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02/09/2019

For the week 2/4-2/8

[Posted 11:30 PM ET, Friday]

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Edition 1,035

Trump World...SOTU

President Trump tweeted Thursday, “So nice how well my State of the Union speech was received.  Thank you to all!”

According to a CBS poll, 76% who tuned in to the address Tuesday night approved of it, just 24% disapproving.  As the pollsters pointed out, however, with such addresses the people who watched tended to lean more towards the president’s own party, at least compared to Americans overall.  In the latest CBS national survey, 25% of Americans identified themselves as Republicans, but among those who watched Tuesday, that figure was 43%.

So while 97% of Republicans approved of the speech, far fewer Democrats who tuned in did (30%).  82% of Independents approved, which is strong if you’re Trump, remote in hand.

56% of Americans who watched the SOTU feel the president’s speech will do more to unite the country, rather than divide it, while 36% don’t think it will change things much.

As you would expect, just 15% of Democrats think the president’s speech will unite us.

Of course all the above is beyond absurd.  I just put it out there for the record.  It is ridiculous to make much at all of a State of the Union, especially in the time of Donald Trump, and when we’re talking the 2020 election is about 20 months away.

I mean, c’mon.  Nothing the president said on Tuesday really matters.  Everyone was way overstating the impact in the days after.  So much is going to change between now and, say, the summer of 2020 when we all really begin to focus on the fall vote.

In the end it’s going to be about geopolitics, and boy could the picture change by then with regards to Russia and China, for example, or the Middle East, or a major terror attack somewhere in the world that in one form or another impacts our lives too.

We have no idea what the state of the global economy is going to be in 18 months, but the current trends are not good.

We have no idea who the Democrats will select to be the opposition, or if the Mueller investigation’s final report is a game changer.

We do know that poll numbers are totally meaningless today, though in terms of the Democratic race for president, they’ll start becoming important by next fall.

In the meantime this is a ‘week in review’ so following is some opinion, largely positive for the president, on the SOTU:

Editorial / Wall Street Journal

“President Trump used his State of the Union address Tuesday to highlight his achievements and make a pitch for bipartisan cooperation in Congress.  Overall it was an effective piece of political rhetoric, especially his defense of his tax and deregulation policies and their results. But we doubt he reframed the political debate in a way that will give Democrats much pause going forward this year.

“Mr. Trump likes these moments before Congress, no doubt because he savors the political theater.  But they are also notable – and perhaps instructive to Americans who don’t follow politics obsessively – because they are among the few times he bothers to make an extended argument about political substance.

“Amid the daily distractions of Robert Mueller and his Twitter blasts, our guess is that this is the first time millions of Americans heard anything at all about the First Step Act and prison reform.  The emotional high point of the speech was his introduction of the two former inmates who became productive in prison and earned their reduced sentences. The political groundwork for criminal-justice reform was  laid by others, but it wouldn’t have happened without Mr. Trump’s endorsement.

“The biggest disappointment was his failure to reframe the immigration debate.  He faces another government shutdown deadline at the end of next week over funding for the border.  Yet he merely repeated his familiar parade of horribles about the border, the caravans moving north, and illegal immigrants who commit crimes.  He is preaching to the converted and persuading no one else.

“At least he added a grace note about legal immigrants and said they could come ‘in the largest numbers ever,’ without any details. But he offered Democrats nothing about the Dreamers or anything else on immigration that would make them want to bend on funding ‘the wall.’

“Mr. Trump sounded like someone who expects no compromise on immigration and thinks it will remain a stalemate through the next election.  We may be headed to another pointless shutdown next week, or Mr. Trump’s declaration of a ‘national emergency’ that would unite Democrats in opposition but divide Republicans. Mr. Trump will probably be talking about the wall for two more long years, which is not where he wants to be politically.

“Mr. Trump made bipartisan offers to Democrats on some of their priorities – controlling drug prices, public works, family leave. But the divide on details between the two parties is so large on these issues that they are unlikely to become law. That’s just as well because anything that could pass this Democratic House is likely to do more harm to businesses than good for consumers and workers.

“Our vote for the self-discipline prize goes to Bernie Sanders, the socialist Vermont Senator, who betrayed merely the hint of a wry smile when Mr. Trump said the U.S. ‘will never be a socialist country.’ The 2020 campaign begins.”

Gerald F. Seib / Wall Street Journal

“When Donald Trump became president, there was reason to believe he might govern as he campaigned, almost as an independent, standing apart from both parties, perhaps even with an ability to bridge the two parties because he was beholden to neither of them.

“And for the first half an hour of his State of the Union address Tuesday night, that was the very tone he set in his remarks in the House chamber.  He opened his arms to Democrats, declaring that Americans are ‘hoping we will govern not as two parties but as one nation.’

“Though himself a regular and enthusiastic practitioner of the political insult, he urged lawmakers to reject ‘pointless destruction’ and to ‘reject the politics of revenge.’  There was nary a mention of the partisan fight that partially shut down the government for 35 days.

“ ‘Victory is not winning for our party,’ he said.  ‘Victory is winning for our country.’

“Then, Mr. Trump turned to the issue that rends the Congress, the two parties, and the nation: immigration.  For 15 minutes he delivered a notably harsh lecture on the evils of illegal immigration and the need for the border wall he demands and that Democrats refuse to fund.

“He said that illegal immigrants bring crime and drugs, and drive down wages for Americans.  ‘Year after year, countless Americans are murdered by criminal illegal aliens,’ he declared.  He said he welcomed legal immigration, saying, ‘I want people to come into our country, in the largest numbers ever’ – though his administration has, in fact, taken steps to reduce legal immigration as well.

“At one point, Democrats groaned as he described the caravans of Central Americans heading toward the U.S. border, though the groans were quickly cut off with a wave of the hand from House Speaker Nancy Pelosi, seated just behind the president.

“Ultimately, Mr. Trump said his administration is offering Democrats a proposal to end the debate about how to secure the southern border, including more law enforcement and perhaps a more limited wall ‘deployed in the areas identified by border agents as having the greatest need.’  But he didn’t mention legal status for the Dreamers, the young immigrants brought here illegally as children, which is a key Democratic demand.

“Mr. Trump didn’t threaten to, as many speculated he might, declare a national emergency to fund wall construction without money approved by Congress.  But there was little sign of any other path toward resolution of what remains a bitter fight with Democrats, who have called the wall the president wants both a waste of money and immoral, and his harsh remarks about illegal immigrants racist....

“The question that hovered over Mr. Trump’s speech, and that will hover over the Capitol in coming weeks, is whether it is possible to step around the immigration fight to avoid another partial government shutdown when temporary funding expires in 10 days, much less move on to other areas of possible bipartisan agreement....[Ed. one being infrastructure]

“The prospects of spending a big chunk of money on infrastructure are enhanced by something Mr. Trump didn’t mention once in his speech, and that Democrats seem no more eager to discuss: the burgeoning federal budget deficit.

“In the fiscal year that ended last September, the first full year of Mr. Trump’s presidency, the federal deficit grew 17%, reaching $779 billion.  It will approach $1 trillion this year, and then rise from there.  Yet there was little concern on display in Congress Tuesday night.”

Michael Gerson / Washington Post

“With Trump, all politics is personal. So he likely presses on with his anti-immigrant campaign for two personal reasons:

“First, he probably thinks he will be judged as a loser if he leaves office without substantial progress on the wall. And he would be judged a loser.  Democrats know this and have the upper hand.

“Second, the enthusiasm of his political base may be the only thing that stands between him and impeachment. Some elected Republicans would happily turn against Trump if they were not in abject fear of angering the GOP base.  So Trump must keep the base happy at all costs.

“Other parts of Trump’s speech were incoherent – or at least dependent on Google being broken down.  He claims he wants high levels of legal immigration, even though he has proposed to slash legal immigration.  He called for action on AIDS and childhood cancer, though he once proposed an 18 percent cut for the National Institutes of Health. He attacked partial-birth abortion, even though he once supported the procedure. And when Trump issues a call to bipartisanship, it is like a murderer speaking at the funeral of his victim.

“Yet – and actually a pretty big yet – there were rays of light, made even brighter by the utter darkness surrounding them.  Trump’s calls to defeat AIDS and fight childhood cancer are truly admirable....

“These health proposals show the power of the presidency at its best – the power to set shared, unexpected moral goals. And that is one power Trump should wield more often.”

Lance Morrow / Wall Street Journal

“Donald Trump’s State of the Union address was a masterpiece – for his purposes.  Two chaotic years into his term, Mr. Trump appeared presidential for seemingly the first time and dramatically advanced his chances for re-election in 2020.

“I am speaking of perceptions – of how the unusual Mr. Trump plays in the public mind. To call the speech a masterpiece will strike his enemies as preposterous.  On the other hand, progressives are sometimes unreliable judges of the country’s moods.  Think of November 2016.

“On Tuesday Mr. Trump enlarged the public’s idea of himself and his presidency, and in proportion diminished his enemies. That was his most effective stroke on Tuesday night: to make the left seem to be lost in irrelevant obsessions and guilty of misinterpreting – falsifying – America and its values.

“He redrew the battleground, leading the discussion abruptly away from the progressives’ preoccupations with race and sex.  He redefined himself in a more civilized light and sought to lend credibility and bipartisanship to his ‘Make America Great Again’ theme by evoking American history and summoning their better angels.  He fetched back to the 20th century’s binary moral perspectives, to the victorious fight against Nazi Germany and to the Cold War against communism.

“The speech sought to annul, or at least soften, the left’s radical critique of American history, which has been the theme of elites since the 1960s, and to define Mr. Trump not as a chief of yahoos but a leader of a thoughtful, broadly respectable patriotism.  It’s wishful thinking to hope that the speech might help to break the cycle of mutual contempt that has so demoralized the country.”

John Podhoretz / New York Post

“It was perhaps the single most bananas political moment of the Trump presidency.

“Newly elected Democratic women in the House of Representatives, dressed all in white, stood up and cheered while the very president they entered politics to oppose and defeat looked on approvingly.

“He had just cited a statistic that 58 percent of the new jobs in America had gone to women.  They immediately applied this stat to themselves, and in an act of almost staggering solipsism, leapt to their feet and began to celebrate their own elections.

“Then Trump advised them to stay standing because they were going to like the next sentence – a sentence about how there were more women in Congress than ever before. To which they and their fellow Democrats began chanting ‘USA!  USA!’ – in the middle of a Trump speech!  And the president looked down upon these people for whom the word ‘impeachment’ is a mantra... and smiled.

“No one had that in the betting pool....

“No one remembers State of the Union addresses, but Trump did make a bid for immortality with an unprecedented passage in which he warned that Democratic investigations of his administration could destroy our economy.

“ ‘An economic miracle is taking place in the United States,’ Trump said.  ‘And the only thing that can stop it are foolish wars, politics or ridiculous partisan investigations.  If there is going to be peace and legislation, there cannot be war and investigation.’

“I don’t mean to be ghoulish here, but it is historically not true that war is bad for the economy.  And congressional oversight of administration practices is a constitutional requirement.

“Unquestionably, irresponsible Democratic Party behavior needs to be opposed, but a president standing in the Capitol saying congressmen will kill the golden goose by doing their jobs is nervy, even for Trump....

“The speech went off in so many directions and the feeling in the chamber got so punch-drunk that by the time the first hour had come and gone, the House chamber was singing ‘Happy Birthday’ to an 81-year-old Holocaust survivor.

“Look.  It was nice. No question. But it was still weird.  Like the whole speech.

“That said, in keeping the opposition party off-balance, Trump really did find a  way to turn the political discussion in the country to his advantage for the first time since he announced he would take credit for the government shutdown.”

Daniel Henninger / Wall Street Journal

“Two analyses of the State of the Union speech are possible – one short, one long. The short version is that if the presidential figure who delivered this speech replaced Trump of Twitter, he’d be on his way to four more years.  The chances of that happening are zero. So on to a longer speculation on the speech’s probable effects on Mr. Trump’s prospects for re-election.

“Since the midterms, in which many suburban voters turned against the president, the Democrats’ solitary political strategy has been that Mr. Trump would self-destruct.  Tuesday evening, Mr. Trump flipped the story line by putting the Democratic Party on the defensive.

“ ‘Tonight, we renew our resolve,’ Mr. Trump announced, ‘that America will never be a socialist country.’  With one line, he put the Democrats in check. Ever since the ‘socialism’ wave began building inside the party’s ranks, professional Democrats had to wonder how long they’d be able to get away with this hooey.

“Recall the response of Ben Jealous, the former NAACP head and Democratic candidate for Maryland governor, to a reporter who asked him last summer if he was a socialist; ‘Are  you f---ing kidding me?' He lost anyway.

“The Democrats’ leftward drift was going to be trouble enough for the party. But when its presidential candidates started to align with Alexandria Ocasio-Cortez’s Instagram version of socialism, it was only a matter of time before someone called them out. The president just did.  And more....

“(What) the Democrats have become – recently suggested in Howard Schultz’s criticism of the party’s mind-set – reveals a vulnerability the president’s strategists recognized.

“Mr. Trump is posing traditional, widely held American values against the Democrats’ confusing, postmodern amalgam of identity politics and national guilt-tripping.  That includes his explicit challenge to Democrats on condoning abortion at full term.

“Democrats are always rubbing your face in some national moral deficiency or failure. Stacey Abrams’ reply went on about ‘layoffs looming’ and people ‘living paycheck to paycheck.’

“Candidate Trump plans to give voters a remake of Ronald Reagan’s morning in America, while the Democrats are offering a nightmare on Elm Street. The optimistic Reagan vision – which was FDR’s and JFK’s – always wins that competition.  By default, the whining Democrats have let dour Donald Trump present himself as the country’s Mr. Sunshine....

“But Mr. Trump’s professed admiration for the McKinley Tariff of 1890 is at cross-purposes with the complex mechanisms of the world economy 129 years later.  General Motors said Wednesday that steel and aluminum tariffs helped damage its bottom line in 2018 by more than $1 billion.  The Journal reports soaring farm bankruptcies in part because of the trade wars.  If those promised Trump trade deals don’t happen, a slowing global – and U.S. – economy will overwhelm his achievements.

“The immigration section of the president’s speech was awful.  It included some grace notes about legal immigrants enriching the nation, but what followed makes one wonder if he believes that.  Arguably, Mr. Trump was simply trying to put political pressure on the Democrats to fund his border wall.  Past some point, though, the catalog of immigrant criminality and threat started to sound like something else.

“What used to be an argument for enforcing our laws and securing the border is close to tipping into ethnic animosity.  Hispanic-surnamed voters might reasonably begin to wonder where they stand in Mr. Trump’s America.  Is the message that we should keep some of them out, or all of them out?”

Trumpets

--Republican Senator Roy Blunt (Mo.) said congressional negotiators were making progress in their talks over border barriers, Blunt saying they were getting closer to a consensus on what kinds of physical barriers would be funded.  He said that extending or improving walls or fences built under previous administrations was a central part of the talks.

Trump has told negotiators he wants to see funding for a physical barrier in the legislation, as well as increased manpower and technology along the border.

The deadline for avoiding another partial government shutdown is Friday, Feb. 15 (12:01 a.m. EST on Feb. 16).

--I had the House hearing on acting attorney general Matthew Whitaker on in the background today as I was writing up this column and there was no reason to turn the sound up.  Totally worthless.  Should have put the Golf Channel on.

But I do believe Democrats, as part of the oversight process, should go after Trump’s tax returns.  Ways and Means Committee Chairman Richard Neal (D-Mass.) is empowered under federal law to inspect any federal tax return, but Neal is not rushing to seek Trump’s, preferring to build his case beforehand in order to avoid the perception of a politically tainted process, so he may not make the request for a few months.

Otherwise, I have been consistent since day one, as I am with everything related to this column.  I’m just waiting for the final Mueller report.

--Federal prosecutors in New York on Monday delivered a sweeping request for documents related to donations and spending by President Trump’s inaugural committee, with no doubt a focus on any information related to foreign contributors.

Only U.S. citizens and legal residents can legally donate to a committee established to finance presidential inaugural festivities.

Trump’s inaugural committee raised a record $107 million to fund events and parties surrounding his assumption of office in January 2017, more than twice the amount raised to fund President Barack Obama’s 2009 inaugural.

--Trump tweets:

“The mainstream media has refused to cover the fact that the head of the VERY important Senate Intelligence Committee, after two years of intensive study and access to Intelligence that only they could get, just stated that they have found NO COLLUSION between ‘Trump’ & Russia....

“....It is all a GIANT AND ILLEGAL HOAX, developed long before the election itself, but used as an excuse by the Democrats as to why Crooked Hillary Clinton lost the Election!  Someday the Fake News Media will turn honest & report that Donald J. Trump was actually a GREAT Candidate!”

“So now Congressman Adam Schiff announces, after having found zero Russian Collusion that he is going to be looking at every aspect of my life, both financial and personal, even though there is no reason to be doing so.  Never happened before!  Unlimited Presidential Harassment...

“...The Dems and their committees are going ‘nuts.’  The Republicans never did this to President Obama, there would be no time left to run government.  I hear other committee heads will do the same thing.  Even stealing people who work at White House!  A continuation of Witch Hunt!”

Wall Street and Trade

Boy, the government shutdown really screwed things up in terms of the economic data.  We learned this week that the BEA, the Bureau of Economic Analysis, will finally release a report on fourth quarter GDP Feb. 28, when the initial estimate was to have been Jan. 30.  The first two ‘looks’ at Q4 will be combined.

Then March 1 we’ll receive key figures on personal income and consumption, for both December and January.

For this week, the only item I cared about was the ISM non-manufacturing PMI for January, 56.7 vs. 58.0 in December, 50 being the dividing line between growth and contraction.

On the trade front, the equity market was hit some on Thursday and Friday with word that President Trump is not meeting with Xi Jinping before a March 1 deadline set by the two countries to achieve a trade deal, Trump saying during an event in the Oval Office that it was also “probably too soon” to know if a meeting between the two was planned in the next month or so.

Just last week, Trump said he would meet with Xi, most likely after his summit with Kim Jong Un, to hammer out a final deal.

If the talks do not succeed, Trump has threatened to increase U.S. tariffs on $200 billion worth of Chinese imports to 25 percent from the current 10 percent if the two have not reached an agreement by 12:01 a.m. March 2.  But I believe we will see some kind of extension, the tariffs remaining at 10 percent in the interim.

Another round of talks is scheduled for next week in Beijing, with Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer leading the American delegation.  The U.S. is pressing China to make major reforms, including on structural issues related to how it treats U.S. companies doing business there.  Washington also accuses China of stealing intellectual property and forcing American businesses to share their technology with Chinese companies. China denies the accusations.

Trump said in his State of the Union address that any new deal with Beijing “must include real, structural change to end unfair trade practices.”

Republican Senator Marco Rubio previously said: “Any trade deal worth making will clearly address China’s rampant IP theft and forced technology transfers, both for the good of the American economy and American workers, as well as our national security.”

In a speech last November, Peter Navarro, a White House trade adviser who definitely has President Trump’s ear, called out Beijing’s march “to acquire the technologies and intellectual property of the world by any means necessary” and control artificial intelligence, robotics and other emerging industries.  Or, as he put it, “the kinds of industries going forward where our sons and daughters and their children will find the good jobs at good wages.”

Bottom line, it would be impossible to come up with a comprehensive agreement agreeable to both sides by March 1, thus we either see an extension, or the trade war grows worse and the global markets tank.

But China will never agree to real structural reform.  Period.

Europe and Asia

The European Commission slashed its growth forecast for the eurozone (EA19) to 1.3% this year versus an earlier estimate of 1.9%, while inflation is expected to run at 1.4%, well short of the European Central Bank’s target of just below 2%.

The growth estimate of 1.3% contrasts with 2.4% in the currency area in 2017 – the fastest pace in a decade.  But the end of the “euroboom” has brought a return to old structural problems, including the political resistance to economic reforms, such as what you see in France today.

Brussels’ euro area forecasts were cut because of weakening global trade, fears of a China slowdown and uncertainty surrounding Brexit.

Valdis Dombrovskis, Commission Vice President for the euro, said the outlook was sparking worries about the links between eurozone sovereign borrowers and banks – a so-called ‘doom loop’ that aggravated the region’s financial crisis earlier this decade.

The EC also cut its annual GDP forecast for Italy to 0.2% in 2019 from a previous projection of 1.2% – marking the weakest annual output since 2014.  Italy is technically in recession after two consecutive quarters of negative growth, and industrial production for December, released this week, was down 0.8% from November, the fourth consecutive decline, and down a sizable 5.5% from Dec. 2017.

