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01/12/2019

For the week 1/7-1/11

[Posted 11:00 PM ET, Friday]

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Edition 1,031

Trump World

President Trump renewed a threat to declare a national emergency to fund the construction of a wall on the Mexican border, as the partial government shutdown becomes the longest in U.S. history as of tomorrow, Saturday.  800,000 received $0.00 on their paychecks today, the first payday of the shutdown, amid growing protests.

The president has been saying that the wall, a key campaign pledge, was necessary to tackle a security crisis on the border.

Democrats say the wall is a waste of taxpayers’ money, some calling it “immoral.”

President Trump has refused to sign legislation to fund and reopen the government if it does not include $5.7 billion for the wall, egged on by the likes of Ann Coulter, Rush Limbaugh, and Sean Hannity.

As for declaring a national emergency, he reissued the threat on a visit to the border at McAllen, Texas, in the Rio Grande Valley, saying that if Congress did not approve funding, he would “probably...I would almost say definitely” declare a national emergency to bypass lawmakers.

“I have the absolute right to declare a national emergency,” he said.

Historic precedence for such a move has been undertaken in times of war and national emergency, funds normally coming from the Department of Defense.

But in bypassing Congress, the president would undoubtedly be sparking a big court challenge and cries of abuse of executive powers.

There are reports the White House is considering diverting some of the $13.9 billion allocated last year for disaster relief, such as in Puerto Rico, Texas and California, to pay for the wall.  The White House is denying these reports.

Declaring a national emergency would allow President Trump to reopen the government, while at the same declaring he had fulfilled a campaign promise.

Trump ally (most of the time, these days), Republican Sen. Lindsey Graham (S.C.) said at this point there was no other pathway forward than to declare a national emergency, tweeting today:

“Mr. President, Declare a national emergency NOW. Build a wall NOW.”

Down in McAllen, Tex., Thursday, President Trump said, “If we don’t have a barrier...you’re not going to be able to solve this problem,” adding the people faced “grueling problems” and a “lot of death” without it.

“They say a wall is medieval... There are some things that work,” said the president.

Today, Trump said he wasn’t planning any imminent declaration of a national emergency, saying it was “up to Congress” to pass a spending bill funding a barrier.  Trump called an emergency declaration an “easy solution” but added, “I’m not going to do it so fast.”

Tuesday, Trump addressed the nation from the Oval Office for a first time, saying the wall was needed to stem a “growing humanitarian and security crisis at our southern border,” involving “thousands of illegal immigrants.”

[As part of the Democrats’ response, Speaker Nancy Pelosi said: “The president is rejecting these bipartisan bills, which would reopen government, over his obsession with forcing American taxpayers to waste billions of dollars on an expensive and ineffective wall, a wall he always promised Mexico would pay for.”  But Pelosi and her partner, Senate Minority Leader Charles Schumer, showed no sign of compromise, refusing to talk about border security until the government is funded.]

Wednesday, the latest face-to-face negotiations between Trump and Republican and Democratic lawmakers failed miserably amid acrimonious calls from both sides, a frustrated Trump walking out, saying “Bye-bye.”

At one point, Sen. Schumer told Trump that federal workers were being hurt by the shutdown and asked why he wouldn’t reopen the government.  “Because you won’t give me what I want,” Schumer quoted Trump as saying.  [Wall Street Journal]

Editorial / Wall Street Journal

“With Democrats in Congress refusing to appropriate $5.7 billion for a border wall, President Trump now says he may declare a national emergency.  He’s probably right that he has the legal authority, but it would set a bad precedent that conservatives who believe in the separation of powers could live to regret.

“Mr. Trump may declare an emergency that would let him reallocate funds that Congress has appropriated for military construction to build his wall.  Before visiting the border on Thursday, he warned that if negotiations with Democrats don’t ‘work out, probably I will do it.  I would almost say definitely.’

“An emergency declaration could let Mr. Trump end the shutdown without conceding an inch to Speaker Nancy Pelosi, but it would strain the limits of his executive authority....

“While a President may sometimes need to act with dispatch, abuses of executive power prompted Congress to pass the National Emergencies Act of 1976. The law requires the President to activate his powers under one of 130 or so statutes that authorize executive emergency actions.

“Members of Congress with a two-thirds vote may revoke an emergency declaration, but the President otherwise enjoys wide latitude within his statutorily delegated powers.  Mr. Trump’s advisers have cited a statute that allows the Defense Secretary during a national emergency ‘to undertake military construction projects, not otherwise authorized by law that are necessary to support such use of the armed forces.’

“Because President Trump has deployed troops to the border, he theoretically could reallocate some of the $10 billion or so unobligated military construction funds for a wall.  This would be a broad interpretation of the law since a wall is not necessary to support troops. But the Supreme Court has nearly always upheld executive actions pursuant to delegations of Congress....

“Republicans rightly criticized Barack Obama for governing by fiat. While President Trump might be on sounder legal footing than President Obama was when he legalized millions of undocumented immigrants, he would be spending scarce military funds essentially to fulfill a campaign promise.

“A wall would cost tens of billions of dollars and take years to build, yet it would neither fix the immediate challenges at the border nor longer-term problems with the immigration system.  More immigration judges and detention facilities are needed to manage the surge of migrants from Central America. Loopholes in the asylum system should be closed.

“But the pull to migrate to America will remain as long as the economy is humming, which is why Congress should expand the legal pathways for immigration.  One danger is that an emergency declaration would further poison prospects for immigration reform as Barack Obama’s orders did....

“The left’s hyperbolic warnings about an imperial Trump Presidency haven’t borne out, and his Administration’s uses of executive power have for the most part been restrained and legally careful. A political spending fight over the wall doesn’t warrant a national-emergency raid on military funds.”

Fareed Zakaria / Washington Post

“Watching the struggle over funding for a border wall, I am struck by the way in which, in one sense, President Trump has already achieved success.  He has been able to conjure up a crisis out of thin air, elevate this manufactured emergency to national attention, paralyze the government and perhaps even invoke warlike authority and bypass Congress.  He may still fail, but it should worry us that a president – any president – can do what Trump has done.

“Let’s be clear: There is no crisis.  The number of undocumented immigrants in the United States has been declining for a decade. The number of people caught trying to sneak across the southern border has been on a downward trend for almost 20 years and is lower than it was in 1973.

“As has often been pointed out, far more people are coming to the U.S. legally and then overstaying their visas than are crossing the southern border illegally. But it’s important to put these numbers in context.  More than 52 million foreigners entered the U.S. legally in fiscal year 2017.  Of this cohort, 98.7 percent left on time and in accordance with their visas.  A large portion of those remaining left after a brief overstay, and the best government estimate is that maybe 0.8 percent of those who entered the country in 2017 had stayed on by mid-2018.

“As for terrorism, the Cato Institute has found that, from 1975 to 2017, ‘there have been zero people murdered or injured in terror attacks committed by illegal border crossers on U.S. soil.’

“As for drugs, the greatest danger comes from fentanyl and fentanyl-like substances, which are at the heart of the opioid crisis.  Most of this comes from China, either shipped directly to the United States or smuggled through Canada or Mexico.  Trump has addressed the root of the problem by pressing the Chinese government to crack down on fentanyl exports, a far more effective strategy than building a physical barrier along the Mexican border.

“Even the Drug Enforcement Administration acknowledged in a report last year that while the southern border is the conduit for most of the heroin entering the United States, the drug typically comes through legal points of entry, hidden in cars or mixed in with other goods in tractor-trailers.  In other words, a wall would do little to stanch the flow.

“And yet, the power of the presidency is such that Trump has been able to place this issue center-stage, shut down the government, force television networks to run an error-ridden, scaremongering Oval Office address, and now perhaps invoke emergency powers. This sounds like something that would be done by Presidents Vladimir Putin, Recep Tayyip Erdogan or Abdel Fatah al-Sissi, not the head of the world’s leading constitutional republic.”

Trump tweets related to the shutdown and the Wall:

“Just left a meeting with Chuck and Nancy, a total waste of time.  I asked what is going to happen in 30 days if I quickly open things up, are you going to approve Border Security which includes a Wall or Steel Barrier?  Nancy said, NO. I said bye-bye, nothing else works!”

“H1-B holders in the United States can rest assured that changes are soon coming which will bring both simplicity and certainty to your stay, including a potential path to citizenship. We want to encourage talented and highly skilled people to pursue career options in the U.S.”

“Humanitarian Crisis at our Southern Border.  I just got back and it is a far worse situation than almost anyone would understand, an invasion!  I have been there numerous times – The Democrats, Cryin’ Chuck and Nancy don’t know how bad and dangerous it is for our ENTIRE COUNTRY....

“....The Steel Barrier, or Wall, should have been built by previous administrations long ago. They never got it done – I will.  Without it, our Country cannot be safe. Criminals, Gangs, Human Traffickers, Drugs and so much other big trouble can easily pour in. It can be stopped cold!”

“I often said during rallies, with little variation, that ‘Mexico will pay for the Wall.’  We have just signed a great new Trade Deal with Mexico. It is Billions of Dollars a year better than the very bad NAFTA deal which it replaces.  The difference pays for Wall many times over!”

[Ed. This just isn’t true.]

A Reuters/Ipsos poll released Tuesday found that 51 percent of adults believe Trump deserves most of the blame for the shutdown, vs. 32 percent who blame congressional Democrats, with 7 percent blaming congressional Republicans, the national opinion poll having been conducted between Jan. 1 and 7, so prior to the Tuesday address to the nation and Trump’s visit to the border, not that either was expected to change many minds.

The poll also found that 41 percent support building additional border fencing, down 12 points from a similar poll that ran in the first week of 2015, while 35 percent support a congressional spending bill that includes funding for the wall, and 25 percent support Trump’s decision to keep the government closed until Congress approves funding for the wall.

77 percent of Republicans in the Reuters/Ipsos poll want additional border fencing, and 54 percent said they support Trump shutting down the government until Congress approves funding for the wall.

--Michael Cohen, President Trump’s former personal lawyer who implicated him in a scheme to pay hush money to two women claiming to have had affairs with him, has agreed to testify before the House Oversight Committee next month, Feb. 7, and give “a full and credible account” of his work for Mr. Trump.

Needless to say, assuming it comes off (I wouldn’t be so sure, yet), the stage is set for what will be must-see television, potentially explosive and damaging to President Trump’s image.

Cohen said in part in a statement: “I look forward to having the privilege of being afforded a platform with which to give a full and credible account of the events which have transpired.”

Cohen has pleaded guilty in federal court in Manhattan last August to tax fraud, making false statements to a bank and a campaign finance violation.  Cohen said the last charge was the result of payments he made at the behest of then-candidate Trump to a woman who was prepared to go public during the 2016 campaign about an affair with Trump years earlier.

Cohen has spent 70 hours with federal prosecutors in Manhattan as well as with special counsel Robert Mueller.

Meanwhile, Paul Manafort’s lawyers did a shoddy job of redacting a new court filling – inadvertently revealing that he’s accused of sharing polling data from the 2016 presidential election with an alleged Russian spy.

Attorneys for the former Trump campaign chairman tried to obscure this and other revelations, but the text beneath the black bars could still be copied and pasted into a new document.

The court papers thus also revealed a meeting between Manafort and his longtime aide, Konstantin Kilimnik, who U.S. officials believe has ties to Russian intelligence, in Madrid, no date provided, and that the two discussed a Ukraine peace plan on more than one occasion.

Manafort pleaded guilty in September to conspiracy charges and agreed to cooperate with Mueller’s investigation in its probe of Russian interference in the election – but prosecutors then said he broke that agreement by telling “multiple discernible lies.”

Manafort’s lawyers, in the new filing, argue he didn’t lie so much as forget.

Separately, Deputy Attorney General Rod Rosenstein, who has been overseeing the Russia investigation, is expected to leave the Justice Department as soon as the choice to run the department, William Barr, is confirmed, which everyone expects.  President Trump nominated Barr after firing Jeff Sessions.

--More Trump tweets:

“There is GREAT unity with the Republicans in the House and Senate, despite the Fake News Media working in overdrive to make the story look otherwise. The Opposition Party & the Dems know we must have Strong Border Security, but don’t want to give ‘Trump’ another one of many wins!”

“Cryin Chuck told his favorite lie when he used his standard sound bite that I ‘slammed the table & walked out of the room.  He had a temper tantrum.’  Because I knew he would say that, and after Nancy said no to proper Border Security, I politely said bye-bye and left, no slamming!”

“The Mainstream Media has NEVER been more dishonest than it is now.  NBC and MSNBC are going Crazy. They report stories, purposely, the exact opposite of the facts. They are truly the Opposition Party working with the Dems.  May even be worse than Fake News CNN, if that is possible!”

“Gave an OFF THE RECORD luncheon, somewhat of a White House tradition or custom to network anchors yesterday – and they quickly leaked the contents of the meeting. Who would believe how bad it has gotten with the mainstream media, which has gone totally bonkers!”

“Billions of dollars are sent to the State of California for Forest fires that, with proper Forest Management, would never happen.  Unless they get their act together, which is unlikely, I have ordered FEMA to send no more money. It is a disgraceful situation in lives & money!”

--White House press secretary Sarah Huckabee Sanders sparred with “Fox News Sunday” anchor Chris Wallace when she defended President Trump’s claims that terrorists are pouring across the southern border.

Last Friday, Homeland Security Secretary Kirstjen Nielsen, who is woefully inadequate to be leading such an important department, said Customs and Border Patrol stopped more than 3,000 “Special Interest Aliens” trying to get into the U.S. via the border.

“But Special Interest Aliens are just people who come from countries that have ever produced a terrorist. They’re not terrorists themselves,” Wallace said to Sanders after showing a clip of Nielsen’s remarks.

“And the State Department says that there is, quote, their words: no credible evidence of any terrorist coming across the border from Mexico,” he added.

Sanders  responded: “We know that roughly, nearly 4,000 known or suspected terrorists come into our country illegally, and we know that our most vulnerable point of entry is at our southern border.”

Wallace said he studied up on the issue because he knew Sanders would bring it up.

“Do you know where those 4,000 people come – where they’re captured?” Wallace asked her.   “Airports.”

“Not always,” she said.

“At airports,” he insisted.

“The State Department says there haven’t been any terrorists that they’ve found coming across the southern border with Mexico,” Wallace continued.

“It’s by air, it’s by land and it’s by sea.  It’s all of the above,” Sanders said, then tried to change the topic to overall border security.

“But one thing that you’re forgetting is that the most vulnerable point of entry that we have into this country is our southern border, and we have to protect it,” she said.

But Wallace continued to hammer home his point, refuting the administration’s claim that terrorists are entering through the border rather than at airports.

“I’m not disagreeing with you that they’re coming through airports.  I’m saying that they come by air, by land and by sea,” Sanders said.

And until the border is fully secured, she said, “the more that we’re going to have an influx, not just of terrorists but of human traffickers, drug inflow and people that are coming here to do American citizens harm.”

Wall Street and the Trade War

From Bloomberg News:

“Trade wars, China’s slowdown, erratic stock markets: The outlook is getting grimmer for an increasing number of companies across the globe.

“Just Thursday, more than a half-dozen corporate giants either lowered their profit forecast, announced massive job cuts or pulled plans in the face of market volatility.  American Airlines Group Inc., Jaguar Land Rover, Macy’s Inc. and BlackRock Inc. were among the biggest casualties, joining the likes of Apple Inc. and FedEx Corp. that have warned recently that the future isn’t looking as good as it did just a few weeks ago.”

I discuss the individual cases below, but the growing doom and gloom sure didn’t adversely impact the stock market this week, with all three major indexes posting gains of over 2%, and the Dow, S&P and Nasdaq having now had their best 3-week rally since after the 2016 election.  The Dow and S&P are up a whopping 10% just since their Christmas Eve trough, Nasdaq even more.

Federal Reserve Chairman Jerome Powell made news again Thursday, when during a Q&A at the Economic Club of Washington, D.C., he suggested the central bank is likely to lower its forecast from two interest rate hikes this year amid volatile financial markets and a slowing U.S. and global economy, citing China’s slowdown as “a concern”.

“During the year, we’ll look at (the economy) and tighter financial conditions and we’ll also lower our rate path” and monitor the effects of that on the economy and markets.  Powell stressed that the Fed has made no decisions about the pace of rate increases this year and will respond to the economy as it evolves, saying officials will be “flexible.”

So the chairman’s remarks largely echoed those of a week before at a forum in Atlanta when he said the Fed “will be patient” as it weighs future rate hikes – a message that led the market to soar.  Powell yesterday also noted inflation has been modest, and today, the December data on consumer prices helped confirm that, with the CPI -0.1%, +0.2% ex-food and energy, thus bringing the year-over-year figures to 1.9% and 2.2%, respectively.

But Powell briefly spooked markets yesterday when he also said the Fed would continue to shrink its $4 trillion balance sheet, which is tightening of a different kind.

“It will be substantially smaller than it is now,” he said, adding that the balance sheet needs to be at a ‘more normal level’ without clarifying what that level was.

Related to the above, the Wall Street Journal’s periodic survey of 73 economists (Jan. 4-8) revealed that the gang sees a growing risk of recession.

On average, those surveyed said there was a 25% chance of a recession in the next year, the highest level since October 2011. The probability was just 13% a year ago.

Trade talks and global growth dominate as risks, with some also citing the Mueller investigation and the deeply divided government.

Forecasters are even more concerned about the outlook for 2020, with 56.6% saying they expect a recession to start then, ditto moi, while another 26.4% say they don’t expect a recession until 2021.

Nearly 84% saw risks to the outlook as tilted to the downside in the latest survey, sharply higher than October’s 53% reading.

The average projection for growth in GDP was 2.2% in 2019, down from near 3% in 2018.  Economists said they saw growth slowing further to 1.7% in 2020.  Both estimates are below the Fed’s outlook...2.3% in 2019, 2.0% in 2020.  The White House maintains the economy can sustain a 3% growth rate. 

On the China Trade War front...high-level talks were held for three days in Beijing, with reportedly some progress but no agreement in the offing, while Liu He, China’s top economic official, is expected to travel to Washington in the coming weeks for a new round of talks to defuse tensions and work towards an ultimate deal between the two countries.

U.S. Treasury Secretary Steven Mnuchin told reporters, “The current intent is that vice premier Liu He is most likely to come and visit us later in the month.”

Liu made a surprise appearance at the start of this week’s talks in Beijing, which were led by a deputy U.S. trade representative and David Malpass, the top Treasury official for international affairs.  When Liu comes to Washington, he is expected to meet with U.S. Trade Representative Robert Lighthizer as well as Mnuchin.

