Washington Post

“This decision scares me partly because I’ve seen with my own eyes the hard-won gains we may be giving up, in visits to the secret bases where this war was waged.  It’s hard to describe the competence of American troops in Syria without sounding corny.  Suffice it to say they found a way to project American power with maximum damage to the enemy and minimum cost for the United States.

“We can grant some of Trump’s larger points, even as we assess the potential costs of his decision. Every war must end, as strategist Fred Charles Ikle once remarked about Vietnam, and the war against the Islamic State had all but ended.  As the terrorist threat receded, so did the legal rationale for deploying American troops – the overstretched authorization to use military force against terrorists passed on Sept. 14, 2001.

“The White House shouldn’t be faulted, either, for stressing that the United States’ national military strategy now focuses on the threat of great-power competitors, such as Russia and China, rather than terrorists.  U.S. strategy became lopsided after 9/11, misallocating resources, and now it’s time for a rebalancing.  I get all that.

“And finally, analysts who’ve followed Syria knew that at some point, the United States would have to retreat from its all-in support for the Syrian Kurdish militia that fought so bravely, to the last man and woman, to liberate eastern Syria from the torture chamber of the Islamic State.  The Kurds want a mini-state east of the Euphrates, but as special envoy James Jeffrey said this week at the Atlantic Council, ‘we do not have permanent relationships with substate entities.’

“The United States was going to have to break the Kurds’ hearts eventually (as we seem to do with so many of our brave allies). But not now, not when Turkish President Recep Tayyip Erdogan was threatening an invasion, trying to jawbone the United States into abandoning its allies. This kind of bullying shouldn’t work against a superpower. But sadly, it just did, with lasting cost to American credibility.”

Editorial / Wall Street Journal

“President Trump startled the world Wednesday, and overrode some of his own advisers, by announcing an abrupt withdrawal of all U.S. forces from Syria.  The decision may fulfill a campaign promise, and it may be popular with many Americans. But Mr. Trump is also sending an Obama-like signal of retreat that will have damaging consequences for his Iran strategy and U.S. interests.

“The President announced the withdrawal in a tweet that took credit for defeating Islamic State, which he said was ‘my only reason for being there during the Trump Presidency.’  Mission accomplished?  Not so fast.

“Give Mr. Trump credit for accelerating the coalition campaign against ISIS and erasing its claim to be a territorial caliphate.  Yet ISIS still holds ground on the border of Syria and Iraq, and it has regrouped into smaller cells waiting for the military space to re-form.  Barack Obama also declared victory over Sunni extremists when he withdrew all U.S. forces from Iraq.  Islamic State formed in the vacuum.

“A Pentagon inspector general report last month highlighted Islamic State’s persistence.  ISIS has ‘continued to move underground and solidify as an insurgency in Iraq and Syria,’ the report said.  ‘Despite the loss of almost all of its territory, the terrorist organization kept some of its bureaucratic structures in place and continued to raise funds. These operations, in combination with concerns about both the ability of the Iraqi Security Forces to operate without Coalition support and the ongoing Syrian civil war, raised the potential for an ISIS resurgence.’

“Mr. Trump inherited a mess in Syria, and by the time he took office it was far more difficult to enforce a no-fly zone to protect opponents of the Bashar Assad regime. But the U.S. presence in northeastern Syria amounted to a de facto no-fly zone that allowed the Kurdish and Arab Syrian Democratic Forces to clear out as many ISIS cells as possible.  Keeping 2,500 forces in northeast Syria to continue this work is hardly an exorbitant commitment.  It is not nation-building.

“The stakes are also larger than ISIS.  Mr. Trump made his withdrawal decision soon after  a phone call with Turkey’s Recep Tayyip Erdogan, who has been threatening to attack the Kurds in Syria. Trump officials insist they aren’t abandoning our allies, but the SDF will now have to make its own survival calculations in striking deals with Mr. Erdogan, Mr. Assad and his Russian and Iranian backers.

“Withdrawing U.S. troops greatly reduces U.S. influence on a diplomatic solution to the Syrian civil war. The U.S. can complain at the United Nations, and it can block money for rebuilding the country, but facts on the ground count for far more. That’s especially true for Iran, which is turning southern Syria into a forward operating base against Israel.

“U.S. officials said Wednesday that their goal of pushing Iran out of Syria hasn’t changed. But how?  By pulling out of Syria, Mr. Trump is missing a chance to impose military costs on Iran’s adventurism.  The mullahs in Tehran will be overjoyed and see signs of another U.S. President’s weakness.  They’ll be less likely to adjust their nuclear program. And Israel will have a harder time stopping Iran’s military and militia buildup in southern Syria, which means growing risks of a regional war.

“Mr. Trump has benefitted in his first two years by projecting an image of strength that Mr. Obama never did.  He struck back against Assad’s use of chemical weapons, revoked the Iran nuclear deal, and sold lethal arms to Ukraine to resist Russian aggression. Retreat in Syria is a sign of weakness that friends and foes will notice.”

Josh Rogin / Washington Post

“When the Assad regime and Iran take over eastern Syria, the United States will realize it has made a long-term strategic blunder. But in the shorter term, millions of Syrians will suffer. The Assad regime, Russia and Iran are their killers, but Trump’s tweet sealed their fate.”

Hugh Hewitt / Washington Post

“When the only people applauding a major national security decision are the ‘me and my shadow’ team of Sens. Rand Paul (R-Ky.) and Mike Lee (R-Utah), the conclusion that a major error has been made is inescapable.

“President Trump has made such a major error....

“This decision puts one of Trump’s signal achievements – the defeat of the Islamic State – in grave danger.  As much as it would pain veterans of the Obama administration to admit, it was Trump who changed the rules of engagement in the battle with the Islamic State.  It was Trump who oversaw their rout and retreat. But the Islamic State is not defeated. And even if the Islamic State stays on its collective heels, those who would replace them – Iran, Bashar al-Assad’s regime and Russia – are greater threats to Americans in Iraq and to our ally Israel.”

Hewitt had Retired Gen. Stan McChrystal as a guest on his radio show Thursday, after the decision to exit Syria.

HH: And in terms of ISIS being defeated, there are still 15-20,000 flying the black flag.  You went one on one with these guys... Do you think they’re eradicated?  Are they still a risk?

SM: I think they’re a big risk.  And ISIS is as much an idea as it is number of fighters. So you can get fixated on counting heads.  In reality, it’s a franchise kind of system. It’s very powerful still, and it needs to be dealt with.

HH: Okay, so now when soldiers hear they’re going home, they’re usually pretty happy. But do you think the soldiers who get sent to Syria are unhappy about doing what is in essence garrison work at this point, right?

SM: I think they think it’s important. The ones I’ve talked to think it’s important. And they also know, particularly this generation, if we don’t get it done, they’ll be back.

Afghanistan: Reports, citing unnamed officials, say 7,000 U.S. troops, about half the remaining U.S. military presence – could go home in months.  According to the Washington Post, outgoing White House Chief of Staff John Kelly and National Security Adviser John Bolton were among those in opposition to Trump’s apparent move.

Sen. Lindsey Graham tweeted: “The conditions in Afghanistan make American troop withdrawals a high risk strategy. We are setting in motion the loss of all our gains.”

According to a quarterly report by the U.S. Special Inspector General for Afghan Reconstruction (Sigar), the Afghan government currently controls or influences only 55.5% of the country’s districts – the lowest level recorded since it began tracking the data in 2015.

Afghan officials said they are not concerned about the withdrawal.

“The fact that a few thousand foreign troops whose roles are primarily advisory and technical support will exit from Afghanistan will not have an impact on security situation,” presidential spokesman Harun Chukhansori told the BBC.

He added that “Afghan security forces have had full responsibility of security affairs” since 2014.  However, U.S. military reports suggest that Taliban control large swathes of Afghanistan – while a BBC study in January found that Taliban fighters were openly active in 70% of the country.

Iraq: Turkish warplanes struck PKK (Kurdistan Workers Party) targets in northern Iraq last Saturday, ignoring protests from Baghdad that said Turkey’s repeated airstrikes violate Iraqi sovereignty and endanger civilians. 

Turkey said it would continue attacking the PKK, which it views as terrorists (see also Syria), as long as it sought refuge in Iraq.

Turkey says the militants use the mountainous northern Iraqi region as a base for deadly attacks inside Turkey, where the Kurdish separatist group has waged an insurgency since the 1980s.

Turkish President Erdogan told supporters last week, “We will bury them in the holes they dug.”

Again, Turkey considers the YPG militia in Syria, which the U.S. has backed, as an extension of the PKK.

Somalia: The U.S. said it killed 62 fighters from the Islamist group al-Shabab in six air strikes in Somalia last weekend (Saturday and Sunday).  These were the deadliest air attacks in Somalia since November 2017, when the U.S. said it killed 100 militants.

The U.S. has a huge military base in neighboring Djibouti, from where it launches such attacks.

Yemen: Pro-government officials said a ceasefire in Yemen’s war was broken minutes after coming into effect.

The warring sides had agreed to a truce that was to be implemented in the port city of Hudaydah, where 90% of the aid relief for the country comes in, but there were reports of clashes between the Houthi rebels and pro-government forces in the city.

Both sides had agreed to the ceasefire at UN-sponsored talks in Sweden last week, but at week’s end it’s tough to determine where things stand.  More than 22 million Yemenis need some form of aid, with eight million on the verge of starvation.

Saudi Arabia: The kingdom denounced U.S. Senate resolutions calling for an end to U.S. military support for the war in Yemen and blaming Crown Prince Mohammed bin Salman for the murder of journalist Jamal Khashoggi, saying they were based on unsubstantiated claims.

The votes were a rare rebuke to President Trump, though largely symbolic. To become law, they would need to pass the House of Representatives, which wasn’t happening under Republican control.  With the incoming Democratic House, though, I’m not sure where things would stand.

North Korea: State media in Pyongyang on Thursday proclaimed North Korea’s commitment to the “denuclearization of the Korean peninsula,” but this includes “completely eliminating the U.S. nuclear threat to Korea.”

President Trump and North Korean leader Kim Jong Un issued a joint statement after their Singapore summit in June that reaffirmed the North’s commitment to “work toward complete denuclearization of the Korean Peninsula” and gave U.S. guarantees of security to North Korea.

But conflicting views of what exactly “denuclearization” means have complicated negotiations, now stalled, ever since.

Thursday’s commentary, released by North Korea’s state-run KCNA news agency, is one of the clearest explanations since June of how Pyongyang sees denuclearization.

“When we refer to the Korean peninsula, the term encompasses the area of DPRK plus South Korean territory where U.S. nuclear weapons and other forms of aggression forces are deployed,” the editorial said, using the initials of North Korea’s official name, the Democratic People’s Republic of Korea.

“When we refer to the ‘denuclearization of the Korean Peninsula’ as well, it should be correctly understood as removing all nuclear threat factors from not only the North and the South but from all neighboring areas.”

North Korea rejects American calls for it to unilaterally denuclearize, and Washington should abandon the “delusion” of forcing Pyongyang to abandon its nuclear weapons “via pressure and oppression,” the article said.

But the Trump administration has said it will not lift sanctions on North Korea until more progress has been made toward the verifiable denuclearization of North Korea.

Washington has also rejected any suggestion that it would reduce its military presence in the region as part of a deal with North Korea, but in a surprise move after the summit, Trump announced that the Pentagon would cancel most of its largest military exercises conducted with the South Koreans.

Trump has said he is working to meet with Kim again sometime early next year.

The KCNA commentary read: “It is obvious that denuclearization of the Korean Peninsula is a joint business that cannot be achieved unless both Korea and the United States strive together.  In this sense, the denuclearization of the Korean Peninsula should be defined as ‘completely eliminating the U.S. nuclear threat to Korea’ before it can eliminate our nuclear deterrent.”

Earlier, North Korea warned that new U.S. sanctions on three of its top officials could “block the path to denuclearization on the Korean peninsula forever” and could result in a return to “exchanges of fire.”

In the meantime, satellite imagery has shown that North Korea is continuing with its nuclear and missile programs.

“The U.S. should realize before it is too late that ‘maximum pressure’ would not work against us,” an official statement said.  It proposed that relations be improved “on a step-by-step approach.”

President Trump has said nothing on this topic this week.

China: President Xi Jinping said China would stick to its policy agenda, despite pressure from the U.S. and others to allow more competition in its economic system and reduce support for state industry.

In a highly-anticipated speech to an audience of party officials, military leaders and entrepreneurs, Xi said “no one is in the position to dictate to the Chinese people what should and should not be done.”  The 80-minute address in Beijing was held to mark the 40th anniversary of the Reform and Opening Up campaign that unleashed the country’s economic boom under then leader Deng Xiaoping.

Xi presented his wide-ranging agenda as the logical outcome of the country’s post-1978 “reform era” and Chinese history more broadly.  He reasserted his contention that the country had entered a “new era” under his leadership and was poised for a bigger role in world affairs.

But while the speech was watched for potential policy announcements, Xi offered no new ideas to boost the economy or assuage U.S. concerns. Instead, he reiterated the need for the Communist Party to exercise leadership and control over all aspects of the country’s development.

“What and how to reform must be based on the overarching goal of improving and developing the socialist system with Chinese characteristics,” Xi said.  “We will resolutely reform what should or can be changed, but will never reform what cannot be changed.”

In terms of the trade war with the U.S., Xi offered no insight into how his government might assuage U.S. demands in ongoing trade talks, including calls to roll back support for state-owned enterprises and key technological industries.

Instead, Xi reaffirmed China’s pursuit of “indigenous innovation” in “core technologies.”

China, Xi kept reiterating, can’t be dictated to, saying:

“We will resolutely fight an uphill battle to prevent and defuse major risks, lift people out of poverty, and prevent and control pollution,” Xi said.  “China will promote trade convenience and continue to play the role of a responsible major nation.”

But the No. 1 lesson China can draw from the 40 years of success is that the country must stick to the leadership of the Communist Party, Xi said.

“The practices of reform and opening up in the past 40 years have shown us that the Chinese Communist Party leadership is the fundamental character of socialism with Chinese characteristics...east, west, south, north, and the middle, the party leads everything,” he said.

“Every step in reform and opening up will not be easy, and we will face all kinds of risks and challenges in the future and we may even encounter unimaginable terrifying tidal waves and horrifying storms,” Xi said.

“Only by improving the party’s leadership and governance...can we ensure the ship of reform and opening up will sail forward.”

And:

“China will never grow at the cost of other countries’ interests but will never give up its legitimate rights and interests...China’s development does not pose a threat to any other country.  No matter how far China develops, it will never seek hegemony.”

Russia: In his annual yearend press conference Thursday, President Vladimir Putin warned a failure to begin negotiations on an extension to a key U.S.-Russian nuclear arms control treaty is leading the world to “a very risky precipice.”

Signed in 2010, the New Start agreement caps the number of nuclear warheads held by the two nations. It expires in 2021, and analysts have warned it could take years to negotiate an extension.

Putin has said Washington’s vow to pull the U.S. out of the INF Treaty, another treaty banning missiles with a range of 500-5,500km, also made the world less safe.

“It is hard to imagine what will happen next.  If those [U.S.] missiles would be positioned in Europe, we will need to make sure we are safe,” he said.  “We are not striving for an advantage, but parity, to guarantee our safety.”

At the press conference, which lasted 3 hours and 45 minutes, Putin opined on nuclear war:

“If, God forbid, something like that were to happen, it would lead to the  end of all civilization and maybe also the planet... These are serious questions and it’s a real shame that there’s a tendency to underestimate them.  It is a legitimate issue, and it is even growing.”