The yield on the Italian 10-year bond climbed during the week from last Friday’s 2.74% to 2.95%, as the weakness in the economy exacerbates its fiscal problems, Italy with a debt-to-GDP ratio of 133%.  [Conversely, the German 10-year, the Bund, saw its yield plummet to a two-year low of 0.08%.]

Separately, the national statistics office said this week that Italians are emigrating in record numbers while live births last year dropped to their lowest level this century, the worsening demographics only adding pressure on the economy.

The population shrank by 90,000 last year, the fourth consecutive annual decline, to an estimated 60.4 million, with about 160,000 Italians moving abroad in 2018, the biggest number since 1981.

“If these brains and hands...do not come back or are not replaced by other brains and hands, the economy will run out of gas,” said Andrea Garnero, economist at the OECD.

A study from Oxford Economics estimates some 2m young Italians – most of them skilled and educated – have left the country since 2008.

Further, the number of people aged 65 and over in Italy has increased by 560,000 since 2015, while the working age population has fallen by about the same amount and is now the lowest on record.

One more item on the growth front.  Brussels cut Germany’s GDP forecast from 1.8% this year to just 1.1%.

In other economic news, IHS Markit reported that the EA19 comp for January was 51.0 vs. 51.1 in December, with services at 51.2.

Other non-manufacturing/service sector readings:

Germany 53.0 vs. 51.8 in December
France 47.8 vs. 49.0 [A comp reading, mfg. and non-mfg., of 48.2, a 50-month low]
Italy 49.7 vs. 50.5 [comp 48.4, 62-mo. low]
Spain 54.7 vs. 54.0
Ireland 54.2, lowest in 68 months

Finally, Eurostat reported December retail sales for the EA19 fell 1.6% over November, up 0.8% year-on-year.

Brexit: British Prime Minister Theresa May and European Commission President Jean-Claude Juncker met on Thursday for what was described as a “robust but constructive” talk in Brussels, though they were also predictably inconclusive.  At the same time as May’s discussions with Juncker, the Bank of England was issuing a report that concluded Britain faced its slowest growth in 10 years in 2019, the Governor of the BOE, Mark Carney, talking of tensions caused by the “fog of Brexit” and the increasingly chaotic withdrawal from the European Union, the BOE forecasting growth of 1.2% this year, down from its previous forecast of 1.7% made in November.  It sees a one-in-four chance of the economy slipping into recession in the second half of the year.

[The EU slashed its growth forecast for the UK to 1.1% in 2019 from 1.8%.]

Mrs. May made the trip to demand the withdrawal agreement be reopened, which the European Union has steadfastly refused to do, but the prime minister needs help in getting the agreement approved by the British Parliament, which already overwhelmingly voted it down, 432-202 back on January 15.

It’s the same thing, over and over again; the sticking point being the unpopular “backstop” – the arrangement to guarantee the border between Northern Ireland the Republic of Ireland remain open...with no hard border that all parties agree could lead to a return of the sectarian violence that plagued Ireland for decades, “The Troubles.”

But the backstop, as constituted, keeps Britain in the EU’s customs union indefinitely if there is no broad-based trade deal between the UK and EU, which is what is supposed to be worked out in the transition period, which would last from March 29, 2019, through Dec. 2020, with the option of a third year, after which the backstop takes hold afterwards, if no agreement at that point.

Many Brexit-supporting Conservative MPs are concerned that the working of the backstop plan could tie the UK to many EU rules indefinitely.

Juncker has essentially said he is willing to tinker with the language a little bit to try to placate Parliament and reassure them there is some end point.

Meanwhile, the British economy is paying a heavy price with all the uncertainty in the business community.  Nissan, which produces around 475,000 vehicles annually in Britain, announced it was canceling plans to build an SUV there and leaving the production in Japan.  It employs about 7,000 workers in the English city of Sunderland.

France / Italy: In a rare move, France recalled its ambassador from Italy, after months of barbed commentary from Italian leaders.  The move apparently hadn’t been made since 1940, when Mussolini declared war.

The protest not only demonstrated the breakdown in relations between the two, founding members of the European Union, but it also reflected the mounting strains at Europe’s core as populists seek to denigrate the bloc and forge anti-European alliances across borders, which is going to play out on a big stage with the European Parliament elections in May.

The chief culprit these days is the populist Italian government, which has been hurling insults, many of the outrageous variety, as the Italian populist leaders try to score points back home on issues like migration by attacking those leaders promoting the vision of a united Europe, French President Emmanuel Macron chief among them.

The final straw appears to have come on Tuesday, when Italy’s deputy prime minister, Luigi Di Maio, the political leader of the Five Star Movement, met in France with a leader of the Yellow Vest protest movement.

Matteo Salvini, the far-right leader and interior minister, recently said France should get rid of its “very bad president.”

While the French Foreign Ministry has been huffing, there is a serious problem with the battle for Europe’s leadership between the nationalist forces of a Salvini and the establishment as espoused by Macron, who has decried the populist “leprosy” rising across the continent.

Salvini, who along with De Maio came to power on the migration issue, has been particularly upset at France closing its border to stop illegal migrants passing through Italy.

Turning to Asia...in China, we had the weeklong official Lunar New Year/Spring Festival, the markets closed there for the entire time, with most factories not reopening for another week (thru Feb. 19).  It’s the big annual crush as workers trek back home for a little break.

Meanwhile, the private Caixin non-manufacturing reading for January came in at 53.6 vs. 53.9 in December.

In Japan...the January service sector PMI came in at 51.6 vs. 51.0 the prior month, but the composite reading for the month was only 50.9 vs. 52.0 because of deterioration in the manufacturing sector.

Street Bytes

--The Dow Jones and Nasdaq have seven-week winning streaks now, for the former the best since Nov. 2017, though the last three weeks’ gains compared to the first four are miniscule.

This week the Dow rose 0.2% to 25106, the S&P eked out a one point, 0.05% gain, and Nasdaq was up 0.5%.

--U.S. Treasury Yields

6-mo. 2.49%  2-yr. 2.47%  10-yr. 2.63%  30-yr. 2.98%

--Bill Gross, the original “Bond King,” announced his retirement on Monday to focus on his personal portfolio and foundation work.  Gross said in a statement:

“I’ve had a wonderful ride for over 40 years in my career – trying at all times to put client interests first while inventing and reinventing active bond management along the way. So many friends and associates at my two firms to thank – nothing is possible without a team working together with a common interest.”

Gross, 74, has run the Janus Henderson Global Unconstrained Bond Fund since late 2014, shortly after a messy departure from the firm he helped found, PIMCO, amidst a management clash.

It was then an equally messy final chapter, but that cannot change the gigantic impact he had on bond trading and how investors viewed the fixed income market.  Janus CEO Dick Weil was correct in saying: “Bill is one of the greatest investors of all time.”

The PIMCO Total Return Fund, which Gross founded in 1987, became the world’s biggest mutual fund as assets swelled to almost $300 billion at its 2013 peak, generating annualized returns of 7.8 percent from inception through his last day.

“No other fund manager made more money for people than Bill Gross,” Morningstar Inc. said in January 2010, when it named him fixed-income manager of the decade.

Nir Kaissar / Bloomberg

“That messy last act refers to Gross’ stint as manager of the Janus Henderson Global Unconstrained Bond Fund since 2014. Gross made some big bets at Janus Henderson that didn’t pay off, most famously a wager last year that rates on U.S. Treasuries and German bunds would converge, resulting in sagging performance for his fund.

“Even though Gross’ calls didn’t turn out the way he and his investors had hoped, Gross was right to bet boldly on his best ideas, and active bond managers would be wise to follow his example.

“The pivot to unconstrained investing was a brave departure for Gross, who had spent the previous three decades perfecting the ‘total return’ approach to bond investing with the PIMCO Total Return Fund he founded in 1987. The strategy attempts to outpace the broad bond market by taking modestly more risk, often by buying lower-quality bonds than are reflected in broad-market bond indexes while targeting a similar average maturity.

“No one did it better than the Bond King. The institutional share class of Gross’ total return fund outpaced the broad bond market, as represented by the Bloomberg Barclays U.S. Aggregate Bond Index, by 1 percentage point annually during his run from June 1987 to September 2014, a huge margin for a bond manager.  And he did it with only modestly more risk...

“Gross was also shockingly consistent. His fund outpaced the bond market during every rolling 10-year period, and never by less than 0.5 percentage points a year.  His average outperformance over all 10-year periods was 1 percentage point a year, and 44 percent of the time he won by a wider margin.  During his best decades, he outperformed by more than 1.6 percentage points annually, a margin that rivals top managers in any asset class.

“Given Gross’ mastery of the total return game, it was hardly necessary for him to stake his reputation on a late-career turn to unconstrained investing, a high-stakes strategy that calls for big bets.  His run at Janus Henderson wasn’t the unmitigated disaster implied by the headlines, but Gross failed to re-create the market-beating magic of his PIMCO days.”

Growing up, I learned to watch “Wall Street Week with Louis Rukeyser” on PBS with my dad.  He got me involved in investing through his subscription to Value Line and those terrific weekly reports you’d put in a giant binder.  I remember doing real well in one of their stock-picking contests when I was like a sophomore in high school.

I loved Rukeyser’s show, which ran from 1970-2002, for the most part, and you’d become familiar with all of Uncle Lou’s regulars, which over time included Bill Gross, Rukeyser’s fixed-income expert, along with Jim Grant.

So it was kind of fun when PIMCO acquired the Thomson Fund Group in the mid-90s, where I was then national sales manager, and I had more than some interaction with Gross. 

PIMCO, out in Newport Beach, Calif., was of course superior to little old Thomson Funds, based in Stamford, Conn., which had survived the bankruptcy of Thomson McKinnon Securities Inc., the TMSI sales force being incorporated into Prudential Securities (at the time Pru-Bache...think legendary George Ball) back in 1990, where I was employed briefly as part of the integration of the two firms before I quit...boy, I have some stories about my five months there...one of my duties was to get the ice at the end of the day for our rather strong drinks...just the national sales department, which drew looks from ‘marketing’ as I passed them carrying the bucket.

My job once PIMCO acquired us was to help ensure the Thomson wholesalers knew the PIMCO story as we added the fixed income pitch to our pretty strong lineup of equity funds, and that entailed holding a slew of conference calls with Gross, which we would offer up to the brokerage community.  I knew what Gross wanted and as the moderator I would actually send him a script beforehand and if I had one talent, it was to make a script sound like it was ‘live’ and unscripted.  I knew Gross liked this because there were no surprises.  [Shout out to my old friend, Phil N., for being the liaison with Newport Beach.]

Anyway, Gross and I would have minimal personal exchanges when I went out to sales conferences where he was our featured speaker, or when we met in Newport Beach for meetings with our own sales force.  Taking a tour of the PIMCO offices was always an eye opener.  It was deathly quiet.  A real tension convention.  It seemed as if there was zero humor (very unlike our offices in Stamford...I did my part to make sure we had a good time).

You also knew the people you were dealing with in Newport Beach had all the right academic credentials and made ginormous sums of money...that they were living in the best houses overlooking the Pacific.

So as much as I had fairly extensive dealings with Bill Gross, if you asked him today if he remembered me I can guarantee he’d say ‘no.’  It’s just the kind of person he is.

But I’ll remember him.  He was truly one of the great investors of all time.  It’s too bad he had such a lousy final chapter to his career, including in his personal life.

--Fed Chairman Jerome Powell dined Monday night with President Trump and Treasury Secretary Steven Mnuchin at the White House, Powell joined by Fed Vice Chairman Richard Clarida.

Needless to say, in light of the president’s criticism of Powell and his interest rate hikes (four in 2018), this had tongues wagging.

It’s not unusual for a president to meet from time to time (albeit infrequently) with the Fed chair, but it was natural to think that the president would none too subtly tell Powell to ‘cut the crap,’ so to speak.

Afterwards, the Fed said of the dinner that Powell’s “comments in this setting were consistent with his remarks at his press conference of last week. He did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that meant for the outlook.”

Powell said last week that political pressure, including from Trump, hadn’t and wouldn’t influence the Fed.

The dinner occurred on Powell’s 66th birthday.  Steak was served.

--Oil fell this week (to $52.71 on WTI) as the market confronted concerns over potentially lagging global demand, the trade war between the U.S. and China not helping, while at the same time production is growing, and OPEC struggles with their mandated production cuts.

There was a report this week that OPEC is negotiating with Russia to join the cartel, for the obvious purposes of better coordinating production levels to give it more leverage in influencing prices.

--Thursday we received an announcement on the biggest bank merger since the 2007-09 financial crisis, U.S. regional BB&T Corp. saying it will buy rival SunTrust Banks Inc. for about $28 billion in stock, the two hoping to close the deal later in the year.

There is no doubt that such a merger, in a relatively brief period of time (the timetable) would not have been doable before the Trump administration’s deregulatory environment, the easing of crisis-era rules, and now other regionals will be pressured to keep up.

It’s really all about technology, and the huge move to online banking.  Even yours truly, while I still go to a physical branch a few times a week for various reasons (including the charity I do the finances for), am surprised how much I rely on being able to go online.

But you need capital to make the huge investments necessary to take the nation in that direction and the regionals can’t compete with the big boys...and still be profitable at a level shareholders will accept.

BB&T and SunTrust said the combined bank would produce annual cost savings of around $1.6 billion by 2022.

The combined company will operate under a new name and have around $442 billion in assets, $301 billion in loans and $324 billion in deposits.  It will rival U.S. Bancorp, which has about $467 billion in assets.

The new bank will blanket much of the East Coast, with headquarters in Charlotte, N.C., though it will retain operations in Winston-Salem, N.C., and Atlanta, the home markets for both companies.

The two have more than 3,100 branches all told and about 740 within 2 miles of each other, so branch closures will occur, both already shuttering locations as customers migrate to digital offerings.

The two are coming at this merger from a position of strength and it’s a natural; a major player in some of the best markets in the U.S.

While the deal will draw criticism from the likes of Senators Elizabeth Warren and Bernie Sanders, regulators will approve it, especially since its asset level, as large as it is, will remain below the level that would make it a systemically important financial institution, thus the new bank will avoid the increased scrutiny the likes of JPMorgan Chase face.

Kelly King, BB&T’s CEO, will be CEO of the combined company until Sept. 12, 2021, after which SunTrust CEO William Rogers will take over.

The shares in both banks rose on the news.

--Amazon founder Jeff Bezos, the world’s richest man, is firing back at National Enquirer owner American Media Inc. (AMI) over what he is calling an “extortion and blackmail” attempt by the tabloid.

In a lengthy blog post on Thursday, Bezos, who also owns the Washington Post, details alleged correspondence between the lawyer for his lead investigator, Martin Singer, and Dylan Howard, the chief content officer for AMI.

In emails posted by Bezos, Howard says the Enquirer would post a series of images it has of Bezos and former Los Angeles news anchor Lauren Sanchez, Bezos’ love interest.

In a separate email, AMI attorney Jon Fine said that the company would not publish the unreleased emails and text if Bezos released a statement “affirming that they have no knowledge or basis for suggesting that AM’s coverage was politically motivated or influenced by political forces.”  The emails also demanded Bezos and his investigator agree that they would stop “referring to such a possibility.”

Bezos’ private security consultant has said he was investigating whether Ms. Sanchez’ brother, who has said he supports President Trump, may have been behind the leak for political reasons; Trump having long criticized Bezos, ostensibly because of The Post’s negative stories on him.

Today, AMI said it “acted lawfully” in its coverage of Bezos – but added it would “thoroughly investigate” Bezos’ claims that the tabloid’s boss tried to blackmail him with nude pictures.

In a statement, the company said: “American Media believes fervently that it acted lawfully in the reporting of the story of Mr. Bezos. Further, at the time of the recent allegations made by Mr. Bezos, it was in good faith negotiations to resolve all matters with him.

“Nonetheless, in light of the nature of the allegations published by Mr. Bezos, the Board has convened and determined that it should promptly and thoroughly investigate the claims.”

Tonight we have this from the Wall Street Journal’s Nicole Hong:

“Federal prosecutors are examining whether the National Enquirer’s publisher violated an earlier deal to avoid facing campaign-finance charges, according to people familiar with the matter, after Jeff Bezos...accused the tabloid of trying to blackmail him....

“The agreement reached last year between federal prosecutors and the Enquirer’s publisher, (AMI), allowed the company to avoid criminal charges for coordinating with the Trump campaign to make an illegal payment in 2016 to silence a woman alleging an affair with the then-presidential candidate.”

This is extremely complicated, and I’m not one to rush to judgment.

But we do know two things.  The story allowed the New York Post to run a front cover today reading “Bezos Exposes Pecker,” alluding to AMI CEO David Pecker, the longtime friend of Donald Trump who was involved in Trump’s (Michael Cohen’s) payment scheme to former Playboy model Karen McDougal, and that Jeff Bezos himself confirms the adage, ‘Even billionaires can be idiots.’

Meanwhile, in terms of the operation of Amazon.com, the company is now reconsidering a corporate campus in New York after facing a wave of opposition.

The company, which announced last year it had chosen a site in Long Island City to house 25,000 employees, has not leased or purchased office space for the project yet, making it easy to withdraw the commitment, according to the Washington Post.

Amazon executives have had internal discussions recently to reassess the situation in New York and explore alternatives, the Post reported, citing people familiar with the matter.

In December, a Quinnipiac University poll of registered voters in New York City found 57% approved of Amazon coming to Long Island City, while 26% opposed the move.

But people were split when asked about the nearly $3 billion financial incentives being given to Amazon, with 46% supporting them and 44% opposing the package.

Needless to say, real estate investors in the area are throwing up today, though tonight the New York Times said Amazon is sticking to its New York plans.

--Google’s parent company, Alphabet Inc., posted a big jump in quarterly revenue, as well as rising costs outside its core online-advertising business, part of its efforts to diversify.

Alphabet reported revenue of $39.28 billion for the quarter and $136.82 billion for the full year, a big jump from $32.3bn and $110bn, respectively, a year earlier, with total profit for Q4 nearly $9bn.

But Google’s fourth-quarter capital expenditures tab jumped 80% to $6.85 billion, as the internet giant spent heavily to expand its cloud and YouTube businesses. 

Cap-ex is “growing at a sizable clip, and the primary driver continues to be investing in technical infrastructure to support growth,” Alphabet CFO Ruth Porat said in an interview with Bloomberg.  “By that we mean data centers and machines.  This reflects our outlook for global growth in ads, search, YouTube and cloud.”

Alphabet had 98,771 employees at the end of 2018, up 23% from a year earlier.

--General Motors reported it made an $11.8bn pretax profit in 2018, down 8.3 percent from 2017, driven largely by the launch of the 2019 redesigned Chevrolet Silverado and GMC Sierra pickups, robust SUV sales and record average U.S. transaction prices.  Global revenue was $147 billion for the year, up 1 percent from 2017.

For the latest quarter, operating profit slipped 8%, but its North American business posted a record fourth-quarter operating profit of $3.04 billion, despite lower overall U.S. sales and a tariff-related hit from commodity costs.  The average selling price for GM’s biggest models, the Chevy Silverado and GMC Sierra, rose to about $44,000 last year.  Ergo, it’s about truck sales rather than total vehicles sold.

CEO Mary Barra has narrowed GM’s focus to the U.S. and China, after leaving Europe and other money-losing regions in recent years, GM forecasting a “modest” decline in China income in 2019 amid sluggish sales there. 

Overall, fourth-quarter revenue rose 2% to $38.4 billion, better than analysts’ forecast of $36.5 billion.

The company announced its hourly union-represented workers will receive profit-sharing checks of $10,750 this year, down from last year’s $11,750 because the amount is based on North American pretax profits, or earnings before interest and taxation. GM’s North American pretax profit in 2018 was $10.8bn, down from $11.9bn in 2017.

GM’s profit-sharing for about 46,500 UAW-covered workers is higher than cross-town rival Ford, which is doling out checks of $7,600.  Fiat Chrysler announced last year it would pay out $5,500 on average, but would give U.S. workers, aside from senior leadership, $2,000 bonuses.

GM is still going ahead with as many as 14,000 job cuts in North America, which has drawn criticism from President Trump, but the company stands to save $2bn annually from the move, the cuts having started recently.

--Fiat Chrysler announced fourth-quarter net profit rose by 61 percent, $1.46 billion, powered by sales of the all-new Ram 1500 and Jeep Wrangler, but the carmaker continued to have trouble in Asia, especially China.  Europe and Latin America were hardly success stories as well.