President Trump, however, confirmed he would not attend the World Economic Forum later this month in Davos, Switzerland, as initially planned, blaming the cancellation on the partial government shutdown.

So this throws cold water on the prospect of Trump sitting down with Chinese vice-president Wang Qishan in Davos, which some hoped could spur progress in the negotiations.

The U.S. has set a deadline of March 2 to reach an agreement on trade, or U.S. tariffs on more than $200bn of Chinese goods will rise from 10 percent to 25 percent in a new escalation.

But with China’s economy slowing rapidly, and the U.S. certainly slowing from the 4% pace of the second quarter of 2018, there is pressure to reach some kind of agreement, though I suspect the deadline will be extended another 2 to 3 months, under the guise of “progress is being made, but these are difficult issues to settle in a matter of 90 days”...something to that effect.

As for the three days of talks that concluded this week, one more than initially planned, my reading of it is there was zero really accomplished, aside from Chinese assurances to buy more U.S. goods and services, as well as opening China’s markets further to U.S. capital.  No progress was made on the larger issues of Chinese subsidies to domestic firms and protection of intellectual property.  It also seems China was miffed at growing U.S. demands for specific concessions on barriers to U.S. goods entering the China market other than tariffs being imposed.

A China trade expert in Beijing told the Financial Times: “The U.S. wants China to have an execution mechanism, which will monitor how China implements the promises. But this is unacceptable for China since it looks like China has been forced to do something.”

And Wednesday, the state newspaper the China Daily said China will not make any “unreasonable concessions” and any agreement must involve compromise on both sides.

The paper said in an editorial that Beijing’s stance remains firm that the dispute harms both countries and disrupts the international trade order and supply chains.

“However, it has also made it clear that it will not seek a solution to the trade frictions by making unreasonable concessions, and any agreement has to involve give and take from both sides.”

But beware President Trump making a deal for the sake of a deal.  He needs “victories” to deflect from the Mueller investigation, and he also knows Wall Street is peopled with idiots who will take any agreement, no matter how flawed, as a major positive...the president needing to juice the stock market as well.

Separately, I have ranted about the United States (read Trump) pulling out of the Trans-Pacific Partnership, which was then rebranded among the other eleven nations that remained in the pact, and days later, the Wall Street Journal had an editorial on same:

“The world turns even if America doesn’t. That’s certainly true on trade, where a rebranded Trans-Pacific Partnership has begun with the new year in 11 countries two years after President Trump withdrew. The biggest losers are American producers.”

Case in point:

“Canada is due for a larger GDP boost than if the U.S. had remained in the pact, and that comes largely at the expense of U.S. farmers who are likely to be edged out of Japanese markets. Tokyo’s regular 38.5% tariff on beef, which applies to the U.S., will fall to 9% for imports from Canada, New Zealand and Australia.  Ottawa estimates total beef exports will increase 10% as a result.

“U.S Wheat Associates President Vince Peterson said in Washington last month that U.S. producers’ 53% market share in Japan risks ‘imminent collapse’ upon implementation of the CPTPP (as it’s now known).  U.S. wheat exports to Japan will face an effective 40-cent a bushel price disadvantage with Canada and Australia....

“The President’s trade supporters say his tariffs are merely short-term costs that will lead to better trade deals. But withdrawal from TPP is a deadweight economic loss because it has led to no other trade concessions from anyone. The U.S. and Japan are again talking about a bilateral trade pact, but the easier and far quicker path to open Japan was TPP.

“The revised TPP is also spurring reform elsewhere. Vietnam is easing restrictions on foreign retailers and raising a foreign investment cap for financial companies as part of the pact. Malaysia is allowing banks form CPTPP countries to open twice the number of branches previously allowed.

“The U.S. withdrawal from TPP was one of the worst own-goals in recent economic history.  Mr. Trump isn’t likely to reconsider in the next two years, but perhaps the next President will.”

I am sure curious to see how the farm belt votes in 2020.  I just wonder how many in those states will finally blame President Trump for what will have been an awful four years for those in the farm industry, recognizing the vote is still likely to be determined by who the Democrats put up.

Europe and Asia

Eurostat reported November unemployment for the euro area (EA19) came in at 7.9%, down from 8.0% in October and from 8.7% in November 2017, 7.9% the lowest rate in the eurozone since October 2008.

Germany 3.3%, France 8.9%, Italy 10.5%, Spain 14.7% (but down from 16.5% a year earlier), Ireland 5.3%, Netherlands 3.5%, Greece 18.6% (Sept.)

The youth jobless rates, while still sky-high in some countries, are coming down:

Spain 34.1%, Italy 31.6%, and Greece 36.6% (Sept.).

But disconcertingly, the youth unemployment rate in France has gone up the past year, from 21.2% to 21.8%.

Separately, in another sign of sickness in the EA19 economy overall, industrial production figures for November fell in Germany, France and the UK.  Not good. 

In Germany, factory orders also fell in the month.

Brexit: This coming Tuesday, Jan. 15, is the day Britain’s parliament is to vote on Prime Minister Theresa May’s Brexit proposal, but the UK’s exit from the European Union increasingly looks like it will be delayed beyond the scheduled date of March 29 regardless of the result of the vote, and subsequent actions, because of the backlog of legislation that needs to be passed, according to senior ministers cited by London’s Evening Standard.

“The legislative timetable is now very tight indeed,” a senior minister told the newspaper today.  “Certainly, if there was defeat on Tuesday and it took some time before it got resolved, it’s hard to see how we can get all the legislation through by March 29.”

As for Mrs. May, she suffered losses in Parliament on amendments the past few days, one of which passed by her critics limits her ability to stall if she loses the vote, and requires her to come up with a Plan B within three working parliamentary days of the expected defeat.

But May doesn’t have a Plan B, except to go begging to the European Union, which has said it wouldn’t renegotiate the deal it already worked out with the prime minister.

Even Japanese Prime Minister Shinzo Abe weighed in this week.  “We truly hope that a no-deal Brexit will be avoided,” Abe said during a visit to see Mrs. May.  “In fact, that is the wish of the whole world.”

The biggest issue for Parliament remains the ‘backstop’ and a guarantee against a hard border in Ireland.

A YouGov poll of more than 25,000 Britons suggested that 22% back Mrs. May’s deal.  53% of Britons believe they – instead of MPs – should be given the final say on Brexit, once those who responded “don’t know” were removed.

And among those who said they would vote in another referendum, the survey suggested 54% would back remaining in the EU, compared to 46% for Leave.  [In the June 2016 referendum, the vote was 52-48 to leave.]

France: I liked this bit from Emilie Delwarde and Richard Lough / Reuters:

“In 1789, Louis XVI summoned France’s aristocracy, clergy and citizens to discuss ways to plug the crown’s dismal finances and quell popular discontent over a sclerotic feudal society. It marked the start of the French Revolution. Within months he was powerless and four years later beheaded by guillotine. Two centuries on, President Emmanuel Macron, often criticized for a monarchical manner, is also calling a national debate to mollify ‘yellow vest’ protesters whose nine-week uprising has set Paris ablaze and shaken his administration.  He will launch the three-month ‘grand debat’ initiative Jan. 15.  As during the rule of the ill-fated king, the French are already writing complaints in ‘grievance books’ opened up by mayors of 5,000 communes.  The debate will focus on four themes – taxes, green energy, institutional reform and citizenship.

“But officials have already said changing the course of Macron’s reforms aimed at liberalizing the economy will be off limits.... By limiting the terms, Macron risks making the same mistake that doomed the monarchy, historian Stephane Sirot of University of Cergy-Pontoise told Le Parisien newspaper.

“ ‘Emmanuel Macron is like Louis XVI who...receives the grievances books but doesn’t understand anything from them.’”

Macron’s hard line on the protesters has backfired badly.  After further protests last weekend in Paris and elsewhere, he tweeted: “Once again, the Republic was attacked with extreme violence – its guardians, its representatives, its symbols.”

French companies this week revealed that the yellow vests protests have cost it dearly in some cases, depending on whether they were forced to close retail stores, or less traffic in the ones that were open.  Consumer confidence has been sliding, for good reason. The protests are depressing.

Turning to Asia...China reported car sales fell for the first time in twenty years in 2018, down 6% to 22.7 million, according to the China Passenger Car Association.  [This is passenger cars.  Including trucks and other vehicles, China’s sales are roughly 28 million, compared with 17 million in the U.S.]

The country’s most successful carmaker, Geely, is forecasting flat sales for this year, ditto the China Association of Automobile Manufacturers, a government-backed industry group.

Foreign car companies such as Ford, Volkswagen, and General Motors have all reported declines in sales the last few months.

But the China National Development and Reform Commission has said it plans to introduce policies to boost consumer spending on cars as well as home appliances this year.

In Japan, the December non-manufacturing PMI came in at 51.0 vs. 52.3 the month before, but this marked the 27th straight month over 50, the dividing line between growth and contraction.

Separately, Japan’s real wages rose the most in five months in November, reversing from a third straight month of drops, government data showed, raising hopes for stronger domestic consumer spending to offset slowing external demand.

Labor ministry data showed inflation-adjusted real wages rose 1.1 percent from a year earlier, following a 0.1 percent decline in October.

Sluggish consumer spending has hampered the central bank’s efforts to stoke a virtuous growth cycle that would generate inflation.  Despite nearly six years of massive monetary stimulus, tame consumer spending has kept core consumer prices at around half the Bank of Japan’s 2 percent price target.

Street Bytes

--As alluded to above, it was the third straight week of solid gains, 2.4% for the Dow Jones, 2.5% for the S&P 500, and 3.5% for Nasdaq.  But the earnings crush starts this week and we’ll see what kinds of comments companies make for clues of as to the impact of the China trade war, Trump’s tariffs, and a general economic slowdown in the U.S.  Frankly, in setting the tone for the rest of the year, these next three weeks could be critical.

--U.S. Treasury Yields

6-mo. 2.50%  2-yr. 2.57%  10-yr. 2.70%  30-yr. 3.03%

The bond market settled down some this week, though the spread between the 2- and  10-year is down to 13 basis points, somewhat worrisome. 

One other economic item of note this week.  The December ISM reading on the service sector came in at 57.6, less than expected and down from the prior month’s 60.7, reflecting the ongoing trend of deceleration in most indicators recently.

--Fitch warned on Wednesday of a possible cut to the U.S. triple-A sovereign credit rating later this year if the ongoing government shutdown leads to it hitting its debt ceiling and hampers coming up with a budget.

“If this shutdown continues to March 1 and the debt ceiling becomes a problem several months later, we may need to start thinking about the policy framework, the inability to pass a budget...and whether all of that is consistent with triple-A,” Fitch said.

--Crude oil prices continued to rise, $51.70 at week’s end on West Texas Intermediate, a gain of over $6.50 in just two weeks.  According to OPEC officials, Saudi Arabia plans to cut crude exports to around 7.1 million barrels a day by the end of January, a reduction of up to 800,000 barrels a day from November levels of around 7.9 million, while increasing ambitious plans to diversify its economy beyond petroleum products.

Which means the Saudis need oil to rise much higher than its current levels, and by all indications, it is targeting $80 a barrel; quite a bit higher from where we stand today.

The export cuts would go beyond the six-month commitment the Saudis made in early December to OPEC.

President Trump would surely not be happy if the Saudis follow through on their new plans, seeing as he had urged the kingdom to ramp up production last fall to replace sanctioned Iranian oil.  The increase turned out to be more than the market needed and prices collapsed.

But the Energy Information Administration said gasoline demand for the week ending Dec. 28 was the lowest since February 2017.  Despite record motor vehicle travel for the holiday, demand was down nearly 900,000 barrels per day, suggesting that demand this winter could be lower than expected.

AAA reported that the national gas price average is $2.24, declining 12 consecutive weeks.  The price is 25-cents cheaper year-over-year.

--Edward Lampert’s ESL Investments has been granted one more chance to save Sears Holdings Corp. with an offer of about $5 billion that would cover severance for workers and bills from its suppliers.

Lampert added $120 million to his bid that the U.S. Bankruptcy Court was requiring in advance to qualify for an auction set for Monday.  ESL would pick up tax and supplier bills that Sears incurred during bankruptcy proceedings, according to reports.

Earlier in the week, it was assumed Sears was on the verge of liquidation after the court rejected a previous offer from Lampert, whose hedge fund remains Sears’ biggest shareholder and creditor.  Lampert had made a $4.4bn bid to take over selected stores and keep them open, but creditors remain unconvinced Sears will ever be profitable again.

If Lampert doesn’t win next week, the only bidders left in the auction are looking to liquidate Sears and Kmart and sell off the parts.  The whole situation is extremely complicated with Lampert and ESL asking the other bidders to drop pending lawsuits that challenge the validity of some of Lampert’s prior rescue deals.  The creditors simply see Sears being worth more dead than alive.

--Thursday was a bloody day for the big box retailers, with Macy’s shares plunging more than 17% after the company cut its same-store sales forecast for the crucial holiday quarter due to weak demand during mid-December.

Comp-store sales (for stores open more than 12 months) are now expected to grow 2 percent, lower than a prior forecast.

CEO Jeff Gennette said in a statement: “The holiday season began strong, particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period and did not return to expected patterns until the week of Christmas.”

But the actual same-store number wasn’t that awful. The problem is Macy’s also cut its forecasts for sales and profit for the year, after it had raised its annual earnings outlook in anticipation of a strong holiday shopping season in November.

--Kohl’s shares fell 5% Thursday after it reported holiday sales that while up over a year ago, trailed the prior year’s increase; same-store sales for the holiday period increasing 1.2%, but far below the 7% realized last year.

CEO Michael Gass said in a statement that management was “delighted” with the 1.2% increase as it built on “positive momentum” throughout the year.

Delighted?

--Target, the eight-largest department store retailer in the U.S., said yesterday it was on track to deliver the strongest full-year comparable sales growth since 2005, with market-share gains across all of its core merchandising categories.

Target said its same-store sales would jump 5.7% for the November-December period, topping the 3-4% it grew last year.   The company added its digital sales would grow by more than 25% for a fifth consecutive year.

But Target’s shares still fell 3% on the day, though they rallied back 2% Friday.

--Ford Motor announced plans for a major shake-up of its operations in the UK and mainland Europe.  The automaker will be cutting thousands of jobs across the continent, and should the UK leave the EU without a negotiated deal, Ford will further review its UK operations.  Most of the immediate job losses will be on the mainland.

Ford has 54,000 employees, with 13,000 in the UK.  Profits at Ford-Europe fell 82% last year, in part due to the fall in the value of the pound as a result of uncertainty over Brexit.

Rival Jaguar Land Rover is set to announce it is cutting up to 4,500 jobs from its 42,500-strong UK workforce, part of a $3.2bn cost-cutting plan, amid what some are calling a “perfect storm”: a downturn in Chinese sales, a slump in diesel sales and concerns about UK competitiveness post-Brexit.

--Ford rival General Motors, on the other hand, said its earnings are picking up speed, though this is thanks largely to plant closures and job cuts.  CEO Mary Barra, criticized by President Trump when the cuts were recently announced, said the boost to operating profit in 2019 will be nearly 20%, or more than $2 billion, with further benefits in 2020.

Raising its earnings guidance today led to a 7% gain in GM’s shares.

GM’s restructuring includes idling five factories in the U.S. and Canada this year, resulting in job losses of around 14,000, which slashes annual costs by $6 billion by 2020.

GM also said it would continue spending heavily on autonomous-vehicle development this year, likely matching the roughly $1 billion it was on track to spend in 2018.

Lastly, GM is optimistic U.S. industrywide sales this year will come close to the 17.3 million vehicles sold in 2018, another strong year.

--Samsung, the world’s largest smartphone maker, as well as semiconductors, said it expects its fourth-quarter operating profit will decline 29%, well below analysts’ current estimates, in another sign of the challenges hitting the tech industry.  Samsung cited “mounting macro uncertainties,” together with “lackluster demand” for memory chips and “intensifying competition” in its handsets business.

Samsung now expects revenue to decline about 11% over last year, with profits subdued in the first quarter of 2019 due to difficult conditions for the memory business.  Detailed earnings for Q4 will come end of the month.

Samsung is a major global bellwether and its struggles are important evidence of the ongoing slowdown in the likes of Europe and Asia.

For the three months ending Sept. 30, global smartphone shipments fell 7% from a year earlier, the fourth straight quarter of declines, according to market researcher Canalys and the Wall Street Journal.

Separately, Samsung plans to unveil its 10th anniversary flagship phone lineup at Feb. 20 events in San Francisco and London, including a fully functional foldable-screen handset.  One of four versions to be unveiled in the first half of the year will feature next-generation 5G network speeds.

--After all its negative news concerning sales in China last week, Apple is cutting its production plan for new iPhones by about 10 percent for the first quarter, the Nikkei Asian Review reported Wednesday.  The company asked its suppliers to produce fewer of its iPhones than planned, Nikkei said.  This is just one report, but it makes sense given what CEO Tim Cook said about China.

But Mr. Cook’s compensation rose 22% to $15.7 million for fiscal 2018, which ended in September, because sales and profit goals were met, solely because Apple raised the price of its flagship iPhone by 50% to nearly $1,000, while unit sales were flat with the prior year.

--Boeing announced on Tuesday that it had booked 893 net new airliner orders last year against 806 deliveries; the 806 below its target of 810 to 815, but above 2017’s 763 and higher than Airbus.

Airbus announced it booked fewer airliner orders in 2018 and trailed Boeing for the year, but the European plane maker remained upbeat about global demand.

Airbus’ net new-order tally was 747, compared with 1,109 net orders in 2017; Airbus delivering 800 planes.  The 1,606 delivered between Airbus and Boeing represented a new high for the commercial airliner industry.

But Airbus finished the year with a backlog of 7,577 planes, representing more than nine years of production, and these long wait times are impacting the ability to secure new deals.

Boeing has won the deliveries race, while Airbus has been ahead on orders since 2013.

Both Boeing and Airbus have suffered production disruptions amid delays in getting engines and other aircraft parts.  Both are calling for higher output in 2019, but neither has given firm production targets.

Boeing did have orders last year for 218 widebody aircraft, which speaks well of demand for despite concerns about an economic slowdown.  Orders for the 737 Max aircraft came in at 675, including 181 in December despite negative headlines concerning a new flight control system following the crash of a Lion Air 737 Max that killed 189 people in October.

--This just in...Elon Musk’s rocket company SpaceX announced it is reducing its workforce by about 10 percent of the more than 6,000 employees.  The company is citing “extraordinarily difficult challenges ahead.”

“To continue delivering for our customers and to succeed in developing interplanetary spacecraft and a global space-based Internet, SpaceX must become a leaner company.  Either of these developments, even when attempted separately, have bankrupted other organizations,” a spokesman said in an email.