“We are essentially witnessing the breakdown of the international order of arms control.”

Ukraine: Ukrainian Orthodox leaders on Saturday approved the creation of a unified church independent of the Moscow Patriarchate and elected a leader to head that new church – a move that could exponentially raise tensions with neighboring Russia.

Spiritual leaders couched their efforts to create an independent church in patriotic rhetoric.  Father Sergei Dmitriev said – given Ukraine’s ongoing conflict with Russia – “we should have our own church, not an agent of the Kremlin in Ukraine.”

Ukrainian President Petro Poroshenko has made the creation of a new church a key campaign issue.

“Ukraine was not, is not, and will not be the canonical territory of the Russian church,” Poroshenko told the gathering, adding that creating an independent Ukrainian Orthodox Church was now a matter of national security.

“This is a question of Ukrainian statehood,” Poroshenko said.  “We are seizing spiritual independence, which can be likened to political independence. We are breaking the chains that tie us to the (Russian) empire.”

In his press conference, Putin said of Ukraine’s move:

“Undoubtedly, it has a political rationale.  Nothing good will come of it for religious freedom in general.  And I’m most concerned about the division of property that will follow.  It’s already happening, effectively.  It could...get bloody.”

Random Musings

--Presidential tracking polls....

Gallup: 38% approval of Trump’s job performance, 57% disapproval (Dec. 16).  86% of Republicans approve, 37% of Independents.
Rasmussen: 49% approval, 50% disapproval (Dec. 21)

--The above-noted Wall Street Journal/NBC News survey had President Trump with a 43% approval rating, including 85% of Republicans.  54% of Americans disapproved.

62%, though, disagreed with the idea that Mr. Trump has been honest and truthful when it comes to the Russian investigation, compared with 56% in an August survey of registered voters.  45% said special counsel Robert Mueller’s investigation should continue, compared with 34% who said it should end.

--In the first CNN/Des Moines Register poll on the 2020 race, former Vice President Joe Biden leads the pack among likely Democratic caucusgoers in Iowa at 32 percent, with 19 percent selecting Sen. Bernie Sanders and 11 percent Texas Rep. Beto O’Rourke.

Now of course such a poll this early is ridiculous, but it will no doubt influence these three in making their decisions early in 2019, and it makes total sense that stories are already emerging of a Biden-O’Rourke ticket.  I can’t imagine ever voting for that, but it would appeal to a lot of Democratic voters, and maybe Independents, and if the two would announce that early, like by March, that would be powerful.

Meanwhile, as I do every four years, I hope to get out to Iowa in August for the State Fair to hear a few candidates, and, more importantly, talk to the locals over a few beers...the only way to get a true sense of the current mood.

--Tennessee Republican Sen. Lamar Alexander announced he would not run for re-election in 2020 and would step down after three terms in the Senate, where he has cut bipartisan deals with Democrats on issues including education and health care.

Alexander’s departure will come just two years after fellow Tennessee  Republican Sen. Bob Corker departs, Corker replaced by GOP Rep. Marsha Blackburn.

--Rep. Martha McSally (R-Ariz.) was appointed by Arizona Gov. Doug Ducey (R) to fill John McCain’s Senate seat, a good selection.  She will have to run in a special election in 2020 for the remaining two years of McCain’s term, and assuming she wants to run for reelection in 2022, she could conceivably spend the next four years campaigning for the seat.

Just last month, McSally lost a close race to Democratic Rep. Kyrsten Sinema, when she was aiming to replace retiring Republican Sen. Jeff Flake.  So McSally becomes her midterm opponent’s Senate colleague.

McSally had faced opposition from the McCain family, as she ran against Sinema on a pro-Trump platform, and apparently insulted the family and McCain’s memory by failing to acknowledge him when touting legislation that was actually named for him – the John S. McCain National Defense Authorization Act for Fiscal Year 2019.

But McSally recently met with Cindy McCain and McCain reportedly accepted her apology for the oversight.  McSally also was classy in defeat to Sinema.

--Departing House Speaker Paul Ryan gave his farewell speech Wednesday, touting the passage of last year’s tax overhaul as the crowning achievement of his two-decade career, though Ryan acknowledged he failed to deliver on some long-promised conservative reforms.

“We went from the worst tax code in the industrialized world to one of the most competitive,” Ryan said.  “That’s something I worked on literally my entire adult life, and it’s something that will help improve the lives of people for a long time to come.”

But the deficit is growing rapidly, and this after Ryan made reducing it a priority of his years in Congress.  Ryan was a total failure in failing to make progress on entitlement reform for programs like Social Security and Medicare.

“I acknowledge plainly that my ambitions for entitlement reforms have outpaced the political reality, and I consider this our greatest unfinished business,” Ryan said.  “Ultimately, solving this problem will require a greater degree of political will than exists today. And I regret that.”

Ryan in his speech decried the “frenzy of politics today,” and while he didn’t mention President Trump, he was critical of the social media-fueled controversy that has become a hallmark of Mr. Trump’s time in the White House.

“We sort of default to lazy litmus tests and shopworn denunciations. It is just emotional pabulum fed from a trough of outrage,” he said.  “It’s exhausting.  It saps meaning from our politics.”

Tell me about it.

--The President is fixated on the market as a barometer of his performance.  So I looked at the numbers from Inauguration through Thursday.

The S&P 500 was up 8.6%., 1/20/17-12/20/18.  [2271.31 – 2467.42]

It was up 54.9% under Barack Obama over the same time period, 1/20/09-12/20/10.  [805.22 – 1247.08]

--From the Dec. 17-24 edition of Army Times:

“President Donald Trump assumed the chairman of the Joint Chiefs of Staff earned a multi-million dollar salary until he was corrected by White House Chief of Staff John Kelly, according to a report in the Washington Post.

“The anecdote about Trump significantly overestimating the salary of the nation’s top military officer came as part of a larger report on the president’s lack of knowledge about federal salaries, spending and deficits. According to the paper, the topic came up while Kelly and Trump were watching television together in recent months.

“The newspaper reported that when Kelly asked Trump how much he thought the Joint Chiefs chairman earns, the president responded with a guess of $5 million. The position actually pays less than $200,000.

“According to the report, when corrected by Kelly, Trump suggested that Gen. Joseph Dunford, the current chairman of the Joint Chiefs, should get a large raise and noted how many stars he had on his uniform....

“Trump frequently praises the military in public speeches, but has made several mistakes in reference to military pay over the last year.

“On several occasions, he has claimed that he gave military members their first raise in a decade as part of the fiscal 2019 defense budget.  In fact, troops have received a pay raise every year since the 1970s.  The 2.6 percent pay raise is the largest the force has seen in a decade, but is based on a formula calculating the expected rise in civilian salaries.”

--After 23 years, The Weekly Standard, a primary voice of conservative Washington that found itself out of step with the Trumpward turn in the Republican Party, announced it was ceasing publication.

The magazine’s parent company, Clarity Media Group, cited a steep decline in subscriptions and revenues, but editorial leadership has clashed with ownership in some instances over its critical coverage of President Trump and the hard-right views of his defenders.

The Standard’s editor in chief, Stephen F. Hayes, one of my favorites, pronounced himself “profoundly disappointed” by the decision. The editor of Commentary magazine, John Podhoretz, who was a co-founder of The Standard in 1995, along with William Kristol, described the closing as a “murder” and “an entirely hostile act” perpetrated by malevolent owners.

It seems that in the end, billionaire conservative businessman Philip F. Anschutz, who controls Clarity Media, didn’t want to own the leading Trump-skeptical publication in conservative media.

I was a subscriber to The Standard for about ten years in its early years, and it was probably my first exposure to the likes of Charles Krauthammer, P.J. O’Rourke, and Robert Kagan.  Outstanding journalism...and entertaining.

I’m sorry to see it go.  And best of luck to its staffers.

President Trump, however, had to dance on The Standard’s grave;

“The pathetic and dishonest Weekly Standard, run by failed prognosticator Bill Kristol (who, like many others, never had a clue), is flat broke and out of business.  Too bad.  May it rest in peace!”

--The U.S. population grew at its slowest rate in over eight decades in the past year, with growth in the South and West continuing to outpace the Northeast and Midwest, according to figures from the Census Bureau.

The numbers, covering the year ended July 1, show the country’s population rose by 0.6% to 327.2 million people; the lowest rate since 1937 (data going back to 1901).

These figures are important in terms of which states are likely to gain or lose congressional seats after the 2020 census.

If the House of Representatives were apportioned based on this year’s data, Texas would gain two seats, for example, while New York and Pennsylvania would be among those losing a seat.

States backing President Trump in 2016 would gain a net two votes in the Electoral College if House seats were allocated according to the new census numbers.

Nevada, Idaho, Utah, Arizona and Florida saw the highest rates of population growth in the country, the new data show.

--The Catholic Church in Illinois withheld the names of at least 500 priests accused of sexual abuse of minors, per a scathing report from the state’s attorney general.

The preliminary report by Attorney General Lisa Madigan concludes that the Catholic dioceses in the state are incapable of investigating themselves and “will not resolve the clergy sexual abuse crisis on their own.”

Cardinal Blasé J. Cupich, the archbishop of Chicago, said in a statement: “I want to express again the profound regret of the whole church for our failures to address the scourge of clerical sexual abuse.

“It is the courage of victim-survivors that has shed purifying light on this dark chapter in church history.”

So pathetic, and tragic.

---

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

God bless America.

---

Gold $1259
Oil $45.42...down almost $6!

Returns for the week 12/17-12/21

Dow Jones  -6.9%  [22445]
S&P 500  -7.1%  [2416]
S&P MidCap  -7.0%
Russell 2000  -8.4%
Nasdaq  -8.4%  [6332]

Returns for the period 1/1/18-12/21/18

Dow Jones  -9.2%
S&P 500  -9.6%
S&P MidCap  -15.2%
Russell 2000  -15.9%
Nasdaq  -8.3%

Yuck!

Bulls 39.3
Bears 21.4

Merry Christmas!!! 

Brian Trumbore



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-12/22/2018-      
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Week in Review

12/22/2018

For the week 12/17-12/21

[Posted 11:30 PM 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 PO Box 990, New Providence, NJ 07974.

*Special thanks to Jeff B. for his ongoing support.

Edition 1,028

Over the weekend, I saw a piece on the wires that read as follows, from Reuters: “U.S. President Donald Trump has told his Turkish counterpart Tayyip Erdogan that Washington is working on extraditing a U.S.-based Muslim cleric accused of orchestrating a failed Turkish coup in 2016, Turkey’s foreign minister said on Sunday.  ‘In Argentina, Trump told Erdogan they were working on extraditing (Fethullah) Gulen and other people,’ Mevlut Cavusoglu said, referring to the G20 summit where the leaders met two weeks ago.  Turkey has long sought the extradition of Gulen, who has lived in self-imposed U.S. exile for nearly two decades.  A former ally of Erdogan, he is blamed by Turkish authorities for the failed coup when rogue soldiers commandeered tanks and helicopters, attacked parliament and shot unarmed civilians.  Gulen denies any involvement in the failed putsch.  Trump said last month he was not considering extraditing the preacher as part of efforts to ease Turkish pressure on Saudi Arabia over the killing of Saudi journalist Jamal Khashoggi in Istanbul.”

Well, I have written extensively on Gulen.  I know where he lives.  I’ve wanted to drive out there.  I’ve tried to contact the Turkish consulate on an unrelated matter and they’ve ignored my request.  After the New Year...we’ll see.

But I read this piece and thought I didn’t see Trump negotiating the extradition of Gulen before.  The subject has been broached, but, wow, this is incredibly reckless.  Congress would flat-out impeach Trump if he ever did something like this, clearly intended without congressional approval.  The U.S. government has found zero...zero...proof Gulen had anything to do with the failed coup.

So this was my mindset on Monday.  Little did I know, the above is nothing compared to what then transpired.  Here we go....

President Trump ordered a rapid withdrawal of all 2,000 United States ground troops from Syria within 30 days, declaring the four-year American-led war against the Islamic State as largely won.

“We have defeated ISIS in Syria, my only reason for being there during the Trump Presidency,” Trump tweeted Wednesday morning, seemingly out of nowhere.  He offered no details, nor word on a larger strategy, in Syria.

White House press secretary, Sarah Huckabee Sanders, said in a statement that “we have started returning United States troops home as we transition to the next phase of this campaign.”

But we are betraying our Kurdish allies who have fought alongside American troops in Syria and who could find themselves under attack in a military offensive now threatened by Turkey.

Pentagon officials first said the American-led airstrike campaign on Islamic State would continue, but subsequent reports said otherwise.

Defense Secretary Jim Mattis and other senior national security officials failed to dissuade Trump from a wholesale troop withdrawal, arguing that the significant national security policy shift would essentially cede foreign influence in Syria to Russia and Iran at a time when American policy calls for challenging both countries.

Trump promised during his presidential campaign to withdraw American troops from Syria, and reluctantly agreed in April to give the Defense Department more time to finish the mission.  But the president has been looking for a way out, and Turkish President Erdogan, in his call with Trump, told him that Turkey is launching its offensive against the Kurds inside northeast Syria; forces Turkey considers to be a terrorist group, as I explained last week. The Syrian Kurds control around 30 percent of Syria’s territory and hope to create an autonomous region, similar to the one in neighboring Iraq.

But Turkey has been accusing the U.S. of failing to tackle security threats in the region.

Estimates vary as to how many ISIS fighters remain in Syria. In the town of Hajin, which the coalition is attempting to retake from the militants, the estimate is 2,000, but the total number of ISIS in Syria and Iraq is as high as 30,000.

By withdrawing, there is no way the U.S. can ensure ISIS doesn’t return, which has been Sec. Mattis’ argument for maintaining a presence.

In April, Mattis said: “We do not want to simply pull out before the diplomats have won the peace.  You win the fight – and then you win the peace.”

Earlier this month, the U.S.-led coalition denied any change to the U.S. presence in a statement:

“Any reports indicating a change in the U.S. position with respect” to the military presence in Syria “are false and designed to sow confusion and chaos.”

Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, said  this month the U.S. needed to train thousands of local forces to ensure a lasting defeat of ISIS.

The Pentagon said Wednesday, after the president’s tweet: “The Coalition has liberated the ISIS-held territory, but the campaign against ISIS is not over,” said spokeswoman Dana White in a statement.  “We have started the process of returning U.S. troops home from Syria as we transition to the next phase of the campaign.  For force protection and operational security reasons we will not provide further details.  We will continue working with our partners and allies to defeat ISIS wherever it operates.”

The thing is, the president has previously slammed his predecessor, Barack Obama, for the withdrawal of American forces from Iraq that preceded an unraveling of the Iraqi armed forces.  This led to ISIS’ advance into the country in 2014.

And I have maintained for years now that Obama’s 2012 move not to work with Turkey on a no-fly zone for Syria will prove to be the critical decision of the century...the result of the inaction being the mass migration to Europe of millions of refugees, the emergence of ISIS, and the entry of Russia to the theater.

Now I may be adding President Trump’s decision to this loop.

Major allies of the president were harshly critical.  Republican Senator Lindsey Graham, who has been carrying Trump’s water, called the withdrawal decision a “huge Obama-like mistake,” warning it would have “devastating consequences” both in Syria and beyond.

“An American withdrawal at this time would be a big win for ISIS, Iran, Bashar al-Assad of Syria, and Russia,” he said in a statement.