--Tesla Inc. said it was lowering the price of its Model 3 sedan by $1,100, the second price cut this year which brings down the cost of its least expensive variant to $42,900, which is still well above the target $35,000 price that CEO Elon Musk has long said is needed after tax credits go away by year end.

But the company today is citing the cost at $35,000 now, when weighing credits and fuel savings, which is a major stretch.

There have been stories out there that Tesla’s Model 3 sales in January were awful, but Tesla reports sales quarterly, not monthly, and the next official report is due in April.

January is typically the slowest month for auto sales, and other electric carmakers suffered declines in January, according to Insideevs.

The Chevy Bolt EV sold 1,175 cars in January 2018; 1,412 in December, and an estimated 925 last month.

Tesla says it has suddenly shifted emphasis to Europe and China for Model 3 sales, raising questions about the strength of demand in the U.S.

In fact, in a conference all, Elon Musk said all the Model 3s  manufactured at its sole assembly plant in Fremont, Calif., are destined for Europe and China.

“Our whole focus is, OK, how do we get those cars made, get them on a ship as fast as possible... It’s very important to get those cars, especially to China, as soon as possible....get them there while there’s sort of a de facto truce on the tariff war.”

--Toyota Motor Corp. reported a 6.6 percent fall in U.S. vehicle sales for January, hurt by lower demand for its Camry and Prius cars.  Camry sales fell 3.4 percent, while Prius sales slumped 57 percent, the company said.

With GM and Ford having stopped reporting monthly sales, analysts are left to dig deep for estimates, and Bloomberg reported that Ford’s sales rose 7 percent last month, while GM’s fell 7 percent.

Fiat Chrysler reported a 2 percent rise in U.S. sales for January, helped by demand for its Ram pickup trucks, and said it expects strong sales in 2019.

Ram sales surged 24 percent compared with the same period a year earlier.

--Today we learned Subaru, Tesla, BMW, Volkswagen, Daimler Vans, Mercedes and Ferrari are recalling about 1.7 million vehicles to replace potentially deadly air bag inflators made by Takata Corp. of Japan.

The announcement was from the U.S. government, with about 10 million inflators being recalled in the U.S. this year, and as many as 70 million by the time the whole mess ends late next year.

Thus far, at least 23 people have died from the inflators hurling shrapnel into drivers and passengers worldwide, with hundreds more injured.                                                                                                              

--Walt Disney reported better-than-expected fiscal first-quarter profits and revenue, with Chairman and CEO Robert Iger playing up importance of streaming, as the firm gears up to compete with Netflix, Amazon and AT&T’s WarnerMedia.  Disney debuted ESPN+ last spring and will launch Disney+, its core direct-to-consumer service, later this year.

Iger touted ESPN+’s growth of 2 million paid subscribers over the last five months, but the service is still losing money.

At the theme parks division, jacked-up ticket prices pushed revenue 4.6 percent higher to $6.8 billion.  Sales at its cable networks rose 4 percent to $4 billion, while studio entertainment sales fell 27.3 percent to $1.82 billion due to the strong performance of blockbusters like “Star Wars: The Last Jedi” a year earlier.  “Mary Poppins Returns” grossed an unspectacular $329 million at the global box office in the quarter, while the big budget fantasy “The Nutcracker and the Four Realms” flopped.

A year ago, “Star Wars: The Last Jedi” was bringing in $1.3 billion in global receipts.

Overall, Disney reported net income of $2.8 billion, on revenue of $15.3 billion during the quarter, with revenue flat from the prior-year.

--BP PLC tripled its annual earnings and swung to a fourth-quarter profit thanks to increased output and higher crude prices in the final quarter of 2018.

BP is still focused on its recovery from the 2010 Deepwater Horizon disaster, which killed 11 people and led to the worst offshore oil spill in U.S. history, and the disaster continues to cost the company billions in payments each year.

But the company had a 3% year-over-year uptick in oil and gas output and has daily output of 3.7 million barrels of oil equivalent (ex-Russia), its highest level since 2010.

BP reported a net income equivalent of $2.7 billion, and it announced it plans to complete more than $10 billion in divestments over the next two years to help offset its $10.5 billion acquisition of BHP Billiton Ltd.’s U.S. shale assets.

--Eddie Lampert and Sears were granted a second chance to revive the iconic brand and save 45,000 jobs, the bankruptcy judge handing Lampert a victory.

Judge Robert Drain ruled Lampert deserves another shot, Lampert’s ESL Investments having filed for bankruptcy on Oct. 15 after 13 years of falling sales.   What was once 4,000 Sears and Kmart stores in 2012 was down to 687 and 68,000 employees last fall at the time of the filing.

ESL is buying the company out of bankruptcy for $5.2 billion in a plan that includes focusing on 425 of its profitable stores and on popular products like Kenmore appliances.

The judge warned ESL not to cause problems in closing the sale, questioning Lampert on whether he wants “his legacy to be akin to Jay Gould,” the ruthless robber baron of the Gilded Age, as some of his critics have charged.

Creditors had argued that the judge should liquidate the company’s assets instead of handing the company back to ESL.

One such creditor, St. Jude Children’s Research Hospital, opposed the sale, claiming that it was still owed more than $700,000 in charitable donations collected by Kmart.  The judge told the two parties to settle the matter.

Investigations continue over how the hedge fund handled the sale of certain Sears assets, including real estate and Lands’ End, which some creditors maintain were sold to ESL entities at favorable terms.

--I have been writing of how U.S. farmers are getting screwed royally by the trade war, and U.S. failure to sign onto the Trans-Pacific Partnership, and also how we would be hoodwinked into believing any new deal with China is a huge win for the farmers when it would be nothing but smoke and mirrors...that, to take one example, soybeans, exports might reach pre-tariff levels, at best.  That is no win!

So the Wall Street Journal this week had a story by Jesse Newman and Jacob Bunge which started thusly.

“A wave of bankruptcies is sweeping the U.S. Farm Belt as trade disputes add pain to the low commodity prices that have been grinding down American farmers for years.

“Throughout much of the Midwest, U.S. farmers are filing for chapter 12 bankruptcy protection at levels not seen for at least a decade, a Wall Street Journal review of federal data shows.”

It’s not just trade disputes, but a worldwide glut in some farm commodities has led to lower prices for corn, soybeans and other farm commodities.

Low milk prices are driving dairy farmers out of business in a market struggling with retaliatory tariffs on U.S. cheese from Mexico and China.

“More than half of U.S. farm households lost money farming in recent years, according to the USDA.”

Chapter 12 bankruptcy allows distressed family farmers or fishermen to devise a plan to repay creditors over three to five years.

U.S. farm debt – covering operations, land, equipment, livestock and more – last year climbed to more than $409 billion, according to a USDA forecast, the largest sum in nearly four decades and a level not seen since the 1980s, at a time when farmland values were going down as interest rates were going up.

The positives today are that the slump comes after a period of historic profitability, allowing farmers to build up their reserves, while interest rates have remained relatively low.

--Twitter reported adjusted earnings for the fourth quarter that were above expectations, ditto revenue of $909 million, up 24% from the year-earlier quarter, but the company guided lower for the current quarter.  The company showed growth in its number of daily active users and posted its fifth quarterly profit in a row, but it also said its monthly user count slipped.

Twitter said it has 126 million daily active users, a figure that is 60 million smaller than Snapchat’s and is dwarfed by Facebook’s 1.2 billion, though Twitter said the number was up 9% in Q4 compared with the same period a year earlier.

--Shares in “the failing New York Times” surged on Wednesday after the company said online subscriptions in the fourth quarter grew by the most since the months following the 2016 presidential election.

The Times’ said it added 265,000 net new digital subscriptions in the final three months of last year and ended 2018 with 3.4 million online and 4.3m total subscriptions.

The company has now set a goal of achieving 10m subscriptions by 2025.

The accelerating readership helped drive revenues from a year ago to $502.7m, well above analysts’ estimates.  NYT also swung to a profit of $56.9m.

Contrary to publications like BuzzFeed, Huffington Post, McClatchy and Vice that have all announced sizable layoffs in recent weeks, the Times has been increasing its investment in the newsroom and opinion departments to further accelerate digital growth.

--Shares in Snap Inc. rebounded after the company put a stop to the downward trend in user numbers that had plagued it since mid-2018, posting a stable user base of 186 million daily Snapchatters in the fourth quarter of 2018.

Snap brought in $390 million in the fourth quarter of 2018, up from $297 million in the third as the company more effectively monetizes its users’ eyeballs with improved ad products.

But the shares, which debuted at $27 in March 2017, closed the week at $9.10, which was 28 percent above the level, pre-earnings, to give you a sense of how far the company had fallen.

--Canada’s economy added a strong 66,800 jobs in January, far better than expected, while the unemployment rate ticked up to 5.8 percent as more people sought work.  But economists said low wage growth and sagging oil prices would keep the central bank from hiking rates when it next meets on March 6.

--Chipotle Mexican Grill handily beat expectations for the fourth quarter and the shares soared.  The fast-casual restaurant chain said comparable store sales jumped 6.1 percent year-over-year, stronger than the 4.5 percent projected by analysts, with digital sales up 65.6 percent, accounting for 12.9 percent of all sales.

For 2019, Chipotle said it expects sales at stores open at least 13 months to grow in the mid-single digit range, while opening between 140 and 155 new restaurants.

The company posted revenue of $1.23bn, up 10.4 percent against the year ago period, with adjusted earnings of $1.72 per share also well above forecast.

--Yum! Brands reported mixed financial results for its fiscal fourth quarter as earnings and revenue missed expectations, though same-store sales grew year-over-year.

Yum, the parent of Taco-Bell and KFC, said same-store sales in the former grew 6%, and 3% in the latter.  The other main division, Pizza Hut, was flat.

--Shares in Estee Lauder were a major reason why the market rose Tuesday after the beauty products company reported higher-than-expected growth in its fiscal second quarter, sales topping $4 billion for the first time.  Net sales rose 7%, with earnings coming in far higher than forecast.

--The FAA reported Monday that O’Hare International Airport is once again the nation’s busiest in terms of total flights, surpassing Atlanta for the first time since 2014.

O’Hare’s total flights last year topped 900,000 for the first time since 2007.  The busiest days for flights there occurred during June and July, and I kind of found it curious that the busiest single day was June 27, with 2,847 arrivals and departures.  Never would have thunk this.

O’Hare saw 903,747 flights in 2018, compared with Hartsfield-Jackson Atlanta International Airport’s 895,502.  Los Angeles, Dallas/Fort Worth and Denver were third through fifth, respectively.  [Chicago Tribune]

--We note the passing of “Chainsaw Al,” Albert J. Dunlap, a tough-talking executive known for turning around troubled companies by laying off workers and closing factories, but whose career ended in an accounting scandal.  He was 81.

As noted by the New York Times’ Richard Sandomir:

“Mr. Dunlap portrayed himself as a foe of corporate waste and a servant of the shareholders who benefited from his actions.  In the 1990s, when he ran Scott Paper, he laid off 11,200 workers; it was just one measure he took that brought him financial rewards of $100 million in salary, stock profits and other compensation after engineering the company’s sale to Kimberly-Clark in 1995.”

Dunlap was then hired by Sunbeam Corporation, an appliance maker, and within a month, amid talk of a different overhaul, the company’s shares soared over 70 percent.  Dunlap promptly laid off half of Sunbeam’s 12,000 people work force, closing or selling off most of its plants and other facilities, and paring its number of product lines.

Dunlap said he recognized when a company had the “death gurgle.”

Dunlap was an advocate of corporate governance reforms, and paying directors in stock instead of cash, to better align their interests with those of shareholders.

But Dunlap’s career came to an abrupt end in 1998, when Sunbeam’s board fired him amid an accounting scandal that involved using 1998 payments to inflate the books for 1997, which showed a non-existent surge in sales as a result.  Sunbeam later filed for bankruptcy in 2001.

Dunlap would spend the rest of his years tied up in court and a civil suit filed by the SEC that accused him of several counts of fraud.  He paid a hefty fine and agreed to be barred from ever again serving as an officer or director of a company.

--The Super Bowl’s ratings were subpar, ditto the game, with CBS reporting a 44.9 mark, down 5.3 percent from last year and the worst rating since 2009 and Steelers-Cardinals.

But there were still more than 100 million viewers on average during the telecast, and CBS reeled in an estimated $382 million in advertising revenue, according to Kantar Media.

Advertisers shelled out as much as $5.25 million for a 30-second spot during the game, a record, but that has more to do with the state of the overall economy than anything.

Foreign Affairs

Venezuela: The crisis grinds on, literally getting worse by the day, with President Nicolas Maduro still in power.  The store shelves are empty, medicines unavailable, the healthcare system in a total state of collapse, and massive hunger, while on the border of Colombia, a caravan of trucks carrying emergency medical aid and food, thanks to the United States, Canada, and Colombia, is blocked from entering the country, per Maduro’s orders, Maduro saying his country doesn’t need handouts.  “We are not beggars.  You want to humiliate Venezuela, and I will not let our people be humiliated,” he said on Monday.

The convoy is designed to put further pressure on him and stoke unrest among the local population.  But protests thus far have failed to topple the socialist regime blamed for the widening shortages.

Many of the protesters believe the army will not fire on them, even if they appear to be supporting the regime.

The aid was called in by Juan Guaido, the opposition leader and self-appointed interim president, who has been recognized by 40 countries so far, including the UK, France, Germany and Spain, in a challenge to Mr. Maduro.

Maduro can only stay in power if he can pay off his key generals. A Venezuelan air force general last Saturday became the first senior military official to defect, claiming in a YouTube video that “90 percent” of the armed forces are against Maduro, Gen. Francisco Yanez calling for mass protests to oust the socialist dictator.

3 million Venezuelans have fled the country thus far, a total that could soar further.

Meanwhile, the IMF has predicted that inflation in Venezuela will hit 10 million percent this year.

Should Maduro be ousted, as The Economist opines, the world will need to act fast.

“The lesson from the Arab Spring is that even a leader who starts by sweeping away a tyrant must bring improvements rapidly or risk losing support. The immediate priorities will be food and health care. The very fact of  a new government will help stop hyperinflation, but Venezuela will also need real money from abroad – international lenders, including the IMF, should be generous. The to-do list is long: Venezuela will need to remove price controls and other distortions and build a social safety-net. It must restart the oil industry, which will entail welcoming foreign investment.  Its debt will need restructuring – including the debt to Russia and China which is due to be paid in oil.  And amid all this, Mr. Guaido’s caretaker government must hold elections.

“A generation ago, Venezuela was a functioning state.  It can be again. It is blessed with oil and fertile land. It has an educated population at home and in the diaspora that fled. And in Mr. Guaido it has a leader who, at last, seems to be able to unite the fractious opposition. But first it must get rid of Mr. Maduro.”

Syria: The Pentagon is preparing to pull all U.S. forces out of Syria by the end of April, despite the fact the Trump administration has yet to come up with a plan to protect its Kurdish partners from attack once the U.S. leaves, as reported by the Wall Street Journal, who talked to current and former U.S. officials.

U.S.-backed fighters are preparing to take the final Syrian sanctuaries held by ISIS, with the U.S. now focused on withdrawal.

But the State Department maintains there is no timetable for a withdrawal, with President Trump putting no firm deadline on an exit, directing the Pentagon just to get all forces out of the country.

The U.S. also still has no deal with Turkey for northeastern Syria that would avert a fight between Turkish forces who would move in and Kurdish forces in Syria that Ankara views as terrorists.

The Kurds are pleading with the Trump administration to come up with a plan to ensure they aren’t targeted by Turkey.

On Tuesday, the commander of U.S. Central Command, Army Gen. Joseph Votel, told the Senate Armed Services Committee that the U.S. withdrawal is neither conditions based nor tied to a fixed timeline.

Votel also provided the first public confirmation that the Pentagon was surprised by Trump’s December tweet, abruptly announcing the U.S. withdrawal from Syria.

“I was not aware of the specific announcement,” said Votel, who is retiring in the spring.  “Certainly we are aware that he has expressed a desire and an intent in the past to depart Syria.”

Votel, under further questioning, admitted: “I was not consulted.”

Iran / Iraq: According to Israel’s Channel 12, Iran, Syria and Hezbollah are establishing a missile factory on the outskirts of the Syrian town of Safita.

According to the report, Israel’s strategy is to make the efforts public to thwart the construction and success of the factory, which is supposed to be where Iran will turn Hezbollah’s missiles into precision-guided munitions, capable of striking targets in Israel with unprecedented accuracy.

Israeli Prime Minister Benjamin Netanyahu has long maintained Hezbollah is attempting to convert ground-to-ground missiles to precision missiles at various sites in Beirut, including at Hariri International Airport.

Israel has been targeting suspected Iranian sites in Syria, most recently striking a warehouse that held vehicles set to smuggle precision rocket converting systems from Syria to Lebanon.

Iran warned Israel on Tuesday of a “firm and appropriate” response if it continued attacking targets in Syria.

Syria’s Foreign Minister Walid al-Moalem said in Tehran: “The Syrian government considers it to be its duty to keep Iranian security forces in Syrian territory.”

Separately, Iran hit back at President Trump’s State of the Union address in which he called Tehran the world’s leading state sponsor of terrorism, saying the U.S. has a history of backing brutal regimes in the Middle East.

“U.S. hostility has led it to support butchers & extremists, who’ve only brought ruin to our region,” Iranian Foreign Minister Javad Zarif tweeted Wednesday.

In the State of the Union, Trump also noted that his withdrawal from the multination nuclear pact with Iran and the subsequent imposition of sanctions were to ensure Tehran never acquired nuclear weapons.

“We will not avert our eyes from a regime that chants death to America and threatens genocide against the Jewish people,” Trump said.

In an interview with CBS News (“Face the Nation”) on Sunday, President Trump said he wanted to keep U.S. troops in Iraq, who are there to fight Islamic State, “because I want to be able to watch Iran.”

Iranian President Hassan Rouhani on Tuesday said Trump’s remarks exposed U.S. lies about its intentions.

“First, you say  that ‘we have come to Iraq for security reasons.’  Then you candidly announce ‘we will stay in Iraq to watch Iraq’s neighbor,’ meaning Iran,” Rouhani said during comments in Tehran.  “This shows your true color,” he said.  “Why do you occupy the soil of foreign countries?”

Meanwhile, Iraqi President Barham Salih was none too pleased about Trump’s comment, telling Washington Post columnist David Ignatius:

“I appreciate what the U.S. has done to help Iraq,” Salih told him.  “We honor that sacrifice.  But this success in Iraq is precarious and should not be unduly burdened.  It could easily unravel.”

Salih is ticked that Trump described al-Asad Air Base as if it’s an American facility, which offends many Iraqis.  Separately, Salih said: “It is of fundamental interest for Iraq to have good relations with Iran.  Don’t overburden Iraq with your own issues.”

David Ignatius:

“Trump lurches from blunder to blunder on the Middle East. His latest statements about rebasing U.S. forces in Iraq were so glib and insensitive to local politics that you have to wonder if the president even understood the mistakes he was making.  Sometimes, Trump’s conduct suggests a behavioral syndrome in which he seems to have no real comprehension that his comments offend others and increase his social isolation.

“The Iraq gaffe followed a much more serious mistake in judgment in December, when Trump suddenly announced he was pulling about 2,000 U.S. troops from Syria at a time when their commanders said their job of destroying the Islamic State wasn’t finished.  Despite opposition from virtually every corner of the U.S. government, Trump pushed ahead....

“When you ask U.S. officials what future security arrangements will exist in northeast Syria, you get a mishmash of answers, none of which adds up to a coherent policy. The United States asked French and British forces if they might stay, but they balked, so right now, Turkish, Russian and Iranian forces are positioning to fill the vacuum.

“Trump last weekend invented a new solution: Everything would be fine, because he was moving Special Operations forces to Iraq.  ‘We have a base in Iraq, and the base is a fantastic edifice...We spent a fortune on building this incredible base. We might as well keep it,’ he told Margaret Brennan on CBS’ ‘Face the Nation’ in an interview that aired Sunday.

“Trump explained (if that’s the right word for his chain of illogic) that if there is new trouble in Syria, as is widely predicted, ‘We’ll come back if we have to. We have very fast airplanes, we have very good cargo planes.’

“Trump’s rebasing-to-Iraq approach, unfortunately, may put U.S. soldiers at greater risk. Right now, the people who kick down the doors of Islamic State terrorists in Syria are our Kurdish-led allies in the Syrian Democratic Forces.  If the United States instead does the raids from Iraq, the danger for U.S. personnel will increase.  But in Trump world, that’s apparently an afterthought.