It seems the issue concerns SpaceX’s Starlink program, which is competing with OneWeb and Canada’s Telesat to be the first to market with a new satellite-based internet service.

Much more on this next week, I imagine, especially in terms of how it could impact Tesla.

--Former Nissan chairman Carlos Ghosn could be in jail for another six months, his lawyer said after Ghosn appeared in court for the first time since his shock arrest in Japan last November.

Accused of financial misconduct, Ghosn told the court he had been “wrongly accused and unfairly detained.”

Once hailed as the man who saved Nissan, Ghosn was led into court in handcuffs with a rope around his waist.

Ghosn’s attorney said he expected his client to be jail for another six months, at least until the first trial is held.  He is accused of moving personal investment losses worth $17 million racked up on foreign exchange dealing to Nissan, while also making $14.7m in payments to a Saudi businessman, using Nissan funds, in exchange for arranging a letter of credit to help with his investment losses.

Then Friday, Japanese prosecutors brought even more charges of financial wrongdoing.

If found guilty of the financial misconduct charges, Ghosn faces up to 10 to 15 years in prison as well as substantial fines.

--Paul Mozur / New York Times:

“One man spent 15 days in a detention center.  The police threatened another’s family.  A third was chained to a chair for eight hours of interrogation.

“Their offense: posting on Twitter.

“The Chinese police, in a sharp escalation of the country’s online censorship efforts, are questioning and detaining a growing number of Twitter users even though the social media platform is blocked in China and the vast majority of people in the country cannot see it.

“The crackdown is the latest front in President Xi Jinping’s campaign to suppress internet activity. In effect, the authorities are extending their control over Chinese citizens’ online lives, even if what they post is unlikely to be seen in the country.”

Beijing is also demanding that Google and Facebook take down content officials object to, even though the two are inaccessible in China as well.

--Further trouble for Chinese telecom and networking equipment giant Huawei Technologies, as Polish authorities arrested a sales director of the company and charged him with conducting espionage on behalf of China, raising further concerns the global company is a spying tool for Beijing.

Polish officials said Huawei itself wasn’t charged with any wrongdoing, but they didn’t details the charges or say whether any sensitive information was compromised.

Washington has labeled Huawei a national security threat, and while the company vehemently denies such charges, the evidence is beginning to add up.

--Last week it was Delta, this week American Airlines Group Inc. trimmed its profit guidance of 2018.  American, just like Delta, said it saw slower-than-expected sales of pricey last-minute holiday tickets.

It’s great for travelers, but investors worry airlines are losing pricing power as more seats remain on the market.

--Oracle Corp. announced it has bought the naming rights to the San Francisco Giants stadium for more than $200 million – a second deal to boost its brand image by sponsoring a hometown sports facility in the San Francisco Bay Area, the other being the Oracle Arena in Oakland that has been home to the Golden State Warriors.  But JPMorgan Chase & Co. agreed to pay $15 million to $20 million annually over 20 years for the rights to the new Chase Center in San Francisco, where the Warriors will play once it opens for the 2019-2020 season.  Years ago, Barclays Plc paid $400 million over 20 years for the name to the Brooklyn Nets arena in New York.

The Giants ballpark is now named AT&T Park, their naming rights having started with Pacific Telesis, Pac-Tel then becoming part of AT&T over time.

--Shares in Constellation Brands fell 12 percent on Wednesday after it warned of weak demand for its cheap wine labels and a stupid investment in the pot industry.

Constellation’s premium brands such as Kim Crawford and Prisoner are selling well, but sales for low-price wines (like Robert Mondavi and Black Box) aren’t what they used to be, Constellation said in reporting fiscal third-quarter results.

The company now predicts wine sales will drop in the low-single digits this year vs. a previous projection of 2 to 4 percent growth.  Constellation said it is exploring “strategic alternatives” for its lower-priced brands, which also include Woodbridge.

But last year, Constellation invested $4 billion in Canadian pot grower Canopy Growth, and since closing the transaction, Constellation has written down the value of its stake by $164 million and said it expects interest expenses will hit full-year earnings by 25 cents a share.

--PG&E Corp. shares cratered and the bonds dropped to all-time lows Tuesday after S&P Global Ratings slashed the utility company’s credit grades to the middle of the junk spectrum from investment grade, citing its limited options for managing wildfire liabilities.  Investors are worried about the potential for the company to file bankruptcy, as California investigators look into whether PG&E equipment ignited the deadliest blaze in state history last year, as well as fires in 2017, which could leave the company with liabilities as high as $30 billion.

--In a worrisome sign for the asset management business, BlackRock, the $6 trillion behemoth, is letting go of about 3% of its workforce, or 500 employees.  It’s emblematic of the changes that will take place after the long bull market ended last year, at least by some measures.  BlackRock and other firms have seen their share prices slide amid slowing investor inflows and with rivals cutting fees on some index funds to zero.

“Market uncertainty is growing, investor preferences are evolving, and the ecosystem in which we operate is becoming increasingly complex,” BlackRock said in a memo Thursday obtained by the Wall Street Journal.

Last October, BlackRock reported that investors took more money out of its funds than they put in for the first time in three years.  Since reaching a high last January, the firm’s shares have lost a third of their value.

--Disneyland Resort is opening up its $1 billion Star Wars expansion in the coming months, so to celebrate, Disney announced price increases of up to 25% for daily tickets, annual passes and parking.  Less than a year ago, the resort hiked prices up to 18%.  Under the latest increases, the cheapest daily ticket will be more than $100.  Daily parking prices are rising to $25 from $20.  Good lord.  [I haven’t been to Disneyland literally since about fourth grade.]

Disneyland expects the new area, dubbed Star Wars: Galaxy’s Edge, to result in record visitor demand.  Hope the toilets work.

--Susan Zirinsky, the longtime producer of “48 Hours” on CBS, is replacing David Rhodes as the president of the network’s news division in March, the company announced Sunday.

The announcement was a surprise, just the latest at a network rocked by allegations of sexual misconduct that have taken down Leslie Moonves, the longtime CEO, Charlie Rose, and Jeff Fager, longtime executive producer of “60 Minutes.  Ryan Kadro, the executive producer of “CBS This Morning,” announced last month he was departing.

Zirinsky was thought to be in line to replace Fager at “60 Minutes,” but now she will select a successor.

--The 76th Golden Globes Awards had solid ratings for NBC, with 18.6 million tuning in, down just 2% from 2018, but up 4% among those in the prized 18-to-49 age group.  The show in general has not faced the double-digit annual decreases in recent years that trophy programs like the Emmys and Oscars have seen.

Speaking of the Oscars, it faces a looming disaster with its next telecast, as the decision has been made to go without a host.  The last time that happened was 1989 and it was broadly panned.

--Breaking tonight...Megyn Kelly is officially out of her contract at NBC News.  She’ll get the remaining $25 to $30 million on her $69 million three-year deal, and be allowed to take jobs at other networks, though she reluctantly signed a non-disclosure agreement, according to reports, so no tell-all books.

Kelly is vowing she’ll be back soon, recognizing her strength is news, not fluff.

--Finally, we have the divorce between Amazon CEO Jeff Bezos and his wife, MacKenzie, of 25 years, with Bezos, 54, worth about $137 billion.  Apparently there is no prenup agreement.  Incredible.  I’ve suddenly become a very big fan of MacKenzie, an award-winning novelist, but I see the line is 75 miles long and I have work to do. 

The couple lives in Washington state, which is a “community property state,” meaning divorcing couples without a prenup split assets 50-50, according to TMZ, which cited “sources with direct knowledge” of their arrangement.

In terms of Amazon, the importance of this mess is that in order to fund a settlement of over $60 billion, Bezos would have to sell or pledge shares, which could dilute his ownership and control of the company.  He currently owns just under 16 percent of Amazon, or 80 million shares.

But MacKenzie should want the family fortune to keep growing, so she may not push for the sale of shares, instead channeling Sally Brown in her letter to Santa.  “If it seems too complicated, make it easy on yourself: just send money.  How about tens and twenties?”  Times 100 million.

After the story broke, salacious details began to emerge of Bezos’ affair with TV anchor Lauren Sanchez, but I won’t write what is being reported in the National Enquirer, concerning texts and supposed photos between the two.  Sanchez is married to Hollywood talent mogul Patrick Whitesell.

Sources close to the Enquirer’s investigation did say that Sanchez sent the texts (sexts) she was exchanging with Bezos to a friend to show off her relationship with the world’s richest man – and then the “friend” passed them along to the Enquirer.

Foreign Affairs...as opposed to those of the domestic variety...

Syria / Iran:

Kevin Bacon / Defense News [written hours prior to today’s announcement of a U.S. withdrawal in Syria]

“The U.S. may have a foreign policy in the Middle East but it hardly resembles what Secretary of State Mike Pompeo described in Cairo on Thursday.

“In between bashing President Obama and American journalists to foreign audiences, Pompeo tried to make the case that the Trump administration has brought a tough new American engagement to the region.  His main messages seemed to be that, despite Trump’s surprise troop withdrawal from Syria, America will stand fast with its security partners – and implicitly, that Trumpian foreign policy reflects a strategic throughline rather than the whims of an inexperienced and erratic celebrity.

“But he offered those in the face of far too much evidence to the contrary.  From pulling out of the Iran nuclear deal to passivity in the face of the Saudi killing of a U.S.-based journalist, Trump has reduced American leadership and leverage in the region.

“One exchange seemed to sum up Pompeo’s situation. Before his Thursday speech at American University in Cairo, the BBC’s Barbara Plett Usher noted that President Trump had said that ISIS was defeated and that he would quickly order U.S. troops home, and then other administration officials had said that neither was the case.  ‘How is that not a contradiction?’ she asked the secretary of state.

“Here is Pompeo’s answer: ‘There’s no contradiction whatsoever. This is a story made up by the media. That’s fine.  You all write what you’d like. The president’s been very clear, and Ambassador [John] Bolton and I have been very clear about this too.’

“But they have not been clear, and their words and frequent policy shifts and on-the-fly adjustments have been documented extensively.  Pompeo couldn’t even finish his answer without contradicting himself.  One breath later, Pompeo said that what he meant was the U.S. will pull out of Syria but continue to fight ISIS everywhere else.

“The Trump administration has an established track record: today’s foreign policy may not be yesterday’s or tomorrow’s. And no matter how hard Pompeo tried to portray chaos as stability, it simply is not true. Administration officials have too often been caught unawares or contradicted outright by their mercurial chief executive.  For Syria, it’s happened twice in less than one year.

“Former Defense Secretary Jim Mattis wasn’t one to sugarcoat Trump’s shifts. He would just say that he and the Defense Department were there to serve the unconventional decision-making of an unconventional president – until Mattis finally resigned in protest over one of those surprise policy outbursts.  (Trump’s second national security advisor, retired Lt. Gen. H.R. McMaster, used to say the same thing, until he quit.)

“But Pompeo, a former Congressman, takes Trump-forgiveness to a new level.  His Cairo speech was a full-blown Potemkin village of U.S. history, policy, and achievements in the Middle East.

“Before he spoke, the State Department issued a basic outline of its Middle East strategy which, like the Pentagon’s defense strategy, the president does not follow.  A ‘fact sheet’ of its major themes highlight ‘Confronting Radical Islamist Terrorism Together’ and ‘Opposing the Iranian Regime and its Proxies.’  Pulling U.S. troops from Syria achieves neither of those, many critics have argued.  But Syria is not mentioned on that sheet, and by the end of Pompeo’s speech it was clear why.  The administration’s new messaging strategy is to highlight other U.S. engagement in the region and proclaim that Trump’s team is doing everything differently and better than Obama’s....

“Pompeo, just before his speech, reassured allies in the region that the United States still stood with them, or at least behind them.  ‘You’ll not fight these battles alone.  Our robust battle against ISIS, al-Qaeda, and other terrorist groups will continue,’ he said. But he did not say how that would happen in Syria. If the U.S. can’t convince Turkey to play nice with the Kurds there, Trump’s pullout may not be much of a pullout, and Pompeo’s vision of a U.S. enduring presence may come true.

“It wasn’t until halfway through Pompeo’s speech – after the Obama bashing, history cherry picking, truth spinning, religion baiting, and chest thumping – that the secretary began to talk about the topic the Trump administration calls its biggest priority: Iran.

“Three months ago, the policy was that the U.S. military would remain in Syria as long as Iran is there. That was then.  This is now.

“ ‘In Syria,’ Pompeo said, ‘the United States will use diplomacy and work with our partners to expel every last Iranian boot, and work through the UN-led process to bring peace and stability to the long-suffering Syrian people.’”

For the record, Pompeo also said some of the following in his speech at the American University in Cairo, referring to President Obama:

“Remember: It was here, here in this very city, another American stood before you. 

“He told you that radical Islamist terrorism does not stem from ideology.  He told you 9/11 led my country to abandon its ideals, particularly in the Middle East.  He told you that the United States and the Muslim world needed ‘a new beginning.’ The results of these misjudgments have been dire.

“In falsely seeing ourselves as a force for what ails the Middle East, we were timid about asserting ourselves when the times – and our partners – demanded it,” Pompeo said, without mentioning Obama by name.

So what happened less than 24 hours after Pompeo’s speech?  We learned the U.S. has begun to pullout from Syria!  A total refutation of everything John Bolton and Pompeo had been saying the past week in trying to reassure allies the U.S. would stay in Syria until the job was done.

While Pompeo had moved on to Bahrain and the United Arab Emirates from Egypt, calling for increasing pressure on Iran, a spokesman for the U.S.-led military coalition in Syria, Colonel Sean Ryan, said the “CJTF-OIR has begun the process of our deliberate withdrawal from Syria,” referring to the U.S.-led anti-jihadist force.

“Out of concern for operational security, we will not discuss specific timelines, locations or troop movements,” he said.

The Syrian Observatory for Human Rights reported that the coalition had started scaling down its presence at Rmeilan airfield in the northeastern province of Hasakeh.

Rami Abdel Rahman, the head of the Britain-based monitoring organization, said, “This is the first such pull-out of American forces since the U.S. president’s announcement” of a full troop withdrawal from Syria last month.  [AFP]

Earlier this week, national security adviser Bolton said the U.S. wouldn’t leave Syria until Turkey promised not to target our Kurdish partners, which provoked furor in Ankara, as President Erdogan then refused to meet with Bolton as originally planned.

Erdogan used a prescheduled speech in parliament to then rip into American proposals that the U.S.-backed Kurds play a key role in Syria after the U.S. troop withdrawal, Erdogan saying Turkey will soon move to “neutralize” all terror threats.

“If there are other terrorists who would attempt to intervene in our intervention then it is our duty to eliminate them as well,” Erdogan added, in a thinly veiled reference to Syrian Kurdish fighters he wants to push from Turkey’s border.

One defense official told the Wall Street Journal, “Nothing has changed,” re: withdrawal plans.  “We don’t take orders from Bolton.”

Initially, U.S. officials said they were preparing to get all forces out of Syria in a matter of weeks, saying Turkey would take on the fight to eliminate Islamic State’s remaining pockets of strength, as agreed to in a Dec. 14 phone call between Trump and Erdogan.

Editorial / Washington Post

“(After) asserting, without justification, that ‘now is the time’ to withdraw U.S. forces from Syria, Mr. Pompeo insisted that the United States would nevertheless ‘expel every last Iranian boot’ from the country. How?  Through ‘diplomacy and work with our partners.’ Further, the administration would achieve ‘stability’ in Syria ‘through the UN-led [peace] process.’  The rhetoric was virtually identical to that of then-Secretary of State John F. Kerry, whose tireless work over several years proved definitively that those goals are unreachable without the leverage of U.S. military power.

“While echoing Mr. Obama’s envoy, Mr. Pompeo muddled the message of his own administration’s national security adviser, John Bolton. Mr. Bolton, rolling back statements by Mr. Trump, earlier this week spelled out ‘objectives’ he said had to be met before U.S. troops left Syria, including the complete defeat of the Islamic State and guarantees from Turkey that it would not attack U.S.-allied Kurds. He also hinted that one U.S. base in southern Syria would remain to thwart the movement of Iranian forces.

“Mr. Pompeo dismissed accounts of these contradictions as ‘made up by the media.’ But not only reporters are confused. Turkish President Recep Tayyip Erdogan, who according to the new White House plan is supposed to fill the vacuum left by departing U.S. forces, was infuriated by Mr. Bolton’s comments and refused to meet with him.  The pro-government Turkish press claimed Mr. Bolton had staged a ‘soft coup’ against Mr. Trump.

“We wouldn’t go that far, but something is badly amiss here.  Mr. Trump’s priorities seem clear, if unfounded: to reverse any policy pursued by Mr. Obama and to withdraw all U.S. forces from the Middle East as quickly as possible. The president’s advisers have more hawkish intentions but lack either a coherent strategy or Mr. Trump’s full backing. None of them seem to understand that while denouncing Mr. Obama’s mistakes, they are, in Syria, about to repeat them.”

Iran: Tehran said it will put two satellites into orbit in coming weeks using domestically made missiles, President Hassan Rouhani said yesterday, a week after Washington warned it not to pursue three planned space rocket launches.

Sec. of State Pompeo warned Iran against pursuing launches that he said would violate a UN Security Council resolution because they use ballistic missile technology.  The U.S. is concerned the same technology can be used to launch warheads.

Iran has said its space vehicle launches and missile tests were not violations and would continue.

Under the UN Security Council Resolution that enshrined Iran’s 2015 nuclear deal with world powers – which the Trump administration pulled out of last spring – the country is ‘called upon’ to refrain from work for up to eight years on ballistic missiles designed to deliver nuclear weapons.

Iraq: Secretary Pompeo visited Iraq on Wednesday as part of the administration’s attempt to convince regional partners that the U.S. will remain involved, despite the withdrawal of troops from Syria and troop reductions in Afghanistan.

Iraqi President Barham Salih told Pompeo in Baghdad: “We will need the support of the U.S.  ISIS is defeated militarily but the mission is not accomplished.”

Pompeo ignored reporters’ questions about the U.S. commitment to maintaining a military presence here, saying his conversations were more focused on the process of government formation in Iraq after their recent election.

But Trump said in addressing U.S. troops during a Dec. 26 visit to Iraq that a withdrawal from there wasn’t under consideration for now.

Israel: Kremlin spokesman Dmitry Peskov denied reports of Russian meddling ahead of Israel’s April election after state censors suppressed a speech by Israel’s domestic intelligence chief accusing a foreign power of planning to hack the vote.