Sen Bob Corker (R-Tenn.), chairman of the Foreign Relations Committee, said he was shocked that Trump would “wake up and make this kind of decision” to pull out of Syria “with this little communication, with this little preparation.  My understanding is we are beginning to move out right now...entirely,” he said.

“This is chaos.  I can only imagine how it’s playing in Syria,” Sen. Graham said.  “I have the same feeling about this as I did in Iraq: Over time, this is not going to play well.”

Graham, in a late-night speech on the Senate floor on Wednesday, then railed against Trump’s decision to withdraw even more, calling it a “stain on the honor” of the U.S.   Graham also said that Trump’s claim ISIS had been defeated was “fake news.”  Graham said he’d just gotten back from a trip to the Middle East and knew for a fact that it was “inaccurate.”

Graham said he was introducing a resolution that would condemn Trump’s decision.

Other GOP senators excoriated Vice President Mike Pence when he went to Capitol Hill to try to explain the president’s decision.

“There was a great deal of concern expressed...what is going to happen to the Kurds, who have fought by our side and helped defeat ISIS and probably need our protection?” said Senate Homeland Security and Government Affairs Committee Chairman Ron Johnson (R-Wis.).  “I asked the vice president, ‘Who are going to be the members of the coalition to prevent ISIS from reconstituting and keep Iran from completely taking over, Iran and Russia, from completely taking over Syria?’”

A statement from the Kurdish-led alliance, the Syria Democratic Forces (SDF), warned of a military vacuum that would leave the alliance trapped between “hostile parties.”

The SDF statement warned that the withdrawal would “negatively impact” the anti-IS campaign and allow the group “to revive itself again.”

It said the U.S. move would have “dangerous implications” for regional stability and “create a political and military vacuum...leaving its people between the claws of hostile parties.”

Not surprisingly, Russian foreign ministry spokeswoman Maria Zakharova said the U.S. decision could result in “genuine, real prospects for a political settlement” in Syria.

Then Thursday, as part of his annual yearend press conference, President Putin said he agreed with Trump’s decision that ISIS has been defeated, while calling the U.S. military presence in Syria illegitimate.

“If the U.S. has decided to withdraw its contingent – that is the right move.... We’ve delivered a serious blow against [Islamic State] in Syria... In that regard, Donald is right.”

But Putin added, “We don’t see any signs yet of the withdrawal of U.S. troops.  How long has the United States been in Afghanistan?  Seventeen years?  And almost every year they say they’re pulling out their troops.”

Israeli Prime Minister Benjamin Netanyahu, no doubt deeply upset, said Thursday that Israel will “continue to act aggressively against Iran’s attempt to entrench itself in Syria.”

Netanyahu added that Israel continues its efforts to thwart the terror tunnels on the Israel-Lebanon border.  “At this moment, we are employing special means to...neutralize these tunnels,” Netanyahu said, adding that “we do not intend to reduce our efforts on either of these fronts, we will escalate them, and I know that we do so with the full support and backing of the U.S.”

France’s defense minister, Florence Parly, said on Twitter Thursday: “Islamic State has been weakened more than ever. But Islamic State has not been wiped from the map nor has its roots.  It is necessary that the last pockets of this terrorist organization be definitively defeated militarily.”

Iranian President Hassan Rouhani traveled to Ankara on Wednesday and lavished praise on Turkey.  [Your editor once gave the bird to the security camera outside the Iranian embassy there, more than once.]

If Iran fills the vacuum that a U.S. withdrawal would leave, Tehran would have its pathway to the sea.  And Vladimir Putin will have his foothold in the Middle East.  Turkey will be appeased.  And the Kurds, trained by and fighting alongside the Americans, will have been abandoned once more.

Washington will have zero leverage in Syria, which weakens its hand in other Middle East negotiations and trouble spots – particularly Iran, which we’ve been led to believe by President Trump is a top priority.

This is nonsensical.

Thursday afternoon, Sec. Mattis then resigned...quitting in protest of Trump’s declaration.

Dear Mr. President:

I have been privileged to serve as our country’s 26th Secretary of Defense which has allowed me to serve alongside our men and women of the Department in defense of our citizens and our ideals.

I am proud of the progress that has been made over the past two years on some of the key goals articulated in our National Defense Strategy: putting the Department on a more sound budgetary footing, improving readiness and lethality in our forces, and reforming the Department’s business practices for greater performance.  Our troops continue to provide the capabilities needed to prevail in conflict and sustain strong U.S. global influence.

One core belief I have always held is that our strength as a nation is inextricably linked to the strength of our unique and comprehensive system of alliances and partnerships. While the U.S. remains the indispensable nation in the free world, we cannot protect our interests or serve that role effectively without maintaining strong alliances and showing respect to those allies.  Like you, I have said from the beginning that the armed forces of the United States should not be the policeman of the world.  Instead, we must use all tools of American power to provide for the common defense, including providing effective leadership to our alliances.  NATO’s 29 democracies demonstrated that strength in their commitment to fighting alongside us following the 9-11 attack on America. The Defeat-ISIS coalition of 74 nations is further proof.

Similarly, I believe we must be resolute and unambiguous in our approach to those countries whose strategic interests are increasingly in tension with ours.  It is clear that China and Russia, for example, want to shape a world consistent with their authoritarian model – gaining veto authority over other nations’ economic, diplomatic, and security decisions – to promote their own interests at the expense of their neighbors, America and our allies. That is why we must use all the tools of American power to provide for the common defense.

My views on treating allies with respect and also being clear-eyed about both malign actors and strategic competitors are strongly held and informed by over four decades of immersion in these issues.  We must do everything possible to advance an international order that is most conducive to our security, prosperity and values, and we are strengthened in this effort by the solidarity of our alliances.

Because you have the right to have a Secretary of Defense whose views are better aligned with ours on these and other subjects, I believe it is right for me to step down from my position. The end date for my tenure is February 28, 2019, a date that should allow sufficient time for a successor to be nominated and confirmed as well as to make sure the Department’s interests are properly articulated and protected at upcoming events to include Congressional posture hearings and the NATO Defense Ministerial meeting in February. Further, that a full transition to a new Secretary of Defense occurs well in advance of the transition of Chairman of the Joint Chiefs of Staff in September in order to ensure stability within the Department.

I pledge my full effort to a smooth transition that ensures the needs and interests of the 2.15 million Service Members and 732,079 DoD civilians receive undistracted attention of the Department at all times so that they can fulfill their critical, round-the-clock mission to protect the American people.

I very much appreciate this opportunity to serve the nation and our men and women in uniform.

James N. Mattis

Not one word of praise or thanks for President Trump directly.  That says it all.

Florida Republican Senator Marco Rubio tweeted after:

“Just read Gen. Mattis resignation letter.  It makes it abundantly clear that we are headed towards a series of grave policy errors which will endanger our nation, damage our alliances & empower our adversaries.

“I hope we who have supported this administration’s initiatives over the last two years can persuade the President to choose a different direction. But we must also fulfill our constitutional duty to conduct oversight over the policies of the executive branch.”

Thursday, Senate Majority Leader Mitch McConnell (R-Ky.) weighed in, saying he was “distressed” by Mattis’ resignation.

“I believe it’s essential that the United States maintain and strengthen the post-World War II alliances that have been carefully built by leaders in both parties,” McConnell said in a statement.  “We must also maintain a clear-eyed understanding of our friends and foes, and recognize that nations like Russia are among the latter....

“So I was sorry to learn that Secretary Mattis, who shares those clear principles, will soon depart the administration. But I am particularly distressed that he is resigning due to sharp differences with the president on these and other key aspects of America’s global leadership.”

*Friday, the following came from Haaretz:

“Islamic State launched an attack on Syrian Democratic Forces’ positions in Hajin region in southeastern Syria, Mustafa Bali, the head of the SDF media office said.

“ ‘ISIS is launching a huge attack, heavy clashes are taking place there,’ he tweeted.  ‘Only 35 percent from Hajin is liberated by our forces.’

“The attack comes just two days after U.S. President Donald Trump announced he was withdrawing troops from Syria.”

---

The Mattis departure and Syrian withdrawal was one of many chaotic developments this week.  President Trump and House Republicans upended a bipartisan effort to fund the government until February on Thursday, which left lawmakers no clear path to avoid a partial shutdown this weekend.

Just two days earlier, the president signaled he was backing off his demand that Congress include $5 billion to fund a southern border wall in any year-end spending bill, the president changed course and told House GOP leaders that he would veto the short-term spending bill approved by the Senate because it didn’t contain wall funding.

The House, which had been expected to pass the Senate version of the bill, instead passed a measure on Thursday night with $5.7 billion in funding for the wall.    The 217-185 vote along party lines sent the bill back to the Senate, where it was certain to be blocked by Democrats.

This all came about because Wednesday, conservatives such as Rush Limbaugh and Anne Coulter excoriated the president for not standing firm on funding of the wall.  Trump then switched gears.

Rep. Mark Meadows (R-N.C.), chairman of the conservative House Freedom Caucus, said forgoing a fight on the wall now would be a blow to Trump’s most faithful supporters.  “To suggest that something is going to improve when the Democrats are in control defies history and defies logic....It would have a devastating impact.  It was the center of his campaign.”

As I go to post, the government is about to shut down we’ll see what Saturday brings.

Wall Street and Trade

The Federal Reserve’s Open Market Committee met Tuesday and Wednesday and, as expected, hiked interest rates a fourth time this year, ninth time since December 2015, nudging the benchmark funds rate to a range between 2.25% and 2.5%.  But what was surprising to many market participants, and scribes such as myself, was that the Fed didn’t announce it would then ‘pause,’ and instead indicated another two rate hikes in 2019, rather than the prior forecast of three. 

“We have seen developments that may signal some softening, relative to what we were expecting a few months ago,” said Chairman Jerome Powell, pointing to the slowing global economy and increased market volatility that is less supportive of growth.  “In our view, these developments have not fundamentally altered the outlook.”

The FOMC did acknowledge recent market pressure, noting in its statement that it “will continue to monitor global economic and financial developments and assess their implications for the economic outlook.”

But in his press conference, Chairman Powell came off as unconcerned about the state of the economy, despite the deepening worries on Wall Street.

Powell did acknowledge the Fed’s job has become tougher because future rate decisions need the most up-to-date figures on jobs, inflation and economic growth.  Powell was hinting it won’t be as easy for the Fed to telegraph future actions as it has been in the past.

Michael Mackenzie / Financial Times

“The final Federal Reserve policy meeting of the year has delivered a message that Wall Street was never going to enjoy hearing.

“Jay Powell and the Federal Open Market Committee had to strike a balance between slowing down the pace of interest rate tightening in 2019 while not unduly alarming an already febrile market with a downbeat assessment of the economy.

“Their attempt landed with a thud, sending the S&P 500 below 2,500 for the first time since September 2017. The market was looking for a stronger sign of a pause to rate hikes by the FOMC in 2019 and was duly disappointed, exacerbating the current brittle mood.

“Hardly helping sentiment was Mr. Powell’s remark during his press conference: ‘There’s a mood of concern, or a mood of angst about growth going forward.’

“The bottom line for the stock market is that a reduction in the economic outlook by the FOMC casts doubt over the pace of corporate profit growth in the coming year – a key driver of equity valuations over the long haul. The prospect has been driving the market’s abject performance of late....

“Given there is no sign of the Fed’s balance sheet contraction – running at $50bn a month – ending soon, we are left with a market twisting in the wind.  Questions about the balance sheet to Mr. Powell during his press conference triggered further selling pressure in equities.”

Editorial / Wall Street Journal

“The Federal Reserve on Wednesday told financial markets that they don’t matter all that much to the real American economy, and the markets barked right back that the Fed doesn’t appreciate the current signs of financial stress that could become economic trouble in 2019.

“That’s the hawkish message from the Federal Open Market Committee’s decision to raise its benchmark interest rate another 0.25% to 2.5%, and especially from Chairman Jay Powell’s press conference. The central banker asserted that the economy is so strong, and labor markets are so robust, that the Fed can afford to raise rates for the fourth time this year, plus two more times next year.

“Sure, said Mr. Powell, ‘some cross-currents have emerged’ in markets, inflation is below the Fed’s 2% target and falling, global growth is slowing, and even U.S. growth will slow next year to between 2% and 2.5% from at least 3% this year, but no matter.  Nothing will keep the Fed from its self-appointed rounds back to ‘a neutral’ rate of interest, as if anyone knows what this is in this brave new world of post-crisis monetary policy.

“The markets reacted with a clenched fist of their own in real time  Equity markets held up well enough until Mr. Powell was asked if the Fed has considered altering the pace of its balance-sheet reduction, known as quantitative tightening, or QT.  Mr. Powell essentially said no, and in any case it doesn’t matter because the Fed’s bond sales aren’t having much of an impact on credit conditions.

“That’s when equity prices took another header, compounding their autumn swoon.  More important, five- and 10-year Treasury bond yields fell sharply before recovering, and were still down on the day. In other words, Mr. Powell and the Fed staff may think they are setting interest rates, but the markets are saying, sorry, we are.

“Markets also seem to be saying they’re not sure Mr. Powell and the Fed appreciate the economic risks ahead from tightening financial conditions.  The high-yield corporate debt market is dead in the water, and the leverage loan market isn’t much better.

“The Fed shouldn’t overreact to a stock-market correction, but you’d think evident stress in credit markets would rouse Mr. Powell from his seeming insouciance.  Or at least motivate him to offer a better explanation than that financial markets and the Fed’s balance sheet don’t matter.

“Though Mr. Powell denied any such thing, as he should, it’s likely the Fed’s robust hawkishness was also a deliberate riposte to Donald Trump’s public pleas not to raise rates.  The FOMC statement was unanimous and barely changed from the one in November despite the growing market anxiety.  We said Mr. Trump’s bullying tweets on interest rates would be counterproductive, and so they were....

“In the last two years the Fed has underestimated growth as it missed the supply-side impact of deregulation and tax cuts on capital and business.  Now the Fed thinks the economy is robust enough to absorb the double monetary whammy of higher interest rates and QT. We’d feel more confident if the experiment they’re undertaking had been attempted before....

“The market test isn’t only when rates were zero and the balance sheet was ballooning to $4.5 trillion. The real measure of success or failure is what happens at the end of the monetary cycle, when the central bank has to unwind the extraordinary measures it said were necessary for so long.  The Ben Bernanke-Janet Yellen-Jerome Powell-Fed staff monetary experiment is only now facing its own stress test.”

Today, New York Fed President John Williams, in an interview with CNBC, attempted to calm the markets, noting he saw a strong economy in 2019, and that two more rate hikes wasn’t necessarily baked in, and, overall, he sought to reassure the Street that the Fed would show flexibility in its policy.  The market loved it for about 30 minutes, then it swooned anew and by the end of the day, we had another 400-point decline in the Dow Jones.

Overall, the major indices suffered through their worst week since the financial crisis, in terms of the Dow Jones and Nasdaq.  [More details to follow.]

On Trade....

Amid the trade war, which is technically supposed to be in a 90-day truce, President Xi Jinping gave an important policy speech in Beijing that I cover in depth down below, but for the purposes of this section, it was disappointing for those expecting some kind of olive branch.

And then on Thursday, the United States accused China of sustained efforts to steal trade secrets and technologies from at least 12 countries in an enormous hacking campaign – a move that deals a blow to Beijing during negotiations to ease trade tensions.

The U.S. Justice Department announced criminal indictments against two accused hackers associated with the Chinese government. Zhu Hua and Zhang Shilong, who the U.S. say acted on behalf of the Chinese Ministry of State Security (MSS), were charged with conspiracy to hack into a dozen companies and government agencies in the U.S. and around the world.