“Trump might have avoided a diplomatic crunch if he’d stopped with the rebasing. But no, he wanted to advertise that, with his plan, he could use the Iraqi base ‘to be able to watch Iran.’  He continued: The al-Asad base is ‘perfectly situated for looking at...different parts of the troubled Middle East rather than pulling up.  And this is what a lot of people don’t understand.’

“The disturbing part is that Trump doesn’t seem to realize that there’s an Iraqi government in Baghdad, facing substantial pro-Iranian pressure, that wants to control its own sovereignty.  U.S. forces were invited to Iraq in 2014 to combat the Islamic State, and Iraqis are genuinely grateful for U.S. help. But they don’t want another occupation.”

Editorial / Wall Street Journal

“President Trump won applause in Tuesday night’s State of the Union address when he declared that ‘great nations do not fight endless wars.’  It’s a resonant line in a country that has been fighting in parts of the Middle East for nearly two decades. And, in a literal sense, the statement is true.

“Yet the risk of Mr. Trump’s rhetoric is that it encourages a public belief that America can abdicate its responsibility to work with allies to preserve the peace.  History shows the great danger in failing to distinguish between fighting wars and deterring them. That’s especially true now that the authoritarian nations of Russia, Iran and China are seeking to dominate their regions and sometimes join forces against U.S. interests.

“One lesson is that keeping troops abroad is often cheaper than bringing them home.  An unwavering commitment to the defense of Western Europe under NATO prevented the Cold War from becoming a hot one. Some 300,000 U.S. troops across Europe deterred Moscow for decades until the Warsaw Pact imploded.

“The same strategy has preserved the peace in North Asia, to the benefit of the American homeland and economy. Strategic commitments to Japan and South Korea, bolstered by some 80,000 American military personnel, have partially contained the North Korean threat while creating space for both countries to become thriving democracies.

“Mr. Trump himself sometimes seems to intuit the importance of troops abroad to protect American interests. The U.S. maintains a naval base in Bahrain, an air base in Qatar, and deployments across Africa to target terrorists that could strike the homeland.  His Pentagon late last year dispatched a carrier strike group to the Persian Gulf for the first time in eight months to contain Iran.

“The President said on Sunday he wants to keep American troops in Iraq to “watch Iran.’  He also wants a 350-ship Navy to patrol key waterways, including on occasion the Taiwan Strait. The point of these sensible deployments is to deter bad actors precisely so the U.S. doesn’t have to fight a war.

“The alternative lesson is that withdrawing U.S. forces can invite war.  That’s the lesson of Barack Obama’s 2011 withdrawal of troops from Iraq while claiming ‘the tide of war is receding.’  Jihadists used the reprieve to form Islamic State, and by 2014 Mr. Obama was re-sending thousands of troops to the same theater.  Staying would have been far less costly.

“Mr. Trump sometimes talks as if the choice now in Syria and Afghanistan is between no troops or tens of thousands and permanent conflict. But the U.S. only has 2,000 troops in Syria, and even he says the U.S. will need to strike Islamic State if it reconstitutes itself. That will require troops somewhere in the region. Likewise, a decision to withdraw from Afghanistan should depend on whether it won’t again become a safe haven for global jihad.

“A key point here – and why Mr. Trump’s rhetorical isolationism is damaging – is that America can’t deter rogue regimes by itself. Whether in NATO or North Asia or the Middle East, the U.S. relies on allies to magnify America’s effectiveness as a keeper of the peace.  Those allies need to trust that America will also be there when needed....

“A rising China is the stiffest test, and a work in progress.  Mr. Trump’s withdrawal from the Pacific trade accord was his worst strategic blunder, missing a chance to form a trade alliance without China. He can correct some of the damage if his talks with Beijing change China’s behavior. But that has a better chance of success if he’d rally Japan and Europe in a united front against China’s bad practices.

“Mr. Trump’s foreign policy has been better than his rhetoric. But he shouldn’t mislead his supporters at home and upset friends abroad by suggesting that peace can be purchased by American retreat.”

Saudi Arabia: As reported by Mark Mazzetti of the New York Times:

“Crown Prince Mohammed bin Salman (MBS) of Saudi Arabia told a top aide in a conversation in 2017 that he would use ‘a bullet’ on Jamal Khashoggi, the journalist killed in October, if Mr. Khashoggi did not return to the kingdom and end his criticism of the Saudi government, according to current and former American and foreign officials with direct knowledge of intelligence reports.

“The conversation, intercepted by American intelligence agencies, is the most detailed evidence to date that the crown prince considered killing Mr. Khashoggi long before a team of Saudi operatives strangled him inside the Saudi Consulate in Istanbul and dismembered his body using a bone saw.”

The Saudi government has denied MBS played any role in the killing, and President Trump has shown little interest in getting to the facts about who was responsible. At the same time, the U.S. intelligence community has been “sifting through years of the crown prince’s voice and text communications that the (National Security Agency) routinely intercepted and stored, much as the agency has long done for other top foreign officials, including close allies of the United States.” [Mark Mazzetti]

North Korea: President Trump announced during his State of the Union address that he would hold his second summit with Kim Jong Un in Vietnam on Feb. 27-28, while giving himself credit for averting a major war on the Korean peninsula.

Citing the halt in Pyongyang’s nuclear testing and no new missile launches in 15 months as proof of progress, Trump said:

“If I had not been elected president of the United States, we would right now, in my opinion, be in a major war with North Korea.”

But of course it was Trump who raised fears of war in 2017 when he threatened to rain “fire and fury like the world has never seen” on North Korea because of the threat its nuclear weapons and missiles posed to the United States.

On Friday Trump then tweeted:

“North Korea, under the leadership of Kim Jong Un, will become a great Economic Powerhouse.  He may surprise some but he won’t surprise me, because I have gotten to know him & fully understand how capable he is.  North Korea will become a different kind of Rocket – an Economic one!”

“My representatives have just left North Korea after a very productive meeting and an agreed upon time and date for the second Summit with Kim Jong Un. It will take place in Hanoi, Vietnam, on February 27 & 28.  I look forward to seeing Chairman Kim & advancing the cause of peace!”

Someone remind the president, again, that Kim starves and kills his own people, including blowing away relatives with anti-tank guns.  I’m glad they are getting together a second time, but, please, Mr. Trump, don’t be an idiot.

And remember, China, which pulls Kim’s strings, more than ever with the ongoing trade tensions between Washington and Beijing wants to keep the U.S. on edge.

U.S. Special Representative for North Korea Stephen Biegun held three days of talks in Pyongyang this week to map out what he called “a set of concrete deliverables” for the second meeting.  He returned to South Korea today to brief officials in Seoul, no details revealed as yet.

Despite Trump’s comments above, in the U.S. view, North Korea has yet to take concrete steps to give up its nuclear weapons.  It has complained that the United States has done little to reciprocate its freezing of nuclear and missile testing and dismantling of some nuclear facilities.

North Korea has repeatedly urged a lifting of punishing U.S.-led sanctions, a formal end to the war, and security guarantees.

South Korean officials have said they believe the summit will center on dismantling the North’s main Yongbyon nuclear complex and how this would be reciprocated, although the United States remains reluctant to provide any sanctions relief.

Meanwhile, the U.S. and South Korea struck an agreement in principle over the costs of their military alliance, ending a monthslong dispute.

While the final details are still to be worked out, the two sides have agreed to a preliminary deal covering roughly 28,500 U.S. military personnel in South Korea.

Under the agreement, Seoul is set to pay roughly $1 billion, according to South Korea’s semiofficial Yonhap News, representing a roughly 20% increase from previous payments.

Last year South Korea paid around $830 million to host U.S. forces, about half the overall cost.  The Trump administration was originally looking for a 50% increase.

China: As reported in the South China Morning Post, “China might come under pressure to reconsider its long-standing ‘no first use’ nuclear policy as it engages in a maritime arms race with the United States, analysts have warned.

“Nuclear competition is brewing between the two countries as China makes gains in weapons development and Washington tries to limit Beijing’s military build-up in the South China Sea.

“The United States is still decades ahead in nuclear weapons development but a successful test late last year of China’s new submarine-launched ballistic missile, the JL-3, is cause for concern in Washington.”

Boy, I don’t agree the U.S. “is still decades ahead” in nuke development, especially seeing as the test of the JL-3 shows China moving ahead with a class of strategic submarines “that could be equipped with nuclear-armed JL-3s that would be more difficult to detect than conventional land-based nuclear weapons.”

In response, the U.S. and its allies have been stepping up their anti-submarine warfare in the South China Sea and Indian Ocean, which one analyst from the Carnegie Center for Global Policy, Zhao Tong, believes is increasing mistrust between the two countries and raising the possibility that Beijing might rethink the “no first use” nuclear weapons policy, which has been in place since the first Chinese nuclear test in 1964.

But it’s not just about new submarine capable missile systems.  China’s ballistic missile technology is advancing rapidly.  Last month, the People’s Liberation Army Rocket Force (PLARF) showed off its firepower by running a simulated strike mission using a Dongfeng-41 (DF-41) intercontinental ballistic missile (ICBM) and revealing footage of the improved stability of its Dongfeng-26 (DF-26) ballistic missile.

The DF-41 is China’s most advanced ICBM and is capable of hitting virtually any target in the world.

The DF-26 is China’s next generation intermediate-range ballistic missile with a range that puts the U.S. island of Guam in the crosshairs, thus the label ‘Guam killer.’

Separately, as reported by the Wall Street Journal, “The U.S. Energy Department says it will ban its scientists and other employees from participating in talent-recruitment programs sponsored by China and other countries suspected of using them to obtain sensitive research.

“In a memo issued Friday (Feb. 1), the department said it would require all of its personnel, contracted scientists and future grant recipients to declare any connections to programs from countries it determines as ‘sensitive.’  Employees with the links will be asked to either sever those ties or resign, senior department officials said....

“ ‘This action’s being taken to protect U.S. national security interests and scientific integrity,’ Dan Brouillette, deputy energy secretary, told The Wall Street Journal.  ‘You’re either going to work for us or work for them.’”

Lastly, China has been accused of sending a fleet of almost 100 ships to hamper Philippine construction work on a disputed island in the South China Sea.

Beijing started sending vessels to Thitu, part of the Spratly chain, according to the Asia Maritime Transparency Initiative run by the Washington-based Center for Strategic and International Studies.

The fleet of ships includes vessels from the navy and coastguard along with dozens of fishing boats.

The report said their presence was part of an effort to coerce the Philippines into stopping the work on the island, which China also claims.

Russia: The U.S. gave Russia written notice on Monday of its decision to withdraw from the Cold War-era Intermediate-Range Nuclear Forces Treaty, after accusing Russia of violating the pact, which has fueled growing tensions between Washington and Moscow, and raised the threat of a renewed missile build-up in Europe.

The Kremlin welcomed an offer by President Trump to renegotiate the INF Treaty, while cautioning that it’s received no specific proposals yet.

“We saw President Trump’s statement about the possibility of a new treaty, which should include other countries,” Russian Deputy Foreign Minister Sergei Ryabkov told reporters in Moscow on Thursday.  “When our American colleagues actually get to the point where they give us something concrete, we will look at this with interest and I hope in an positive way.”

Trump said in his State of the Union address that the U.S. may be open to negotiating another agreement to replace the 1987 INF Treaty, one that could include China as well as Russia. 

But President Vladimir Putin said last weekend, after the U.S. move to suspend the Treaty, that Russia would start work on creating new missiles, including hypersonic ones, and told ministers not to initiate disarmament talks with Washington.

Putin said that Russia will not increase its military budget for the new weapons and it won’t deploy its weapons in Europe and other regions unless the United States does so.

The INF Treaty will expire in six months if there is no renegotiation.

Random Musings

--Presidential approval ratings....

Gallup: 37% approve of Trump’s job performance, 59% disapprove (Jan. 15); 88% Republicans, 32% Independents...reminder this is now monthly.
Rasmussen: 50% approval, 49% disapproval (Feb. 8)

--According to a new CNN/SSRS poll, President Trump’s job approval stands at 40%, 55% disapprove, slightly more positive than in January during the shutdown.  His approval rating for handling immigration stands at 41%.

66% said Trump should not declare a national emergency in order to build the wall, vs. 31% who say he should.

But among conservative Republicans, 78% favor shutting down government if no agreement is reached including wall funding, or the declaration of a national emergency in order to build the wall (72% favor that).

Speaker Nancy Pelosi’s approval rating has risen eight points since December to 42% favorable (47% see her unfavorably).

Trump’s approval rating on the economy remained in positive territory (48% approve, 45% disapprove).

--According to a separate CNN/SSRS poll, more than six in 10 Democratic and Democratic-leaning voters say former Vice President Joe Biden should make a run for president, and half of all Americans say they would be at least somewhat likely to back him should he run for the White House.

At the same time, 52% of Americans say they are not at all likely to support President Trump for re-election in the coming 2020 contest.

Support for a bid from Biden is higher among Democratic voters this year than it was in 2015.  Back then, only about half of Democratic voters said they wanted Biden to run (53% in August, 47% in October).

Among Democrats, Biden has greater support than anyone else tested: 44% say they are very likely to support him, 32% say so of Sen. Kamala Harris, 30% Vermont Sen. Bernie Sanders, 21% Massachusetts Sen. Elizabeth Warren, 19% New Jersey Sen. Cory Booker and 15% former Texas Rep. Beto O’Rourke.  New York Sen. Kirsten Gillibrand, former New York City Mayor Michael Bloomberg, and Ohio Sen. Sherrod Brown, bring up the rear, with lack of awareness hurting Gillibrand and Brown.

I think we can already look at the above names and draw some conclusions.  To me, Sen. Warren is irrelevant and won’t make it to the Iowa caucuses.  It’s why I’m not even mentioning her latest problem with the old application. 

Bernie Sanders is also history.  No one cares anymore, even the socialists.

Kirsten Gillibrand will never receive major approval, but she could make it to Iowa.

Minnesota Sen. Amy Klobuchar, on the other hand, announcing this weekend, will have staying power, ditto, obviously, Kamala Harris.

Beto O’Rourke?  See ya.  What a clown he was in those recent social media posts.  He won’t be on the ballot in New Hampshire.

Sen. Cory Booker?  You may not like Chris Christie, but Christie is one sharp analyst.  He likes Booker, as a politician and a person, and I agree with my former governor that if Booker can avoid going too far left, he could have staying power...which means to South Carolina.

To me, aside from Klobuchar, another dark horse is Ohio Sen. Sherrod Brown.  He should be a classic Democratic presidential candidate.  Maybe he’d get his butt kicked, like win just a few states, but he’s experienced and stable.  An old-school liberal, but not a radical by any means.

And then there’s Biden.  I need more time figuring out his chances, because I’m not sure he even runs.

And I’m not sure Michael Bloomberg runs either.  He has to know he doesn’t stand a snowball’s chance in hell.  I wish he was the third party candidate just so I had an alternative come November 2020.

So for the record, making it through Iowa and New Hampshire I’ll say are Harris, Klobuchar, Booker, and Brown...for now.

Just an opinion, and just having fun.  No need to riot and torch the global HQ of StocksandNews, boys and girls.

--A POLITICO/Morning Consult poll released Monday found 76 percent of registered voters believe the wealthiest Americans should pay more in taxes.  A recent Fox News survey showed that 70 percent of Americans favor raising taxes on those earning over $10 million – including 54 percent of Republicans.

--I had an opportunity to comment on Democratic Virginia Governor Ralph Northam before I posted last Friday night, hours after it had been reported that the governor was in a yearbook photo that showed him in blackface, while he was in medical school in 1984.  But I’m proud of my ‘wait 24 hours’ adage, so I opted not to say anything.  In terms of building a historical record, delay doesn’t hurt me, and so the next day, Saturday, Northam, who at first apologized for the photo, under a cavalcade of calls for him to resign, suddenly said he was not in the photo, but then he admitted another incident where he was in blackface, for which no picture has surfaced, and in an incredibly poor performance during a news conference that day, would have started moonwalking, a la Michael Jackson, were his wife not there to intervene.

Northam still, however, refused to step down, with every leading Democratic politician in the state screaming for him to do so.  And then the next in line for his job, Lt. Gov. Justin Fairfax, was hit with sex assault allegations, with his accuser, a college professor, coming forward to refute his denials that it was consensual.   [Today, a second woman claimed Fairfax assaulted her when they were students at Duke.]

Then, Virginia’s Democratic Attorney General Mark Herring issued a stunning statement admitting he wore brown makeup (it’s still blackface) as part of an act to dress up as a black rapper when he was a student at the University of Virginia.

So you had the top three politicians in the state, all Democrats, all under fire and neither resigning under the pressure.

Further, a staffer from Northam’s yearbook insists the photos “were chosen by the individual student.”

Should all three eventually step down, the third inline for the Virginia governorship is state House Speaker Kirk Cox, a Republican.  The Republicans gained their one-seat control of the Virginia House of Delegates literally by sheer chance in 2017.  The election for the balance-tipping seat resulted in a tie – and the GOP candidate won when his name was drawn from a bowl.

Late Thursday, we saw a hint of a possible resolution with a statement issued by U.S. Senators Tim Kaine and Mark Warner, and signed by seven other Virginia Democrats from the House of Representatives, still calling on Northam to resign, but the statement suggested a readiness to forgive AG Mark Herring, Herring seen by some as more sympathetic in part because he went to the Virginia Legislative Black Caucus to confess his blackface experience before it became public.  Plus he was just 19 when it occurred, vs. Northam who was 25 when he donned blackface to masquerade as Michael Jackson.

But as I go to post, Northam is showing no signs of stepping down.

--We note the passing of John Dingell, 92. Dingell, a Democratic lawmaker from Michigan was the longest-serving member of Congress, having served his final year as a representative in 2015.  He was in hospice care since suffering a heart attack in September.

His wife, Rep. Debbie Dingell, wrote on Twitter: “I am home with John and we have entered a new phase. He is my love and we have been a team for nearly 40 years.

Dingell was first elected in 1955 and announced in 2014 that he would not be seeking a 30th term in the House.  He was a staunch supporter of the auto industry.

--Pope Francis admitted that clerics have sexually abused nuns, and in one case they were kept as sex slaves.

He said in that case his predecessor, Pope Benedict, was forced to shut down an entire congregation of nuns who were being abused by priests.

He said the Church was attempting to address the problem but said it was “still going on.”

A spokesman for the Vatican later said the particular order that was dissolved was based in France.

Separately, Pope Francis became the first pontiff to visit the Arabian Peninsula, the birthplace of Islam, as part of a trip seeking to improve relations with the Muslim world.

The pope stayed three days in the Emirates, which is relatively tolerant compared to the others in the region, UAE being home to one million Christians.

UAE has millions of workers from India, the Philippines and South America who have helped fuel its growth.

But the UAE is on the side of its ally Saudi Arabia in the war in Yemen, a four-year conflict that has pushed Yemen’s small Christian communities into hiding, while creating the world’s worst humanitarian crisis and leading to the death by starvation of some 85,000 children.

Reminder, Saudi Arabia does not allow the construction of churches.

The pope’s trip went off without incident.

--The past five years have been the hottest in modern records, federal scientists said Wednesday.  According to a report by the National Aeronautics and Space Administration and the National Oceanic and Atmospheric Administration, which track annual climate trends, 2018 was the fourth-warmest, the warmest being 2016, followed by 2017 and 2015 – with 2014 following 2018 as No. 5 among the hottest years on record.

Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies in New York, said, “The impacts of long-term global warming are already being felt – in coastal flooding, heat waves, intense precipitation and ecosystem change.”

During 2018, the average temperature across global land and ocean surfaces was 1.4F above the 20th-century average*, according to NOAA’s report.  It noted record high temperatures across much of Europe and the Mediterranean Sea, the Middle East, and New Zealand and its surrounding ocean – across parts of Asia, the Atlantic Ocean and the western Pacific.

*Some stories say 1.8F but this is above the late 19th century, when humans started pumping large amounts of carbon dioxide into the atmosphere.

NOAA added that nine of the 10 warmest years have now occurred since 2005.

--Last week I talked about all the snowfall in California, a good thing, and then a few days later, the ski resorts of the Eastern Sierra and Tahoe regions were forced to close part or all operations Monday because of a blizzard that dropped as much as 9...9...feet of snow.  Another 3 feet were forecast the following 24 hours.  As my grandfather would have said, “Gee willikers.”