Israeli media were barred from naming the country that Shin Bet chief Nadav Argaman said was trying to interfere, the gag order being described as a security precaution.

Israeli commentators speculated Argaman pointed the finger at Russia, which Prime Minister Benjamin Netanyahu’s own intelligence minister, Israel Katz, told local media last month could potentially want to replicate in Israel an alleged online influence campaign and email hacking to help Donald Trump in 2016.

Peskov, in Moscow, said: “Russia has not interfered, does not interfere and doesn’t intend to interfere in any election in any country in the world.”

It is a highly-sensitive situation, given Russia’s backing of Syria, and Israel’s air strikes on suspected Iranian and Hezbollah guerrilla targets there.

Separately, Prime Minister Netanyahu, in a nationally televised address Monday, asserted his innocence and rebuffed accusations of corruption against him.

It remains unclear whether attorney-general Avichai Mandelblit will announce his decision to indict Netanyahu before or after the April 9 elections.  The prime minister has insisted he will not resign should he be so.

North and South Korea / China: South Korean President Moon Jae-in said on Thursday the second U.S.-North Korea summit and leader Kim Jong Un’s visit to Seoul will take place “soon” and will be turning points to cement peace on the Korean peninsula.  Moon also told a news conference the South Korean government would cooperate with the United States in resolving the issue of sanctions on North Korea in order to reopen the Kaesong industrial zone, shared by the two Koreas, and Mount Kumgang tours.

This comes after Kim made a fourth visit to China on his armored train, meeting with Chinese President Xi Jinping.  Xi said he hopes North Korea and the United States can meet each other half way as they plan a second summit.

President Trump told reporters at the White House on Sunday: “We are negotiating a location... It will be announced probably in the not-too-distant future.”

Pyongyang has demanded Washington lift sanctions imposed because of its nuclear and missile tests, and declare an official end to the 1950-53 Korean War.  North Korea claims the demands are in response to Pyongyang’s initial, unilateral steps toward denuclearization that included dismantling its only known nuclear testing site and a key missile engine facility.

Xi said after talks with Kim, “The political settlement of the peninsula issue faces a rare historic opportunity....China hopes that North Korea and the United States will meet each other halfway.”

Xi commended North Korea for its denuclearization efforts, according to Xinhua.

But most intelligence experts in the United States believe Kim hasn’t done anything with regards to denuclearization and instead continues to build up his arsenal, while the “dismantling” spoken of is a sham.  Certainly analysis of satellite imagery says so.

In Seoul, President Moon said among the potential measures North Korea could take included abolishing intercontinental and intermediate-range ballistic missiles and dismantling weapons production facilities and other nuclear sites.  However, Moon said reducing U.S. military commitments, such as a withdrawal of troops or strategic assets from the region, would be unlikely options for Washington.

Moon told reporters: “U.S. forces in South Korea or strategic assets in places like Guam and Japan are not linked with North Korea alone, as they exist for the stability and peace of the entire Northeast Asia.”

Kim Jong Un turned 35 this week.

Separately, according to a Chinese military researcher, U.S. naval operations in the South China Sea could spark conflict and the U.S. would be to blame if a clash occurred.

The warning came as Chinese and U.S. trade teams were ending talks in Beijing.  Fears remain strategic tensions between the two countries are growing.

Zhang Junshe, a researcher at China’s PLA Naval Military Studies Research Institute, no doubt channeling the government, said: “Both countries’ warships definitely have come into close proximity and it’s easy for there to be a misunderstanding or an error of judgment, even a collision.  If there is a collision, the root cause is the United States.”

Earlier this week, a U.S. guided-missile destroyer sailed near disputed islands in what China called a “provocation,” just as the trade talks began.

Separately, He Lei, former vice president of China’s Academy of Military Sciences, told the South China Morning Post, “foreign forces” that attempted to prevent the unification of China and Taiwan could compel Beijing to use force to bring the self-ruled island under its control.

“Foreign forces that pose as world police to interfere in China’s affairs, to obstruct and damage China’s unification, are the main culprits that could force the mainland to use force to resolve the Taiwan issue,” he said.

Xi Jinping, who is also chairman of the Central Military Commission, told a meeting of top military authorities that China faced increasing risks and challenges, and the armed forces must work to secure its security and development needs.

“The world is facing a period of major changes never seen in a century, and China is still in an important period of strategic opportunity for development,” he was quoted as saying.

Xi’s comments last weekend followed his remarks from days before that China still reserved the right to use force to achieve “reunification” with Taiwan and prevent the island’s independence.

Taiwan’s President Tsai Ing-wen said on Saturday she was open to talks with the mainland if Beijing was willing to promote democracy and renounce the use of force against the self-ruled island.

Tsai’s comments came two days after she rejected President Xi’s proposal for the two sides to start talks on unification based on the “one country, two systems” model that applies to Hong Kong.

“As the democratically elected president, I have to defend our democracy, freedom, and way of life,” Tsai told foreign journalists in Taipei to explain her rejection of Xi’s proposal.

Tsai said Xi’s statement (which I covered in detail last week) highlighted two fundamental dangers posed by Beijing to freedom and democracy in Taiwan.

“First, by emphasizing ‘one China’ and ‘one country, two systems,’ particularly in the context of the so-called 1992 consensus, China has made clear their political intentions towards Taiwan and their steps for unification.

“This is a major disregard for the fact that the Republic of China, Taiwan does exist, and is in full operation like all other democratic countries,” she said.

“Second, China’s plan to engage in political consultation with the political parties instead of the democratically elected government of Taiwan is a continuation of its deliberate campaign to undermine and subvert our democratic process and create division in our society.”

Tsai added: “The lack of democracy and protection of human rights, as well as the military threats from China are the major reasons (that people here do not trust Beijing).”

Finally, in a memo obtained by Bloomberg News, retired Air Force Brigadier General Robert Spaulding said China’s desire to dominate new wireless technology, 5G, poses a global threat that should be thwarted by a new, secure network.  China will gain a capability for mayhem and mass surveillance if it dominates 5G networks that link billions of devices.

“The more connected we are, and 5G will make us the most connected by far, the more vulnerable we become,” said Spalding, who left the National Security Council last year.

Venezuela: President Nicolas Maduro was sworn in this week for a second six-year term amid a crumbling economy and disintegrating society. 

Earlier this month, the Organization of American States referred to Maduro’s government as “dictatorial” and 13 South American nations in the co-called Group of Lima called for new presidential elections.

Maduro dismisses such demands as a plot orchestrated by the U.S.

“Venezuela must be respected and we will use our political and diplomatic faculties to make them respect us,” he said.

At least 40 nations, including the U.S., the European Union and neighboring Colombia, refuse to recognize Maduro as the country’s legitimate president.  In Venezuela, he has a 15% approval rating.

Most of his vocal critics in South America are struggling to cope with the arrival of hundreds of thousands of Venezuelan migrants.  Colombia, for example, now hosts 1 million.  Colombian President Ivan Duque said nations should “reject the Venezuelan dictatorship and do everything necessary to restore democracy and constitutional order.”

Inflation in Venezuela in 2018 exceeded 1 million percent, and the economy shrank 15% last year, with a further decline of 10% anticipated in 2019.

I have been disappointed the military didn’t take out the nut-case years ago.

Democratic Republic of Congo: There is chaos here following the release of presidential election results, with the Catholic Church even stepping into the dispute, the church saying data collected by its 40,000-strong observer mission showed a different winner from the one announced by Congo’s electoral commission. 

The commission, widely seen as being controlled by incumbent President Joseph Kabila, stunned the people when it named opposition leader Felix Tshisekedi as the winner of the Dec. 30 vote, the first victory by an opposition candidate in the country’s history.

But while at first blush you would think, ‘Oh, this is good,’ it isn’t, because there are allegations of a backroom deal between Tshisekedi, who had been trailing in the opinion polls, and Mr. Kabila, who has been reluctant to give up power after 18 years.

France has also said the outcome was at odds with what was seen on the ground.

The vote tallies collected by the Catholic Church showed businessman Martin Fayulu winning.

The church is a major power broker in a nation that is 40% Catholic.  It oversaw a popular campaign to pressure Kabila to step down.  But the church has now taken a stand in demanding a transfer of power as violence could now rack the country, as it has the past 25 years.

This was meant to be Congo’s first democratic transfer of power in 59 years of independence.

The constitutional court will weigh in on the election and the supposed results in the next week or so.

It’s easy to forget that Congo is the size of Western Europe and a critical player in the technology sector for its natural resources.

Random Musings

--Presidential tracking polls:

Gallup: 39% approval of Trump’s job performance, 55% disapprove. [Dec. 22...as I said last time, Gallup is now switching to monthly figures, the next report Jan. 15, but for consistency I will keep up the current figure until it changes.]
Rasmussen: 45% approval, 54% disapproval (Jan. 11).

--Daniel Henninger / Wall Street Journal

“The reasons offered for why Donald Trump won’t win re-election in 2020 continue to pile up.  His approval rating is stuck, seemingly forever, below 45%. The Wall Street Journal/NBC poll puts the percentage of voters who say they’re likely to vote for him at 38%, while some 52% currently prefer a Democratic candidate.

“Numbers like that are why every Democrat and your grandfather is jumping into the presidential race.  It’s why the Pelosi-Schumer tag team is chest-thumping over the border wall.

“Finally, the truest weather vane of the political winds is freshman Sen. Mitt Romney’s maiden diatribe against President Trump in the Washington Post.  Mr. Romney’s denunciatory op-ed was a politician sensing that this presidency is – his words – ‘in descent.’

“The anti-Trump betting could be right.  Much of the country is exhausted with Mr. Trump’s manic personal style and may vote for some downtime when choosing the next president.

“But that Romney op-ed served one useful purpose: It reminded us why neither Mitt Romney nor anyone like him will take the Republican nomination away from Donald Trump.

“One of the abiding mysteries of recent political history remains how the blunt and brutal character standing on the GOP primary stage in his fire-engine-red tie beat the skilled politicians alongside him.  You can find the answer in Mr. Romney’s Washington Post article.

“ ‘A president,’ Mr. Romney intoned, ‘should unite us and inspire us to follow ‘our better angels.’’  And then he said: ‘I do not intend to comment on every tweet or fault.  But I will speak out against significant statements or actions that are divisive, racist, sexist, anti-immigrant, dishonest or destructive to democratic institutions.’

“You could not make up a more explicit pander to the prevailing political zeitgeist, or conventional wisdom, on Donald Trump – racist, sexist, destructive to democratic institutions.  This is a kitchen sink of anti-Trump buzzwords.  And the enduring reality two years after Mr. Trump won the presidency is that more U.S. voters than the conventional wisdom will admit just don’t care.

“For two years, this column has received emails virtually every week from readers who have been along for the entire Trump ride. Some love him, others abhor him.

“But among the most intriguing on this political odyssey are those in recent months who have been at pains to say they don’t need more descriptions of what a crude, often insufferable boor Donald Trump is. They know that.    The reference to ‘nutburgers’ is his summary of the cultural and political left in America:

“ ‘When I see long-hoped for ‘Resistance’ to those nutburgers from Trump – which I did not see from Nixon, Ford, Bush 41 or Bush 43 – I am unalterably supportive, flawed vessel or not. It’s not the man, it’s the resistance that binds us to him.’

“This is the voice of the resistance on the right. These aren’t only dislocated people living inside the Trump ‘base’ in places like hollowed-out Wilkes-Barre, Pa. This sentiment has been building for decades.  Its scale is suggested by the degree of Trump outrages these voters have been willing to discount on behalf of a larger cultural and political cause....

“Mitt Romney and virtually all Republican politicians entertaining runs for the presidency simply will not stand up to this dominant status quo. They just won’t do it.  Instead, they address these matters in a kind of tiptoeing careful-speak. Meanwhile, any Democratic candidate, notably a so-called ‘serious’ moderate such as Joe Biden, must pay obeisance to these ideas or get out of politics.

“As to appeals to our ‘better angels’ – typified by the Romney op-ed or anytime John Kasich speaks – history shows that the cultural left simply pockets these genuflections and then pushes its army forward. This history of bad faith – the identity left’s takeover of the campuses being Exhibit A – has created the right’s resistance, which in 2016 defaulted to Donald Trump and still does.

“Anyone thinking of challenging Mr. Trump in the New Hampshire primary will have to show they understand, and would fight for, voters who don’t care about ‘the man’ but care deeply about the nation’s cultural direction.  Which means being willing to accept exclusion and ridicule by the media trolls. Don’t hold your breath.

“It is possible Mr. Trump will personally grind down enough people to make him a one-term president.  Still, we hope no one feigns shock in 2020 if, despite everything, at least half the electorate quietly opts for the incumbent over what the Democrats have come to stand for. The resistance on the right is real, with the presidency the only outlet remaining for their vote.”

Henninger’s brilliant column really resonated with me.  He has nailed the opinion of the droves of detractors I developed since the election of Donald Trump.  I get it.  Some of the emails I’ve received over the past few months in particular are the nastiest I’ve had since the early days of StocksandNews.  More on this in a month or so when I ‘celebrate’ 20 years.

--Iowa Republican Congressman Steve King questioned how terms like “white nationalist” and “white supremacist” have become racist – comments that prompted stinging rebuke from GOP leaders and a primary challenger.

“White nationalist, white supremacist, Western civilization – how did that language become offensive?” King told the New York Times in an interview published on Thursday.  “Why did I sit in classes teaching me about the merits of our history and our civilization?”

King has been marginalized recently because of his extremist views, but Republicans blasted him, with Rep. Tim Ryan (R-Ohio) urging the House to respond.

“The U.S. House of Representatives must censure Rep. Steve King for his racists remarks. These remarks should also be  repudiated by Republican Leader Kevin McCarthy and all of Rep. King’s colleagues,” Ryan wrote on Twitter.  “Support for white supremacist ideology should have no place in Congress.”

McCarthy (and Steve Scalise) did condemn King’s comments.

Sen. Tim Scott (R-S.C.) ripped into King in an op-ed for the Washington Post today, Scott being the only black Republican senator.

“When people with opinions similar to King’s open their mouths, they damage not only the Republican Party and the conservative brand but also our nation as a whole.  They want to be treated with fairness for some perceived slights but refuse to return the favor to those on the other side....

“Some in our party wonder why Republicans are consistently accused of racism – it is because of our silence when things like this are said.”

Iowa State Sen. Randy Feenstra said he would mount a challenge in 2020 against the nine-term congressman.

King only won his midterm race by 3 percent and hasn’t said whether he will run for reelection.

--New York City Mayor Bill de Blasio was on a roll this week, as he preps for a future presidential bid (really).  Hizzoner rolled out legislation guaranteeing private-sector employees two weeks of paid vacation every year, obligating businesses with more than five people on staff to grant full-time and part-time workers 10 paid personal days – on top of the five sick days the city mandated in 2014.

Employees would have to provide two weeks’ notice and have at least four months on the job to qualify.  Unused days would roll over to the subsequent year.

But this should only be mandated for companies with more than a substantial number of employees, say a minimum of 50.  Businesses with more than five?  That’s nuts.

“New Yorkers need a break!” De Blasio declared.

In general, I have no problem with the concept, except it should come only after you have been with a company six months, not four...which was my personal experience in the business world.

And I do have to add that a local business I know well, employing lots of service staff, is changing management and the new boss wants to scrap the two weeks paid vacation that had been offered for decades by the prior manager, a friend of mine.  It’s outrageous.

But de Blasio’s new bill came a day after he rolled out a proposal that he touted as universal health coverage for 600,000 uninsured New Yorkers, including undocumented immigrants. He unveiled it on MSNBC, but leaked it the day before to the Washington Post to build his national profile.

“From this moment on in New York City, everyone is guaranteed the right to health care,” De Blasio said.

The city estimated the plan will cost at least $100 million annually when fully implemented.  But this would amount to less than $200 a year for coverage of those 600,000, while coverage costs thousands for the commercially-insured population.

When asked about the fairness of the program given the amount other New Yorkers’ spend on health costs, De Blasio described paying for health care for those who can’t afford it as a moral obligation.  “I refuse the notion that these folks don’t deserve health care,” he said.

De Blasio supports a single-payer health system in which the government would cover all health costs, preferably at the federal level.

For those of you outside the region, just understand this is one of the least likable people on the planet, non-terrorist/dictator category.

--According to a report from the American Cancer Society, deaths from cancer dropped 27% over a quarter century, or an estimated 2.6 million fewer people during that period.

Since the peak in 1991, the death rate from cancer has steadily dropped 1.5% a year through 2016, primarily because of long-running efforts to reduce smoking, as well as advances in detection and treatment of cancer at earlier stages.

But the bad news is that the percentage of cancer cases attributed to obesity is increasing.  Rebecca Siegel, a director at the American Cancer Society and the lead author of the new report, said: “We are probably only seeing the tip of the iceberg regarding the influence of the obesity epidemic on cancer rates.”

--According to a report from the Rhodium Group, an independent research firm, U.S. carbon emissions rose 3.4% in 2018, though this was due to a strong economy, outstripping a sharp decline in the number of power plants burning coal.

--According to the National Snow and Ice Data Center, the amount of sea ice around Antarctica has melted to a record low for January.  As of January 1, there was 2.11 million square miles of sea ice around the continent, the smallest January area since records began in 1978.

The figure was 726,000 square miles below average – an area roughly twice the size of Texas.

[Sea ice is frozen ocean water that melts each summer, then refreezes each winter.  Yes, I understand water currents have a big say in the levels, not just temperatures.]

--Separately, an analysis published in the journal Science found that the oceans are heating up 40 percent faster on average than a United Nations panel estimated five years ago.  This isn’t good, sports fans.

Granted, there have been all manner of studies with varying results on ocean temperatures, but this one from Berkeley Earth seems to employ the best science, using floating platforms that measure ocean temps down to 6,500 feet and then transmit the data to satellites.

--Finally, what a warm story we had at week’s end; the discovery of 13-year-old Jayme Closs in rural Wisconsin after 88 days, the suspect having killed her parents prior to kidnapping her.

All we can do is wish her the best...and may she get some rest, and peace.  We know she’ll get the right support.  God love her.

---

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

God bless America.

---

Gold $1287
Oil $51.70

Returns for the week 1/7-1/11

Dow Jones  +2.4%  [23995]
S&P 500  +2.5%  [2596]
S&P MidCap  +4.7%
Russell 2000  +4.8%
Nasdaq  +3.5%  [6971]

Returns for the period 1/1/19-1/11/19

Dow Jones  +2.9%
S&P 500  +3.6%
S&P MidCap  +6.1%
Russell 2000  +7.3%
Nasdaq   +5.1%

Bulls 34.8
Bears  
29.4

Have a great week.