According to the indictment, a group of hackers known as APT10, said to stand for Advanced Persistent Threat 10, conducted extensive campaigns of global intrusions into computer systems since at least 2006.

Friday, China accused Washington of “fabricating facts” and urged the U.S. to “stop smearing the Chinese side of cybersecurity issues,” the foreign ministry in Beijing said in a statement, adding that it had lodged an official protest.

Separately, China arrested a third Canadian in China amid a diplomatic dispute over the arrest of Huawei’s chief financial officer, Meng Wanzhou in Vancouver, at the behest of the United States. Canadian Prime Minister Justin Trudeau has been under fire for his seemingly mild response, saying it was not the time to be “stomping on a table” over the arrests.

Meanwhile, the European Union launched a challenge at the World Trade Organization also on Thursday over forced technology transfer by China, its second such move this year.  The European Commission, which oversees trade policy in the 28-member European Union, said in a statement that it was significantly broadening and deepening the scope of its WTO action against China.

Editorial / Wall Street Journal

“The indictment says APT 10 targeted Managed Service Providers (MSPs), which are firms other companies use to store intellectual property and business data.  MSPs also perform IT services from patches to cloud services, making them an ideal target for espionage.

“The hackers stole hundreds of gigabytes of sensitive data from 45 technology companies in ‘at least a dozen U.S. states.’ The unnamed firms run the gamut from aviation to space technology to oil and gas exploration.

“U.S. agencies were also compromised, including NASA’s Goddard Space Center and Jet Propulsion Laboratory.  Justice further cites pilfering of U.S. Navy data, including information on more than 100,000 personnel. This is after last week’s Journal report on the alleged theft of U.S. Navy contractor data on antiship missiles and more. Deputy Attorney General Rod Rosenstein said the group also pilfered data from companies ‘in at least a dozen countries,’ including Brazil, Canada, France, Germany, India, and the U.K....

“FBI Director Christopher Wray said Thursday that hackers aren’t ‘just Chinese officials with epaulettes on their uniforms. These are state-owned enterprises, ostensibly private companies, hackers of all shapes and sizes, researchers, businessmen’ working ‘on behalf of the Chinese government.’

“This is a crucial point. These aren’t rogue hackers.  They are part of a systematic Chinese effort to rob the West’s technological secrets, military and economic.  Like the global shunning of Huawei, the charges mean the U.S. is starting to get serious about showing Beijing there is a price to be paid for refusing to obey the rules of free global commerce.  Don’t stop until the Chinese behavior stops.”

Editorial / Wall Street Journal, Part II

“It is well known that President Trump invests fervent belief in the stock market as a performance measure. When it’s rising, as it often has during his Presidency, he says that his policies are responsible. But what about a week like this with markets in decline, including a steep two-day drop in the Dow Jones average?  No logic exists that will allow Mr. Trump to take responsibility only for sunny days.

“The President is right to believe in market signals.  More than any individual can do, markets absorb material events occurring in the world and make financial bets on the future. This week they have had to absorb three major events: The Federal Reserve’s decision to raise interest rates after public pressure from the President not to do so; Mr. Trump’s abrupt and unilateral decision to pull U.S. troops out of Syria; and Mr. Trump’s 11th-hour threat Thursday not to sign a budget bill that would prevent a Friday night government shutdown.

“Mr. Trump entered the Presidency as a disrupter of the status quo, for which he has many fans. We include ourselves among those who believe the political status quo – here and abroad – was overdue for challenge.  He has provided that with a sharp cut in the U.S. corporate tax rate, economy-wide deregulation and U.S. withdrawal from the Obama Iran nuclear deal and the Paris climate accord.

“The execution of those decisions, however, is a far cry from what is happening now.  Mr. Trump crossed over this week from considered disruption into a degree of political volatility that has the potential to raise the political risks for himself and U.S. interests.

“Fed Chairman Jerome Powell was at pains during his press conference to make the economic case for raising rates now, but the overhang from Mr. Trump’s threats against Mr. Powell and the Fed were impossible to dismiss. And then as if markets and the world didn’t have enough to absorb from the Fed’s decision, Mr. Trump made his Syria pullout call the same day.

“On Thursday, Mr. Trump tweeted that ‘Getting out of Syria was no surprise’ because he campaigned on it. But the abruptness of the announcement did catch his own advisers and the world by surprise. The Chairman of the Joint Chiefs, General Joseph Dunford, is widely reported to have not been consulted.

“Withdrawing those 2,000 American troops from the Middle East is a significant act for which allies in the region and elsewhere needed a decent interval to prepare.  Mr. Trump gave them none. The decision, which emerged after Mr. Trump’s phone call with Turkish dictator Recep Tayyip Erdogan, did earn public praise from one big beneficiary – Russia’s Vladimir Putin.

“Then on Thursday Mr. Trump tweeted that Defense Secretary Jim Mattis, one of his strongest appointees, ‘will be retiring’ in February. This landed shortly after the Journal reported that Mr. Trump may withdraw most U.S. troops from Afghanistan within weeks.  Mr. Mattis’ resignation letter makes clear he is leaving because he disagrees with Mr. Trump’s treatment of allies and his impulsive decision making.

“Meanwhile, the Thursday threat to shut down the government over funding for the wall comes amid no strategy for prevailing in this fight.  Most Senators have left town after voting to fund the government until February.  Any new spending patch needs 60 Senate votes, meaning Democratic Leader Chuck Schumer’s blessing for what surely would be a bottom-dollar fig leaf of wall funding.

“Mr. Trump should take this week’s big market selloff seriously as a useful warning.  The successful disruptions of the President’s first year emerged from planned strategies executed by allies in the government and Congress.  His erratic actions this week are different.  Heading into 2019 and divided government, Mr. Trump is acting less like a confident disturber of the status quo and more like a raging bull.”

---

In terms of U.S. economic data this week, we had a final look at third-quarter GDP and it ticked down to 3.4%.

2018 (annualized GDP)

Q3... 3.4%
Q2... 4.2%
Q1... 2.2%

2017

Q4... 2.3%
Q3... 2.8%
Q2... 3.0%
Q1... 1.8%

Separately, there was a slight improvement in the housing picture for November, with housing starts a little better than expected, while existing home sales also came in above forecast, though in terms of a 3-month average, they were down a seventh consecutive month, and down 7% over year ago levels.  That said the sudden drop in the 10-year Treasury yield, to its lowest weekly close since March 30, is undoubtedly spurring a little activity.

We also had figures on November personal income, up 0.2%, and consumption, up 0.4% (solid), while durable goods rose a less than expected 0.8%.

The Fed’s preferred inflation barometer, the PCE, or personal consumption expenditures index, rose 1.9% on core for the 12 months in November.  So this remains no issue.

Overall, the Atlanta Fed’s GDPNow barometer for the fourth quarter fell a bit to 2.7%.

According to a new Wall Street Journal/NBC News poll, one-third of Americans say the economy will get worse in 2019, the highest level of wariness in five years.  [28% say they believe the economy will get better.]

56% of respondents said the nation was on the wrong track despite a strong economy, which is kind of staggering.

Europe and Asia

Just one piece of Eurozone economic news on the week...euro area annual inflation came in at a 1.9% rate in November, down from 2.2% in October.  A year earlier the rate was 1.5%.  [Eurostat]

Brexit:  The vote in Parliament on Prime Minister Theresa May’s Brexit proposal, which she was forced to pull out of on Dec. 11, has been rescheduled for the week of Jan. 14, so we are sort of catching a little break in terms of news flow during the holidays.  But come Jan. 2, all hell is going to break loose again.

In under 100 days, the U.K. is due to leave the European Union, but now the options include postponing the divorce, calling another referendum or even announcing fresh national elections.

The thing is, Parliament will not go along with the terms Mrs. May negotiated with the EU.  May and all her ministers publicly say her exit deal is the only option available to avoid potential economic and social chaos.  But behind closed doors, the inner circle is considering dire options for when she fails.

According to some officials, the issue of a second referendum is gaining ground, an idea gaining traction in mainstream U.K. politics, but one that Mrs. May vehemently rejects – or there could be a new election to choose a government.

In either case, Brexit would have to be delayed.

It is also possible that after Parliament rejects the bill, the British electorate could be asked to decide.  The prime minister says the will of the people must be adhered to.

And then you have players such as Northern Ireland’s Democratic Unionist Party, whose support May depends on to stay in power. The DUP says it is ready to vote against the prime minister and bring down her government unless major changes can be made to the Brexit deal.

Meanwhile, both the European Union and the U.K. need to prepare for Britain exiting the EU without a withdrawal agreement, with the government putting 3,500 military personnel on standby  to assist government agencies.  A no-deal exit would jam ports, threatening manufacturing supply chains and food and medicine supplies.

European Commission President Jean-Claude Juncker said the risks of a no-deal Brexit “are obvious, it would be an absolute catastrophe.”

The Bank of England in November said its worst-case analysis suggests a crash-out Brexit could leave the economy 10% smaller after four years than it would have been had the U.K. never voted to leave.

Britain’s five major business groups warned, “There is simply not enough time to prevent severe dislocation and disruption in just 100 days.”

The most significant arrangements being worked out involve the residency rights of U.K. citizens living in EU countries, and vice versa, and items such as air travel, which could continue as is for a year after a no deal; and in financial services, with the EU allowing EU financial firms to continue using U.K. clearing houses for derivatives for 12 months.

But the plans between the two sides say nothing about the island of Ireland, which is headed to a restoration of a physical border that the U.K. and the EU are both trying to avoid.  This would not be good.

Italy: The European Commission, the EU’s executive arm, has decided not to press Italy over its revised 2019 budget that Brussels says will result in a budget deficit of 3% of GDP, while the Italian government says it will be closer to 2%.

With the economic outlook worsening, though, both Rome and Brussels lost their appetites for a confrontation.  France’s fiscal giveaways to appease the street protesters against President Emmanuel Macros also weakened the EU’s budget hawks when it came to Italy.

The Commission is still expressing doubts Italy can reach its growth targets, and as European Commissioner Valdis Dombrovskis put it: “Italy urgently needs to restore confidence in its economy to ease financial conditions and support investment.”

Italy today is on the verge of a shallow recession, and the government is now forecasting growth of just 1% next year.  But many believe even this is too optimistic.

France: There were far fewer Yellow Vest protesters last weekend in Paris and other French cities, but thousands still marched against the policies of President Emmanuel Macron.

The ranks of protesters dwindled after Mr. Macron promised tax cuts and wage increases to mollify the Yellow Vests, who are demonstrating over the cost of living and high taxes.

But now Macron’s government has shot a hole in the budget owing to the promises made.

Hopefully, Paris has a peaceful holiday week. 

Hungary: Thousands of Hungarians thronged the streets of Budapest on Sunday in the fourth and largest protest in a week against what they see as the increasingly authoritarian rule of right-wing nationalist Viktor Orban.  About 10,000 demonstrators braved freezing temperatures in a march dubbed “Merry Xmas Mr. Prime Minister.”

The demonstration was organized by opposition parties, students, and trade unions to demand a free media, withdrawal of a labor law increasing overtime (which I covered last week), and an independent judiciary.

Orban’s ruling party Fidesz said “criminals” were behind the “street riots” and accused Hungarian-born U.S. billionaire George Soros of stoking the protests. [Of course.]

Soros is a strong critic of Orban but denies claims against him as lies to create a false external enemy.

I am on record for years now as supporting Orban’s hard-line stance on the Muslim migration issue, but I made it clear I was dead-set against his anti-media, authoritarian policies.

Editorial / Wall Street Journal

“Hungary has moved in an anti-democratic direction since Viktor Orban returned to power in 2010. But the protests in Budapest in recent days are a reminder that he hasn’t dragged all of his countrymen along with his program.

“The demonstrations began Wednesday (Dec. 12) after the National Assembly, where Mr. Orban’s Fidesz Party has a two-thirds majority, passed labor legislation that critics call the ‘slave law.’ It lets businesses ask employees to work up to 400 overtime hours annually, up from 250.  The legislation also gives employers more time to settle overtime payments.

“Hungary isn’t welcoming to immigrants, many of its most-qualified workers leave for better-paying work elsewhere in Europe, and its roughly 1.5 births per woman is one of the lowest fertility rates in the world.  All of this has led to a severe labor shortage, and liberalizing overtime laws is a good economic idea. But the measure is opposed even by nearly two-thirds of Mr. Orban’s supporters.

“The Assembly also created new administrative courts to handle government matters like taxes and elections. The government says the courts will be independent, but Mr. Orban’s Justice Minister oversees them.

“Freezing temperatures haven’t been enough to deter thousands of Hungarians from marching against these measures. They see a threat to their democracy, especially given Mr. Orban’s bad record on press freedom and the rule of law.  Mr. Orban effectively has forced Central European University, an American institution founded by financier George Soros, to leave the country by next year. The ruling party has also dealt harshly with media critics while overseeing free but unfair elections.

“Like the Yellow Vest protests in France, the demonstrations in Budapest started over a particular policy. But they’ve unified a disparate opposition and become a broader critique of Mr. Orban’s heavy-handed rule....

“Mr. Orban isn’t bending on the policies.  His bet may be that he can ride out the protesters the way he has the objections from the European Union to his limits on press freedom.  The protests are a  signal that Hungary’s voters don’t want their country to follow the authoritarian path of Vladimir Putin’s Russia.”

As I go to post, the protests continue.  This is an important story, in the broader context of Europe and the EU.  More next time.

Belgium: Prime Minister Charles Michel resigned following a failed attempt to win parliamentary backing for his minority administration, deepening the country’s political crisis.

The Flemish nationalist N-VA party quit Michel’s government earlier this month over its opposition to a UN migration pact.

Michel’s decision marks the bitter end of a government that represented a political experiment for the linguistically divided country.

In 2014, Michel teamed up with the N-VA, the most popular party in Dutch-speaking Flanders but one committed to the eventual break-up of Belgium.

The UN migration pact seeks to make legal migration easier, providing services to migrants and toughening laws against anti-migrant hate crimes as a potential catalyst for changes to national laws, but it is not legally binding.

France’s far-right leader Marine Le Pen, and Steve Bannon, former adviser to President Trump, denounced the UN pact at an event in Brussels last weekend.

“The country that signs the pact obviously signs a pact with the devil,” Ms. Le Pen said.

Critics say the deal could increase immigration to Europe.

Early elections are now likely, though the country was set to go to the polls in May.

Turning to Asia....

I’ve been writing that China’s central government wants better control of economic data and this week Beijing ordered authorities in the country’s export hub, Guangdong province, to stop producing a regional purchasing managers’ index for the manufacturing sector.

The order by the National Bureau of Statistics means the province will no longer be allowed to release monthly purchasing managers’ index (PMI) data...at least that is my understanding.

This would be like the U.S. government telling the popular Chicago Purchasing Managers Index folks to stop releasing their data, which is sometimes market moving.

The Bank of Japan has again kept interest rates on hold, as Tokyo continues to move out of step with central bankers around the world moving toward tighter monetary policy.

The BoJ kept its short-term interest rate target at minus 0.1 percent, in a seven to two vote, and said it will purchase Japanese government bonds to maintain the yield on the 10-year note at around zero percent.

Trump World

--Appearing on ABC’s “This Week” with George Stephanopoulos, Illinois Democratic Sen. Dick Durbin had an interesting observation on border security.