--Finally, for those of us in the northeast, to be truthful, this winter thus far has been a piece of cake.  Our most significant snowfall in the New York City area (upstate New York and parts of New England is a different story) was back on Nov. 15, and until the brief Polar Vortex here (really all of two days), Thanksgiving, and one other day in January, the temps have been above normal.  [December didn’t have one day here with a ‘high’ below 32.]

But we all know we’ll get a whopper of a snowstorm in March.

Meanwhile, Punxsutawney Phil emerged from his burrow in Pennsylvania, rudely woken up by humans in long waistcoats, and failed to see his shadow, signaling an early spring, i.e., golfers in the northeast may see somewhat favorable conditions as early as about March 20 (unless you like to play in mud beforehand).

But the thing is, Punxsutawney Phil’s forecast is correct only 40% of the time.

By contrast we have Staten Island Chuck...or Chuck IV, or V...New York Mayor Bill de Blasio having killed Chuck II or III back in 2015, when he “accidentally” dropped the soothsayer, Chuck dying from the trauma a week later, his family successfully suing the City for $millions.

You won’t find de Blasio anywhere near Staten Island since, at least on Feb. 2nd, but the thing is, Chuck didn’t see his shadow either (early spring) and Chuck has an 80% success ratio!  So it should be a mudders’ delight for golfers.  Personally, I’m normally late April / early May before I make my appearance on the fairways and greens.

---

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

God bless America.

---

Gold $1318
Oil $52.71

Returns for the week 2/4-2/8

Dow Jones +0.2%  [25106]
S&P 500  +0.05%  [2707]
S&P MidCap  +0.6%
Russell 2000  +0.3%
Nasdaq  +0.5%  [7298]

Returns for the period 1/1/19-2/8/19

Dow Jones  +7.6%
S&P 500  +8.0%
S&P MidCap  +11.4%
Russell 2000  +11.7%
Nasdaq  +10.0%

Bulls 48.6
Bears 20.6

Have a great week.

Dr. Bortrum posted a new column!

Happy Valentine’s Day!

Brian Trumbore

 

 



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Week in Review

02/09/2019

For the week 2/4-2/8

[Posted 11:30 PM ET, Friday]

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

Edition 1,035

Trump World...SOTU

President Trump tweeted Thursday, “So nice how well my State of the Union speech was received.  Thank you to all!”

According to a CBS poll, 76% who tuned in to the address Tuesday night approved of it, just 24% disapproving.  As the pollsters pointed out, however, with such addresses the people who watched tended to lean more towards the president’s own party, at least compared to Americans overall.  In the latest CBS national survey, 25% of Americans identified themselves as Republicans, but among those who watched Tuesday, that figure was 43%.

So while 97% of Republicans approved of the speech, far fewer Democrats who tuned in did (30%).  82% of Independents approved, which is strong if you’re Trump, remote in hand.

56% of Americans who watched the SOTU feel the president’s speech will do more to unite the country, rather than divide it, while 36% don’t think it will change things much.

As you would expect, just 15% of Democrats think the president’s speech will unite us.

Of course all the above is beyond absurd.  I just put it out there for the record.  It is ridiculous to make much at all of a State of the Union, especially in the time of Donald Trump, and when we’re talking the 2020 election is about 20 months away.

I mean, c’mon.  Nothing the president said on Tuesday really matters.  Everyone was way overstating the impact in the days after.  So much is going to change between now and, say, the summer of 2020 when we all really begin to focus on the fall vote.

In the end it’s going to be about geopolitics, and boy could the picture change by then with regards to Russia and China, for example, or the Middle East, or a major terror attack somewhere in the world that in one form or another impacts our lives too.

We have no idea what the state of the global economy is going to be in 18 months, but the current trends are not good.

We have no idea who the Democrats will select to be the opposition, or if the Mueller investigation’s final report is a game changer.

We do know that poll numbers are totally meaningless today, though in terms of the Democratic race for president, they’ll start becoming important by next fall.

In the meantime this is a ‘week in review’ so following is some opinion, largely positive for the president, on the SOTU:

Editorial / Wall Street Journal

“President Trump used his State of the Union address Tuesday to highlight his achievements and make a pitch for bipartisan cooperation in Congress.  Overall it was an effective piece of political rhetoric, especially his defense of his tax and deregulation policies and their results. But we doubt he reframed the political debate in a way that will give Democrats much pause going forward this year.

“Mr. Trump likes these moments before Congress, no doubt because he savors the political theater.  But they are also notable – and perhaps instructive to Americans who don’t follow politics obsessively – because they are among the few times he bothers to make an extended argument about political substance.

“Amid the daily distractions of Robert Mueller and his Twitter blasts, our guess is that this is the first time millions of Americans heard anything at all about the First Step Act and prison reform.  The emotional high point of the speech was his introduction of the two former inmates who became productive in prison and earned their reduced sentences. The political groundwork for criminal-justice reform was  laid by others, but it wouldn’t have happened without Mr. Trump’s endorsement.

“The biggest disappointment was his failure to reframe the immigration debate.  He faces another government shutdown deadline at the end of next week over funding for the border.  Yet he merely repeated his familiar parade of horribles about the border, the caravans moving north, and illegal immigrants who commit crimes.  He is preaching to the converted and persuading no one else.

“At least he added a grace note about legal immigrants and said they could come ‘in the largest numbers ever,’ without any details. But he offered Democrats nothing about the Dreamers or anything else on immigration that would make them want to bend on funding ‘the wall.’

“Mr. Trump sounded like someone who expects no compromise on immigration and thinks it will remain a stalemate through the next election.  We may be headed to another pointless shutdown next week, or Mr. Trump’s declaration of a ‘national emergency’ that would unite Democrats in opposition but divide Republicans. Mr. Trump will probably be talking about the wall for two more long years, which is not where he wants to be politically.

“Mr. Trump made bipartisan offers to Democrats on some of their priorities – controlling drug prices, public works, family leave. But the divide on details between the two parties is so large on these issues that they are unlikely to become law. That’s just as well because anything that could pass this Democratic House is likely to do more harm to businesses than good for consumers and workers.

“Our vote for the self-discipline prize goes to Bernie Sanders, the socialist Vermont Senator, who betrayed merely the hint of a wry smile when Mr. Trump said the U.S. ‘will never be a socialist country.’ The 2020 campaign begins.”

Gerald F. Seib / Wall Street Journal

“When Donald Trump became president, there was reason to believe he might govern as he campaigned, almost as an independent, standing apart from both parties, perhaps even with an ability to bridge the two parties because he was beholden to neither of them.

“And for the first half an hour of his State of the Union address Tuesday night, that was the very tone he set in his remarks in the House chamber.  He opened his arms to Democrats, declaring that Americans are ‘hoping we will govern not as two parties but as one nation.’

“Though himself a regular and enthusiastic practitioner of the political insult, he urged lawmakers to reject ‘pointless destruction’ and to ‘reject the politics of revenge.’  There was nary a mention of the partisan fight that partially shut down the government for 35 days.

“ ‘Victory is not winning for our party,’ he said.  ‘Victory is winning for our country.’

“Then, Mr. Trump turned to the issue that rends the Congress, the two parties, and the nation: immigration.  For 15 minutes he delivered a notably harsh lecture on the evils of illegal immigration and the need for the border wall he demands and that Democrats refuse to fund.

“He said that illegal immigrants bring crime and drugs, and drive down wages for Americans.  ‘Year after year, countless Americans are murdered by criminal illegal aliens,’ he declared.  He said he welcomed legal immigration, saying, ‘I want people to come into our country, in the largest numbers ever’ – though his administration has, in fact, taken steps to reduce legal immigration as well.

“At one point, Democrats groaned as he described the caravans of Central Americans heading toward the U.S. border, though the groans were quickly cut off with a wave of the hand from House Speaker Nancy Pelosi, seated just behind the president.

“Ultimately, Mr. Trump said his administration is offering Democrats a proposal to end the debate about how to secure the southern border, including more law enforcement and perhaps a more limited wall ‘deployed in the areas identified by border agents as having the greatest need.’  But he didn’t mention legal status for the Dreamers, the young immigrants brought here illegally as children, which is a key Democratic demand.

“Mr. Trump didn’t threaten to, as many speculated he might, declare a national emergency to fund wall construction without money approved by Congress.  But there was little sign of any other path toward resolution of what remains a bitter fight with Democrats, who have called the wall the president wants both a waste of money and immoral, and his harsh remarks about illegal immigrants racist....

“The question that hovered over Mr. Trump’s speech, and that will hover over the Capitol in coming weeks, is whether it is possible to step around the immigration fight to avoid another partial government shutdown when temporary funding expires in 10 days, much less move on to other areas of possible bipartisan agreement....[Ed. one being infrastructure]

“The prospects of spending a big chunk of money on infrastructure are enhanced by something Mr. Trump didn’t mention once in his speech, and that Democrats seem no more eager to discuss: the burgeoning federal budget deficit.

“In the fiscal year that ended last September, the first full year of Mr. Trump’s presidency, the federal deficit grew 17%, reaching $779 billion.  It will approach $1 trillion this year, and then rise from there.  Yet there was little concern on display in Congress Tuesday night.”

Michael Gerson / Washington Post

“With Trump, all politics is personal. So he likely presses on with his anti-immigrant campaign for two personal reasons:

“First, he probably thinks he will be judged as a loser if he leaves office without substantial progress on the wall. And he would be judged a loser.  Democrats know this and have the upper hand.

“Second, the enthusiasm of his political base may be the only thing that stands between him and impeachment. Some elected Republicans would happily turn against Trump if they were not in abject fear of angering the GOP base.  So Trump must keep the base happy at all costs.

“Other parts of Trump’s speech were incoherent – or at least dependent on Google being broken down.  He claims he wants high levels of legal immigration, even though he has proposed to slash legal immigration.  He called for action on AIDS and childhood cancer, though he once proposed an 18 percent cut for the National Institutes of Health. He attacked partial-birth abortion, even though he once supported the procedure. And when Trump issues a call to bipartisanship, it is like a murderer speaking at the funeral of his victim.

“Yet – and actually a pretty big yet – there were rays of light, made even brighter by the utter darkness surrounding them.  Trump’s calls to defeat AIDS and fight childhood cancer are truly admirable....

“These health proposals show the power of the presidency at its best – the power to set shared, unexpected moral goals. And that is one power Trump should wield more often.”

Lance Morrow / Wall Street Journal

“Donald Trump’s State of the Union address was a masterpiece – for his purposes.  Two chaotic years into his term, Mr. Trump appeared presidential for seemingly the first time and dramatically advanced his chances for re-election in 2020.

“I am speaking of perceptions – of how the unusual Mr. Trump plays in the public mind. To call the speech a masterpiece will strike his enemies as preposterous.  On the other hand, progressives are sometimes unreliable judges of the country’s moods.  Think of November 2016.

“On Tuesday Mr. Trump enlarged the public’s idea of himself and his presidency, and in proportion diminished his enemies. That was his most effective stroke on Tuesday night: to make the left seem to be lost in irrelevant obsessions and guilty of misinterpreting – falsifying – America and its values.

“He redrew the battleground, leading the discussion abruptly away from the progressives’ preoccupations with race and sex.  He redefined himself in a more civilized light and sought to lend credibility and bipartisanship to his ‘Make America Great Again’ theme by evoking American history and summoning their better angels.  He fetched back to the 20th century’s binary moral perspectives, to the victorious fight against Nazi Germany and to the Cold War against communism.

“The speech sought to annul, or at least soften, the left’s radical critique of American history, which has been the theme of elites since the 1960s, and to define Mr. Trump not as a chief of yahoos but a leader of a thoughtful, broadly respectable patriotism.  It’s wishful thinking to hope that the speech might help to break the cycle of mutual contempt that has so demoralized the country.”

John Podhoretz / New York Post

“It was perhaps the single most bananas political moment of the Trump presidency.

“Newly elected Democratic women in the House of Representatives, dressed all in white, stood up and cheered while the very president they entered politics to oppose and defeat looked on approvingly.

“He had just cited a statistic that 58 percent of the new jobs in America had gone to women.  They immediately applied this stat to themselves, and in an act of almost staggering solipsism, leapt to their feet and began to celebrate their own elections.

“Then Trump advised them to stay standing because they were going to like the next sentence – a sentence about how there were more women in Congress than ever before. To which they and their fellow Democrats began chanting ‘USA!  USA!’ – in the middle of a Trump speech!  And the president looked down upon these people for whom the word ‘impeachment’ is a mantra... and smiled.

“No one had that in the betting pool....

“No one remembers State of the Union addresses, but Trump did make a bid for immortality with an unprecedented passage in which he warned that Democratic investigations of his administration could destroy our economy.

“ ‘An economic miracle is taking place in the United States,’ Trump said.  ‘And the only thing that can stop it are foolish wars, politics or ridiculous partisan investigations.  If there is going to be peace and legislation, there cannot be war and investigation.’

“I don’t mean to be ghoulish here, but it is historically not true that war is bad for the economy.  And congressional oversight of administration practices is a constitutional requirement.

“Unquestionably, irresponsible Democratic Party behavior needs to be opposed, but a president standing in the Capitol saying congressmen will kill the golden goose by doing their jobs is nervy, even for Trump....

“The speech went off in so many directions and the feeling in the chamber got so punch-drunk that by the time the first hour had come and gone, the House chamber was singing ‘Happy Birthday’ to an 81-year-old Holocaust survivor.

“Look.  It was nice. No question. But it was still weird.  Like the whole speech.

“That said, in keeping the opposition party off-balance, Trump really did find a  way to turn the political discussion in the country to his advantage for the first time since he announced he would take credit for the government shutdown.”

Daniel Henninger / Wall Street Journal

“Two analyses of the State of the Union speech are possible – one short, one long. The short version is that if the presidential figure who delivered this speech replaced Trump of Twitter, he’d be on his way to four more years.  The chances of that happening are zero. So on to a longer speculation on the speech’s probable effects on Mr. Trump’s prospects for re-election.

“Since the midterms, in which many suburban voters turned against the president, the Democrats’ solitary political strategy has been that Mr. Trump would self-destruct.  Tuesday evening, Mr. Trump flipped the story line by putting the Democratic Party on the defensive.

“ ‘Tonight, we renew our resolve,’ Mr. Trump announced, ‘that America will never be a socialist country.’  With one line, he put the Democrats in check. Ever since the ‘socialism’ wave began building inside the party’s ranks, professional Democrats had to wonder how long they’d be able to get away with this hooey.

“Recall the response of Ben Jealous, the former NAACP head and Democratic candidate for Maryland governor, to a reporter who asked him last summer if he was a socialist; ‘Are  you f---ing kidding me?' He lost anyway.

“The Democrats’ leftward drift was going to be trouble enough for the party. But when its presidential candidates started to align with Alexandria Ocasio-Cortez’s Instagram version of socialism, it was only a matter of time before someone called them out. The president just did.  And more....

“(What) the Democrats have become – recently suggested in Howard Schultz’s criticism of the party’s mind-set – reveals a vulnerability the president’s strategists recognized.

“Mr. Trump is posing traditional, widely held American values against the Democrats’ confusing, postmodern amalgam of identity politics and national guilt-tripping.  That includes his explicit challenge to Democrats on condoning abortion at full term.

“Democrats are always rubbing your face in some national moral deficiency or failure. Stacey Abrams’ reply went on about ‘layoffs looming’ and people ‘living paycheck to paycheck.’

“Candidate Trump plans to give voters a remake of Ronald Reagan’s morning in America, while the Democrats are offering a nightmare on Elm Street. The optimistic Reagan vision – which was FDR’s and JFK’s – always wins that competition.  By default, the whining Democrats have let dour Donald Trump present himself as the country’s Mr. Sunshine....

“But Mr. Trump’s professed admiration for the McKinley Tariff of 1890 is at cross-purposes with the complex mechanisms of the world economy 129 years later.  General Motors said Wednesday that steel and aluminum tariffs helped damage its bottom line in 2018 by more than $1 billion.  The Journal reports soaring farm bankruptcies in part because of the trade wars.  If those promised Trump trade deals don’t happen, a slowing global – and U.S. – economy will overwhelm his achievements.

“The immigration section of the president’s speech was awful.  It included some grace notes about legal immigrants enriching the nation, but what followed makes one wonder if he believes that.  Arguably, Mr. Trump was simply trying to put political pressure on the Democrats to fund his border wall.  Past some point, though, the catalog of immigrant criminality and threat started to sound like something else.

“What used to be an argument for enforcing our laws and securing the border is close to tipping into ethnic animosity.  Hispanic-surnamed voters might reasonably begin to wonder where they stand in Mr. Trump’s America.  Is the message that we should keep some of them out, or all of them out?”

Trumpets

--Republican Senator Roy Blunt (Mo.) said congressional negotiators were making progress in their talks over border barriers, Blunt saying they were getting closer to a consensus on what kinds of physical barriers would be funded.  He said that extending or improving walls or fences built under previous administrations was a central part of the talks.

Trump has told negotiators he wants to see funding for a physical barrier in the legislation, as well as increased manpower and technology along the border.

The deadline for avoiding another partial government shutdown is Friday, Feb. 15 (12:01 a.m. EST on Feb. 16).

--I had the House hearing on acting attorney general Matthew Whitaker on in the background today as I was writing up this column and there was no reason to turn the sound up.  Totally worthless.  Should have put the Golf Channel on.

But I do believe Democrats, as part of the oversight process, should go after Trump’s tax returns.  Ways and Means Committee Chairman Richard Neal (D-Mass.) is empowered under federal law to inspect any federal tax return, but Neal is not rushing to seek Trump’s, preferring to build his case beforehand in order to avoid the perception of a politically tainted process, so he may not make the request for a few months.

Otherwise, I have been consistent since day one, as I am with everything related to this column.  I’m just waiting for the final Mueller report.

--Federal prosecutors in New York on Monday delivered a sweeping request for documents related to donations and spending by President Trump’s inaugural committee, with no doubt a focus on any information related to foreign contributors.

Only U.S. citizens and legal residents can legally donate to a committee established to finance presidential inaugural festivities.

Trump’s inaugural committee raised a record $107 million to fund events and parties surrounding his assumption of office in January 2017, more than twice the amount raised to fund President Barack Obama’s 2009 inaugural.

--Trump tweets:

“The mainstream media has refused to cover the fact that the head of the VERY important Senate Intelligence Committee, after two years of intensive study and access to Intelligence that only they could get, just stated that they have found NO COLLUSION between ‘Trump’ & Russia....

“....It is all a GIANT AND ILLEGAL HOAX, developed long before the election itself, but used as an excuse by the Democrats as to why Crooked Hillary Clinton lost the Election!  Someday the Fake News Media will turn honest & report that Donald J. Trump was actually a GREAT Candidate!”

“So now Congressman Adam Schiff announces, after having found zero Russian Collusion that he is going to be looking at every aspect of my life, both financial and personal, even though there is no reason to be doing so.  Never happened before!  Unlimited Presidential Harassment...

“...The Dems and their committees are going ‘nuts.’  The Republicans never did this to President Obama, there would be no time left to run government.  I hear other committee heads will do the same thing.  Even stealing people who work at White House!  A continuation of Witch Hunt!”

Wall Street and Trade

Boy, the government shutdown really screwed things up in terms of the economic data.  We learned this week that the BEA, the Bureau of Economic Analysis, will finally release a report on fourth quarter GDP Feb. 28, when the initial estimate was to have been Jan. 30.  The first two ‘looks’ at Q4 will be combined.

Then March 1 we’ll receive key figures on personal income and consumption, for both December and January.

For this week, the only item I cared about was the ISM non-manufacturing PMI for January, 56.7 vs. 58.0 in December, 50 being the dividing line between growth and contraction.

On the trade front, the equity market was hit some on Thursday and Friday with word that President Trump is not meeting with Xi Jinping before a March 1 deadline set by the two countries to achieve a trade deal, Trump saying during an event in the Oval Office that it was also “probably too soon” to know if a meeting between the two was planned in the next month or so.

Just last week, Trump said he would meet with Xi, most likely after his summit with Kim Jong Un, to hammer out a final deal.

If the talks do not succeed, Trump has threatened to increase U.S. tariffs on $200 billion worth of Chinese imports to 25 percent from the current 10 percent if the two have not reached an agreement by 12:01 a.m. March 2.  But I believe we will see some kind of extension, the tariffs remaining at 10 percent in the interim.

Another round of talks is scheduled for next week in Beijing, with Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer leading the American delegation.  The U.S. is pressing China to make major reforms, including on structural issues related to how it treats U.S. companies doing business there.  Washington also accuses China of stealing intellectual property and forcing American businesses to share their technology with Chinese companies. China denies the accusations.