Brian Trumbore



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Week in Review

01/12/2019

For the week 1/7-1/11

[Posted 11:00 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.

Edition 1,031

Trump World

President Trump renewed a threat to declare a national emergency to fund the construction of a wall on the Mexican border, as the partial government shutdown becomes the longest in U.S. history as of tomorrow, Saturday.  800,000 received $0.00 on their paychecks today, the first payday of the shutdown, amid growing protests.

The president has been saying that the wall, a key campaign pledge, was necessary to tackle a security crisis on the border.

Democrats say the wall is a waste of taxpayers’ money, some calling it “immoral.”

President Trump has refused to sign legislation to fund and reopen the government if it does not include $5.7 billion for the wall, egged on by the likes of Ann Coulter, Rush Limbaugh, and Sean Hannity.

As for declaring a national emergency, he reissued the threat on a visit to the border at McAllen, Texas, in the Rio Grande Valley, saying that if Congress did not approve funding, he would “probably...I would almost say definitely” declare a national emergency to bypass lawmakers.

“I have the absolute right to declare a national emergency,” he said.

Historic precedence for such a move has been undertaken in times of war and national emergency, funds normally coming from the Department of Defense.

But in bypassing Congress, the president would undoubtedly be sparking a big court challenge and cries of abuse of executive powers.

There are reports the White House is considering diverting some of the $13.9 billion allocated last year for disaster relief, such as in Puerto Rico, Texas and California, to pay for the wall.  The White House is denying these reports.

Declaring a national emergency would allow President Trump to reopen the government, while at the same declaring he had fulfilled a campaign promise.

Trump ally (most of the time, these days), Republican Sen. Lindsey Graham (S.C.) said at this point there was no other pathway forward than to declare a national emergency, tweeting today:

“Mr. President, Declare a national emergency NOW. Build a wall NOW.”

Down in McAllen, Tex., Thursday, President Trump said, “If we don’t have a barrier...you’re not going to be able to solve this problem,” adding the people faced “grueling problems” and a “lot of death” without it.

“They say a wall is medieval... There are some things that work,” said the president.

Today, Trump said he wasn’t planning any imminent declaration of a national emergency, saying it was “up to Congress” to pass a spending bill funding a barrier.  Trump called an emergency declaration an “easy solution” but added, “I’m not going to do it so fast.”

Tuesday, Trump addressed the nation from the Oval Office for a first time, saying the wall was needed to stem a “growing humanitarian and security crisis at our southern border,” involving “thousands of illegal immigrants.”

[As part of the Democrats’ response, Speaker Nancy Pelosi said: “The president is rejecting these bipartisan bills, which would reopen government, over his obsession with forcing American taxpayers to waste billions of dollars on an expensive and ineffective wall, a wall he always promised Mexico would pay for.”  But Pelosi and her partner, Senate Minority Leader Charles Schumer, showed no sign of compromise, refusing to talk about border security until the government is funded.]

Wednesday, the latest face-to-face negotiations between Trump and Republican and Democratic lawmakers failed miserably amid acrimonious calls from both sides, a frustrated Trump walking out, saying “Bye-bye.”

At one point, Sen. Schumer told Trump that federal workers were being hurt by the shutdown and asked why he wouldn’t reopen the government.  “Because you won’t give me what I want,” Schumer quoted Trump as saying.  [Wall Street Journal]

Editorial / Wall Street Journal

“With Democrats in Congress refusing to appropriate $5.7 billion for a border wall, President Trump now says he may declare a national emergency.  He’s probably right that he has the legal authority, but it would set a bad precedent that conservatives who believe in the separation of powers could live to regret.

“Mr. Trump may declare an emergency that would let him reallocate funds that Congress has appropriated for military construction to build his wall.  Before visiting the border on Thursday, he warned that if negotiations with Democrats don’t ‘work out, probably I will do it.  I would almost say definitely.’

“An emergency declaration could let Mr. Trump end the shutdown without conceding an inch to Speaker Nancy Pelosi, but it would strain the limits of his executive authority....

“While a President may sometimes need to act with dispatch, abuses of executive power prompted Congress to pass the National Emergencies Act of 1976. The law requires the President to activate his powers under one of 130 or so statutes that authorize executive emergency actions.

“Members of Congress with a two-thirds vote may revoke an emergency declaration, but the President otherwise enjoys wide latitude within his statutorily delegated powers.  Mr. Trump’s advisers have cited a statute that allows the Defense Secretary during a national emergency ‘to undertake military construction projects, not otherwise authorized by law that are necessary to support such use of the armed forces.’

“Because President Trump has deployed troops to the border, he theoretically could reallocate some of the $10 billion or so unobligated military construction funds for a wall.  This would be a broad interpretation of the law since a wall is not necessary to support troops. But the Supreme Court has nearly always upheld executive actions pursuant to delegations of Congress....

“Republicans rightly criticized Barack Obama for governing by fiat. While President Trump might be on sounder legal footing than President Obama was when he legalized millions of undocumented immigrants, he would be spending scarce military funds essentially to fulfill a campaign promise.

“A wall would cost tens of billions of dollars and take years to build, yet it would neither fix the immediate challenges at the border nor longer-term problems with the immigration system.  More immigration judges and detention facilities are needed to manage the surge of migrants from Central America. Loopholes in the asylum system should be closed.

“But the pull to migrate to America will remain as long as the economy is humming, which is why Congress should expand the legal pathways for immigration.  One danger is that an emergency declaration would further poison prospects for immigration reform as Barack Obama’s orders did....

“The left’s hyperbolic warnings about an imperial Trump Presidency haven’t borne out, and his Administration’s uses of executive power have for the most part been restrained and legally careful. A political spending fight over the wall doesn’t warrant a national-emergency raid on military funds.”

Fareed Zakaria / Washington Post

“Watching the struggle over funding for a border wall, I am struck by the way in which, in one sense, President Trump has already achieved success.  He has been able to conjure up a crisis out of thin air, elevate this manufactured emergency to national attention, paralyze the government and perhaps even invoke warlike authority and bypass Congress.  He may still fail, but it should worry us that a president – any president – can do what Trump has done.

“Let’s be clear: There is no crisis.  The number of undocumented immigrants in the United States has been declining for a decade. The number of people caught trying to sneak across the southern border has been on a downward trend for almost 20 years and is lower than it was in 1973.

“As has often been pointed out, far more people are coming to the U.S. legally and then overstaying their visas than are crossing the southern border illegally. But it’s important to put these numbers in context.  More than 52 million foreigners entered the U.S. legally in fiscal year 2017.  Of this cohort, 98.7 percent left on time and in accordance with their visas.  A large portion of those remaining left after a brief overstay, and the best government estimate is that maybe 0.8 percent of those who entered the country in 2017 had stayed on by mid-2018.

“As for terrorism, the Cato Institute has found that, from 1975 to 2017, ‘there have been zero people murdered or injured in terror attacks committed by illegal border crossers on U.S. soil.’

“As for drugs, the greatest danger comes from fentanyl and fentanyl-like substances, which are at the heart of the opioid crisis.  Most of this comes from China, either shipped directly to the United States or smuggled through Canada or Mexico.  Trump has addressed the root of the problem by pressing the Chinese government to crack down on fentanyl exports, a far more effective strategy than building a physical barrier along the Mexican border.

“Even the Drug Enforcement Administration acknowledged in a report last year that while the southern border is the conduit for most of the heroin entering the United States, the drug typically comes through legal points of entry, hidden in cars or mixed in with other goods in tractor-trailers.  In other words, a wall would do little to stanch the flow.

“And yet, the power of the presidency is such that Trump has been able to place this issue center-stage, shut down the government, force television networks to run an error-ridden, scaremongering Oval Office address, and now perhaps invoke emergency powers. This sounds like something that would be done by Presidents Vladimir Putin, Recep Tayyip Erdogan or Abdel Fatah al-Sissi, not the head of the world’s leading constitutional republic.”

Trump tweets related to the shutdown and the Wall:

“Just left a meeting with Chuck and Nancy, a total waste of time.  I asked what is going to happen in 30 days if I quickly open things up, are you going to approve Border Security which includes a Wall or Steel Barrier?  Nancy said, NO. I said bye-bye, nothing else works!”

“H1-B holders in the United States can rest assured that changes are soon coming which will bring both simplicity and certainty to your stay, including a potential path to citizenship. We want to encourage talented and highly skilled people to pursue career options in the U.S.”

“Humanitarian Crisis at our Southern Border.  I just got back and it is a far worse situation than almost anyone would understand, an invasion!  I have been there numerous times – The Democrats, Cryin’ Chuck and Nancy don’t know how bad and dangerous it is for our ENTIRE COUNTRY....

“....The Steel Barrier, or Wall, should have been built by previous administrations long ago. They never got it done – I will.  Without it, our Country cannot be safe. Criminals, Gangs, Human Traffickers, Drugs and so much other big trouble can easily pour in. It can be stopped cold!”

“I often said during rallies, with little variation, that ‘Mexico will pay for the Wall.’  We have just signed a great new Trade Deal with Mexico. It is Billions of Dollars a year better than the very bad NAFTA deal which it replaces.  The difference pays for Wall many times over!”

[Ed. This just isn’t true.]

A Reuters/Ipsos poll released Tuesday found that 51 percent of adults believe Trump deserves most of the blame for the shutdown, vs. 32 percent who blame congressional Democrats, with 7 percent blaming congressional Republicans, the national opinion poll having been conducted between Jan. 1 and 7, so prior to the Tuesday address to the nation and Trump’s visit to the border, not that either was expected to change many minds.

The poll also found that 41 percent support building additional border fencing, down 12 points from a similar poll that ran in the first week of 2015, while 35 percent support a congressional spending bill that includes funding for the wall, and 25 percent support Trump’s decision to keep the government closed until Congress approves funding for the wall.

77 percent of Republicans in the Reuters/Ipsos poll want additional border fencing, and 54 percent said they support Trump shutting down the government until Congress approves funding for the wall.

--Michael Cohen, President Trump’s former personal lawyer who implicated him in a scheme to pay hush money to two women claiming to have had affairs with him, has agreed to testify before the House Oversight Committee next month, Feb. 7, and give “a full and credible account” of his work for Mr. Trump.

Needless to say, assuming it comes off (I wouldn’t be so sure, yet), the stage is set for what will be must-see television, potentially explosive and damaging to President Trump’s image.

Cohen said in part in a statement: “I look forward to having the privilege of being afforded a platform with which to give a full and credible account of the events which have transpired.”

Cohen has pleaded guilty in federal court in Manhattan last August to tax fraud, making false statements to a bank and a campaign finance violation.  Cohen said the last charge was the result of payments he made at the behest of then-candidate Trump to a woman who was prepared to go public during the 2016 campaign about an affair with Trump years earlier.

Cohen has spent 70 hours with federal prosecutors in Manhattan as well as with special counsel Robert Mueller.

Meanwhile, Paul Manafort’s lawyers did a shoddy job of redacting a new court filling – inadvertently revealing that he’s accused of sharing polling data from the 2016 presidential election with an alleged Russian spy.

Attorneys for the former Trump campaign chairman tried to obscure this and other revelations, but the text beneath the black bars could still be copied and pasted into a new document.

The court papers thus also revealed a meeting between Manafort and his longtime aide, Konstantin Kilimnik, who U.S. officials believe has ties to Russian intelligence, in Madrid, no date provided, and that the two discussed a Ukraine peace plan on more than one occasion.

Manafort pleaded guilty in September to conspiracy charges and agreed to cooperate with Mueller’s investigation in its probe of Russian interference in the election – but prosecutors then said he broke that agreement by telling “multiple discernible lies.”

Manafort’s lawyers, in the new filing, argue he didn’t lie so much as forget.

Separately, Deputy Attorney General Rod Rosenstein, who has been overseeing the Russia investigation, is expected to leave the Justice Department as soon as the choice to run the department, William Barr, is confirmed, which everyone expects.  President Trump nominated Barr after firing Jeff Sessions.

--More Trump tweets:

“There is GREAT unity with the Republicans in the House and Senate, despite the Fake News Media working in overdrive to make the story look otherwise. The Opposition Party & the Dems know we must have Strong Border Security, but don’t want to give ‘Trump’ another one of many wins!”

“Cryin Chuck told his favorite lie when he used his standard sound bite that I ‘slammed the table & walked out of the room.  He had a temper tantrum.’  Because I knew he would say that, and after Nancy said no to proper Border Security, I politely said bye-bye and left, no slamming!”

“The Mainstream Media has NEVER been more dishonest than it is now.  NBC and MSNBC are going Crazy. They report stories, purposely, the exact opposite of the facts. They are truly the Opposition Party working with the Dems.  May even be worse than Fake News CNN, if that is possible!”

“Gave an OFF THE RECORD luncheon, somewhat of a White House tradition or custom to network anchors yesterday – and they quickly leaked the contents of the meeting. Who would believe how bad it has gotten with the mainstream media, which has gone totally bonkers!”

“Billions of dollars are sent to the State of California for Forest fires that, with proper Forest Management, would never happen.  Unless they get their act together, which is unlikely, I have ordered FEMA to send no more money. It is a disgraceful situation in lives & money!”

--White House press secretary Sarah Huckabee Sanders sparred with “Fox News Sunday” anchor Chris Wallace when she defended President Trump’s claims that terrorists are pouring across the southern border.

Last Friday, Homeland Security Secretary Kirstjen Nielsen, who is woefully inadequate to be leading such an important department, said Customs and Border Patrol stopped more than 3,000 “Special Interest Aliens” trying to get into the U.S. via the border.

“But Special Interest Aliens are just people who come from countries that have ever produced a terrorist. They’re not terrorists themselves,” Wallace said to Sanders after showing a clip of Nielsen’s remarks.

“And the State Department says that there is, quote, their words: no credible evidence of any terrorist coming across the border from Mexico,” he added.

Sanders  responded: “We know that roughly, nearly 4,000 known or suspected terrorists come into our country illegally, and we know that our most vulnerable point of entry is at our southern border.”

Wallace said he studied up on the issue because he knew Sanders would bring it up.

“Do you know where those 4,000 people come – where they’re captured?” Wallace asked her.   “Airports.”

“Not always,” she said.

“At airports,” he insisted.

“The State Department says there haven’t been any terrorists that they’ve found coming across the southern border with Mexico,” Wallace continued.

“It’s by air, it’s by land and it’s by sea.  It’s all of the above,” Sanders said, then tried to change the topic to overall border security.

“But one thing that you’re forgetting is that the most vulnerable point of entry that we have into this country is our southern border, and we have to protect it,” she said.

But Wallace continued to hammer home his point, refuting the administration’s claim that terrorists are entering through the border rather than at airports.

“I’m not disagreeing with you that they’re coming through airports.  I’m saying that they come by air, by land and by sea,” Sanders said.

And until the border is fully secured, she said, “the more that we’re going to have an influx, not just of terrorists but of human traffickers, drug inflow and people that are coming here to do American citizens harm.”

Wall Street and the Trade War

From Bloomberg News:

“Trade wars, China’s slowdown, erratic stock markets: The outlook is getting grimmer for an increasing number of companies across the globe.

“Just Thursday, more than a half-dozen corporate giants either lowered their profit forecast, announced massive job cuts or pulled plans in the face of market volatility.  American Airlines Group Inc., Jaguar Land Rover, Macy’s Inc. and BlackRock Inc. were among the biggest casualties, joining the likes of Apple Inc. and FedEx Corp. that have warned recently that the future isn’t looking as good as it did just a few weeks ago.”

I discuss the individual cases below, but the growing doom and gloom sure didn’t adversely impact the stock market this week, with all three major indexes posting gains of over 2%, and the Dow, S&P and Nasdaq having now had their best 3-week rally since after the 2016 election.  The Dow and S&P are up a whopping 10% just since their Christmas Eve trough, Nasdaq even more.

Federal Reserve Chairman Jerome Powell made news again Thursday, when during a Q&A at the Economic Club of Washington, D.C., he suggested the central bank is likely to lower its forecast from two interest rate hikes this year amid volatile financial markets and a slowing U.S. and global economy, citing China’s slowdown as “a concern”.

“During the year, we’ll look at (the economy) and tighter financial conditions and we’ll also lower our rate path” and monitor the effects of that on the economy and markets.  Powell stressed that the Fed has made no decisions about the pace of rate increases this year and will respond to the economy as it evolves, saying officials will be “flexible.”

So the chairman’s remarks largely echoed those of a week before at a forum in Atlanta when he said the Fed “will be patient” as it weighs future rate hikes – a message that led the market to soar.  Powell yesterday also noted inflation has been modest, and today, the December data on consumer prices helped confirm that, with the CPI -0.1%, +0.2% ex-food and energy, thus bringing the year-over-year figures to 1.9% and 2.2%, respectively.

But Powell briefly spooked markets yesterday when he also said the Fed would continue to shrink its $4 trillion balance sheet, which is tightening of a different kind.

“It will be substantially smaller than it is now,” he said, adding that the balance sheet needs to be at a ‘more normal level’ without clarifying what that level was.

Related to the above, the Wall Street Journal’s periodic survey of 73 economists (Jan. 4-8) revealed that the gang sees a growing risk of recession.

On average, those surveyed said there was a 25% chance of a recession in the next year, the highest level since October 2011. The probability was just 13% a year ago.

Trade talks and global growth dominate as risks, with some also citing the Mueller investigation and the deeply divided government.

Forecasters are even more concerned about the outlook for 2020, with 56.6% saying they expect a recession to start then, ditto moi, while another 26.4% say they don’t expect a recession until 2021.

Nearly 84% saw risks to the outlook as tilted to the downside in the latest survey, sharply higher than October’s 53% reading.

The average projection for growth in GDP was 2.2% in 2019, down from near 3% in 2018.  Economists said they saw growth slowing further to 1.7% in 2020.  Both estimates are below the Fed’s outlook...2.3% in 2019, 2.0% in 2020.  The White House maintains the economy can sustain a 3% growth rate. 

On the China Trade War front...high-level talks were held for three days in Beijing, with reportedly some progress but no agreement in the offing, while Liu He, China’s top economic official, is expected to travel to Washington in the coming weeks for a new round of talks to defuse tensions and work towards an ultimate deal between the two countries.

U.S. Treasury Secretary Steven Mnuchin told reporters, “The current intent is that vice premier Liu He is most likely to come and visit us later in the month.”

Liu made a surprise appearance at the start of this week’s talks in Beijing, which were led by a deputy U.S. trade representative and David Malpass, the top Treasury official for international affairs.  When Liu comes to Washington, he is expected to meet with U.S. Trade Representative Robert Lighthizer as well as Mnuchin.