DURBIN: George, we ought to pay attention to something else that came out last week, the Centers for Disease Control said the most deadly narcotic in America today is fentanyl. Fentanyl is flowing across that border from Mexico into the United States and killing thousands of innocent people.

STEPHANOPOULOS: The president says that’s why we need a wall.

DURBIN: What will the wall do to stop it?  Virtually nothing.  Pardon me?

STEPHANOPOULOS: That’s as I said, the president says that’s why we need a wall.

DURBIN: 80 percent of the narcotics coming into the United States are coming through ports of entry, official openings in the so-called barrier or wall between the United States and Mexico.  What we could do came out in testimony this week.  We could be scanning the vehicles coming into the United States to see if they contain contraband, narcotics, firearms, even victims of human trafficking.  Fewer than 1 out of 5 vehicles are being scanned now.

I asked the people at Customs and Border Protection what would it cost to have scanners scan all the vehicles coming in?  They said $300 million.  That’s a far cry from $5 billion, and a much more effective way to have a secure border.

--Editorial / Washington Post

“Two reports prepared for the Senate on Russian disinformation unfold a now-indisputable narrative; The Kremlin engaged in a coordinated campaign to elevate Donald Trump to the presidency, and this country’s technology companies were central to its strategy.

“The Russia operation is staggering in its scale, precision and deceptiveness.  Pages generated by the Kremlin-linked Internet Research Agency elicited nearly 40 million likes and more than 30 million shares on Facebook alone, reeling in susceptible users with provocative advertisements and then giving them propaganda to spread far and wide. The aim was not to toss the country into tumult, but to put the preferred candidate of a foreign adversary in the Oval Office.  All the while, Americans were entirely unaware of what was happening: What seemed like local Black Lives Matter activists were actually Russian trolls well-versed in the buzzwords of social justice.  Ostensible patriots for Second Amendment rights were broadcasting from St. Petersburg.

“Republicans have protested over the past year that election interference is neither unusual nor important. This week’s reports comprehensively put both arguments to rest. Russia waged an unprecedented campaign, targeting Americans across all segments of society, on platforms large and small. The studies do not even cover the entirety of Russia’s online tampering: The hack-and-leak operation that led to the release of Hillary Clinton campaign chairman John Podesta’s private emails, orchestrated by the GRU, Russia’s military intelligence agency, was another crucial salvo in a pro-Trump onslaught.”

--Acting U.S. Attorney General Matthew Whitaker has decided not to recuse himself from overseeing the investigation into Russian meddling in the 2016 presidential election, disregarding advice from his own ethics officials.

The decision by Whitaker, known for making comments critical of Special Counsel Robert Mueller’s Russia probe before being appointed last month by President Trump, was conveyed in a letter to congressional leaders by Assistant Attorney General Stephen Boyd.

Boyd said in the three-page letter department ethics officials determined that Whitaker lacked any personal, political or business conflicts that would disqualify him from supervision of Mueller’s investigation.

Ethics officials concluded, however, that if their recommendation were sought ‘they would advise that the acting attorney general should recuse himself’ because ‘a reasonable person with knowledge of the relevant facts likely would question’ Whitaker’s impartiality, Boyd wrote. 

--A federal judge on Tuesday postponed  the sentencing of Michael Flynn, President Trump’s first national security adviser, after warning Flynn that he could face prison time for lying to federal investigators about his conversations with the Russian ambassador during the presidential transition and hiding his role lobbying for Turkey.

At Flynn’s sentencing hearing in Federal District Court in Washington, Judge Emmet G. Sullivan called Flynn’s crimes “a very serious offense” and said he was not hiding his “disgust” at what Flynn had done.

“All along you were an unregistered agent of a foreign country while serving as the national security adviser,” the judge told Flynn.*  “Arguably that undermines everything that this flag over here stands for.  Arguably you sold your country out.”

*But Flynn left the employ of Turkey when he became NSA.

Federal prosecutors have recommended a lenient sentence, or probation, rather than the up to six months Flynn could receive, because Flynn has provided “substantial help” with multiple criminal inquiries.

Earlier, President Trump tweeted:

“Good luck today in court to General Michael Flynn.  Will be interesting to see what he has to say, despite tremendous pressure being put on him, about Russian Collusion in our great and, obviously, highly successful political campaign. There was no Collusion!”

--The president signed a criminal justice reform bill today; The First Step Act, which sailed through the Senate 87 to 12, before passage in the House.

Trump tweeted:

“America is the greatest Country in the world and my job is to fight for ALL citizens, even those who have made mistakes. Congratulations to the Senate on the bi-partisan passing of a historic Criminal Justice Reform Bill...

“...This will keep our communities safer, and provide hope and a second chance, to those who earn it.  In addition to everything else, billions of dollars will be saved.”

The bill makes sweeping changes to the criminal justice system, including making it easier for some prisoners to earn early release to halfway houses and protecting first-time offenders from mandatory minimum sentences.

--Yet another cabinet member, Interior Secretary Ryan Zinke is leaving under a cloud; the target of multiple federal ethics investigations into his political activity and travel.

Congressional Democrats plan to launch multiple probes of the administration come January, so Zinke at least dodges them.  

--Someone please tell the president that his chief domestic adviser, Stephen Miller, is killing him.  He was also the worst possible surrogate to throw out there Thursday night.  I wanted to reach through the television and strangle him.  He’s a punk.  He also clearly has hair issues, as anyone who saw him over the weekend, and then last night, can attest to.  [Think Chia pet.]

Trump tweets:

“So hard to believe that Lindsey Graham would be against saving soldier lives & billions of $$$. Why are we fighting for our enemy, Syria, by staying & killing ISIS for them, Russia, Iran & other locals? Time to focus on our Country & bring our youth back home where they belong!”

“Does the USA want to be the Policemen of the Middle East, getting NOTHING but spending precious lives and trillions of dollars protecting others who, in almost all cases, do not appreciate what we are doing?  Do we want to be there forever? Time for others to finally fight....

“....Russia, Iran, Syria & many others are not happy about the U.S. leaving, despite what the Fake News says, because now they will have to fight ISIS and others, who they hate, without us.  I am building by far the most powerful military in the world.  ISIS hits us they are doomed!”

[Ed. this particular tweet sums up the president’s mindset.  First we are told ISIS is destroyed.  Then, above, he talks of them continuing the fight.]

“When I begrudgingly signed the Omnibus Bill, I was promised the Wall and Border Security by leadership. Would be done by end of year (NOW). It didn’t happen!  We foolishly fight for Border Security for other countries – but not for our beloved U.S.A.  Not good!”

“The Democrats, whose votes we need in the Senate, will probably vote against Border Security and the Wall even though they know it is DESPERATELY NEEDED.  If the Dems vote no, there will be a shutdown that will last for a very long time.  People don’t want Open Borders and Crime!”

“Senator Mitch McConnell should fight for the Wall and Border Security as hard as he fought for anything.  He will need Democrat votes, but as shown in the House, good things happen.  If enough Dems don’t vote, it will be a Democrat Shutdown!  House Republicans were great yesterday!

“There has never been a president who has been tougher (but fair) on China or Russia – Never, just look at the facts.  The Fake News tries so hard to paint the opposite picture.”

“Mexico is paying (indirectly) for the Wall through the new USMCA, the replacement for NAFTA!  Far more money coming to the U.S.  Because of the tremendous dangers at the Border, including large scale criminal and drug inflow, the United States Military will build the Wall!”

“Never in the history of our Country has the ‘press’ been more dishonest than it is today. Stories that should be good, are bad. Stories that should be bad, are horrible.  Many stories, like with the REAL story on Russia, Clinton & the DNC, seldom get reported. Too bad!”

“A REAL scandal is the one sided coverage, hour by hour, of networks like NBC & Democrat spin machines like Saturday Night Live. It is all nothing less than unfair news coverage and Dem commercials.  Should be tested in courts, can’t be legal?  Only defame & belittle! Collusion?”

“The Trump Foundation has done great work and given away lots of money, both mine and others, to great charities over the years – with me taking NO fees, rent, salaries, etc. Now, as usual, I am getting slammed by Cuomo and the Dems in a long running civil lawsuit started by....

“...sleazebag AG Eric Schneiderman, who has since resigned over horrific women abuse, when I wanted to close the Foundation so as not to be in conflict with politics.  Shady Eric was head of New Yorkers for Clinton, and refused to even look at the corrupt Clinton Foundation....

“...In any event, it goes on and one & the new AG, who is now being replaced by yet another AG (who openly campaigned on a GET TRUMP agenda), does little else but rant, rave & politic against me. Will never be treated fairly by these people – a total double standard of ‘justice.’”

Trump’s charitable foundation, which prosecutors allege served mainly to further his interests, is to be dissolved.

It shelled out thousands of dollars for sports memorabilia and appeared to steer donations to causes in Iowa to boost Mr. Trump’s fortunes ahead of the state’s pivotal caucuses in the 2016 election.

New York Attorney General Barbara Underwood said in a statement: “Our petition detailed a  shocking pattern of illegality involving the Trump Foundation – including unlawful coordination with the Trump presidential campaign, repeated and willful self-dealing and much more.”

Street Bytes

--As alluded to above, it was an absolutely awful week on the Street with the Dow Jones losing 6.9% to 22445, the S&P 500 7.1%, and Nasdaq 8.4%.  It was the worst week since 2008 for the Dow and Nasdaq, the worst in seven years for the S&P.

Nasdaq is now in bear market territory, down 21.5% from its Aug. 29 high, while the Dow is off 16%, and the S&P 18% from their respective all-time marks, just short of the 20% ‘bear market’ level.

Meanwhile, the FAANG trade is over.  Facebook, Amazon, Apple, Netflix and Google parent Alphabet have all dropped between 20 and 35 percent since the Nasdaq peaked in late August; $1.2 trillion in combined market value between the five.

Apple, for example, is down to $150 from a high of $233.50.  Facebook is now $124.50, down from $218.50.  Amazon is at $1,377, off its $2,050 high.

Also, more than $80.7 billion poured out of U.S.-based stock funds during the 14 days through Wednesday, according to Lipper.

--U.S. Treasury Yields

6-mo. 2.53%  2-yr. 2.64%  10-yr. 2.78%  30-yr. 3.02%

Take advantage of this if you’re a homebuyer.                               

--Oil continued to tumble (collapse) on signs that economic growth, and thus demand for energy, is slowing.  Consumption in the likes of China, India and across emerging Asia – the source of two-thirds of global oil-demand growth – is slowing.  There are fears that the U.S. economy is slowing as well.

And while OPEC and other oil producers including Russia agreed to curb output at their latest meeting, the cuts don’t happen until next month and production has been at or near record highs in the U.S., Russia and Saudi Arabia.

The U.S. announced that shale production should climb to over 8 million bpd for the first time by the end of December.  Compare this to Russian output just hitting a record 11.42 million bpd this month, according to industry sources.

So today, crude oil closed the week at $45.42 on WTI, the lowest since July 2017.

Meanwhile, the national gas price average continues to drive toward the cheapest pump prices seen during the month of December since 2016, six cents less than a year ago, according to AAA, at $2.37 for a national average.

--Johnson & Johnson Chairman and CEO Alex Gorsky on Monday issued a video statement defending the company’s talc in its baby powder product, following a Reuters examination of thousands of pages of company memos, internal reports and other confidential documents with lawyers for some of the 11,700 plaintiffs now claiming that the company’s talc caused their cancers – including thousands of women with ovarian cancer.

In 1976, as the U.S. Food and Drug Administration (FDA) was weighing limits on asbestos in cosmetic talc products, J&J assured the regulator that no asbestos was “detected in any sample” of talc produced between December 1972 and October 1975.  It didn’t tell the agency that at least three tests by three different labs from 1972 to 1975 had found asbestos in its talc – in one case at levels reported as “rather high.”

“J’s baby powder is safe and does not cause cancer.  Studies of tens of thousands of women and thousands of men show that talc does not cause cancer or asbestos-related disease,” Gorsky said.

“If we believe our products weren’t safe, they would be off the shelves and out of the market immediately.” J&J executives and lawyers have long insisted the signature powder is safe and asbestos-free.  Settling would set a “really bad precedent when the science and facts [are] on our side,” said Chief Financial Officer Joseph Wolk on Monday.

Johnson’s franchise of soaps, shampoos and powders is one of the few brands to use the company’s name.

Baby Powder is just $420 million of J&J’s $76.5 billion in revenue last year.  But its considered an essential facet of the health care products maker’s carefully tended image as a caring company – a “sacred cow,” as one 2003 internal email put it.

Analysts, for the most part, have minimized concerns about the lawsuits’ potential financial impact.  But J&J’s defense still goes up against countless legal and public-relations hits.

--Juul Labs Inc. sold a 35% stake to tobacco giant Altria Group Inc. in a $12.8 billion deal that turns the e-cigarette maker into one of Silicon Valley’s most valuable privately held companies and makes the tobacco giant relevant again for Americans who are averse to traditional smoking.

So Juul is now valued at $38 billion and you’ll see its vaping products next to Marlboro cigarettes on retail shelves.  Altria, which is focused on the U.S. market after spinning off Philip Morris International Inc. in 2008, will get one-third of the board seats upon antitrust clearance.

Altria has been diversifying away from cigarettes, with investments such as its 45% stake in Canadian cannabis company Cronos Group Inc., which Altria can take majority control of in the future.

Just a few months ago, Juul was valued at $16 billion after Tiger Global Management led a $1.2bn investment.

So among private companies, Juul, at $38bn, is ahead of Airbnb ($31bn) and trails only Uber ($76bn).

Juul just launched in 2015, quickly gaining the ire of parents and regulators who say the company’s devices hook teenagers.  Juul’s U.S. market share of the vaping market has soared to 53% from 16% a year ago, according to market research firm IRI.

Food and Drug Administration Commissioner Scott Gottlieb has called youth use of of e-cigarettes an epidemic, Gottlieb saying last month that e-cig use had soared 78% this year among high school kids and 48% among middle school students.

Juul, in turn, is positioning itself as a technology company on a mission to help addicted smokers quit tar-burning cigarettes.

--From the Wall Street Journal: “Goldman Sachs Group Inc.’s push for Asian business and lax oversight of partners led the bank to dismiss warning signs in its dealings with a corrupt Malaysian investment fund, internal documents and interviews with people involved in the transactions show.

“When the fund, 1 Malaysia Development Bhd., first sought Goldman’s help raising money, the bond deal came before a committee of senior bankers in Hong Kong in 2012 for a key round of vetting.  Among the concerns sketched out in the meeting’s agenda: ‘potential media and political scrutiny,’ Goldman’s unusual role as both financier and adviser, the colossal profit earned on what should have been a modest transaction – and how much of that haul would need to be disclosed. Not up for discussion: the young fund’s scant track record.

“The deal happened anyway.  It has ensnared Goldman in one of the largest financial frauds in history and darkened the early days of its new chief executive, David Solomon.

“On Monday, Malaysia lodged criminal charges against the bank.  The country’s attorney general said he would seek a fine well above the $2.7 billion allegedly stolen by two former Goldman bankers and a Malaysian financier named Jho Low, whom U.S. prosecutors accuse of conspiring to loot the fund.”

It’s possible the Justice Department could levy a fine itself of as much as $2 billion.

Former CEO Lloyd Blankfein (still chairman) is very much under scrutiny.  His wife, while chowing down on halibut during lunch at the Four Seasons, told her girlfriend vipers, “My Lloyd did nothing wrong.”

Goldman Sachs’ shares finished the week at $160, off another 5% today, and down from a 52-week high of $275.