Trump said in his State of the Union address that any new deal with Beijing “must include real, structural change to end unfair trade practices.”

Republican Senator Marco Rubio previously said: “Any trade deal worth making will clearly address China’s rampant IP theft and forced technology transfers, both for the good of the American economy and American workers, as well as our national security.”

In a speech last November, Peter Navarro, a White House trade adviser who definitely has President Trump’s ear, called out Beijing’s march “to acquire the technologies and intellectual property of the world by any means necessary” and control artificial intelligence, robotics and other emerging industries.  Or, as he put it, “the kinds of industries going forward where our sons and daughters and their children will find the good jobs at good wages.”

Bottom line, it would be impossible to come up with a comprehensive agreement agreeable to both sides by March 1, thus we either see an extension, or the trade war grows worse and the global markets tank.

But China will never agree to real structural reform.  Period.

Europe and Asia

The European Commission slashed its growth forecast for the eurozone (EA19) to 1.3% this year versus an earlier estimate of 1.9%, while inflation is expected to run at 1.4%, well short of the European Central Bank’s target of just below 2%.

The growth estimate of 1.3% contrasts with 2.4% in the currency area in 2017 – the fastest pace in a decade.  But the end of the “euroboom” has brought a return to old structural problems, including the political resistance to economic reforms, such as what you see in France today.

Brussels’ euro area forecasts were cut because of weakening global trade, fears of a China slowdown and uncertainty surrounding Brexit.

Valdis Dombrovskis, Commission Vice President for the euro, said the outlook was sparking worries about the links between eurozone sovereign borrowers and banks – a so-called ‘doom loop’ that aggravated the region’s financial crisis earlier this decade.

The EC also cut its annual GDP forecast for Italy to 0.2% in 2019 from a previous projection of 1.2% – marking the weakest annual output since 2014.  Italy is technically in recession after two consecutive quarters of negative growth, and industrial production for December, released this week, was down 0.8% from November, the fourth consecutive decline, and down a sizable 5.5% from Dec. 2017.

The yield on the Italian 10-year bond climbed during the week from last Friday’s 2.74% to 2.95%, as the weakness in the economy exacerbates its fiscal problems, Italy with a debt-to-GDP ratio of 133%.  [Conversely, the German 10-year, the Bund, saw its yield plummet to a two-year low of 0.08%.]

Separately, the national statistics office said this week that Italians are emigrating in record numbers while live births last year dropped to their lowest level this century, the worsening demographics only adding pressure on the economy.

The population shrank by 90,000 last year, the fourth consecutive annual decline, to an estimated 60.4 million, with about 160,000 Italians moving abroad in 2018, the biggest number since 1981.

“If these brains and hands...do not come back or are not replaced by other brains and hands, the economy will run out of gas,” said Andrea Garnero, economist at the OECD.

A study from Oxford Economics estimates some 2m young Italians – most of them skilled and educated – have left the country since 2008.

Further, the number of people aged 65 and over in Italy has increased by 560,000 since 2015, while the working age population has fallen by about the same amount and is now the lowest on record.

One more item on the growth front.  Brussels cut Germany’s GDP forecast from 1.8% this year to just 1.1%.

In other economic news, IHS Markit reported that the EA19 comp for January was 51.0 vs. 51.1 in December, with services at 51.2.

Other non-manufacturing/service sector readings:

Germany 53.0 vs. 51.8 in December
France 47.8 vs. 49.0 [A comp reading, mfg. and non-mfg., of 48.2, a 50-month low]
Italy 49.7 vs. 50.5 [comp 48.4, 62-mo. low]
Spain 54.7 vs. 54.0
Ireland 54.2, lowest in 68 months

Finally, Eurostat reported December retail sales for the EA19 fell 1.6% over November, up 0.8% year-on-year.

Brexit: British Prime Minister Theresa May and European Commission President Jean-Claude Juncker met on Thursday for what was described as a “robust but constructive” talk in Brussels, though they were also predictably inconclusive.  At the same time as May’s discussions with Juncker, the Bank of England was issuing a report that concluded Britain faced its slowest growth in 10 years in 2019, the Governor of the BOE, Mark Carney, talking of tensions caused by the “fog of Brexit” and the increasingly chaotic withdrawal from the European Union, the BOE forecasting growth of 1.2% this year, down from its previous forecast of 1.7% made in November.  It sees a one-in-four chance of the economy slipping into recession in the second half of the year.

[The EU slashed its growth forecast for the UK to 1.1% in 2019 from 1.8%.]

Mrs. May made the trip to demand the withdrawal agreement be reopened, which the European Union has steadfastly refused to do, but the prime minister needs help in getting the agreement approved by the British Parliament, which already overwhelmingly voted it down, 432-202 back on January 15.

It’s the same thing, over and over again; the sticking point being the unpopular “backstop” – the arrangement to guarantee the border between Northern Ireland the Republic of Ireland remain open...with no hard border that all parties agree could lead to a return of the sectarian violence that plagued Ireland for decades, “The Troubles.”

But the backstop, as constituted, keeps Britain in the EU’s customs union indefinitely if there is no broad-based trade deal between the UK and EU, which is what is supposed to be worked out in the transition period, which would last from March 29, 2019, through Dec. 2020, with the option of a third year, after which the backstop takes hold afterwards, if no agreement at that point.

Many Brexit-supporting Conservative MPs are concerned that the working of the backstop plan could tie the UK to many EU rules indefinitely.

Juncker has essentially said he is willing to tinker with the language a little bit to try to placate Parliament and reassure them there is some end point.

Meanwhile, the British economy is paying a heavy price with all the uncertainty in the business community.  Nissan, which produces around 475,000 vehicles annually in Britain, announced it was canceling plans to build an SUV there and leaving the production in Japan.  It employs about 7,000 workers in the English city of Sunderland.

France / Italy: In a rare move, France recalled its ambassador from Italy, after months of barbed commentary from Italian leaders.  The move apparently hadn’t been made since 1940, when Mussolini declared war.

The protest not only demonstrated the breakdown in relations between the two, founding members of the European Union, but it also reflected the mounting strains at Europe’s core as populists seek to denigrate the bloc and forge anti-European alliances across borders, which is going to play out on a big stage with the European Parliament elections in May.

The chief culprit these days is the populist Italian government, which has been hurling insults, many of the outrageous variety, as the Italian populist leaders try to score points back home on issues like migration by attacking those leaders promoting the vision of a united Europe, French President Emmanuel Macron chief among them.

The final straw appears to have come on Tuesday, when Italy’s deputy prime minister, Luigi Di Maio, the political leader of the Five Star Movement, met in France with a leader of the Yellow Vest protest movement.

Matteo Salvini, the far-right leader and interior minister, recently said France should get rid of its “very bad president.”

While the French Foreign Ministry has been huffing, there is a serious problem with the battle for Europe’s leadership between the nationalist forces of a Salvini and the establishment as espoused by Macron, who has decried the populist “leprosy” rising across the continent.

Salvini, who along with De Maio came to power on the migration issue, has been particularly upset at France closing its border to stop illegal migrants passing through Italy.

Turning to Asia...in China, we had the weeklong official Lunar New Year/Spring Festival, the markets closed there for the entire time, with most factories not reopening for another week (thru Feb. 19).  It’s the big annual crush as workers trek back home for a little break.

Meanwhile, the private Caixin non-manufacturing reading for January came in at 53.6 vs. 53.9 in December.

In Japan...the January service sector PMI came in at 51.6 vs. 51.0 the prior month, but the composite reading for the month was only 50.9 vs. 52.0 because of deterioration in the manufacturing sector.

Street Bytes

--The Dow Jones and Nasdaq have seven-week winning streaks now, for the former the best since Nov. 2017, though the last three weeks’ gains compared to the first four are miniscule.

This week the Dow rose 0.2% to 25106, the S&P eked out a one point, 0.05% gain, and Nasdaq was up 0.5%.

--U.S. Treasury Yields

6-mo. 2.49%  2-yr. 2.47%  10-yr. 2.63%  30-yr. 2.98%

--Bill Gross, the original “Bond King,” announced his retirement on Monday to focus on his personal portfolio and foundation work.  Gross said in a statement:

“I’ve had a wonderful ride for over 40 years in my career – trying at all times to put client interests first while inventing and reinventing active bond management along the way. So many friends and associates at my two firms to thank – nothing is possible without a team working together with a common interest.”

Gross, 74, has run the Janus Henderson Global Unconstrained Bond Fund since late 2014, shortly after a messy departure from the firm he helped found, PIMCO, amidst a management clash.

It was then an equally messy final chapter, but that cannot change the gigantic impact he had on bond trading and how investors viewed the fixed income market.  Janus CEO Dick Weil was correct in saying: “Bill is one of the greatest investors of all time.”

The PIMCO Total Return Fund, which Gross founded in 1987, became the world’s biggest mutual fund as assets swelled to almost $300 billion at its 2013 peak, generating annualized returns of 7.8 percent from inception through his last day.

“No other fund manager made more money for people than Bill Gross,” Morningstar Inc. said in January 2010, when it named him fixed-income manager of the decade.

Nir Kaissar / Bloomberg

“That messy last act refers to Gross’ stint as manager of the Janus Henderson Global Unconstrained Bond Fund since 2014. Gross made some big bets at Janus Henderson that didn’t pay off, most famously a wager last year that rates on U.S. Treasuries and German bunds would converge, resulting in sagging performance for his fund.

“Even though Gross’ calls didn’t turn out the way he and his investors had hoped, Gross was right to bet boldly on his best ideas, and active bond managers would be wise to follow his example.

“The pivot to unconstrained investing was a brave departure for Gross, who had spent the previous three decades perfecting the ‘total return’ approach to bond investing with the PIMCO Total Return Fund he founded in 1987. The strategy attempts to outpace the broad bond market by taking modestly more risk, often by buying lower-quality bonds than are reflected in broad-market bond indexes while targeting a similar average maturity.

“No one did it better than the Bond King. The institutional share class of Gross’ total return fund outpaced the broad bond market, as represented by the Bloomberg Barclays U.S. Aggregate Bond Index, by 1 percentage point annually during his run from June 1987 to September 2014, a huge margin for a bond manager.  And he did it with only modestly more risk...

“Gross was also shockingly consistent. His fund outpaced the bond market during every rolling 10-year period, and never by less than 0.5 percentage points a year.  His average outperformance over all 10-year periods was 1 percentage point a year, and 44 percent of the time he won by a wider margin.  During his best decades, he outperformed by more than 1.6 percentage points annually, a margin that rivals top managers in any asset class.

“Given Gross’ mastery of the total return game, it was hardly necessary for him to stake his reputation on a late-career turn to unconstrained investing, a high-stakes strategy that calls for big bets.  His run at Janus Henderson wasn’t the unmitigated disaster implied by the headlines, but Gross failed to re-create the market-beating magic of his PIMCO days.”

Growing up, I learned to watch “Wall Street Week with Louis Rukeyser” on PBS with my dad.  He got me involved in investing through his subscription to Value Line and those terrific weekly reports you’d put in a giant binder.  I remember doing real well in one of their stock-picking contests when I was like a sophomore in high school.

I loved Rukeyser’s show, which ran from 1970-2002, for the most part, and you’d become familiar with all of Uncle Lou’s regulars, which over time included Bill Gross, Rukeyser’s fixed-income expert, along with Jim Grant.

So it was kind of fun when PIMCO acquired the Thomson Fund Group in the mid-90s, where I was then national sales manager, and I had more than some interaction with Gross. 

PIMCO, out in Newport Beach, Calif., was of course superior to little old Thomson Funds, based in Stamford, Conn., which had survived the bankruptcy of Thomson McKinnon Securities Inc., the TMSI sales force being incorporated into Prudential Securities (at the time Pru-Bache...think legendary George Ball) back in 1990, where I was employed briefly as part of the integration of the two firms before I quit...boy, I have some stories about my five months there...one of my duties was to get the ice at the end of the day for our rather strong drinks...just the national sales department, which drew looks from ‘marketing’ as I passed them carrying the bucket.

My job once PIMCO acquired us was to help ensure the Thomson wholesalers knew the PIMCO story as we added the fixed income pitch to our pretty strong lineup of equity funds, and that entailed holding a slew of conference calls with Gross, which we would offer up to the brokerage community.  I knew what Gross wanted and as the moderator I would actually send him a script beforehand and if I had one talent, it was to make a script sound like it was ‘live’ and unscripted.  I knew Gross liked this because there were no surprises.  [Shout out to my old friend, Phil N., for being the liaison with Newport Beach.]

Anyway, Gross and I would have minimal personal exchanges when I went out to sales conferences where he was our featured speaker, or when we met in Newport Beach for meetings with our own sales force.  Taking a tour of the PIMCO offices was always an eye opener.  It was deathly quiet.  A real tension convention.  It seemed as if there was zero humor (very unlike our offices in Stamford...I did my part to make sure we had a good time).

You also knew the people you were dealing with in Newport Beach had all the right academic credentials and made ginormous sums of money...that they were living in the best houses overlooking the Pacific.

So as much as I had fairly extensive dealings with Bill Gross, if you asked him today if he remembered me I can guarantee he’d say ‘no.’  It’s just the kind of person he is.

But I’ll remember him.  He was truly one of the great investors of all time.  It’s too bad he had such a lousy final chapter to his career, including in his personal life.

--Fed Chairman Jerome Powell dined Monday night with President Trump and Treasury Secretary Steven Mnuchin at the White House, Powell joined by Fed Vice Chairman Richard Clarida.

Needless to say, in light of the president’s criticism of Powell and his interest rate hikes (four in 2018), this had tongues wagging.

It’s not unusual for a president to meet from time to time (albeit infrequently) with the Fed chair, but it was natural to think that the president would none too subtly tell Powell to ‘cut the crap,’ so to speak.

Afterwards, the Fed said of the dinner that Powell’s “comments in this setting were consistent with his remarks at his press conference of last week. He did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that meant for the outlook.”

Powell said last week that political pressure, including from Trump, hadn’t and wouldn’t influence the Fed.

The dinner occurred on Powell’s 66th birthday.  Steak was served.

--Oil fell this week (to $52.71 on WTI) as the market confronted concerns over potentially lagging global demand, the trade war between the U.S. and China not helping, while at the same time production is growing, and OPEC struggles with their mandated production cuts.

There was a report this week that OPEC is negotiating with Russia to join the cartel, for the obvious purposes of better coordinating production levels to give it more leverage in influencing prices.

--Thursday we received an announcement on the biggest bank merger since the 2007-09 financial crisis, U.S. regional BB&T Corp. saying it will buy rival SunTrust Banks Inc. for about $28 billion in stock, the two hoping to close the deal later in the year.

There is no doubt that such a merger, in a relatively brief period of time (the timetable) would not have been doable before the Trump administration’s deregulatory environment, the easing of crisis-era rules, and now other regionals will be pressured to keep up.

It’s really all about technology, and the huge move to online banking.  Even yours truly, while I still go to a physical branch a few times a week for various reasons (including the charity I do the finances for), am surprised how much I rely on being able to go online.

But you need capital to make the huge investments necessary to take the nation in that direction and the regionals can’t compete with the big boys...and still be profitable at a level shareholders will accept.

BB&T and SunTrust said the combined bank would produce annual cost savings of around $1.6 billion by 2022.

The combined company will operate under a new name and have around $442 billion in assets, $301 billion in loans and $324 billion in deposits.  It will rival U.S. Bancorp, which has about $467 billion in assets.

The new bank will blanket much of the East Coast, with headquarters in Charlotte, N.C., though it will retain operations in Winston-Salem, N.C., and Atlanta, the home markets for both companies.

The two have more than 3,100 branches all told and about 740 within 2 miles of each other, so branch closures will occur, both already shuttering locations as customers migrate to digital offerings.

The two are coming at this merger from a position of strength and it’s a natural; a major player in some of the best markets in the U.S.

While the deal will draw criticism from the likes of Senators Elizabeth Warren and Bernie Sanders, regulators will approve it, especially since its asset level, as large as it is, will remain below the level that would make it a systemically important financial institution, thus the new bank will avoid the increased scrutiny the likes of JPMorgan Chase face.

Kelly King, BB&T’s CEO, will be CEO of the combined company until Sept. 12, 2021, after which SunTrust CEO William Rogers will take over.

The shares in both banks rose on the news.

--Amazon founder Jeff Bezos, the world’s richest man, is firing back at National Enquirer owner American Media Inc. (AMI) over what he is calling an “extortion and blackmail” attempt by the tabloid.

In a lengthy blog post on Thursday, Bezos, who also owns the Washington Post, details alleged correspondence between the lawyer for his lead investigator, Martin Singer, and Dylan Howard, the chief content officer for AMI.

In emails posted by Bezos, Howard says the Enquirer would post a series of images it has of Bezos and former Los Angeles news anchor Lauren Sanchez, Bezos’ love interest.

In a separate email, AMI attorney Jon Fine said that the company would not publish the unreleased emails and text if Bezos released a statement “affirming that they have no knowledge or basis for suggesting that AM’s coverage was politically motivated or influenced by political forces.”  The emails also demanded Bezos and his investigator agree that they would stop “referring to such a possibility.”

Bezos’ private security consultant has said he was investigating whether Ms. Sanchez’ brother, who has said he supports President Trump, may have been behind the leak for political reasons; Trump having long criticized Bezos, ostensibly because of The Post’s negative stories on him.

Today, AMI said it “acted lawfully” in its coverage of Bezos – but added it would “thoroughly investigate” Bezos’ claims that the tabloid’s boss tried to blackmail him with nude pictures.

In a statement, the company said: “American Media believes fervently that it acted lawfully in the reporting of the story of Mr. Bezos. Further, at the time of the recent allegations made by Mr. Bezos, it was in good faith negotiations to resolve all matters with him.

“Nonetheless, in light of the nature of the allegations published by Mr. Bezos, the Board has convened and determined that it should promptly and thoroughly investigate the claims.”

Tonight we have this from the Wall Street Journal’s Nicole Hong:

“Federal prosecutors are examining whether the National Enquirer’s publisher violated an earlier deal to avoid facing campaign-finance charges, according to people familiar with the matter, after Jeff Bezos...accused the tabloid of trying to blackmail him....

“The agreement reached last year between federal prosecutors and the Enquirer’s publisher, (AMI), allowed the company to avoid criminal charges for coordinating with the Trump campaign to make an illegal payment in 2016 to silence a woman alleging an affair with the then-presidential candidate.”

This is extremely complicated, and I’m not one to rush to judgment.

But we do know two things.  The story allowed the New York Post to run a front cover today reading “Bezos Exposes Pecker,” alluding to AMI CEO David Pecker, the longtime friend of Donald Trump who was involved in Trump’s (Michael Cohen’s) payment scheme to former Playboy model Karen McDougal, and that Jeff Bezos himself confirms the adage, ‘Even billionaires can be idiots.’

Meanwhile, in terms of the operation of Amazon.com, the company is now reconsidering a corporate campus in New York after facing a wave of opposition.

The company, which announced last year it had chosen a site in Long Island City to house 25,000 employees, has not leased or purchased office space for the project yet, making it easy to withdraw the commitment, according to the Washington Post.

Amazon executives have had internal discussions recently to reassess the situation in New York and explore alternatives, the Post reported, citing people familiar with the matter.

In December, a Quinnipiac University poll of registered voters in New York City found 57% approved of Amazon coming to Long Island City, while 26% opposed the move.

But people were split when asked about the nearly $3 billion financial incentives being given to Amazon, with 46% supporting them and 44% opposing the package.

Needless to say, real estate investors in the area are throwing up today, though tonight the New York Times said Amazon is sticking to its New York plans.

--Google’s parent company, Alphabet Inc., posted a big jump in quarterly revenue, as well as rising costs outside its core online-advertising business, part of its efforts to diversify.

Alphabet reported revenue of $39.28 billion for the quarter and $136.82 billion for the full year, a big jump from $32.3bn and $110bn, respectively, a year earlier, with total profit for Q4 nearly $9bn.

But Google’s fourth-quarter capital expenditures tab jumped 80% to $6.85 billion, as the internet giant spent heavily to expand its cloud and YouTube businesses. 

Cap-ex is “growing at a sizable clip, and the primary driver continues to be investing in technical infrastructure to support growth,” Alphabet CFO Ruth Porat said in an interview with Bloomberg.  “By that we mean data centers and machines.  This reflects our outlook for global growth in ads, search, YouTube and cloud.”