President Trump, however, confirmed he would not attend the World Economic Forum later this month in Davos, Switzerland, as initially planned, blaming the cancellation on the partial government shutdown.

So this throws cold water on the prospect of Trump sitting down with Chinese vice-president Wang Qishan in Davos, which some hoped could spur progress in the negotiations.

The U.S. has set a deadline of March 2 to reach an agreement on trade, or U.S. tariffs on more than $200bn of Chinese goods will rise from 10 percent to 25 percent in a new escalation.

But with China’s economy slowing rapidly, and the U.S. certainly slowing from the 4% pace of the second quarter of 2018, there is pressure to reach some kind of agreement, though I suspect the deadline will be extended another 2 to 3 months, under the guise of “progress is being made, but these are difficult issues to settle in a matter of 90 days”...something to that effect.

As for the three days of talks that concluded this week, one more than initially planned, my reading of it is there was zero really accomplished, aside from Chinese assurances to buy more U.S. goods and services, as well as opening China’s markets further to U.S. capital.  No progress was made on the larger issues of Chinese subsidies to domestic firms and protection of intellectual property.  It also seems China was miffed at growing U.S. demands for specific concessions on barriers to U.S. goods entering the China market other than tariffs being imposed.

A China trade expert in Beijing told the Financial Times: “The U.S. wants China to have an execution mechanism, which will monitor how China implements the promises. But this is unacceptable for China since it looks like China has been forced to do something.”

And Wednesday, the state newspaper the China Daily said China will not make any “unreasonable concessions” and any agreement must involve compromise on both sides.

The paper said in an editorial that Beijing’s stance remains firm that the dispute harms both countries and disrupts the international trade order and supply chains.

“However, it has also made it clear that it will not seek a solution to the trade frictions by making unreasonable concessions, and any agreement has to involve give and take from both sides.”

But beware President Trump making a deal for the sake of a deal.  He needs “victories” to deflect from the Mueller investigation, and he also knows Wall Street is peopled with idiots who will take any agreement, no matter how flawed, as a major positive...the president needing to juice the stock market as well.

Separately, I have ranted about the United States (read Trump) pulling out of the Trans-Pacific Partnership, which was then rebranded among the other eleven nations that remained in the pact, and days later, the Wall Street Journal had an editorial on same:

“The world turns even if America doesn’t. That’s certainly true on trade, where a rebranded Trans-Pacific Partnership has begun with the new year in 11 countries two years after President Trump withdrew. The biggest losers are American producers.”

Case in point:

“Canada is due for a larger GDP boost than if the U.S. had remained in the pact, and that comes largely at the expense of U.S. farmers who are likely to be edged out of Japanese markets. Tokyo’s regular 38.5% tariff on beef, which applies to the U.S., will fall to 9% for imports from Canada, New Zealand and Australia.  Ottawa estimates total beef exports will increase 10% as a result.

“U.S Wheat Associates President Vince Peterson said in Washington last month that U.S. producers’ 53% market share in Japan risks ‘imminent collapse’ upon implementation of the CPTPP (as it’s now known).  U.S. wheat exports to Japan will face an effective 40-cent a bushel price disadvantage with Canada and Australia....

“The President’s trade supporters say his tariffs are merely short-term costs that will lead to better trade deals. But withdrawal from TPP is a deadweight economic loss because it has led to no other trade concessions from anyone. The U.S. and Japan are again talking about a bilateral trade pact, but the easier and far quicker path to open Japan was TPP.

“The revised TPP is also spurring reform elsewhere. Vietnam is easing restrictions on foreign retailers and raising a foreign investment cap for financial companies as part of the pact. Malaysia is allowing banks form CPTPP countries to open twice the number of branches previously allowed.

“The U.S. withdrawal from TPP was one of the worst own-goals in recent economic history.  Mr. Trump isn’t likely to reconsider in the next two years, but perhaps the next President will.”

I am sure curious to see how the farm belt votes in 2020.  I just wonder how many in those states will finally blame President Trump for what will have been an awful four years for those in the farm industry, recognizing the vote is still likely to be determined by who the Democrats put up.

Europe and Asia

Eurostat reported November unemployment for the euro area (EA19) came in at 7.9%, down from 8.0% in October and from 8.7% in November 2017, 7.9% the lowest rate in the eurozone since October 2008.

Germany 3.3%, France 8.9%, Italy 10.5%, Spain 14.7% (but down from 16.5% a year earlier), Ireland 5.3%, Netherlands 3.5%, Greece 18.6% (Sept.)

The youth jobless rates, while still sky-high in some countries, are coming down:

Spain 34.1%, Italy 31.6%, and Greece 36.6% (Sept.).

But disconcertingly, the youth unemployment rate in France has gone up the past year, from 21.2% to 21.8%.

Separately, in another sign of sickness in the EA19 economy overall, industrial production figures for November fell in Germany, France and the UK.  Not good. 

In Germany, factory orders also fell in the month.

Brexit: This coming Tuesday, Jan. 15, is the day Britain’s parliament is to vote on Prime Minister Theresa May’s Brexit proposal, but the UK’s exit from the European Union increasingly looks like it will be delayed beyond the scheduled date of March 29 regardless of the result of the vote, and subsequent actions, because of the backlog of legislation that needs to be passed, according to senior ministers cited by London’s Evening Standard.

“The legislative timetable is now very tight indeed,” a senior minister told the newspaper today.  “Certainly, if there was defeat on Tuesday and it took some time before it got resolved, it’s hard to see how we can get all the legislation through by March 29.”

As for Mrs. May, she suffered losses in Parliament on amendments the past few days, one of which passed by her critics limits her ability to stall if she loses the vote, and requires her to come up with a Plan B within three working parliamentary days of the expected defeat.

But May doesn’t have a Plan B, except to go begging to the European Union, which has said it wouldn’t renegotiate the deal it already worked out with the prime minister.

Even Japanese Prime Minister Shinzo Abe weighed in this week.  “We truly hope that a no-deal Brexit will be avoided,” Abe said during a visit to see Mrs. May.  “In fact, that is the wish of the whole world.”

The biggest issue for Parliament remains the ‘backstop’ and a guarantee against a hard border in Ireland.

A YouGov poll of more than 25,000 Britons suggested that 22% back Mrs. May’s deal.  53% of Britons believe they – instead of MPs – should be given the final say on Brexit, once those who responded “don’t know” were removed.

And among those who said they would vote in another referendum, the survey suggested 54% would back remaining in the EU, compared to 46% for Leave.  [In the June 2016 referendum, the vote was 52-48 to leave.]

France: I liked this bit from Emilie Delwarde and Richard Lough / Reuters:

“In 1789, Louis XVI summoned France’s aristocracy, clergy and citizens to discuss ways to plug the crown’s dismal finances and quell popular discontent over a sclerotic feudal society. It marked the start of the French Revolution. Within months he was powerless and four years later beheaded by guillotine. Two centuries on, President Emmanuel Macron, often criticized for a monarchical manner, is also calling a national debate to mollify ‘yellow vest’ protesters whose nine-week uprising has set Paris ablaze and shaken his administration.  He will launch the three-month ‘grand debat’ initiative Jan. 15.  As during the rule of the ill-fated king, the French are already writing complaints in ‘grievance books’ opened up by mayors of 5,000 communes.  The debate will focus on four themes – taxes, green energy, institutional reform and citizenship.

“But officials have already said changing the course of Macron’s reforms aimed at liberalizing the economy will be off limits.... By limiting the terms, Macron risks making the same mistake that doomed the monarchy, historian Stephane Sirot of University of Cergy-Pontoise told Le Parisien newspaper.

“ ‘Emmanuel Macron is like Louis XVI who...receives the grievances books but doesn’t understand anything from them.’”

Macron’s hard line on the protesters has backfired badly.  After further protests last weekend in Paris and elsewhere, he tweeted: “Once again, the Republic was attacked with extreme violence – its guardians, its representatives, its symbols.”

French companies this week revealed that the yellow vests protests have cost it dearly in some cases, depending on whether they were forced to close retail stores, or less traffic in the ones that were open.  Consumer confidence has been sliding, for good reason. The protests are depressing.

Turning to Asia...China reported car sales fell for the first time in twenty years in 2018, down 6% to 22.7 million, according to the China Passenger Car Association.  [This is passenger cars.  Including trucks and other vehicles, China’s sales are roughly 28 million, compared with 17 million in the U.S.]

The country’s most successful carmaker, Geely, is forecasting flat sales for this year, ditto the China Association of Automobile Manufacturers, a government-backed industry group.

Foreign car companies such as Ford, Volkswagen, and General Motors have all reported declines in sales the last few months.

But the China National Development and Reform Commission has said it plans to introduce policies to boost consumer spending on cars as well as home appliances this year.

In Japan, the December non-manufacturing PMI came in at 51.0 vs. 52.3 the month before, but this marked the 27th straight month over 50, the dividing line between growth and contraction.

Separately, Japan’s real wages rose the most in five months in November, reversing from a third straight month of drops, government data showed, raising hopes for stronger domestic consumer spending to offset slowing external demand.

Labor ministry data showed inflation-adjusted real wages rose 1.1 percent from a year earlier, following a 0.1 percent decline in October.

Sluggish consumer spending has hampered the central bank’s efforts to stoke a virtuous growth cycle that would generate inflation.  Despite nearly six years of massive monetary stimulus, tame consumer spending has kept core consumer prices at around half the Bank of Japan’s 2 percent price target.

Street Bytes

--As alluded to above, it was the third straight week of solid gains, 2.4% for the Dow Jones, 2.5% for the S&P 500, and 3.5% for Nasdaq.  But the earnings crush starts this week and we’ll see what kinds of comments companies make for clues of as to the impact of the China trade war, Trump’s tariffs, and a general economic slowdown in the U.S.  Frankly, in setting the tone for the rest of the year, these next three weeks could be critical.

--U.S. Treasury Yields

6-mo. 2.50%  2-yr. 2.57%  10-yr. 2.70%  30-yr. 3.03%

The bond market settled down some this week, though the spread between the 2- and  10-year is down to 13 basis points, somewhat worrisome. 

One other economic item of note this week.  The December ISM reading on the service sector came in at 57.6, less than expected and down from the prior month’s 60.7, reflecting the ongoing trend of deceleration in most indicators recently.

--Fitch warned on Wednesday of a possible cut to the U.S. triple-A sovereign credit rating later this year if the ongoing government shutdown leads to it hitting its debt ceiling and hampers coming up with a budget.

“If this shutdown continues to March 1 and the debt ceiling becomes a problem several months later, we may need to start thinking about the policy framework, the inability to pass a budget...and whether all of that is consistent with triple-A,” Fitch said.

--Crude oil prices continued to rise, $51.70 at week’s end on West Texas Intermediate, a gain of over $6.50 in just two weeks.  According to OPEC officials, Saudi Arabia plans to cut crude exports to around 7.1 million barrels a day by the end of January, a reduction of up to 800,000 barrels a day from November levels of around 7.9 million, while increasing ambitious plans to diversify its economy beyond petroleum products.

Which means the Saudis need oil to rise much higher than its current levels, and by all indications, it is targeting $80 a barrel; quite a bit higher from where we stand today.

The export cuts would go beyond the six-month commitment the Saudis made in early December to OPEC.

President Trump would surely not be happy if the Saudis follow through on their new plans, seeing as he had urged the kingdom to ramp up production last fall to replace sanctioned Iranian oil.  The increase turned out to be more than the market needed and prices collapsed.

But the Energy Information Administration said gasoline demand for the week ending Dec. 28 was the lowest since February 2017.  Despite record motor vehicle travel for the holiday, demand was down nearly 900,000 barrels per day, suggesting that demand this winter could be lower than expected.

AAA reported that the national gas price average is $2.24, declining 12 consecutive weeks.  The price is 25-cents cheaper year-over-year.

--Edward Lampert’s ESL Investments has been granted one more chance to save Sears Holdings Corp. with an offer of about $5 billion that would cover severance for workers and bills from its suppliers.

Lampert added $120 million to his bid that the U.S. Bankruptcy Court was requiring in advance to qualify for an auction set for Monday.  ESL would pick up tax and supplier bills that Sears incurred during bankruptcy proceedings, according to reports.

Earlier in the week, it was assumed Sears was on the verge of liquidation after the court rejected a previous offer from Lampert, whose hedge fund remains Sears’ biggest shareholder and creditor.  Lampert had made a $4.4bn bid to take over selected stores and keep them open, but creditors remain unconvinced Sears will ever be profitable again.

If Lampert doesn’t win next week, the only bidders left in the auction are looking to liquidate Sears and Kmart and sell off the parts.  The whole situation is extremely complicated with Lampert and ESL asking the other bidders to drop pending lawsuits that challenge the validity of some of Lampert’s prior rescue deals.  The creditors simply see Sears being worth more dead than alive.

--Thursday was a bloody day for the big box retailers, with Macy’s shares plunging more than 17% after the company cut its same-store sales forecast for the crucial holiday quarter due to weak demand during mid-December.

Comp-store sales (for stores open more than 12 months) are now expected to grow 2 percent, lower than a prior forecast.

CEO Jeff Gennette said in a statement: “The holiday season began strong, particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period and did not return to expected patterns until the week of Christmas.”

But the actual same-store number wasn’t that awful. The problem is Macy’s also cut its forecasts for sales and profit for the year, after it had raised its annual earnings outlook in anticipation of a strong holiday shopping season in November.

--Kohl’s shares fell 5% Thursday after it reported holiday sales that while up over a year ago, trailed the prior year’s increase; same-store sales for the holiday period increasing 1.2%, but far below the 7% realized last year.

CEO Michael Gass said in a statement that management was “delighted” with the 1.2% increase as it built on “positive momentum” throughout the year.

Delighted?

--Target, the eight-largest department store retailer in the U.S., said yesterday it was on track to deliver the strongest full-year comparable sales growth since 2005, with market-share gains across all of its core merchandising categories.

Target said its same-store sales would jump 5.7% for the November-December period, topping the 3-4% it grew last year.   The company added its digital sales would grow by more than 25% for a fifth consecutive year.

But Target’s shares still fell 3% on the day, though they rallied back 2% Friday.

--Ford Motor announced plans for a major shake-up of its operations in the UK and mainland Europe.  The automaker will be cutting thousands of jobs across the continent, and should the UK leave the EU without a negotiated deal, Ford will further review its UK operations.  Most of the immediate job losses will be on the mainland.

Ford has 54,000 employees, with 13,000 in the UK.  Profits at Ford-Europe fell 82% last year, in part due to the fall in the value of the pound as a result of uncertainty over Brexit.

Rival Jaguar Land Rover is set to announce it is cutting up to 4,500 jobs from its 42,500-strong UK workforce, part of a $3.2bn cost-cutting plan, amid what some are calling a “perfect storm”: a downturn in Chinese sales, a slump in diesel sales and concerns about UK competitiveness post-Brexit.

--Ford rival General Motors, on the other hand, said its earnings are picking up speed, though this is thanks largely to plant closures and job cuts.  CEO Mary Barra, criticized by President Trump when the cuts were recently announced, said the boost to operating profit in 2019 will be nearly 20%, or more than $2 billion, with further benefits in 2020.

Raising its earnings guidance today led to a 7% gain in GM’s shares.

GM’s restructuring includes idling five factories in the U.S. and Canada this year, resulting in job losses of around 14,000, which slashes annual costs by $6 billion by 2020.

GM also said it would continue spending heavily on autonomous-vehicle development this year, likely matching the roughly $1 billion it was on track to spend in 2018.

Lastly, GM is optimistic U.S. industrywide sales this year will come close to the 17.3 million vehicles sold in 2018, another strong year.

--Samsung, the world’s largest smartphone maker, as well as semiconductors, said it expects its fourth-quarter operating profit will decline 29%, well below analysts’ current estimates, in another sign of the challenges hitting the tech industry.  Samsung cited “mounting macro uncertainties,” together with “lackluster demand” for memory chips and “intensifying competition” in its handsets business.

Samsung now expects revenue to decline about 11% over last year, with profits subdued in the first quarter of 2019 due to difficult conditions for the memory business.  Detailed earnings for Q4 will come end of the month.

Samsung is a major global bellwether and its struggles are important evidence of the ongoing slowdown in the likes of Europe and Asia.

For the three months ending Sept. 30, global smartphone shipments fell 7% from a year earlier, the fourth straight quarter of declines, according to market researcher Canalys and the Wall Street Journal.

Separately, Samsung plans to unveil its 10th anniversary flagship phone lineup at Feb. 20 events in San Francisco and London, including a fully functional foldable-screen handset.  One of four versions to be unveiled in the first half of the year will feature next-generation 5G network speeds.

--After all its negative news concerning sales in China last week, Apple is cutting its production plan for new iPhones by about 10 percent for the first quarter, the Nikkei Asian Review reported Wednesday.  The company asked its suppliers to produce fewer of its iPhones than planned, Nikkei said.  This is just one report, but it makes sense given what CEO Tim Cook said about China.

But Mr. Cook’s compensation rose 22% to $15.7 million for fiscal 2018, which ended in September, because sales and profit goals were met, solely because Apple raised the price of its flagship iPhone by 50% to nearly $1,000, while unit sales were flat with the prior year.

--Boeing announced on Tuesday that it had booked 893 net new airliner orders last year against 806 deliveries; the 806 below its target of 810 to 815, but above 2017’s 763 and higher than Airbus.

Airbus announced it booked fewer airliner orders in 2018 and trailed Boeing for the year, but the European plane maker remained upbeat about global demand.

Airbus’ net new-order tally was 747, compared with 1,109 net orders in 2017; Airbus delivering 800 planes.  The 1,606 delivered between Airbus and Boeing represented a new high for the commercial airliner industry.

But Airbus finished the year with a backlog of 7,577 planes, representing more than nine years of production, and these long wait times are impacting the ability to secure new deals.

Boeing has won the deliveries race, while Airbus has been ahead on orders since 2013.

Both Boeing and Airbus have suffered production disruptions amid delays in getting engines and other aircraft parts.  Both are calling for higher output in 2019, but neither has given firm production targets.

Boeing did have orders last year for 218 widebody aircraft, which speaks well of demand for despite concerns about an economic slowdown.  Orders for the 737 Max aircraft came in at 675, including 181 in December despite negative headlines concerning a new flight control system following the crash of a Lion Air 737 Max that killed 189 people in October.

--This just in...Elon Musk’s rocket company SpaceX announced it is reducing its workforce by about 10 percent of the more than 6,000 employees.  The company is citing “extraordinarily difficult challenges ahead.”

“To continue delivering for our customers and to succeed in developing interplanetary spacecraft and a global space-based Internet, SpaceX must become a leaner company.  Either of these developments, even when attempted separately, have bankrupted other organizations,” a spokesman said in an email.