--Here we go again...Facebook gave some of the world’s largest technology companies more intrusive access to users’ personal data than it has disclosed, thus exempting those business partners, including Microsoft’s Bing search engine, Yahoo, Netflix and Spotify, from the ability to see the names of virtually all Facebook users’ friends without consent, in the case of the first two, and the ability to read Facebook users’ private message for the latter two.

Facebook also permitted Amazon to obtain users’ names and contact information through their friends.

This went on for years, and comes on top of all the other privacy scandals Facebook faces, first set off by revelations last spring that a political consulting firm, Cambridge Analytica, improperly used Facebook data to build tools that aided President Trump’s campaign.

It was back in April that CEO Mark Zuckerberg insisted his company had instituted stricter privacy protections long ago, assuring lawmakers that people “have complete control” over everything they share on Facebook.

It was a total crock of s---.  We now know Facebook allowed certain companies access to data despite those protections.  And we still have the issue from 2011, when Facebook reached an agreement with the Federal Trade Commission that barred the social network from sharing user data without explicit permission, an agreement FB has obviously run afoul of.

I noted a while ago that Zuckerberg and chief operating officer Sheryl Sandberg should be indicted.  It’s absolutely nuts they haven’t been.

Headline on the front cover of Thursday’s New York Daily News:

“Hey, Facebook...

“Stop playing us for suckerbergs

“...Sniveling social slimeball slammed for sharing users’ info with media giants”

--Former Nissan chairman Carlos Ghosn was re-arrested on fresh charges, Japanese media reported, dashing any hopes he could be released on bail.

Ghosn has spent the last month in prison, accused of misusing funds and hiding $80m of income.

Thursday, a court rejected a request for the prosecution to extend his detention, so it was assumed he would be released on bail, but then today, he was re-arrested, with prosecutors now accusing Ghosn of shifting a private investment loss of over $16m onto Nissan in the wake of the 2008 financial crisis.

--FedEx Corp. said on Tuesday it was starting a voluntary buyout program for some U.S. workers after troubles in its express delivery business and a European acquisition have hurt profits.  The company declined to say how many jobs it is targeting.

Today, FedEx employs more than 450,000 people globally, with the vast majority of its buyout offers being made to workers at the FedEx Express unit, which has 227,000 employees, and at FedEx Services, which provides back-office functions and employs another 30,000 people.

The shares cratered nearly 13% in response, taking its loss for the year to 26%.

After last year’s tax overhaul that dropped the corporate rate, FedEx was one of the first companies to commit to new spending and wage increases.  In January, the company said it would spend $200 million on raises, mostly for hourly workers, and put $1.5 billion into pension plans.

But now there is weakness in Europe stemming from ongoing Brexit talks and protests in France.  Tariffs and trade disputes are also raising concerns in Asia.  FedEx Chief Marketing Officer Raj Subramaniam said on a conference call, “The peak for global economic growth now appears to be behind us.”

Yup, that statement alone will tank a stock.

FedEx said Tuesday that it was offering four weeks of pay for every year of service, up to a maximum of two years of pay, as well as funding to healthcare accounts.

The carrier said the buyout program should result in a $450 million to $575 million pre-tax charge in the quarter ending May 31.

FedEx has also struggled since acquiring European rival TNT Express for $4.8 billion in 2016.

For the quarter ended Nov. 30, FedEx reported a profit of $935 million, compared with $866 million a year ago. Revenue was $17.8 billion.  For the full year, FedEx lowered its per-share earnings forecast for the current fiscal year to $12.65 to $13.40 a share from $15.50 to $16.60. 

--Nike sales rose 10% in the latest quarter as the apparel and footwear seller continued to ride strong demand worldwide, weathering a backlash for an ad campaign featuring Colin Kaepernick.

Revenue in Nike’s North American market rose 9% to $3.78 billion (8% increase in footwear, 10% in apparel). Equipment sales fell 3% from a year ago.

Sales in China rose 26% to $1.54 billion.

Total sales for the quarter ended Nov. 30 reached $9.37bn, ahead of expectations.

Nike’s profit was $847 million, compared with $767 million a year ago.

The stock bucked the overall market on Friday, advancing 7%.

--Oracle Corp. reported flat revenue for its latest quarter, a result better than what the Street had been expecting, with the software giant making progress in its struggling cloud business.

Revenue in the cloud services and license support segment, the company’s largest, rose to a stronger-than-projected $6.64 billion in the quarter ended Nov. 30.  Overall, Oracle reported revenue of $9.56 billion, just shy of $9.59 billion from a year earlier.

But Oracle changed how it reports its quarterly results, mixing the cloud business with its licensing support business, thus clouding, err, making it more difficult to track how the cloud biz is actually doing.

The company also expects revenue in its fiscal third quarter to essentially be flat, when you factor the impact from currency conversion.

Oracle sought to reassure investors about the cloud business during a conference call with analysts.

“We need more than just a great database,” said Larry Ellison, co-founder, chairman and chief technology officer.  “We also need first-class infrastructure to run the database on, and we now finally have that.”

--What a total disaster at Gatwick Airport Wednesday night into Thursday, as tens of thousands of passengers suffered flight chaos after the lone runway at the airport was closed due to drones being flown nearby.

The runway was closed from 9 p.m. Wed. until 3 a.m. Thursday, and then again for a time later on as the drone(s) kept reappearing.

--Charter Communications has been forced to pay consumers back to the tune of $62.5 million in direct refunds for unreliable internet services, part of a $174.2 million deal with New York Attorney General Barbara Underwood to settle claims by her office that Charter fraudulently advertised internet speeds it lacked capacity to deliver, and rented modems and routers slower than customers paid for.

“This settlement should serve as a wakeup call to any company serving New York consumers: fulfill your promises, or pay the price,” Underwood wrote in Tuesday’s release.

Not only will the company have to directly repay 700,000 of its active subscribers $75 to $150, but it will have to provide 2.2 million households with free streaming and premium channels – a $100 million value, according to Underwood. The $62.5 million in direct refunds is believed to be the largest payout to consumers by an internet provider in the nation’s history.

--From the Wall Street Journal: “About 1.4 billion pounds of American, cheddar and other kinds of cheese is socked away at cold-storage warehouses across the country, the biggest stockpile since federal record-keeping began a century ago.

“Driving the glut are cheese makers who ramped up production before trade tensions abroad tamped down demand for many of their products.  Shifting tastes at home have further changed the outlook for traditional cheese makers.  Many are paying to store their excess cheese in hopes demand and prices will improve....

“Cheese exports have suffered since Mexico and China, major dairy buyers, instituted retaliatory tariffs on U.S. cheese and whey.  Cheese shipments to Mexico in September were down more than 10% annually, according to the U.S. Dairy Export Council trade group, and shipments to China were down 63% annually.”

But it’s also true that American tastes are changing.  Consumption of mozzarella has topped cheddar since 2010, and consumption of processed cheese spreads per capita is about half what it was in 2006.

--Fox News host Tucker Carlson is standing firm on his immigration position even as his primetime show continues to lose advertisers for his anti-immigrant comments.  A spokeswoman for IHOP told HuffPost Tuesday that the pancake house stands for “welcoming folks from all backgrounds and beliefs into our restaurants and continually evaluate ad placements to ensure they align with our values.  In this case, we will no longer be advertising on this show.”

Carlson’s initial remarks that got the conservative talk show host into trouble last Thursday were: “Our country’s economy is becoming more automated and tech-centered by the day.  It’s obvious that we need more scientists and skilled engineers. But that’s not what we’re getting.  Instead, we’re getting waves of people with high school educations or less.  Nice people, no one doubts that but as an economic matter, this is insane.  It’s indefensible, so nobody even tries to defend it. Instead, our leaders demand that you shut up and accept this. We have a moral obligation to admit the world’s poor, they tell us, even if it makes our own country poorer and dirtier and more divided.”

I’m biting my tongue.

--CBS said it will deny Les Moonves a $120 million severance package, saying the former CEO tried to conceal evidence and misled the company during the months-long investigation into sexual misconduct accusations against him.

The board said in a statement Monday: “With regard to Mr. Moonves, we have determined that there are grounds to terminate for cause, including his willful and material misfeasance, violation of company policies and breach of his employment contract, as well as his willful failure to cooperate fully with the company’s investigation, Mr. Moonves will not receive any severance payment from the company.”

According to the investigation, Moonves received oral sex from at least four CBS employees in an arrangement that appeared “transactional” in nature.  One of the women appeared to be “on call” to perform oral sex on him, according to the New York Times.

“A number of employees were aware of this and believed that the woman was protected from discipline or termination as a result of it,” the lawyers wrote in their report.  “Moonves admitted to receiving oral sex from the woman, his subordinate, in his office, but described it as consensual.” [New York Post / New York Times]

Foreign Affairs

Syria: Opinion on the withdrawal...for the archives....

Gayle Tzemach Lemmon / Defense One

“Last week in Northeast Syria, one thought struck me when it came to the battle against the so-called Islamic State: If the ISIS fight is over, no one has told ISIS.

“I have been watching Raqqa closely since April, including from the ground.  A shift in U.S. policy that would remove American troops from Northeast Syria would jeopardize the gains U.S. troops and their partner Syrian Democratic Forces, or SDF, have fought – and sacrificed – to achieve.

“Raqqa’s stability exists because of that partnership, but it remains extremely fragile. ISIS sleeper cells are trying to find footholds, take advantage of Raqqa’s shortage of services, and make it harder for the U.S.-backed coalition to stop their reemergence. So far, U.S.-backed forces have been able to keep the pressure on enough to allow moms and dads I have met to push forward with their lives.  If Raqqa is not to become Baghdad in its worst moments, the pressure must be continued.  If those U.S.-backed forces are forced to go it alone, there will be four winners: ISIS, the Syrian regime, Russia and Iran.

“I have had the privilege of traveling to Northeast Syria five times since August 2017. And what you see on the ground is a story of fragile gains and forward momentum amid great challenge.  It is one of the few stories of significant, one-directional progress created by U.S. policy and executed by U.S.-backed forces in the post-9/11 conflicts.  Because of those U.S.-backed forces, where ISIS once ruled a level of stability now allows beauty shop owners, perfume entrepreneurs, civil society leaders and teachers to get back to work rebuilding their city and escaping extremism.

“That few Americans know fully the positive dividends of a policy executed in their names is a testament to this moment’s lack of attention on all things international.  It is also a reflection of the Trump administration’s understandable desire to assuage the concerns of NATO ally Turkey, which views the Kurds who have risked their lives to lead the fight against ISIS as terrorists.

“No one would argue that ignoring Turkey’s security concerns is the correct path for U.S. policy.  But neither is abandoning the troops whose young generation has laid down its life – over and over again, in city after city, in the ISIS fight.

“Walk through cemeteries in Kobani and Qamishil and see the white marble rows remembering daughters and sons killed battling ISIS.  Photos of young women and young men whose parents will never greet them or hug them again are pasted against the headstones.  These are the young people who have sacrificed all to free territory from ISIS control.  And these are the people who still today are fighting ISIS and seeking to bring real stability for the women and men who survived the horror of ISIS.  Little ones I’ve met who witnessed beheadings.  Moms who shielded their children’s eyes from hangings.    These forces risk their lives every day in the ISIS fight. And their work has allowed visitors to drive across the region for hours without getting shaken down or ripped off, or far worse, because of the security they have brought to the ground.  This is the tempered victory against ISIS that will be jeopardized if U.S. troops leave the region.”

Benny Avni / New York Post

“In what will likely mark the worst foreign-policy decision of his presidency to date, President Trump on Wednesday announced that he is ceding Syria to the jackals....

“Trump’s closest Washington allies panned the decision almost immediately.  ‘Withdrawal of this small American force in Syria would be a huge Obama-like mistake,” Sen. Lindsey Graham tweeted.

“Remember President Obama’s fateful 2013 decision to forgo enforcement of that infamous ‘red line’ against use of chemical weapons by the Damascus regime?  Just as then, leaving Syria now would mark a turning point in the war – for the worse – while delivering another blow to America’s prestige and global power.

“Wednesday’s decision contradicts numerous previous administration statements.  ‘We’re not going to leave (Syria) as long as Iranian troops are outside Iranian borders, and that includes Iranian proxies and militias,’ National Security Advisor John Bolton said in September.

“Last week, the president’s special envoy to the anti-ISIS coalition, Brett McGurk, told State Department reporters that ‘it would be reckless if we were just to say, well, the physical caliphate is defeated, so we can just leave now.  I think anyone who’s looked at a conflict like this would agree with that.’

“Well, apparently not everyone. So what made Trump decide, against all advice, to turn away from America’s Syrian commitments?

“Earlier this week, Trump was on the phone with Turkey’s president, Recep Tayyip Erdogan, who recently threatened to invade northern Syria to fight Kurds controlling large swaths of the Turkish-Syrian border. That phone call may well have triggered Trump’s decision.

“Turkey and America have a lot to discuss. Ankara, a partner in a project that created the world’s most formidable fighter jet, the F-35, made a deal with Russia to buy S-400 anti-aircraft missiles.  America wants the Turks to instead buy U.S.-made air-defense systems, and this week approved a $3.5 billion Patriot missile sale to Turkey.

“Ankara, meanwhile, wants Washington to extradite Erdogan’s bogeyman, Fethullah Gulen, an Islamic preacher who resides in Pennsylvania.  The U.S. has long resisted extradition, arguing that Turkey has no credible evidence for Gulen’s responsibility for a failed coup attempt against Erdogan in 2016.  Yet on Tuesday, Trump’s press secretary, Sarah Sanders, said America will ‘take a look at’ coughing up Gulen.

“Trump’s decision to leave Syria, then, could be one component in a complex deal with Erdogan. Without U.S. troops in the area, the Turks get a freer hand in dealing with the Kurds, while America gets – what exactly? It seems ‘The Art of the Deal’ writer blundered in making major concessions to Ankara upfront without getting enough concrete commitments in return.

“Meanwhile, the Kurdish fighters, who were America’s most reliable allies in chasing ISIS from Syrian territory, are left to the whims of Erdogan, who considers them anti-Turkish terrorists and who isn’t known for meting out mercy....

“Mostly, the implication is the removal of a major military bulwark against Iran and Hezbollah, which are trying to make permanent their presence in Syria, right on Israel’s border – a problem Bolton acknowledged in the recent past. Israel can’t be happy.

“Earlier in the week, Netanyahu touted Israel’s successes against Iran in Syria, adding, ‘We’re striking Iran [militarily] in Syria and of course the U.S. struck them economically.’  He may have stumbled on a top Trump foreign-policy principle: America will fight in the economic arena, leaving physical combat to allies and partners.

“But when we abdicate military responsibilities, as Trump has decided to do in Syria, the world’s most nefarious powers – in this case, Russia, Iran, the butcher Bashar al-Assad and Erdogan – take the spoils.

“And yes, as numerous members of Trump’s administration have warned, ISIS could soon follow in one form or another, as well. This time, Trump won’t be able to blame his predecessor.”

Tony Badran / USA TODAY

“The Iranians have been working to establish a so-called ‘land bridge’ or territorial continuum stretching from Tehran to the Mediterranean via Iraq and Syria. At present, the U.S.-controlled zone in eastern Syria poses a major obstacle to this objective. Already, Iranian-led Shiite militias are operating at the edges of the U.S. zone and could move in swiftly and connect the Iraqi and Syrian terrains. This would provide Iran with overland routes to deliver advanced weapons to Hezbollah in Lebanon, while building up offensive capabilities in Syria, including in the south, along the country’s border with Israel.