Alphabet had 98,771 employees at the end of 2018, up 23% from a year earlier.

--General Motors reported it made an $11.8bn pretax profit in 2018, down 8.3 percent from 2017, driven largely by the launch of the 2019 redesigned Chevrolet Silverado and GMC Sierra pickups, robust SUV sales and record average U.S. transaction prices.  Global revenue was $147 billion for the year, up 1 percent from 2017.

For the latest quarter, operating profit slipped 8%, but its North American business posted a record fourth-quarter operating profit of $3.04 billion, despite lower overall U.S. sales and a tariff-related hit from commodity costs.  The average selling price for GM’s biggest models, the Chevy Silverado and GMC Sierra, rose to about $44,000 last year.  Ergo, it’s about truck sales rather than total vehicles sold.

CEO Mary Barra has narrowed GM’s focus to the U.S. and China, after leaving Europe and other money-losing regions in recent years, GM forecasting a “modest” decline in China income in 2019 amid sluggish sales there. 

Overall, fourth-quarter revenue rose 2% to $38.4 billion, better than analysts’ forecast of $36.5 billion.

The company announced its hourly union-represented workers will receive profit-sharing checks of $10,750 this year, down from last year’s $11,750 because the amount is based on North American pretax profits, or earnings before interest and taxation. GM’s North American pretax profit in 2018 was $10.8bn, down from $11.9bn in 2017.

GM’s profit-sharing for about 46,500 UAW-covered workers is higher than cross-town rival Ford, which is doling out checks of $7,600.  Fiat Chrysler announced last year it would pay out $5,500 on average, but would give U.S. workers, aside from senior leadership, $2,000 bonuses.

GM is still going ahead with as many as 14,000 job cuts in North America, which has drawn criticism from President Trump, but the company stands to save $2bn annually from the move, the cuts having started recently.

--Fiat Chrysler announced fourth-quarter net profit rose by 61 percent, $1.46 billion, powered by sales of the all-new Ram 1500 and Jeep Wrangler, but the carmaker continued to have trouble in Asia, especially China.  Europe and Latin America were hardly success stories as well.

--Tesla Inc. said it was lowering the price of its Model 3 sedan by $1,100, the second price cut this year which brings down the cost of its least expensive variant to $42,900, which is still well above the target $35,000 price that CEO Elon Musk has long said is needed after tax credits go away by year end.

But the company today is citing the cost at $35,000 now, when weighing credits and fuel savings, which is a major stretch.

There have been stories out there that Tesla’s Model 3 sales in January were awful, but Tesla reports sales quarterly, not monthly, and the next official report is due in April.

January is typically the slowest month for auto sales, and other electric carmakers suffered declines in January, according to Insideevs.

The Chevy Bolt EV sold 1,175 cars in January 2018; 1,412 in December, and an estimated 925 last month.

Tesla says it has suddenly shifted emphasis to Europe and China for Model 3 sales, raising questions about the strength of demand in the U.S.

In fact, in a conference all, Elon Musk said all the Model 3s  manufactured at its sole assembly plant in Fremont, Calif., are destined for Europe and China.

“Our whole focus is, OK, how do we get those cars made, get them on a ship as fast as possible... It’s very important to get those cars, especially to China, as soon as possible....get them there while there’s sort of a de facto truce on the tariff war.”

--Toyota Motor Corp. reported a 6.6 percent fall in U.S. vehicle sales for January, hurt by lower demand for its Camry and Prius cars.  Camry sales fell 3.4 percent, while Prius sales slumped 57 percent, the company said.

With GM and Ford having stopped reporting monthly sales, analysts are left to dig deep for estimates, and Bloomberg reported that Ford’s sales rose 7 percent last month, while GM’s fell 7 percent.

Fiat Chrysler reported a 2 percent rise in U.S. sales for January, helped by demand for its Ram pickup trucks, and said it expects strong sales in 2019.

Ram sales surged 24 percent compared with the same period a year earlier.

--Today we learned Subaru, Tesla, BMW, Volkswagen, Daimler Vans, Mercedes and Ferrari are recalling about 1.7 million vehicles to replace potentially deadly air bag inflators made by Takata Corp. of Japan.

The announcement was from the U.S. government, with about 10 million inflators being recalled in the U.S. this year, and as many as 70 million by the time the whole mess ends late next year.

Thus far, at least 23 people have died from the inflators hurling shrapnel into drivers and passengers worldwide, with hundreds more injured.                                                                                                              

--Walt Disney reported better-than-expected fiscal first-quarter profits and revenue, with Chairman and CEO Robert Iger playing up importance of streaming, as the firm gears up to compete with Netflix, Amazon and AT&T’s WarnerMedia.  Disney debuted ESPN+ last spring and will launch Disney+, its core direct-to-consumer service, later this year.

Iger touted ESPN+’s growth of 2 million paid subscribers over the last five months, but the service is still losing money.

At the theme parks division, jacked-up ticket prices pushed revenue 4.6 percent higher to $6.8 billion.  Sales at its cable networks rose 4 percent to $4 billion, while studio entertainment sales fell 27.3 percent to $1.82 billion due to the strong performance of blockbusters like “Star Wars: The Last Jedi” a year earlier.  “Mary Poppins Returns” grossed an unspectacular $329 million at the global box office in the quarter, while the big budget fantasy “The Nutcracker and the Four Realms” flopped.

A year ago, “Star Wars: The Last Jedi” was bringing in $1.3 billion in global receipts.

Overall, Disney reported net income of $2.8 billion, on revenue of $15.3 billion during the quarter, with revenue flat from the prior-year.

--BP PLC tripled its annual earnings and swung to a fourth-quarter profit thanks to increased output and higher crude prices in the final quarter of 2018.

BP is still focused on its recovery from the 2010 Deepwater Horizon disaster, which killed 11 people and led to the worst offshore oil spill in U.S. history, and the disaster continues to cost the company billions in payments each year.

But the company had a 3% year-over-year uptick in oil and gas output and has daily output of 3.7 million barrels of oil equivalent (ex-Russia), its highest level since 2010.

BP reported a net income equivalent of $2.7 billion, and it announced it plans to complete more than $10 billion in divestments over the next two years to help offset its $10.5 billion acquisition of BHP Billiton Ltd.’s U.S. shale assets.

--Eddie Lampert and Sears were granted a second chance to revive the iconic brand and save 45,000 jobs, the bankruptcy judge handing Lampert a victory.

Judge Robert Drain ruled Lampert deserves another shot, Lampert’s ESL Investments having filed for bankruptcy on Oct. 15 after 13 years of falling sales.   What was once 4,000 Sears and Kmart stores in 2012 was down to 687 and 68,000 employees last fall at the time of the filing.

ESL is buying the company out of bankruptcy for $5.2 billion in a plan that includes focusing on 425 of its profitable stores and on popular products like Kenmore appliances.

The judge warned ESL not to cause problems in closing the sale, questioning Lampert on whether he wants “his legacy to be akin to Jay Gould,” the ruthless robber baron of the Gilded Age, as some of his critics have charged.

Creditors had argued that the judge should liquidate the company’s assets instead of handing the company back to ESL.

One such creditor, St. Jude Children’s Research Hospital, opposed the sale, claiming that it was still owed more than $700,000 in charitable donations collected by Kmart.  The judge told the two parties to settle the matter.

Investigations continue over how the hedge fund handled the sale of certain Sears assets, including real estate and Lands’ End, which some creditors maintain were sold to ESL entities at favorable terms.

--I have been writing of how U.S. farmers are getting screwed royally by the trade war, and U.S. failure to sign onto the Trans-Pacific Partnership, and also how we would be hoodwinked into believing any new deal with China is a huge win for the farmers when it would be nothing but smoke and mirrors...that, to take one example, soybeans, exports might reach pre-tariff levels, at best.  That is no win!

So the Wall Street Journal this week had a story by Jesse Newman and Jacob Bunge which started thusly.

“A wave of bankruptcies is sweeping the U.S. Farm Belt as trade disputes add pain to the low commodity prices that have been grinding down American farmers for years.

“Throughout much of the Midwest, U.S. farmers are filing for chapter 12 bankruptcy protection at levels not seen for at least a decade, a Wall Street Journal review of federal data shows.”

It’s not just trade disputes, but a worldwide glut in some farm commodities has led to lower prices for corn, soybeans and other farm commodities.

Low milk prices are driving dairy farmers out of business in a market struggling with retaliatory tariffs on U.S. cheese from Mexico and China.

“More than half of U.S. farm households lost money farming in recent years, according to the USDA.”

Chapter 12 bankruptcy allows distressed family farmers or fishermen to devise a plan to repay creditors over three to five years.

U.S. farm debt – covering operations, land, equipment, livestock and more – last year climbed to more than $409 billion, according to a USDA forecast, the largest sum in nearly four decades and a level not seen since the 1980s, at a time when farmland values were going down as interest rates were going up.

The positives today are that the slump comes after a period of historic profitability, allowing farmers to build up their reserves, while interest rates have remained relatively low.

--Twitter reported adjusted earnings for the fourth quarter that were above expectations, ditto revenue of $909 million, up 24% from the year-earlier quarter, but the company guided lower for the current quarter.  The company showed growth in its number of daily active users and posted its fifth quarterly profit in a row, but it also said its monthly user count slipped.

Twitter said it has 126 million daily active users, a figure that is 60 million smaller than Snapchat’s and is dwarfed by Facebook’s 1.2 billion, though Twitter said the number was up 9% in Q4 compared with the same period a year earlier.

--Shares in “the failing New York Times” surged on Wednesday after the company said online subscriptions in the fourth quarter grew by the most since the months following the 2016 presidential election.

The Times’ said it added 265,000 net new digital subscriptions in the final three months of last year and ended 2018 with 3.4 million online and 4.3m total subscriptions.

The company has now set a goal of achieving 10m subscriptions by 2025.

The accelerating readership helped drive revenues from a year ago to $502.7m, well above analysts’ estimates.  NYT also swung to a profit of $56.9m.

Contrary to publications like BuzzFeed, Huffington Post, McClatchy and Vice that have all announced sizable layoffs in recent weeks, the Times has been increasing its investment in the newsroom and opinion departments to further accelerate digital growth.

--Shares in Snap Inc. rebounded after the company put a stop to the downward trend in user numbers that had plagued it since mid-2018, posting a stable user base of 186 million daily Snapchatters in the fourth quarter of 2018.

Snap brought in $390 million in the fourth quarter of 2018, up from $297 million in the third as the company more effectively monetizes its users’ eyeballs with improved ad products.

But the shares, which debuted at $27 in March 2017, closed the week at $9.10, which was 28 percent above the level, pre-earnings, to give you a sense of how far the company had fallen.

--Canada’s economy added a strong 66,800 jobs in January, far better than expected, while the unemployment rate ticked up to 5.8 percent as more people sought work.  But economists said low wage growth and sagging oil prices would keep the central bank from hiking rates when it next meets on March 6.

--Chipotle Mexican Grill handily beat expectations for the fourth quarter and the shares soared.  The fast-casual restaurant chain said comparable store sales jumped 6.1 percent year-over-year, stronger than the 4.5 percent projected by analysts, with digital sales up 65.6 percent, accounting for 12.9 percent of all sales.

For 2019, Chipotle said it expects sales at stores open at least 13 months to grow in the mid-single digit range, while opening between 140 and 155 new restaurants.

The company posted revenue of $1.23bn, up 10.4 percent against the year ago period, with adjusted earnings of $1.72 per share also well above forecast.

--Yum! Brands reported mixed financial results for its fiscal fourth quarter as earnings and revenue missed expectations, though same-store sales grew year-over-year.

Yum, the parent of Taco-Bell and KFC, said same-store sales in the former grew 6%, and 3% in the latter.  The other main division, Pizza Hut, was flat.

--Shares in Estee Lauder were a major reason why the market rose Tuesday after the beauty products company reported higher-than-expected growth in its fiscal second quarter, sales topping $4 billion for the first time.  Net sales rose 7%, with earnings coming in far higher than forecast.

--The FAA reported Monday that O’Hare International Airport is once again the nation’s busiest in terms of total flights, surpassing Atlanta for the first time since 2014.

O’Hare’s total flights last year topped 900,000 for the first time since 2007.  The busiest days for flights there occurred during June and July, and I kind of found it curious that the busiest single day was June 27, with 2,847 arrivals and departures.  Never would have thunk this.

O’Hare saw 903,747 flights in 2018, compared with Hartsfield-Jackson Atlanta International Airport’s 895,502.  Los Angeles, Dallas/Fort Worth and Denver were third through fifth, respectively.  [Chicago Tribune]

--We note the passing of “Chainsaw Al,” Albert J. Dunlap, a tough-talking executive known for turning around troubled companies by laying off workers and closing factories, but whose career ended in an accounting scandal.  He was 81.

As noted by the New York Times’ Richard Sandomir:

“Mr. Dunlap portrayed himself as a foe of corporate waste and a servant of the shareholders who benefited from his actions.  In the 1990s, when he ran Scott Paper, he laid off 11,200 workers; it was just one measure he took that brought him financial rewards of $100 million in salary, stock profits and other compensation after engineering the company’s sale to Kimberly-Clark in 1995.”

Dunlap was then hired by Sunbeam Corporation, an appliance maker, and within a month, amid talk of a different overhaul, the company’s shares soared over 70 percent.  Dunlap promptly laid off half of Sunbeam’s 12,000 people work force, closing or selling off most of its plants and other facilities, and paring its number of product lines.

Dunlap said he recognized when a company had the “death gurgle.”

Dunlap was an advocate of corporate governance reforms, and paying directors in stock instead of cash, to better align their interests with those of shareholders.

But Dunlap’s career came to an abrupt end in 1998, when Sunbeam’s board fired him amid an accounting scandal that involved using 1998 payments to inflate the books for 1997, which showed a non-existent surge in sales as a result.  Sunbeam later filed for bankruptcy in 2001.

Dunlap would spend the rest of his years tied up in court and a civil suit filed by the SEC that accused him of several counts of fraud.  He paid a hefty fine and agreed to be barred from ever again serving as an officer or director of a company.

--The Super Bowl’s ratings were subpar, ditto the game, with CBS reporting a 44.9 mark, down 5.3 percent from last year and the worst rating since 2009 and Steelers-Cardinals.

But there were still more than 100 million viewers on average during the telecast, and CBS reeled in an estimated $382 million in advertising revenue, according to Kantar Media.

Advertisers shelled out as much as $5.25 million for a 30-second spot during the game, a record, but that has more to do with the state of the overall economy than anything.

Foreign Affairs

Venezuela: The crisis grinds on, literally getting worse by the day, with President Nicolas Maduro still in power.  The store shelves are empty, medicines unavailable, the healthcare system in a total state of collapse, and massive hunger, while on the border of Colombia, a caravan of trucks carrying emergency medical aid and food, thanks to the United States, Canada, and Colombia, is blocked from entering the country, per Maduro’s orders, Maduro saying his country doesn’t need handouts.  “We are not beggars.  You want to humiliate Venezuela, and I will not let our people be humiliated,” he said on Monday.

The convoy is designed to put further pressure on him and stoke unrest among the local population.  But protests thus far have failed to topple the socialist regime blamed for the widening shortages.

Many of the protesters believe the army will not fire on them, even if they appear to be supporting the regime.

The aid was called in by Juan Guaido, the opposition leader and self-appointed interim president, who has been recognized by 40 countries so far, including the UK, France, Germany and Spain, in a challenge to Mr. Maduro.

Maduro can only stay in power if he can pay off his key generals. A Venezuelan air force general last Saturday became the first senior military official to defect, claiming in a YouTube video that “90 percent” of the armed forces are against Maduro, Gen. Francisco Yanez calling for mass protests to oust the socialist dictator.

3 million Venezuelans have fled the country thus far, a total that could soar further.

Meanwhile, the IMF has predicted that inflation in Venezuela will hit 10 million percent this year.

Should Maduro be ousted, as The Economist opines, the world will need to act fast.

“The lesson from the Arab Spring is that even a leader who starts by sweeping away a tyrant must bring improvements rapidly or risk losing support. The immediate priorities will be food and health care. The very fact of  a new government will help stop hyperinflation, but Venezuela will also need real money from abroad – international lenders, including the IMF, should be generous. The to-do list is long: Venezuela will need to remove price controls and other distortions and build a social safety-net. It must restart the oil industry, which will entail welcoming foreign investment.  Its debt will need restructuring – including the debt to Russia and China which is due to be paid in oil.  And amid all this, Mr. Guaido’s caretaker government must hold elections.

“A generation ago, Venezuela was a functioning state.  It can be again. It is blessed with oil and fertile land. It has an educated population at home and in the diaspora that fled. And in Mr. Guaido it has a leader who, at last, seems to be able to unite the fractious opposition. But first it must get rid of Mr. Maduro.”

Syria: The Pentagon is preparing to pull all U.S. forces out of Syria by the end of April, despite the fact the Trump administration has yet to come up with a plan to protect its Kurdish partners from attack once the U.S. leaves, as reported by the Wall Street Journal, who talked to current and former U.S. officials.

U.S.-backed fighters are preparing to take the final Syrian sanctuaries held by ISIS, with the U.S. now focused on withdrawal.

But the State Department maintains there is no timetable for a withdrawal, with President Trump putting no firm deadline on an exit, directing the Pentagon just to get all forces out of the country.

The U.S. also still has no deal with Turkey for northeastern Syria that would avert a fight between Turkish forces who would move in and Kurdish forces in Syria that Ankara views as terrorists.

The Kurds are pleading with the Trump administration to come up with a plan to ensure they aren’t targeted by Turkey.

On Tuesday, the commander of U.S. Central Command, Army Gen. Joseph Votel, told the Senate Armed Services Committee that the U.S. withdrawal is neither conditions based nor tied to a fixed timeline.

Votel also provided the first public confirmation that the Pentagon was surprised by Trump’s December tweet, abruptly announcing the U.S. withdrawal from Syria.

“I was not aware of the specific announcement,” said Votel, who is retiring in the spring.  “Certainly we are aware that he has expressed a desire and an intent in the past to depart Syria.”

Votel, under further questioning, admitted: “I was not consulted.”

Iran / Iraq: According to Israel’s Channel 12, Iran, Syria and Hezbollah are establishing a missile factory on the outskirts of the Syrian town of Safita.

According to the report, Israel’s strategy is to make the efforts public to thwart the construction and success of the factory, which is supposed to be where Iran will turn Hezbollah’s missiles into precision-guided munitions, capable of striking targets in Israel with unprecedented accuracy.

Israeli Prime Minister Benjamin Netanyahu has long maintained Hezbollah is attempting to convert ground-to-ground missiles to precision missiles at various sites in Beirut, including at Hariri International Airport.

Israel has been targeting suspected Iranian sites in Syria, most recently striking a warehouse that held vehicles set to smuggle precision rocket converting systems from Syria to Lebanon.

Iran warned Israel on Tuesday of a “firm and appropriate” response if it continued attacking targets in Syria.

Syria’s Foreign Minister Walid al-Moalem said in Tehran: “The Syrian government considers it to be its duty to keep Iranian security forces in Syrian territory.”

Separately, Iran hit back at President Trump’s State of the Union address in which he called Tehran the world’s leading state sponsor of terrorism, saying the U.S. has a history of backing brutal regimes in the Middle East.

“U.S. hostility has led it to support butchers & extremists, who’ve only brought ruin to our region,” Iranian Foreign Minister Javad Zarif tweeted Wednesday.

In the State of the Union, Trump also noted that his withdrawal from the multination nuclear pact with Iran and the subsequent imposition of sanctions were to ensure Tehran never acquired nuclear weapons.

“We will not avert our eyes from a regime that chants death to America and threatens genocide against the Jewish people,” Trump said.

In an interview with CBS News (“Face the Nation”) on Sunday, President Trump said he wanted to keep U.S. troops in Iraq, who are there to fight Islamic State, “because I want to be able to watch Iran.”

Iranian President Hassan Rouhani on Tuesday said Trump’s remarks exposed U.S. lies about its intentions.

“First, you say  that ‘we have come to Iraq for security reasons.’  Then you candidly announce ‘we will stay in Iraq to watch Iraq’s neighbor,’ meaning Iran,” Rouhani said during comments in Tehran.  “This shows your true color,” he said.  “Why do you occupy the soil of foreign countries?”

Meanwhile, Iraqi President Barham Salih was none too pleased about Trump’s comment, telling Washington Post columnist David Ignatius:

“I appreciate what the U.S. has done to help Iraq,” Salih told him.  “We honor that sacrifice.  But this success in Iraq is precarious and should not be unduly burdened.  It could easily unravel.”