It seems the issue concerns SpaceX’s Starlink program, which is competing with OneWeb and Canada’s Telesat to be the first to market with a new satellite-based internet service.

Much more on this next week, I imagine, especially in terms of how it could impact Tesla.

--Former Nissan chairman Carlos Ghosn could be in jail for another six months, his lawyer said after Ghosn appeared in court for the first time since his shock arrest in Japan last November.

Accused of financial misconduct, Ghosn told the court he had been “wrongly accused and unfairly detained.”

Once hailed as the man who saved Nissan, Ghosn was led into court in handcuffs with a rope around his waist.

Ghosn’s attorney said he expected his client to be jail for another six months, at least until the first trial is held.  He is accused of moving personal investment losses worth $17 million racked up on foreign exchange dealing to Nissan, while also making $14.7m in payments to a Saudi businessman, using Nissan funds, in exchange for arranging a letter of credit to help with his investment losses.

Then Friday, Japanese prosecutors brought even more charges of financial wrongdoing.

If found guilty of the financial misconduct charges, Ghosn faces up to 10 to 15 years in prison as well as substantial fines.

--Paul Mozur / New York Times:

“One man spent 15 days in a detention center.  The police threatened another’s family.  A third was chained to a chair for eight hours of interrogation.

“Their offense: posting on Twitter.

“The Chinese police, in a sharp escalation of the country’s online censorship efforts, are questioning and detaining a growing number of Twitter users even though the social media platform is blocked in China and the vast majority of people in the country cannot see it.

“The crackdown is the latest front in President Xi Jinping’s campaign to suppress internet activity. In effect, the authorities are extending their control over Chinese citizens’ online lives, even if what they post is unlikely to be seen in the country.”

Beijing is also demanding that Google and Facebook take down content officials object to, even though the two are inaccessible in China as well.

--Further trouble for Chinese telecom and networking equipment giant Huawei Technologies, as Polish authorities arrested a sales director of the company and charged him with conducting espionage on behalf of China, raising further concerns the global company is a spying tool for Beijing.

Polish officials said Huawei itself wasn’t charged with any wrongdoing, but they didn’t details the charges or say whether any sensitive information was compromised.

Washington has labeled Huawei a national security threat, and while the company vehemently denies such charges, the evidence is beginning to add up.

--Last week it was Delta, this week American Airlines Group Inc. trimmed its profit guidance of 2018.  American, just like Delta, said it saw slower-than-expected sales of pricey last-minute holiday tickets.

It’s great for travelers, but investors worry airlines are losing pricing power as more seats remain on the market.

--Oracle Corp. announced it has bought the naming rights to the San Francisco Giants stadium for more than $200 million – a second deal to boost its brand image by sponsoring a hometown sports facility in the San Francisco Bay Area, the other being the Oracle Arena in Oakland that has been home to the Golden State Warriors.  But JPMorgan Chase & Co. agreed to pay $15 million to $20 million annually over 20 years for the rights to the new Chase Center in San Francisco, where the Warriors will play once it opens for the 2019-2020 season.  Years ago, Barclays Plc paid $400 million over 20 years for the name to the Brooklyn Nets arena in New York.

The Giants ballpark is now named AT&T Park, their naming rights having started with Pacific Telesis, Pac-Tel then becoming part of AT&T over time.

--Shares in Constellation Brands fell 12 percent on Wednesday after it warned of weak demand for its cheap wine labels and a stupid investment in the pot industry.

Constellation’s premium brands such as Kim Crawford and Prisoner are selling well, but sales for low-price wines (like Robert Mondavi and Black Box) aren’t what they used to be, Constellation said in reporting fiscal third-quarter results.

The company now predicts wine sales will drop in the low-single digits this year vs. a previous projection of 2 to 4 percent growth.  Constellation said it is exploring “strategic alternatives” for its lower-priced brands, which also include Woodbridge.

But last year, Constellation invested $4 billion in Canadian pot grower Canopy Growth, and since closing the transaction, Constellation has written down the value of its stake by $164 million and said it expects interest expenses will hit full-year earnings by 25 cents a share.

--PG&E Corp. shares cratered and the bonds dropped to all-time lows Tuesday after S&P Global Ratings slashed the utility company’s credit grades to the middle of the junk spectrum from investment grade, citing its limited options for managing wildfire liabilities.  Investors are worried about the potential for the company to file bankruptcy, as California investigators look into whether PG&E equipment ignited the deadliest blaze in state history last year, as well as fires in 2017, which could leave the company with liabilities as high as $30 billion.

--In a worrisome sign for the asset management business, BlackRock, the $6 trillion behemoth, is letting go of about 3% of its workforce, or 500 employees.  It’s emblematic of the changes that will take place after the long bull market ended last year, at least by some measures.  BlackRock and other firms have seen their share prices slide amid slowing investor inflows and with rivals cutting fees on some index funds to zero.

“Market uncertainty is growing, investor preferences are evolving, and the ecosystem in which we operate is becoming increasingly complex,” BlackRock said in a memo Thursday obtained by the Wall Street Journal.

Last October, BlackRock reported that investors took more money out of its funds than they put in for the first time in three years.  Since reaching a high last January, the firm’s shares have lost a third of their value.

--Disneyland Resort is opening up its $1 billion Star Wars expansion in the coming months, so to celebrate, Disney announced price increases of up to 25% for daily tickets, annual passes and parking.  Less than a year ago, the resort hiked prices up to 18%.  Under the latest increases, the cheapest daily ticket will be more than $100.  Daily parking prices are rising to $25 from $20.  Good lord.  [I haven’t been to Disneyland literally since about fourth grade.]

Disneyland expects the new area, dubbed Star Wars: Galaxy’s Edge, to result in record visitor demand.  Hope the toilets work.

--Susan Zirinsky, the longtime producer of “48 Hours” on CBS, is replacing David Rhodes as the president of the network’s news division in March, the company announced Sunday.

The announcement was a surprise, just the latest at a network rocked by allegations of sexual misconduct that have taken down Leslie Moonves, the longtime CEO, Charlie Rose, and Jeff Fager, longtime executive producer of “60 Minutes.  Ryan Kadro, the executive producer of “CBS This Morning,” announced last month he was departing.

Zirinsky was thought to be in line to replace Fager at “60 Minutes,” but now she will select a successor.

--The 76th Golden Globes Awards had solid ratings for NBC, with 18.6 million tuning in, down just 2% from 2018, but up 4% among those in the prized 18-to-49 age group.  The show in general has not faced the double-digit annual decreases in recent years that trophy programs like the Emmys and Oscars have seen.

Speaking of the Oscars, it faces a looming disaster with its next telecast, as the decision has been made to go without a host.  The last time that happened was 1989 and it was broadly panned.

--Breaking tonight...Megyn Kelly is officially out of her contract at NBC News.  She’ll get the remaining $25 to $30 million on her $69 million three-year deal, and be allowed to take jobs at other networks, though she reluctantly signed a non-disclosure agreement, according to reports, so no tell-all books.

Kelly is vowing she’ll be back soon, recognizing her strength is news, not fluff.

--Finally, we have the divorce between Amazon CEO Jeff Bezos and his wife, MacKenzie, of 25 years, with Bezos, 54, worth about $137 billion.  Apparently there is no prenup agreement.  Incredible.  I’ve suddenly become a very big fan of MacKenzie, an award-winning novelist, but I see the line is 75 miles long and I have work to do. 

The couple lives in Washington state, which is a “community property state,” meaning divorcing couples without a prenup split assets 50-50, according to TMZ, which cited “sources with direct knowledge” of their arrangement.

In terms of Amazon, the importance of this mess is that in order to fund a settlement of over $60 billion, Bezos would have to sell or pledge shares, which could dilute his ownership and control of the company.  He currently owns just under 16 percent of Amazon, or 80 million shares.

But MacKenzie should want the family fortune to keep growing, so she may not push for the sale of shares, instead channeling Sally Brown in her letter to Santa.  “If it seems too complicated, make it easy on yourself: just send money.  How about tens and twenties?”  Times 100 million.

After the story broke, salacious details began to emerge of Bezos’ affair with TV anchor Lauren Sanchez, but I won’t write what is being reported in the National Enquirer, concerning texts and supposed photos between the two.  Sanchez is married to Hollywood talent mogul Patrick Whitesell.

Sources close to the Enquirer’s investigation did say that Sanchez sent the texts (sexts) she was exchanging with Bezos to a friend to show off her relationship with the world’s richest man – and then the “friend” passed them along to the Enquirer.

Foreign Affairs...as opposed to those of the domestic variety...

Syria / Iran:

Kevin Bacon / Defense News [written hours prior to today’s announcement of a U.S. withdrawal in Syria]

“The U.S. may have a foreign policy in the Middle East but it hardly resembles what Secretary of State Mike Pompeo described in Cairo on Thursday.

“In between bashing President Obama and American journalists to foreign audiences, Pompeo tried to make the case that the Trump administration has brought a tough new American engagement to the region.  His main messages seemed to be that, despite Trump’s surprise troop withdrawal from Syria, America will stand fast with its security partners – and implicitly, that Trumpian foreign policy reflects a strategic throughline rather than the whims of an inexperienced and erratic celebrity.

“But he offered those in the face of far too much evidence to the contrary.  From pulling out of the Iran nuclear deal to passivity in the face of the Saudi killing of a U.S.-based journalist, Trump has reduced American leadership and leverage in the region.

“One exchange seemed to sum up Pompeo’s situation. Before his Thursday speech at American University in Cairo, the BBC’s Barbara Plett Usher noted that President Trump had said that ISIS was defeated and that he would quickly order U.S. troops home, and then other administration officials had said that neither was the case.  ‘How is that not a contradiction?’ she asked the secretary of state.

“Here is Pompeo’s answer: ‘There’s no contradiction whatsoever. This is a story made up by the media. That’s fine.  You all write what you’d like. The president’s been very clear, and Ambassador [John] Bolton and I have been very clear about this too.’

“But they have not been clear, and their words and frequent policy shifts and on-the-fly adjustments have been documented extensively.  Pompeo couldn’t even finish his answer without contradicting himself.  One breath later, Pompeo said that what he meant was the U.S. will pull out of Syria but continue to fight ISIS everywhere else.

“The Trump administration has an established track record: today’s foreign policy may not be yesterday’s or tomorrow’s. And no matter how hard Pompeo tried to portray chaos as stability, it simply is not true. Administration officials have too often been caught unawares or contradicted outright by their mercurial chief executive.  For Syria, it’s happened twice in less than one year.

“Former Defense Secretary Jim Mattis wasn’t one to sugarcoat Trump’s shifts. He would just say that he and the Defense Department were there to serve the unconventional decision-making of an unconventional president – until Mattis finally resigned in protest over one of those surprise policy outbursts.  (Trump’s second national security advisor, retired Lt. Gen. H.R. McMaster, used to say the same thing, until he quit.)

“But Pompeo, a former Congressman, takes Trump-forgiveness to a new level.  His Cairo speech was a full-blown Potemkin village of U.S. history, policy, and achievements in the Middle East.

“Before he spoke, the State Department issued a basic outline of its Middle East strategy which, like the Pentagon’s defense strategy, the president does not follow.  A ‘fact sheet’ of its major themes highlight ‘Confronting Radical Islamist Terrorism Together’ and ‘Opposing the Iranian Regime and its Proxies.’  Pulling U.S. troops from Syria achieves neither of those, many critics have argued.  But Syria is not mentioned on that sheet, and by the end of Pompeo’s speech it was clear why.  The administration’s new messaging strategy is to highlight other U.S. engagement in the region and proclaim that Trump’s team is doing everything differently and better than Obama’s....

“Pompeo, just before his speech, reassured allies in the region that the United States still stood with them, or at least behind them.  ‘You’ll not fight these battles alone.  Our robust battle against ISIS, al-Qaeda, and other terrorist groups will continue,’ he said. But he did not say how that would happen in Syria. If the U.S. can’t convince Turkey to play nice with the Kurds there, Trump’s pullout may not be much of a pullout, and Pompeo’s vision of a U.S. enduring presence may come true.

“It wasn’t until halfway through Pompeo’s speech – after the Obama bashing, history cherry picking, truth spinning, religion baiting, and chest thumping – that the secretary began to talk about the topic the Trump administration calls its biggest priority: Iran.

“Three months ago, the policy was that the U.S. military would remain in Syria as long as Iran is there. That was then.  This is now.

“ ‘In Syria,’ Pompeo said, ‘the United States will use diplomacy and work with our partners to expel every last Iranian boot, and work through the UN-led process to bring peace and stability to the long-suffering Syrian people.’”

For the record, Pompeo also said some of the following in his speech at the American University in Cairo, referring to President Obama:

“Remember: It was here, here in this very city, another American stood before you. 

“He told you that radical Islamist terrorism does not stem from ideology.  He told you 9/11 led my country to abandon its ideals, particularly in the Middle East.  He told you that the United States and the Muslim world needed ‘a new beginning.’ The results of these misjudgments have been dire.

“In falsely seeing ourselves as a force for what ails the Middle East, we were timid about asserting ourselves when the times – and our partners – demanded it,” Pompeo said, without mentioning Obama by name.

So what happened less than 24 hours after Pompeo’s speech?  We learned the U.S. has begun to pullout from Syria!  A total refutation of everything John Bolton and Pompeo had been saying the past week in trying to reassure allies the U.S. would stay in Syria until the job was done.

While Pompeo had moved on to Bahrain and the United Arab Emirates from Egypt, calling for increasing pressure on Iran, a spokesman for the U.S.-led military coalition in Syria, Colonel Sean Ryan, said the “CJTF-OIR has begun the process of our deliberate withdrawal from Syria,” referring to the U.S.-led anti-jihadist force.

“Out of concern for operational security, we will not discuss specific timelines, locations or troop movements,” he said.

The Syrian Observatory for Human Rights reported that the coalition had started scaling down its presence at Rmeilan airfield in the northeastern province of Hasakeh.

Rami Abdel Rahman, the head of the Britain-based monitoring organization, said, “This is the first such pull-out of American forces since the U.S. president’s announcement” of a full troop withdrawal from Syria last month.  [AFP]

Earlier this week, national security adviser Bolton said the U.S. wouldn’t leave Syria until Turkey promised not to target our Kurdish partners, which provoked furor in Ankara, as President Erdogan then refused to meet with Bolton as originally planned.

Erdogan used a prescheduled speech in parliament to then rip into American proposals that the U.S.-backed Kurds play a key role in Syria after the U.S. troop withdrawal, Erdogan saying Turkey will soon move to “neutralize” all terror threats.

“If there are other terrorists who would attempt to intervene in our intervention then it is our duty to eliminate them as well,” Erdogan added, in a thinly veiled reference to Syrian Kurdish fighters he wants to push from Turkey’s border.

One defense official told the Wall Street Journal, “Nothing has changed,” re: withdrawal plans.  “We don’t take orders from Bolton.”

Initially, U.S. officials said they were preparing to get all forces out of Syria in a matter of weeks, saying Turkey would take on the fight to eliminate Islamic State’s remaining pockets of strength, as agreed to in a Dec. 14 phone call between Trump and Erdogan.

Editorial / Washington Post

“(After) asserting, without justification, that ‘now is the time’ to withdraw U.S. forces from Syria, Mr. Pompeo insisted that the United States would nevertheless ‘expel every last Iranian boot’ from the country. How?  Through ‘diplomacy and work with our partners.’ Further, the administration would achieve ‘stability’ in Syria ‘through the UN-led [peace] process.’  The rhetoric was virtually identical to that of then-Secretary of State John F. Kerry, whose tireless work over several years proved definitively that those goals are unreachable without the leverage of U.S. military power.

“While echoing Mr. Obama’s envoy, Mr. Pompeo muddled the message of his own administration’s national security adviser, John Bolton. Mr. Bolton, rolling back statements by Mr. Trump, earlier this week spelled out ‘objectives’ he said had to be met before U.S. troops left Syria, including the complete defeat of the Islamic State and guarantees from Turkey that it would not attack U.S.-allied Kurds. He also hinted that one U.S. base in southern Syria would remain to thwart the movement of Iranian forces.

“Mr. Pompeo dismissed accounts of these contradictions as ‘made up by the media.’ But not only reporters are confused. Turkish President Recep Tayyip Erdogan, who according to the new White House plan is supposed to fill the vacuum left by departing U.S. forces, was infuriated by Mr. Bolton’s comments and refused to meet with him.  The pro-government Turkish press claimed Mr. Bolton had staged a ‘soft coup’ against Mr. Trump.

“We wouldn’t go that far, but something is badly amiss here.  Mr. Trump’s priorities seem clear, if unfounded: to reverse any policy pursued by Mr. Obama and to withdraw all U.S. forces from the Middle East as quickly as possible. The president’s advisers have more hawkish intentions but lack either a coherent strategy or Mr. Trump’s full backing. None of them seem to understand that while denouncing Mr. Obama’s mistakes, they are, in Syria, about to repeat them.”

Iran: Tehran said it will put two satellites into orbit in coming weeks using domestically made missiles, President Hassan Rouhani said yesterday, a week after Washington warned it not to pursue three planned space rocket launches.

Sec. of State Pompeo warned Iran against pursuing launches that he said would violate a UN Security Council resolution because they use ballistic missile technology.  The U.S. is concerned the same technology can be used to launch warheads.

Iran has said its space vehicle launches and missile tests were not violations and would continue.

Under the UN Security Council Resolution that enshrined Iran’s 2015 nuclear deal with world powers – which the Trump administration pulled out of last spring – the country is ‘called upon’ to refrain from work for up to eight years on ballistic missiles designed to deliver nuclear weapons.

Iraq: Secretary Pompeo visited Iraq on Wednesday as part of the administration’s attempt to convince regional partners that the U.S. will remain involved, despite the withdrawal of troops from Syria and troop reductions in Afghanistan.

Iraqi President Barham Salih told Pompeo in Baghdad: “We will need the support of the U.S.  ISIS is defeated militarily but the mission is not accomplished.”

Pompeo ignored reporters’ questions about the U.S. commitment to maintaining a military presence here, saying his conversations were more focused on the process of government formation in Iraq after their recent election.

But Trump said in addressing U.S. troops during a Dec. 26 visit to Iraq that a withdrawal from there wasn’t under consideration for now.

Israel: Kremlin spokesman Dmitry Peskov denied reports of Russian meddling ahead of Israel’s April election after state censors suppressed a speech by Israel’s domestic intelligence chief accusing a foreign power of planning to hack the vote.