“In his remarks announcing America’s withdrawal from the Iran nuclear deal in May, Trump confirmed his administration would work to ‘block [Iran’s] menacing activity across the Middle East.’  In April, the president spoke of not wanting ‘to give Iran open season to the Mediterranean.’  It’s unclear what steps the administration now intends to take to make good on this stated objective. Although the withdrawal from Syria doesn’t eliminate all U.S. options, it does cede critical terrain to Iran.

“The withdrawal from Syria will also affect the administration’s economic pressure campaign against Iran and its regional assets. The U.S.-controlled zone in eastern Syria is home to the bulk of the country’s gas and oil fields, currently off limits to Assad.  Thus, for years, Iran has been subsidizing its Syrian ally’s energy needs, costing Tehran billions. The Assad regime, with Russian and Iranian support, will now prepare to retake these oil and gas fields....

“The Trump administration’s withdrawal from the Iran deal and announced campaign of maximum pressure on Tehran were important strategic moves to roll back Iran’s expansion in the Middle East.  But a precipitous U.S. withdrawal from Syria – giving Iran’s clients control of Syria’s energy resources and its forces freedom of movement across the region – poses a serious challenge to President Trump’s strategy.”

Editorial / Washington Post

“President Trump’s sudden move to yank U.S. troops out of Syria undermined at a stroke several foreign policy goals he has championed. The president promised to finish the job of destroying the Islamic State, but the withdrawal will leave thousands of its fighters still in place. He vowed to roll back Iran’s aggression across the Middle East, but his decision will allow its forces to entrench in the country that is the keystone of Tehran’s ambitions.  He promised to protect Israel, but that nation will now be left to face alone the buildup by Iran and its proxies along its northern border.

“The president’s top national security advisers had carefully developed and articulated a strategy of maintaining a U.S. presence in Syria until the Islamic State was beyond revival and Iran withdrew its forces – a plan they were defending up until this week.  Mr. Trump has again demonstrated, to them and to the world, that no U.S. policy or foreign commitment is immune to his whims....

“Mr. Trump has justified some of his most controversial decisions, including his continued support for Saudi Arabia’s Crown Prince Mohammed bin Salman, as needed to contain Iran’s threat to the United States and its allies. But the Syria withdrawal hands Tehran and its ally Russia a windfall. Iran has deployed thousands of fighters and allied militiamen to Syria and aspires to create a corridor to Lebanon and the Mediterranean, as well as a new front against Israel along the Golan Heights.  In reaction to that threat, Mr. Trump’s national security adviser, John Bolton, announced Sept. 24 that ‘We’re not going to leave [Syria] as long as Iranian troops are outside Iranian borders, and that includes Iranian proxies and militias.’

“U.S. ambitions in Syria have never been backed by adequate resources, and a case could be made that neither Congress nor the American public were prepared to support the mission suggested by Mr. Bolton. But Mr. Trump’s decision appears to have been precipitated by the bellicose rhetoric of Turkey’s Recep Tayypi Erdogan, who last week threatened – not for the first time – a military operation against Syrian Kurds, even though U.S. troops are positioned around them.  The autocratic Turkish ruler appears to have extracted favors from Mr. Trump in recent days, including the sale of U.S. Patriot missiles and a promise to reexamine the possible extradition of his rival, Fethullah Gulen, from Pennsylvania. If Mr. Trump received anything in return, he hasn’t disclosed it.

“The Syrian Kurdish forces, which have fought alongside the United States and played a crucial role in liberating most of eastern Syria from the jihadists, will be perhaps the foremost victims of Mr. Trump’s decision. Betrayed by Washington, they will now be subject to a military offensive by Turkey.  The stab in the back will send an unforgettable message to all who are asked to cooperate with the United States in the fight against terrorism: Washington is an unreliable and dangerous partner.”

Victoria Nuland / Washington Post

“With his decision to withdraw all U.S. forces about Syria, President Trump hands a huge New Year’s gift to President Bashar al-Assad, the Islamic State, the Kremlin and Tehran.  He also guarantees the reversal of U.S. military gains there and extinguishes any leverage Secretary of State Mike Pompeo and his special envoy for Syria, James Jeffrey, may have to drive a diplomatic settlement that meets the administration’s own goals of keeping and Islamic State and Iran out.  Most important, Trump falls into the same trap that President Barack Obama did when he withdrew all U.S. forces from Iraq in 2011.  Trump’s decision virtually ensures that security will disintegrate further, that the Islamic State and Iran will surge again, and that the United States will be compelled to come back into Syria at even greater military cost and in more adverse conditions that if we had stayed....

“U.S. diplomacy also died another sad death with Trump’s tweet. Special envoy Jeffrey has had some quiet successes in recent months, including helping to de-escalate tensions between Turkey and Russia over Idlib in September.  Jeffrey had been poised to take on the job of midwifing a new political path for Syria, anticipating the likely failure of Russian efforts to negotiate a new constitution by Dec. 31.  If the United States withdraws, not even Washington’s Syrian friends will participate in a U.S.-led diplomatic push. They’ll be too busy defending themselves from the Islamic State and Iran.

“A few thousand tweets ago, Trump criticized his predecessor for leaving Iraq to the Islamic  State in 2011, then having to return in force in 2014. The United States currently has 5,200 troops deployed to Iraq and spends $13.6 million-per-day on military operations there. By that measure, the president should consider our 2,000 troops in Syria a bargain, an insurance policy and vital leverage against far worse outcomes for us, for Syria and for the global balance of power.”

David Ignatius / Washington Post

“This decision scares me partly because I’ve seen with my own eyes the hard-won gains we may be giving up, in visits to the secret bases where this war was waged.  It’s hard to describe the competence of American troops in Syria without sounding corny.  Suffice it to say they found a way to project American power with maximum damage to the enemy and minimum cost for the United States.

“We can grant some of Trump’s larger points, even as we assess the potential costs of his decision. Every war must end, as strategist Fred Charles Ikle once remarked about Vietnam, and the war against the Islamic State had all but ended.  As the terrorist threat receded, so did the legal rationale for deploying American troops – the overstretched authorization to use military force against terrorists passed on Sept. 14, 2001.

“The White House shouldn’t be faulted, either, for stressing that the United States’ national military strategy now focuses on the threat of great-power competitors, such as Russia and China, rather than terrorists.  U.S. strategy became lopsided after 9/11, misallocating resources, and now it’s time for a rebalancing.  I get all that.

“And finally, analysts who’ve followed Syria knew that at some point, the United States would have to retreat from its all-in support for the Syrian Kurdish militia that fought so bravely, to the last man and woman, to liberate eastern Syria from the torture chamber of the Islamic State.  The Kurds want a mini-state east of the Euphrates, but as special envoy James Jeffrey said this week at the Atlantic Council, ‘we do not have permanent relationships with substate entities.’

“The United States was going to have to break the Kurds’ hearts eventually (as we seem to do with so many of our brave allies). But not now, not when Turkish President Recep Tayyip Erdogan was threatening an invasion, trying to jawbone the United States into abandoning its allies. This kind of bullying shouldn’t work against a superpower. But sadly, it just did, with lasting cost to American credibility.”

Editorial / Wall Street Journal

“President Trump startled the world Wednesday, and overrode some of his own advisers, by announcing an abrupt withdrawal of all U.S. forces from Syria.  The decision may fulfill a campaign promise, and it may be popular with many Americans. But Mr. Trump is also sending an Obama-like signal of retreat that will have damaging consequences for his Iran strategy and U.S. interests.

“The President announced the withdrawal in a tweet that took credit for defeating Islamic State, which he said was ‘my only reason for being there during the Trump Presidency.’  Mission accomplished?  Not so fast.

“Give Mr. Trump credit for accelerating the coalition campaign against ISIS and erasing its claim to be a territorial caliphate.  Yet ISIS still holds ground on the border of Syria and Iraq, and it has regrouped into smaller cells waiting for the military space to re-form.  Barack Obama also declared victory over Sunni extremists when he withdrew all U.S. forces from Iraq.  Islamic State formed in the vacuum.

“A Pentagon inspector general report last month highlighted Islamic State’s persistence.  ISIS has ‘continued to move underground and solidify as an insurgency in Iraq and Syria,’ the report said.  ‘Despite the loss of almost all of its territory, the terrorist organization kept some of its bureaucratic structures in place and continued to raise funds. These operations, in combination with concerns about both the ability of the Iraqi Security Forces to operate without Coalition support and the ongoing Syrian civil war, raised the potential for an ISIS resurgence.’

“Mr. Trump inherited a mess in Syria, and by the time he took office it was far more difficult to enforce a no-fly zone to protect opponents of the Bashar Assad regime. But the U.S. presence in northeastern Syria amounted to a de facto no-fly zone that allowed the Kurdish and Arab Syrian Democratic Forces to clear out as many ISIS cells as possible.  Keeping 2,500 forces in northeast Syria to continue this work is hardly an exorbitant commitment.  It is not nation-building.

“The stakes are also larger than ISIS.  Mr. Trump made his withdrawal decision soon after  a phone call with Turkey’s Recep Tayyip Erdogan, who has been threatening to attack the Kurds in Syria. Trump officials insist they aren’t abandoning our allies, but the SDF will now have to make its own survival calculations in striking deals with Mr. Erdogan, Mr. Assad and his Russian and Iranian backers.

“Withdrawing U.S. troops greatly reduces U.S. influence on a diplomatic solution to the Syrian civil war. The U.S. can complain at the United Nations, and it can block money for rebuilding the country, but facts on the ground count for far more. That’s especially true for Iran, which is turning southern Syria into a forward operating base against Israel.

“U.S. officials said Wednesday that their goal of pushing Iran out of Syria hasn’t changed. But how?  By pulling out of Syria, Mr. Trump is missing a chance to impose military costs on Iran’s adventurism.  The mullahs in Tehran will be overjoyed and see signs of another U.S. President’s weakness.  They’ll be less likely to adjust their nuclear program. And Israel will have a harder time stopping Iran’s military and militia buildup in southern Syria, which means growing risks of a regional war.

“Mr. Trump has benefitted in his first two years by projecting an image of strength that Mr. Obama never did.  He struck back against Assad’s use of chemical weapons, revoked the Iran nuclear deal, and sold lethal arms to Ukraine to resist Russian aggression. Retreat in Syria is a sign of weakness that friends and foes will notice.”

Josh Rogin / Washington Post

“When the Assad regime and Iran take over eastern Syria, the United States will realize it has made a long-term strategic blunder. But in the shorter term, millions of Syrians will suffer. The Assad regime, Russia and Iran are their killers, but Trump’s tweet sealed their fate.”

Hugh Hewitt / Washington Post

“When the only people applauding a major national security decision are the ‘me and my shadow’ team of Sens. Rand Paul (R-Ky.) and Mike Lee (R-Utah), the conclusion that a major error has been made is inescapable.

“President Trump has made such a major error....

“This decision puts one of Trump’s signal achievements – the defeat of the Islamic State – in grave danger.  As much as it would pain veterans of the Obama administration to admit, it was Trump who changed the rules of engagement in the battle with the Islamic State.  It was Trump who oversaw their rout and retreat. But the Islamic State is not defeated. And even if the Islamic State stays on its collective heels, those who would replace them – Iran, Bashar al-Assad’s regime and Russia – are greater threats to Americans in Iraq and to our ally Israel.”

Hewitt had Retired Gen. Stan McChrystal as a guest on his radio show Thursday, after the decision to exit Syria.

HH: And in terms of ISIS being defeated, there are still 15-20,000 flying the black flag.  You went one on one with these guys... Do you think they’re eradicated?  Are they still a risk?

SM: I think they’re a big risk.  And ISIS is as much an idea as it is number of fighters. So you can get fixated on counting heads.  In reality, it’s a franchise kind of system. It’s very powerful still, and it needs to be dealt with.

HH: Okay, so now when soldiers hear they’re going home, they’re usually pretty happy. But do you think the soldiers who get sent to Syria are unhappy about doing what is in essence garrison work at this point, right?

SM: I think they think it’s important. The ones I’ve talked to think it’s important. And they also know, particularly this generation, if we don’t get it done, they’ll be back.

Afghanistan: Reports, citing unnamed officials, say 7,000 U.S. troops, about half the remaining U.S. military presence – could go home in months.  According to the Washington Post, outgoing White House Chief of Staff John Kelly and National Security Adviser John Bolton were among those in opposition to Trump’s apparent move.

Sen. Lindsey Graham tweeted: “The conditions in Afghanistan make American troop withdrawals a high risk strategy. We are setting in motion the loss of all our gains.”

According to a quarterly report by the U.S. Special Inspector General for Afghan Reconstruction (Sigar), the Afghan government currently controls or influences only 55.5% of the country’s districts – the lowest level recorded since it began tracking the data in 2015.

Afghan officials said they are not concerned about the withdrawal.

“The fact that a few thousand foreign troops whose roles are primarily advisory and technical support will exit from Afghanistan will not have an impact on security situation,” presidential spokesman Harun Chukhansori told the BBC.

He added that “Afghan security forces have had full responsibility of security affairs” since 2014.  However, U.S. military reports suggest that Taliban control large swathes of Afghanistan – while a BBC study in January found that Taliban fighters were openly active in 70% of the country.

Iraq: Turkish warplanes struck PKK (Kurdistan Workers Party) targets in northern Iraq last Saturday, ignoring protests from Baghdad that said Turkey’s repeated airstrikes violate Iraqi sovereignty and endanger civilians. 

Turkey said it would continue attacking the PKK, which it views as terrorists (see also Syria), as long as it sought refuge in Iraq.

Turkey says the militants use the mountainous northern Iraqi region as a base for deadly attacks inside Turkey, where the Kurdish separatist group has waged an insurgency since the 1980s.

Turkish President Erdogan told supporters last week, “We will bury them in the holes they dug.”

Again, Turkey considers the YPG militia in Syria, which the U.S. has backed, as an extension of the PKK.

Somalia: The U.S. said it killed 62 fighters from the Islamist group al-Shabab in six air strikes in Somalia last weekend (Saturday and Sunday).  These were the deadliest air attacks in Somalia since November 2017, when the U.S. said it killed 100 militants.

The U.S. has a huge military base in neighboring Djibouti, from where it launches such attacks.

Yemen: Pro-government officials said a ceasefire in Yemen’s war was broken minutes after coming into effect.

The warring sides had agreed to a truce that was to be implemented in the port city of Hudaydah, where 90% of the aid relief for the country comes in, but there were reports of clashes between the Houthi rebels and pro-government forces in the city.

Both sides had agreed to the ceasefire at UN-sponsored talks in Sweden last week, but at week’s end it’s tough to determine where things stand.  More than 22 million Yemenis need some form of aid, with eight million on the verge of starvation.

Saudi Arabia: The kingdom denounced U.S. Senate resolutions calling for an end to U.S. military support for the war in Yemen and blaming Crown Prince Mohammed bin Salman for the murder of journalist Jamal Khashoggi, saying they were based on unsubstantiated claims.

The votes were a rare rebuke to President Trump, though largely symbolic. To become law, they would need to pass the House of Representatives, which wasn’t happening under Republican control.  With the incoming Democratic House, though, I’m not sure where things would stand.

North Korea: State media in Pyongyang on Thursday proclaimed North Korea’s commitment to the “denuclearization of the Korean peninsula,” but this includes “completely eliminating the U.S. nuclear threat to Korea.”

President Trump and North Korean leader Kim Jong Un issued a joint statement after their Singapore summit in June that reaffirmed the North’s commitment to “work toward complete denuclearization of the Korean Peninsula” and gave U.S. guarantees of security to North Korea.

But conflicting views of what exactly “denuclearization” means have complicated negotiations, now stalled, ever since.

Thursday’s commentary, released by North Korea’s state-run KCNA news agency, is one of the clearest explanations since June of how Pyongyang sees denuclearization.

“When we refer to the Korean peninsula, the term encompasses the area of DPRK plus South Korean territory where U.S. nuclear weapons and other forms of aggression forces are deployed,” the editorial said, using the initials of North Korea’s official name, the Democratic People’s Republic of Korea.

“When we refer to the ‘denuclearization of the Korean Peninsula’ as well, it should be correctly understood as removing all nuclear threat factors from not only the North and the South but from all neighboring areas.”

North Korea rejects American calls for it to unilaterally denuclearize, and Washington should abandon the “delusion” of forcing Pyongyang to abandon its nuclear weapons “via pressure and oppression,” the article said.

But the Trump administration has said it will not lift sanctions on North Korea until more progress has been made toward the verifiable denuclearization of North Korea.

Washington has also rejected any suggestion that it would reduce its military presence in the region as part of a deal with North Korea, but in a surprise move after the summit, Trump announced that the Pentagon would cancel most of its largest military exercises conducted with the South Koreans.

Trump has said he is working to meet with Kim again sometime early next year.

The KCNA commentary read: “It is obvious that denuclearization of the Korean Peninsula is a joint business that cannot be achieved unless both Korea and the United States strive together.  In this sense, the denuclearization of the Korean Peninsula should be defined as ‘completely eliminating the U.S. nuclear threat to Korea’ before it can eliminate our nuclear deterrent.”

Earlier, North Korea warned that new U.S. sanctions on three of its top officials could “block the path to denuclearization on the Korean peninsula forever” and could result in a return to “exchanges of fire.”

In the meantime, satellite imagery has shown that North Korea is continuing with its nuclear and missile programs.

“The U.S. should realize before it is too late that ‘maximum pressure’ would not work against us,” an official statement said.  It proposed that relations be improved “on a step-by-step approach.”

President Trump has said nothing on this topic this week.

China: President Xi Jinping said China would stick to its policy agenda, despite pressure from the U.S. and others to allow more competition in its economic system and reduce support for state industry.

In a highly-anticipated speech to an audience of party officials, military leaders and entrepreneurs, Xi said “no one is in the position to dictate to the Chinese people what should and should not be done.”  The 80-minute address in Beijing was held to mark the 40th anniversary of the Reform and Opening Up campaign that unleashed the country’s economic boom under then leader Deng Xiaoping.

Xi presented his wide-ranging agenda as the logical outcome of the country’s post-1978 “reform era” and Chinese history more broadly.  He reasserted his contention that the country had entered a “new era” under his leadership and was poised for a bigger role in world affairs.

But while the speech was watched for potential policy announcements, Xi offered no new ideas to boost the economy or assuage U.S. concerns. Instead, he reiterated the need for the Communist Party to exercise leadership and control over all aspects of the country’s development.

“What and how to reform must be based on the overarching goal of improving and developing the socialist system with Chinese characteristics,” Xi said.  “We will resolutely reform what should or can be changed, but will never reform what cannot be changed.”

In terms of the trade war with the U.S., Xi offered no insight into how his government might assuage U.S. demands in ongoing trade talks, including calls to roll back support for state-owned enterprises and key technological industries.

Instead, Xi reaffirmed China’s pursuit of “indigenous innovation” in “core technologies.”

China, Xi kept reiterating, can’t be dictated to, saying:

“We will resolutely fight an uphill battle to prevent and defuse major risks, lift people out of poverty, and prevent and control pollution,” Xi said.  “China will promote trade convenience and continue to play the role of a responsible major nation.”

But the No. 1 lesson China can draw from the 40 years of success is that the country must stick to the leadership of the Communist Party, Xi said.

“The practices of reform and opening up in the past 40 years have shown us that the Chinese Communist Party leadership is the fundamental character of socialism with Chinese characteristics...east, west, south, north, and the middle, the party leads everything,” he said.

“Every step in reform and opening up will not be easy, and we will face all kinds of risks and challenges in the future and we may even encounter unimaginable terrifying tidal waves and horrifying storms,” Xi said.

“Only by improving the party’s leadership and governance...can we ensure the ship of reform and opening up will sail forward.”

And:

“China will never grow at the cost of other countries’ interests but will never give up its legitimate rights and interests...China’s development does not pose a threat to any other country.  No matter how far China develops, it will never seek hegemony.”

Russia: In his annual yearend press conference Thursday, President Vladimir Putin warned a failure to begin negotiations on an extension to a key U.S.-Russian nuclear arms control treaty is leading the world to “a very risky precipice.”

Signed in 2010, the New Start agreement caps the number of nuclear warheads held by the two nations. It expires in 2021, and analysts have warned it could take years to negotiate an extension.

Putin has said Washington’s vow to pull the U.S. out of the INF Treaty, another treaty banning missiles with a range of 500-5,500km, also made the world less safe.

“It is hard to imagine what will happen next.  If those [U.S.] missiles would be positioned in Europe, we will need to make sure we are safe,” he said.  “We are not striving for an advantage, but parity, to guarantee our safety.”

At the press conference, which lasted 3 hours and 45 minutes, Putin opined on nuclear war:

“If, God forbid, something like that were to happen, it would lead to the  end of all civilization and maybe also the planet... These are serious questions and it’s a real shame that there’s a tendency to underestimate them.  It is a legitimate issue, and it is even growing.”

“We are essentially witnessing the breakdown of the international order of arms control.”

Ukraine: Ukrainian Orthodox leaders on Saturday approved the creation of a unified church independent of the Moscow Patriarchate and elected a leader to head that new church – a move that could exponentially raise tensions with neighboring Russia.

Spiritual leaders couched their efforts to create an independent church in patriotic rhetoric.  Father Sergei Dmitriev said – given Ukraine’s ongoing conflict with Russia – “we should have our own church, not an agent of the Kremlin in Ukraine.”

Ukrainian President Petro Poroshenko has made the creation of a new church a key campaign issue.

“Ukraine was not, is not, and will not be the canonical territory of the Russian church,” Poroshenko told the gathering, adding that creating an independent Ukrainian Orthodox Church was now a matter of national security.

“This is a question of Ukrainian statehood,” Poroshenko said.  “We are seizing spiritual independence, which can be likened to political independence. We are breaking the chains that tie us to the (Russian) empire.”

In his press conference, Putin said of Ukraine’s move:

“Undoubtedly, it has a political rationale.  Nothing good will come of it for religious freedom in general.  And I’m most concerned about the division of property that will follow.  It’s already happening, effectively.  It could...get bloody.”

Random Musings

--Presidential tracking polls....

Gallup: 38% approval of Trump’s job performance, 57% disapproval (Dec. 16).  86% of Republicans approve, 37% of Independents.
Rasmussen: 49% approval, 50% disapproval (Dec. 21)

--The above-noted Wall Street Journal/NBC News survey had President Trump with a 43% approval rating, including 85% of Republicans.  54% of Americans disapproved.

62%, though, disagreed with the idea that Mr. Trump has been honest and truthful when it comes to the Russian investigation, compared with 56% in an August survey of registered voters.  45% said special counsel Robert Mueller’s investigation should continue, compared with 34% who said it should end.

--In the first CNN/Des Moines Register poll on the 2020 race, former Vice President Joe Biden leads the pack among likely Democratic caucusgoers in Iowa at 32 percent, with 19 percent selecting Sen. Bernie Sanders and 11 percent Texas Rep. Beto O’Rourke.

Now of course such a poll this early is ridiculous, but it will no doubt influence these three in making their decisions early in 2019, and it makes total sense that stories are already emerging of a Biden-O’Rourke ticket.  I can’t imagine ever voting for that, but it would appeal to a lot of Democratic voters, and maybe Independents, and if the two would announce that early, like by March, that would be powerful.

Meanwhile, as I do every four years, I hope to get out to Iowa in August for the State Fair to hear a few candidates, and, more importantly, talk to the locals over a few beers...the only way to get a true sense of the current mood.

--Tennessee Republican Sen. Lamar Alexander announced he would not run for re-election in 2020 and would step down after three terms in the Senate, where he has cut bipartisan deals with Democrats on issues including education and health care.

Alexander’s departure will come just two years after fellow Tennessee  Republican Sen. Bob Corker departs, Corker replaced by GOP Rep. Marsha Blackburn.

--Rep. Martha McSally (R-Ariz.) was appointed by Arizona Gov. Doug Ducey (R) to fill John McCain’s Senate seat, a good selection.  She will have to run in a special election in 2020 for the remaining two years of McCain’s term, and assuming she wants to run for reelection in 2022, she could conceivably spend the next four years campaigning for the seat.

Just last month, McSally lost a close race to Democratic Rep. Kyrsten Sinema, when she was aiming to replace retiring Republican Sen. Jeff Flake.  So McSally becomes her midterm opponent’s Senate colleague.

McSally had faced opposition from the McCain family, as she ran against Sinema on a pro-Trump platform, and apparently insulted the family and McCain’s memory by failing to acknowledge him when touting legislation that was actually named for him – the John S. McCain National Defense Authorization Act for Fiscal Year 2019.

But McSally recently met with Cindy McCain and McCain reportedly accepted her apology for the oversight.  McSally also was classy in defeat to Sinema.

--Departing House Speaker Paul Ryan gave his farewell speech Wednesday, touting the passage of last year’s tax overhaul as the crowning achievement of his two-decade career, though Ryan acknowledged he failed to deliver on some long-promised conservative reforms.

“We went from the worst tax code in the industrialized world to one of the most competitive,” Ryan said.  “That’s something I worked on literally my entire adult life, and it’s something that will help improve the lives of people for a long time to come.”

But the deficit is growing rapidly, and this after Ryan made reducing it a priority of his years in Congress.  Ryan was a total failure in failing to make progress on entitlement reform for programs like Social Security and Medicare.

“I acknowledge plainly that my ambitions for entitlement reforms have outpaced the political reality, and I consider this our greatest unfinished business,” Ryan said.  “Ultimately, solving this problem will require a greater degree of political will than exists today. And I regret that.”

Ryan in his speech decried the “frenzy of politics today,” and while he didn’t mention President Trump, he was critical of the social media-fueled controversy that has become a hallmark of Mr. Trump’s time in the White House.

“We sort of default to lazy litmus tests and shopworn denunciations. It is just emotional pabulum fed from a trough of outrage,” he said.  “It’s exhausting.  It saps meaning from our politics.”

Tell me about it.

--The President is fixated on the market as a barometer of his performance.  So I looked at the numbers from Inauguration through Thursday.

The S&P 500 was up 8.6%., 1/20/17-12/20/18.  [2271.31 – 2467.42]

It was up 54.9% under Barack Obama over the same time period, 1/20/09-12/20/10.  [805.22 – 1247.08]

--From the Dec. 17-24 edition of Army Times:

“President Donald Trump assumed the chairman of the Joint Chiefs of Staff earned a multi-million dollar salary until he was corrected by White House Chief of Staff John Kelly, according to a report in the Washington Post.

“The anecdote about Trump significantly overestimating the salary of the nation’s top military officer came as part of a larger report on the president’s lack of knowledge about federal salaries, spending and deficits. According to the paper, the topic came up while Kelly and Trump were watching television together in recent months.

“The newspaper reported that when Kelly asked Trump how much he thought the Joint Chiefs chairman earns, the president responded with a guess of $5 million. The position actually pays less than $200,000.

“According to the report, when corrected by Kelly, Trump suggested that Gen. Joseph Dunford, the current chairman of the Joint Chiefs, should get a large raise and noted how many stars he had on his uniform....

“Trump frequently praises the military in public speeches, but has made several mistakes in reference to military pay over the last year.

“On several occasions, he has claimed that he gave military members their first raise in a decade as part of the fiscal 2019 defense budget.  In fact, troops have received a pay raise every year since the 1970s.  The 2.6 percent pay raise is the largest the force has seen in a decade, but is based on a formula calculating the expected rise in civilian salaries.”

--After 23 years, The Weekly Standard, a primary voice of conservative Washington that found itself out of step with the Trumpward turn in the Republican Party, announced it was ceasing publication.

The magazine’s parent company, Clarity Media Group, cited a steep decline in subscriptions and revenues, but editorial leadership has clashed with ownership in some instances over its critical coverage of President Trump and the hard-right views of his defenders.

The Standard’s editor in chief, Stephen F. Hayes, one of my favorites, pronounced himself “profoundly disappointed” by the decision. The editor of Commentary magazine, John Podhoretz, who was a co-founder of The Standard in 1995, along with William Kristol, described the closing as a “murder” and “an entirely hostile act” perpetrated by malevolent owners.

It seems that in the end, billionaire conservative businessman Philip F. Anschutz, who controls Clarity Media, didn’t want to own the leading Trump-skeptical publication in conservative media.

I was a subscriber to The Standard for about ten years in its early years, and it was probably my first exposure to the likes of Charles Krauthammer, P.J. O’Rourke, and Robert Kagan.  Outstanding journalism...and entertaining.

I’m sorry to see it go.  And best of luck to its staffers.

President Trump, however, had to dance on The Standard’s grave;

“The pathetic and dishonest Weekly Standard, run by failed prognosticator Bill Kristol (who, like many others, never had a clue), is flat broke and out of business.  Too bad.  May it rest in peace!”

--The U.S. population grew at its slowest rate in over eight decades in the past year, with growth in the South and West continuing to outpace the Northeast and Midwest, according to figures from the Census Bureau.

The numbers, covering the year ended July 1, show the country’s population rose by 0.6% to 327.2 million people; the lowest rate since 1937 (data going back to 1901).

These figures are important in terms of which states are likely to gain or lose congressional seats after the 2020 census.

If the House of Representatives were apportioned based on this year’s data, Texas would gain two seats, for example, while New York and Pennsylvania would be among those losing a seat.

States backing President Trump in 2016 would gain a net two votes in the Electoral College if House seats were allocated according to the new census numbers.

Nevada, Idaho, Utah, Arizona and Florida saw the highest rates of population growth in the country, the new data show.

--The Catholic Church in Illinois withheld the names of at least 500 priests accused of sexual abuse of minors, per a scathing report from the state’s attorney general.

The preliminary report by Attorney General Lisa Madigan concludes that the Catholic dioceses in the state are incapable of investigating themselves and “will not resolve the clergy sexual abuse crisis on their own.”

Cardinal Blasé J. Cupich, the archbishop of Chicago, said in a statement: “I want to express again the profound regret of the whole church for our failures to address the scourge of clerical sexual abuse.

“It is the courage of victim-survivors that has shed purifying light on this dark chapter in church history.”

So pathetic, and tragic.

---

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

God bless America.

---

Gold $1259
Oil $45.42...down almost $6!

Returns for the week 12/17-12/21

Dow Jones  -6.9%  [22445]
S&P 500  -7.1%  [2416]
S&P MidCap  -7.0%
Russell 2000  -8.4%
Nasdaq  -8.4%  [6332]

Returns for the period 1/1/18-12/21/18

Dow Jones  -9.2%
S&P 500  -9.6%
S&P MidCap  -15.2%
Russell 2000  -15.9%
Nasdaq  -8.3%

Yuck!

Bulls 39.3
Bears 21.4

Merry Christmas!!! 

Brian Trumbore