Israeli media were barred from naming the country that Shin Bet chief Nadav Argaman said was trying to interfere, the gag order being described as a security precaution.

Israeli commentators speculated Argaman pointed the finger at Russia, which Prime Minister Benjamin Netanyahu’s own intelligence minister, Israel Katz, told local media last month could potentially want to replicate in Israel an alleged online influence campaign and email hacking to help Donald Trump in 2016.

Peskov, in Moscow, said: “Russia has not interfered, does not interfere and doesn’t intend to interfere in any election in any country in the world.”

It is a highly-sensitive situation, given Russia’s backing of Syria, and Israel’s air strikes on suspected Iranian and Hezbollah guerrilla targets there.

Separately, Prime Minister Netanyahu, in a nationally televised address Monday, asserted his innocence and rebuffed accusations of corruption against him.

It remains unclear whether attorney-general Avichai Mandelblit will announce his decision to indict Netanyahu before or after the April 9 elections.  The prime minister has insisted he will not resign should he be so.

North and South Korea / China: South Korean President Moon Jae-in said on Thursday the second U.S.-North Korea summit and leader Kim Jong Un’s visit to Seoul will take place “soon” and will be turning points to cement peace on the Korean peninsula.  Moon also told a news conference the South Korean government would cooperate with the United States in resolving the issue of sanctions on North Korea in order to reopen the Kaesong industrial zone, shared by the two Koreas, and Mount Kumgang tours.

This comes after Kim made a fourth visit to China on his armored train, meeting with Chinese President Xi Jinping.  Xi said he hopes North Korea and the United States can meet each other half way as they plan a second summit.

President Trump told reporters at the White House on Sunday: “We are negotiating a location... It will be announced probably in the not-too-distant future.”

Pyongyang has demanded Washington lift sanctions imposed because of its nuclear and missile tests, and declare an official end to the 1950-53 Korean War.  North Korea claims the demands are in response to Pyongyang’s initial, unilateral steps toward denuclearization that included dismantling its only known nuclear testing site and a key missile engine facility.

Xi said after talks with Kim, “The political settlement of the peninsula issue faces a rare historic opportunity....China hopes that North Korea and the United States will meet each other halfway.”

Xi commended North Korea for its denuclearization efforts, according to Xinhua.

But most intelligence experts in the United States believe Kim hasn’t done anything with regards to denuclearization and instead continues to build up his arsenal, while the “dismantling” spoken of is a sham.  Certainly analysis of satellite imagery says so.

In Seoul, President Moon said among the potential measures North Korea could take included abolishing intercontinental and intermediate-range ballistic missiles and dismantling weapons production facilities and other nuclear sites.  However, Moon said reducing U.S. military commitments, such as a withdrawal of troops or strategic assets from the region, would be unlikely options for Washington.

Moon told reporters: “U.S. forces in South Korea or strategic assets in places like Guam and Japan are not linked with North Korea alone, as they exist for the stability and peace of the entire Northeast Asia.”

Kim Jong Un turned 35 this week.

Separately, according to a Chinese military researcher, U.S. naval operations in the South China Sea could spark conflict and the U.S. would be to blame if a clash occurred.

The warning came as Chinese and U.S. trade teams were ending talks in Beijing.  Fears remain strategic tensions between the two countries are growing.

Zhang Junshe, a researcher at China’s PLA Naval Military Studies Research Institute, no doubt channeling the government, said: “Both countries’ warships definitely have come into close proximity and it’s easy for there to be a misunderstanding or an error of judgment, even a collision.  If there is a collision, the root cause is the United States.”

Earlier this week, a U.S. guided-missile destroyer sailed near disputed islands in what China called a “provocation,” just as the trade talks began.

Separately, He Lei, former vice president of China’s Academy of Military Sciences, told the South China Morning Post, “foreign forces” that attempted to prevent the unification of China and Taiwan could compel Beijing to use force to bring the self-ruled island under its control.

“Foreign forces that pose as world police to interfere in China’s affairs, to obstruct and damage China’s unification, are the main culprits that could force the mainland to use force to resolve the Taiwan issue,” he said.

Xi Jinping, who is also chairman of the Central Military Commission, told a meeting of top military authorities that China faced increasing risks and challenges, and the armed forces must work to secure its security and development needs.

“The world is facing a period of major changes never seen in a century, and China is still in an important period of strategic opportunity for development,” he was quoted as saying.

Xi’s comments last weekend followed his remarks from days before that China still reserved the right to use force to achieve “reunification” with Taiwan and prevent the island’s independence.

Taiwan’s President Tsai Ing-wen said on Saturday she was open to talks with the mainland if Beijing was willing to promote democracy and renounce the use of force against the self-ruled island.

Tsai’s comments came two days after she rejected President Xi’s proposal for the two sides to start talks on unification based on the “one country, two systems” model that applies to Hong Kong.

“As the democratically elected president, I have to defend our democracy, freedom, and way of life,” Tsai told foreign journalists in Taipei to explain her rejection of Xi’s proposal.

Tsai said Xi’s statement (which I covered in detail last week) highlighted two fundamental dangers posed by Beijing to freedom and democracy in Taiwan.

“First, by emphasizing ‘one China’ and ‘one country, two systems,’ particularly in the context of the so-called 1992 consensus, China has made clear their political intentions towards Taiwan and their steps for unification.

“This is a major disregard for the fact that the Republic of China, Taiwan does exist, and is in full operation like all other democratic countries,” she said.

“Second, China’s plan to engage in political consultation with the political parties instead of the democratically elected government of Taiwan is a continuation of its deliberate campaign to undermine and subvert our democratic process and create division in our society.”

Tsai added: “The lack of democracy and protection of human rights, as well as the military threats from China are the major reasons (that people here do not trust Beijing).”

Finally, in a memo obtained by Bloomberg News, retired Air Force Brigadier General Robert Spaulding said China’s desire to dominate new wireless technology, 5G, poses a global threat that should be thwarted by a new, secure network.  China will gain a capability for mayhem and mass surveillance if it dominates 5G networks that link billions of devices.

“The more connected we are, and 5G will make us the most connected by far, the more vulnerable we become,” said Spalding, who left the National Security Council last year.

Venezuela: President Nicolas Maduro was sworn in this week for a second six-year term amid a crumbling economy and disintegrating society. 

Earlier this month, the Organization of American States referred to Maduro’s government as “dictatorial” and 13 South American nations in the co-called Group of Lima called for new presidential elections.

Maduro dismisses such demands as a plot orchestrated by the U.S.

“Venezuela must be respected and we will use our political and diplomatic faculties to make them respect us,” he said.

At least 40 nations, including the U.S., the European Union and neighboring Colombia, refuse to recognize Maduro as the country’s legitimate president.  In Venezuela, he has a 15% approval rating.

Most of his vocal critics in South America are struggling to cope with the arrival of hundreds of thousands of Venezuelan migrants.  Colombia, for example, now hosts 1 million.  Colombian President Ivan Duque said nations should “reject the Venezuelan dictatorship and do everything necessary to restore democracy and constitutional order.”

Inflation in Venezuela in 2018 exceeded 1 million percent, and the economy shrank 15% last year, with a further decline of 10% anticipated in 2019.

I have been disappointed the military didn’t take out the nut-case years ago.

Democratic Republic of Congo: There is chaos here following the release of presidential election results, with the Catholic Church even stepping into the dispute, the church saying data collected by its 40,000-strong observer mission showed a different winner from the one announced by Congo’s electoral commission. 

The commission, widely seen as being controlled by incumbent President Joseph Kabila, stunned the people when it named opposition leader Felix Tshisekedi as the winner of the Dec. 30 vote, the first victory by an opposition candidate in the country’s history.

But while at first blush you would think, ‘Oh, this is good,’ it isn’t, because there are allegations of a backroom deal between Tshisekedi, who had been trailing in the opinion polls, and Mr. Kabila, who has been reluctant to give up power after 18 years.

France has also said the outcome was at odds with what was seen on the ground.

The vote tallies collected by the Catholic Church showed businessman Martin Fayulu winning.

The church is a major power broker in a nation that is 40% Catholic.  It oversaw a popular campaign to pressure Kabila to step down.  But the church has now taken a stand in demanding a transfer of power as violence could now rack the country, as it has the past 25 years.

This was meant to be Congo’s first democratic transfer of power in 59 years of independence.

The constitutional court will weigh in on the election and the supposed results in the next week or so.

It’s easy to forget that Congo is the size of Western Europe and a critical player in the technology sector for its natural resources.

Random Musings

--Presidential tracking polls:

Gallup: 39% approval of Trump’s job performance, 55% disapprove. [Dec. 22...as I said last time, Gallup is now switching to monthly figures, the next report Jan. 15, but for consistency I will keep up the current figure until it changes.]
Rasmussen: 45% approval, 54% disapproval (Jan. 11).

--Daniel Henninger / Wall Street Journal

“The reasons offered for why Donald Trump won’t win re-election in 2020 continue to pile up.  His approval rating is stuck, seemingly forever, below 45%. The Wall Street Journal/NBC poll puts the percentage of voters who say they’re likely to vote for him at 38%, while some 52% currently prefer a Democratic candidate.

“Numbers like that are why every Democrat and your grandfather is jumping into the presidential race.  It’s why the Pelosi-Schumer tag team is chest-thumping over the border wall.

“Finally, the truest weather vane of the political winds is freshman Sen. Mitt Romney’s maiden diatribe against President Trump in the Washington Post.  Mr. Romney’s denunciatory op-ed was a politician sensing that this presidency is – his words – ‘in descent.’

“The anti-Trump betting could be right.  Much of the country is exhausted with Mr. Trump’s manic personal style and may vote for some downtime when choosing the next president.

“But that Romney op-ed served one useful purpose: It reminded us why neither Mitt Romney nor anyone like him will take the Republican nomination away from Donald Trump.

“One of the abiding mysteries of recent political history remains how the blunt and brutal character standing on the GOP primary stage in his fire-engine-red tie beat the skilled politicians alongside him.  You can find the answer in Mr. Romney’s Washington Post article.

“ ‘A president,’ Mr. Romney intoned, ‘should unite us and inspire us to follow ‘our better angels.’’  And then he said: ‘I do not intend to comment on every tweet or fault.  But I will speak out against significant statements or actions that are divisive, racist, sexist, anti-immigrant, dishonest or destructive to democratic institutions.’

“You could not make up a more explicit pander to the prevailing political zeitgeist, or conventional wisdom, on Donald Trump – racist, sexist, destructive to democratic institutions.  This is a kitchen sink of anti-Trump buzzwords.  And the enduring reality two years after Mr. Trump won the presidency is that more U.S. voters than the conventional wisdom will admit just don’t care.

“For two years, this column has received emails virtually every week from readers who have been along for the entire Trump ride. Some love him, others abhor him.

“But among the most intriguing on this political odyssey are those in recent months who have been at pains to say they don’t need more descriptions of what a crude, often insufferable boor Donald Trump is. They know that.    The reference to ‘nutburgers’ is his summary of the cultural and political left in America:

“ ‘When I see long-hoped for ‘Resistance’ to those nutburgers from Trump – which I did not see from Nixon, Ford, Bush 41 or Bush 43 – I am unalterably supportive, flawed vessel or not. It’s not the man, it’s the resistance that binds us to him.’

“This is the voice of the resistance on the right. These aren’t only dislocated people living inside the Trump ‘base’ in places like hollowed-out Wilkes-Barre, Pa. This sentiment has been building for decades.  Its scale is suggested by the degree of Trump outrages these voters have been willing to discount on behalf of a larger cultural and political cause....

“Mitt Romney and virtually all Republican politicians entertaining runs for the presidency simply will not stand up to this dominant status quo. They just won’t do it.  Instead, they address these matters in a kind of tiptoeing careful-speak. Meanwhile, any Democratic candidate, notably a so-called ‘serious’ moderate such as Joe Biden, must pay obeisance to these ideas or get out of politics.

“As to appeals to our ‘better angels’ – typified by the Romney op-ed or anytime John Kasich speaks – history shows that the cultural left simply pockets these genuflections and then pushes its army forward. This history of bad faith – the identity left’s takeover of the campuses being Exhibit A – has created the right’s resistance, which in 2016 defaulted to Donald Trump and still does.

“Anyone thinking of challenging Mr. Trump in the New Hampshire primary will have to show they understand, and would fight for, voters who don’t care about ‘the man’ but care deeply about the nation’s cultural direction.  Which means being willing to accept exclusion and ridicule by the media trolls. Don’t hold your breath.

“It is possible Mr. Trump will personally grind down enough people to make him a one-term president.  Still, we hope no one feigns shock in 2020 if, despite everything, at least half the electorate quietly opts for the incumbent over what the Democrats have come to stand for. The resistance on the right is real, with the presidency the only outlet remaining for their vote.”

Henninger’s brilliant column really resonated with me.  He has nailed the opinion of the droves of detractors I developed since the election of Donald Trump.  I get it.  Some of the emails I’ve received over the past few months in particular are the nastiest I’ve had since the early days of StocksandNews.  More on this in a month or so when I ‘celebrate’ 20 years.

--Iowa Republican Congressman Steve King questioned how terms like “white nationalist” and “white supremacist” have become racist – comments that prompted stinging rebuke from GOP leaders and a primary challenger.

“White nationalist, white supremacist, Western civilization – how did that language become offensive?” King told the New York Times in an interview published on Thursday.  “Why did I sit in classes teaching me about the merits of our history and our civilization?”

King has been marginalized recently because of his extremist views, but Republicans blasted him, with Rep. Tim Ryan (R-Ohio) urging the House to respond.

“The U.S. House of Representatives must censure Rep. Steve King for his racists remarks. These remarks should also be  repudiated by Republican Leader Kevin McCarthy and all of Rep. King’s colleagues,” Ryan wrote on Twitter.  “Support for white supremacist ideology should have no place in Congress.”

McCarthy (and Steve Scalise) did condemn King’s comments.

Sen. Tim Scott (R-S.C.) ripped into King in an op-ed for the Washington Post today, Scott being the only black Republican senator.

“When people with opinions similar to King’s open their mouths, they damage not only the Republican Party and the conservative brand but also our nation as a whole.  They want to be treated with fairness for some perceived slights but refuse to return the favor to those on the other side....

“Some in our party wonder why Republicans are consistently accused of racism – it is because of our silence when things like this are said.”

Iowa State Sen. Randy Feenstra said he would mount a challenge in 2020 against the nine-term congressman.

King only won his midterm race by 3 percent and hasn’t said whether he will run for reelection.

--New York City Mayor Bill de Blasio was on a roll this week, as he preps for a future presidential bid (really).  Hizzoner rolled out legislation guaranteeing private-sector employees two weeks of paid vacation every year, obligating businesses with more than five people on staff to grant full-time and part-time workers 10 paid personal days – on top of the five sick days the city mandated in 2014.

Employees would have to provide two weeks’ notice and have at least four months on the job to qualify.  Unused days would roll over to the subsequent year.

But this should only be mandated for companies with more than a substantial number of employees, say a minimum of 50.  Businesses with more than five?  That’s nuts.

“New Yorkers need a break!” De Blasio declared.

In general, I have no problem with the concept, except it should come only after you have been with a company six months, not four...which was my personal experience in the business world.

And I do have to add that a local business I know well, employing lots of service staff, is changing management and the new boss wants to scrap the two weeks paid vacation that had been offered for decades by the prior manager, a friend of mine.  It’s outrageous.

But de Blasio’s new bill came a day after he rolled out a proposal that he touted as universal health coverage for 600,000 uninsured New Yorkers, including undocumented immigrants. He unveiled it on MSNBC, but leaked it the day before to the Washington Post to build his national profile.

“From this moment on in New York City, everyone is guaranteed the right to health care,” De Blasio said.

The city estimated the plan will cost at least $100 million annually when fully implemented.  But this would amount to less than $200 a year for coverage of those 600,000, while coverage costs thousands for the commercially-insured population.

When asked about the fairness of the program given the amount other New Yorkers’ spend on health costs, De Blasio described paying for health care for those who can’t afford it as a moral obligation.  “I refuse the notion that these folks don’t deserve health care,” he said.

De Blasio supports a single-payer health system in which the government would cover all health costs, preferably at the federal level.

For those of you outside the region, just understand this is one of the least likable people on the planet, non-terrorist/dictator category.

--According to a report from the American Cancer Society, deaths from cancer dropped 27% over a quarter century, or an estimated 2.6 million fewer people during that period.

Since the peak in 1991, the death rate from cancer has steadily dropped 1.5% a year through 2016, primarily because of long-running efforts to reduce smoking, as well as advances in detection and treatment of cancer at earlier stages.

But the bad news is that the percentage of cancer cases attributed to obesity is increasing.  Rebecca Siegel, a director at the American Cancer Society and the lead author of the new report, said: “We are probably only seeing the tip of the iceberg regarding the influence of the obesity epidemic on cancer rates.”

--According to a report from the Rhodium Group, an independent research firm, U.S. carbon emissions rose 3.4% in 2018, though this was due to a strong economy, outstripping a sharp decline in the number of power plants burning coal.

--According to the National Snow and Ice Data Center, the amount of sea ice around Antarctica has melted to a record low for January.  As of January 1, there was 2.11 million square miles of sea ice around the continent, the smallest January area since records began in 1978.

The figure was 726,000 square miles below average – an area roughly twice the size of Texas.

[Sea ice is frozen ocean water that melts each summer, then refreezes each winter.  Yes, I understand water currents have a big say in the levels, not just temperatures.]

--Separately, an analysis published in the journal Science found that the oceans are heating up 40 percent faster on average than a United Nations panel estimated five years ago.  This isn’t good, sports fans.

Granted, there have been all manner of studies with varying results on ocean temperatures, but this one from Berkeley Earth seems to employ the best science, using floating platforms that measure ocean temps down to 6,500 feet and then transmit the data to satellites.

--Finally, what a warm story we had at week’s end; the discovery of 13-year-old Jayme Closs in rural Wisconsin after 88 days, the suspect having killed her parents prior to kidnapping her.

All we can do is wish her the best...and may she get some rest, and peace.  We know she’ll get the right support.  God love her.

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

God bless America.

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Gold $1287
Oil $51.70

Returns for the week 1/7-1/11

Dow Jones  +2.4%  [23995]
S&P 500  +2.5%  [2596]
S&P MidCap  +4.7%
Russell 2000  +4.8%
Nasdaq  +3.5%  [6971]

Returns for the period 1/1/19-1/11/19

Dow Jones  +2.9%
S&P 500  +3.6%
S&P MidCap  +6.1%
Russell 2000  +7.3%
Nasdaq   +5.1%

Bulls 34.8
Bears  
29.4

Have a great week.

Brian Trumbore