Salih is ticked that Trump described al-Asad Air Base as if it’s an American facility, which offends many Iraqis.  Separately, Salih said: “It is of fundamental interest for Iraq to have good relations with Iran.  Don’t overburden Iraq with your own issues.”

David Ignatius:

“Trump lurches from blunder to blunder on the Middle East. His latest statements about rebasing U.S. forces in Iraq were so glib and insensitive to local politics that you have to wonder if the president even understood the mistakes he was making.  Sometimes, Trump’s conduct suggests a behavioral syndrome in which he seems to have no real comprehension that his comments offend others and increase his social isolation.

“The Iraq gaffe followed a much more serious mistake in judgment in December, when Trump suddenly announced he was pulling about 2,000 U.S. troops from Syria at a time when their commanders said their job of destroying the Islamic State wasn’t finished.  Despite opposition from virtually every corner of the U.S. government, Trump pushed ahead....

“When you ask U.S. officials what future security arrangements will exist in northeast Syria, you get a mishmash of answers, none of which adds up to a coherent policy. The United States asked French and British forces if they might stay, but they balked, so right now, Turkish, Russian and Iranian forces are positioning to fill the vacuum.

“Trump last weekend invented a new solution: Everything would be fine, because he was moving Special Operations forces to Iraq.  ‘We have a base in Iraq, and the base is a fantastic edifice...We spent a fortune on building this incredible base. We might as well keep it,’ he told Margaret Brennan on CBS’ ‘Face the Nation’ in an interview that aired Sunday.

“Trump explained (if that’s the right word for his chain of illogic) that if there is new trouble in Syria, as is widely predicted, ‘We’ll come back if we have to. We have very fast airplanes, we have very good cargo planes.’

“Trump’s rebasing-to-Iraq approach, unfortunately, may put U.S. soldiers at greater risk. Right now, the people who kick down the doors of Islamic State terrorists in Syria are our Kurdish-led allies in the Syrian Democratic Forces.  If the United States instead does the raids from Iraq, the danger for U.S. personnel will increase.  But in Trump world, that’s apparently an afterthought.

“Trump might have avoided a diplomatic crunch if he’d stopped with the rebasing. But no, he wanted to advertise that, with his plan, he could use the Iraqi base ‘to be able to watch Iran.’  He continued: The al-Asad base is ‘perfectly situated for looking at...different parts of the troubled Middle East rather than pulling up.  And this is what a lot of people don’t understand.’

“The disturbing part is that Trump doesn’t seem to realize that there’s an Iraqi government in Baghdad, facing substantial pro-Iranian pressure, that wants to control its own sovereignty.  U.S. forces were invited to Iraq in 2014 to combat the Islamic State, and Iraqis are genuinely grateful for U.S. help. But they don’t want another occupation.”

Editorial / Wall Street Journal

“President Trump won applause in Tuesday night’s State of the Union address when he declared that ‘great nations do not fight endless wars.’  It’s a resonant line in a country that has been fighting in parts of the Middle East for nearly two decades. And, in a literal sense, the statement is true.

“Yet the risk of Mr. Trump’s rhetoric is that it encourages a public belief that America can abdicate its responsibility to work with allies to preserve the peace.  History shows the great danger in failing to distinguish between fighting wars and deterring them. That’s especially true now that the authoritarian nations of Russia, Iran and China are seeking to dominate their regions and sometimes join forces against U.S. interests.

“One lesson is that keeping troops abroad is often cheaper than bringing them home.  An unwavering commitment to the defense of Western Europe under NATO prevented the Cold War from becoming a hot one. Some 300,000 U.S. troops across Europe deterred Moscow for decades until the Warsaw Pact imploded.

“The same strategy has preserved the peace in North Asia, to the benefit of the American homeland and economy. Strategic commitments to Japan and South Korea, bolstered by some 80,000 American military personnel, have partially contained the North Korean threat while creating space for both countries to become thriving democracies.

“Mr. Trump himself sometimes seems to intuit the importance of troops abroad to protect American interests. The U.S. maintains a naval base in Bahrain, an air base in Qatar, and deployments across Africa to target terrorists that could strike the homeland.  His Pentagon late last year dispatched a carrier strike group to the Persian Gulf for the first time in eight months to contain Iran.

“The President said on Sunday he wants to keep American troops in Iraq to “watch Iran.’  He also wants a 350-ship Navy to patrol key waterways, including on occasion the Taiwan Strait. The point of these sensible deployments is to deter bad actors precisely so the U.S. doesn’t have to fight a war.

“The alternative lesson is that withdrawing U.S. forces can invite war.  That’s the lesson of Barack Obama’s 2011 withdrawal of troops from Iraq while claiming ‘the tide of war is receding.’  Jihadists used the reprieve to form Islamic State, and by 2014 Mr. Obama was re-sending thousands of troops to the same theater.  Staying would have been far less costly.

“Mr. Trump sometimes talks as if the choice now in Syria and Afghanistan is between no troops or tens of thousands and permanent conflict. But the U.S. only has 2,000 troops in Syria, and even he says the U.S. will need to strike Islamic State if it reconstitutes itself. That will require troops somewhere in the region. Likewise, a decision to withdraw from Afghanistan should depend on whether it won’t again become a safe haven for global jihad.

“A key point here – and why Mr. Trump’s rhetorical isolationism is damaging – is that America can’t deter rogue regimes by itself. Whether in NATO or North Asia or the Middle East, the U.S. relies on allies to magnify America’s effectiveness as a keeper of the peace.  Those allies need to trust that America will also be there when needed....

“A rising China is the stiffest test, and a work in progress.  Mr. Trump’s withdrawal from the Pacific trade accord was his worst strategic blunder, missing a chance to form a trade alliance without China. He can correct some of the damage if his talks with Beijing change China’s behavior. But that has a better chance of success if he’d rally Japan and Europe in a united front against China’s bad practices.

“Mr. Trump’s foreign policy has been better than his rhetoric. But he shouldn’t mislead his supporters at home and upset friends abroad by suggesting that peace can be purchased by American retreat.”

Saudi Arabia: As reported by Mark Mazzetti of the New York Times:

“Crown Prince Mohammed bin Salman (MBS) of Saudi Arabia told a top aide in a conversation in 2017 that he would use ‘a bullet’ on Jamal Khashoggi, the journalist killed in October, if Mr. Khashoggi did not return to the kingdom and end his criticism of the Saudi government, according to current and former American and foreign officials with direct knowledge of intelligence reports.

“The conversation, intercepted by American intelligence agencies, is the most detailed evidence to date that the crown prince considered killing Mr. Khashoggi long before a team of Saudi operatives strangled him inside the Saudi Consulate in Istanbul and dismembered his body using a bone saw.”

The Saudi government has denied MBS played any role in the killing, and President Trump has shown little interest in getting to the facts about who was responsible. At the same time, the U.S. intelligence community has been “sifting through years of the crown prince’s voice and text communications that the (National Security Agency) routinely intercepted and stored, much as the agency has long done for other top foreign officials, including close allies of the United States.” [Mark Mazzetti]

North Korea: President Trump announced during his State of the Union address that he would hold his second summit with Kim Jong Un in Vietnam on Feb. 27-28, while giving himself credit for averting a major war on the Korean peninsula.

Citing the halt in Pyongyang’s nuclear testing and no new missile launches in 15 months as proof of progress, Trump said:

“If I had not been elected president of the United States, we would right now, in my opinion, be in a major war with North Korea.”

But of course it was Trump who raised fears of war in 2017 when he threatened to rain “fire and fury like the world has never seen” on North Korea because of the threat its nuclear weapons and missiles posed to the United States.

On Friday Trump then tweeted:

“North Korea, under the leadership of Kim Jong Un, will become a great Economic Powerhouse.  He may surprise some but he won’t surprise me, because I have gotten to know him & fully understand how capable he is.  North Korea will become a different kind of Rocket – an Economic one!”

“My representatives have just left North Korea after a very productive meeting and an agreed upon time and date for the second Summit with Kim Jong Un. It will take place in Hanoi, Vietnam, on February 27 & 28.  I look forward to seeing Chairman Kim & advancing the cause of peace!”

Someone remind the president, again, that Kim starves and kills his own people, including blowing away relatives with anti-tank guns.  I’m glad they are getting together a second time, but, please, Mr. Trump, don’t be an idiot.

And remember, China, which pulls Kim’s strings, more than ever with the ongoing trade tensions between Washington and Beijing wants to keep the U.S. on edge.

U.S. Special Representative for North Korea Stephen Biegun held three days of talks in Pyongyang this week to map out what he called “a set of concrete deliverables” for the second meeting.  He returned to South Korea today to brief officials in Seoul, no details revealed as yet.

Despite Trump’s comments above, in the U.S. view, North Korea has yet to take concrete steps to give up its nuclear weapons.  It has complained that the United States has done little to reciprocate its freezing of nuclear and missile testing and dismantling of some nuclear facilities.

North Korea has repeatedly urged a lifting of punishing U.S.-led sanctions, a formal end to the war, and security guarantees.

South Korean officials have said they believe the summit will center on dismantling the North’s main Yongbyon nuclear complex and how this would be reciprocated, although the United States remains reluctant to provide any sanctions relief.

Meanwhile, the U.S. and South Korea struck an agreement in principle over the costs of their military alliance, ending a monthslong dispute.

While the final details are still to be worked out, the two sides have agreed to a preliminary deal covering roughly 28,500 U.S. military personnel in South Korea.

Under the agreement, Seoul is set to pay roughly $1 billion, according to South Korea’s semiofficial Yonhap News, representing a roughly 20% increase from previous payments.

Last year South Korea paid around $830 million to host U.S. forces, about half the overall cost.  The Trump administration was originally looking for a 50% increase.

China: As reported in the South China Morning Post, “China might come under pressure to reconsider its long-standing ‘no first use’ nuclear policy as it engages in a maritime arms race with the United States, analysts have warned.

“Nuclear competition is brewing between the two countries as China makes gains in weapons development and Washington tries to limit Beijing’s military build-up in the South China Sea.

“The United States is still decades ahead in nuclear weapons development but a successful test late last year of China’s new submarine-launched ballistic missile, the JL-3, is cause for concern in Washington.”

Boy, I don’t agree the U.S. “is still decades ahead” in nuke development, especially seeing as the test of the JL-3 shows China moving ahead with a class of strategic submarines “that could be equipped with nuclear-armed JL-3s that would be more difficult to detect than conventional land-based nuclear weapons.”

In response, the U.S. and its allies have been stepping up their anti-submarine warfare in the South China Sea and Indian Ocean, which one analyst from the Carnegie Center for Global Policy, Zhao Tong, believes is increasing mistrust between the two countries and raising the possibility that Beijing might rethink the “no first use” nuclear weapons policy, which has been in place since the first Chinese nuclear test in 1964.

But it’s not just about new submarine capable missile systems.  China’s ballistic missile technology is advancing rapidly.  Last month, the People’s Liberation Army Rocket Force (PLARF) showed off its firepower by running a simulated strike mission using a Dongfeng-41 (DF-41) intercontinental ballistic missile (ICBM) and revealing footage of the improved stability of its Dongfeng-26 (DF-26) ballistic missile.

The DF-41 is China’s most advanced ICBM and is capable of hitting virtually any target in the world.

The DF-26 is China’s next generation intermediate-range ballistic missile with a range that puts the U.S. island of Guam in the crosshairs, thus the label ‘Guam killer.’

Separately, as reported by the Wall Street Journal, “The U.S. Energy Department says it will ban its scientists and other employees from participating in talent-recruitment programs sponsored by China and other countries suspected of using them to obtain sensitive research.

“In a memo issued Friday (Feb. 1), the department said it would require all of its personnel, contracted scientists and future grant recipients to declare any connections to programs from countries it determines as ‘sensitive.’  Employees with the links will be asked to either sever those ties or resign, senior department officials said....

“ ‘This action’s being taken to protect U.S. national security interests and scientific integrity,’ Dan Brouillette, deputy energy secretary, told The Wall Street Journal.  ‘You’re either going to work for us or work for them.’”

Lastly, China has been accused of sending a fleet of almost 100 ships to hamper Philippine construction work on a disputed island in the South China Sea.

Beijing started sending vessels to Thitu, part of the Spratly chain, according to the Asia Maritime Transparency Initiative run by the Washington-based Center for Strategic and International Studies.

The fleet of ships includes vessels from the navy and coastguard along with dozens of fishing boats.

The report said their presence was part of an effort to coerce the Philippines into stopping the work on the island, which China also claims.

Russia: The U.S. gave Russia written notice on Monday of its decision to withdraw from the Cold War-era Intermediate-Range Nuclear Forces Treaty, after accusing Russia of violating the pact, which has fueled growing tensions between Washington and Moscow, and raised the threat of a renewed missile build-up in Europe.

The Kremlin welcomed an offer by President Trump to renegotiate the INF Treaty, while cautioning that it’s received no specific proposals yet.

“We saw President Trump’s statement about the possibility of a new treaty, which should include other countries,” Russian Deputy Foreign Minister Sergei Ryabkov told reporters in Moscow on Thursday.  “When our American colleagues actually get to the point where they give us something concrete, we will look at this with interest and I hope in an positive way.”

Trump said in his State of the Union address that the U.S. may be open to negotiating another agreement to replace the 1987 INF Treaty, one that could include China as well as Russia. 

But President Vladimir Putin said last weekend, after the U.S. move to suspend the Treaty, that Russia would start work on creating new missiles, including hypersonic ones, and told ministers not to initiate disarmament talks with Washington.

Putin said that Russia will not increase its military budget for the new weapons and it won’t deploy its weapons in Europe and other regions unless the United States does so.

The INF Treaty will expire in six months if there is no renegotiation.

Random Musings

--Presidential approval ratings....

Gallup: 37% approve of Trump’s job performance, 59% disapprove (Jan. 15); 88% Republicans, 32% Independents...reminder this is now monthly.
Rasmussen: 50% approval, 49% disapproval (Feb. 8)

--According to a new CNN/SSRS poll, President Trump’s job approval stands at 40%, 55% disapprove, slightly more positive than in January during the shutdown.  His approval rating for handling immigration stands at 41%.

66% said Trump should not declare a national emergency in order to build the wall, vs. 31% who say he should.

But among conservative Republicans, 78% favor shutting down government if no agreement is reached including wall funding, or the declaration of a national emergency in order to build the wall (72% favor that).

Speaker Nancy Pelosi’s approval rating has risen eight points since December to 42% favorable (47% see her unfavorably).

Trump’s approval rating on the economy remained in positive territory (48% approve, 45% disapprove).

--According to a separate CNN/SSRS poll, more than six in 10 Democratic and Democratic-leaning voters say former Vice President Joe Biden should make a run for president, and half of all Americans say they would be at least somewhat likely to back him should he run for the White House.

At the same time, 52% of Americans say they are not at all likely to support President Trump for re-election in the coming 2020 contest.

Support for a bid from Biden is higher among Democratic voters this year than it was in 2015.  Back then, only about half of Democratic voters said they wanted Biden to run (53% in August, 47% in October).

Among Democrats, Biden has greater support than anyone else tested: 44% say they are very likely to support him, 32% say so of Sen. Kamala Harris, 30% Vermont Sen. Bernie Sanders, 21% Massachusetts Sen. Elizabeth Warren, 19% New Jersey Sen. Cory Booker and 15% former Texas Rep. Beto O’Rourke.  New York Sen. Kirsten Gillibrand, former New York City Mayor Michael Bloomberg, and Ohio Sen. Sherrod Brown, bring up the rear, with lack of awareness hurting Gillibrand and Brown.

I think we can already look at the above names and draw some conclusions.  To me, Sen. Warren is irrelevant and won’t make it to the Iowa caucuses.  It’s why I’m not even mentioning her latest problem with the old application. 

Bernie Sanders is also history.  No one cares anymore, even the socialists.

Kirsten Gillibrand will never receive major approval, but she could make it to Iowa.

Minnesota Sen. Amy Klobuchar, on the other hand, announcing this weekend, will have staying power, ditto, obviously, Kamala Harris.

Beto O’Rourke?  See ya.  What a clown he was in those recent social media posts.  He won’t be on the ballot in New Hampshire.

Sen. Cory Booker?  You may not like Chris Christie, but Christie is one sharp analyst.  He likes Booker, as a politician and a person, and I agree with my former governor that if Booker can avoid going too far left, he could have staying power...which means to South Carolina.

To me, aside from Klobuchar, another dark horse is Ohio Sen. Sherrod Brown.  He should be a classic Democratic presidential candidate.  Maybe he’d get his butt kicked, like win just a few states, but he’s experienced and stable.  An old-school liberal, but not a radical by any means.

And then there’s Biden.  I need more time figuring out his chances, because I’m not sure he even runs.

And I’m not sure Michael Bloomberg runs either.  He has to know he doesn’t stand a snowball’s chance in hell.  I wish he was the third party candidate just so I had an alternative come November 2020.

So for the record, making it through Iowa and New Hampshire I’ll say are Harris, Klobuchar, Booker, and Brown...for now.

Just an opinion, and just having fun.  No need to riot and torch the global HQ of StocksandNews, boys and girls.

--A POLITICO/Morning Consult poll released Monday found 76 percent of registered voters believe the wealthiest Americans should pay more in taxes.  A recent Fox News survey showed that 70 percent of Americans favor raising taxes on those earning over $10 million – including 54 percent of Republicans.

--I had an opportunity to comment on Democratic Virginia Governor Ralph Northam before I posted last Friday night, hours after it had been reported that the governor was in a yearbook photo that showed him in blackface, while he was in medical school in 1984.  But I’m proud of my ‘wait 24 hours’ adage, so I opted not to say anything.  In terms of building a historical record, delay doesn’t hurt me, and so the next day, Saturday, Northam, who at first apologized for the photo, under a cavalcade of calls for him to resign, suddenly said he was not in the photo, but then he admitted another incident where he was in blackface, for which no picture has surfaced, and in an incredibly poor performance during a news conference that day, would have started moonwalking, a la Michael Jackson, were his wife not there to intervene.

Northam still, however, refused to step down, with every leading Democratic politician in the state screaming for him to do so.  And then the next in line for his job, Lt. Gov. Justin Fairfax, was hit with sex assault allegations, with his accuser, a college professor, coming forward to refute his denials that it was consensual.   [Today, a second woman claimed Fairfax assaulted her when they were students at Duke.]

Then, Virginia’s Democratic Attorney General Mark Herring issued a stunning statement admitting he wore brown makeup (it’s still blackface) as part of an act to dress up as a black rapper when he was a student at the University of Virginia.

So you had the top three politicians in the state, all Democrats, all under fire and neither resigning under the pressure.

Further, a staffer from Northam’s yearbook insists the photos “were chosen by the individual student.”

Should all three eventually step down, the third inline for the Virginia governorship is state House Speaker Kirk Cox, a Republican.  The Republicans gained their one-seat control of the Virginia House of Delegates literally by sheer chance in 2017.  The election for the balance-tipping seat resulted in a tie – and the GOP candidate won when his name was drawn from a bowl.

Late Thursday, we saw a hint of a possible resolution with a statement issued by U.S. Senators Tim Kaine and Mark Warner, and signed by seven other Virginia Democrats from the House of Representatives, still calling on Northam to resign, but the statement suggested a readiness to forgive AG Mark Herring, Herring seen by some as more sympathetic in part because he went to the Virginia Legislative Black Caucus to confess his blackface experience before it became public.  Plus he was just 19 when it occurred, vs. Northam who was 25 when he donned blackface to masquerade as Michael Jackson.

But as I go to post, Northam is showing no signs of stepping down.

--We note the passing of John Dingell, 92. Dingell, a Democratic lawmaker from Michigan was the longest-serving member of Congress, having served his final year as a representative in 2015.  He was in hospice care since suffering a heart attack in September.

His wife, Rep. Debbie Dingell, wrote on Twitter: “I am home with John and we have entered a new phase. He is my love and we have been a team for nearly 40 years.

Dingell was first elected in 1955 and announced in 2014 that he would not be seeking a 30th term in the House.  He was a staunch supporter of the auto industry.

--Pope Francis admitted that clerics have sexually abused nuns, and in one case they were kept as sex slaves.

He said in that case his predecessor, Pope Benedict, was forced to shut down an entire congregation of nuns who were being abused by priests.

He said the Church was attempting to address the problem but said it was “still going on.”

A spokesman for the Vatican later said the particular order that was dissolved was based in France.

Separately, Pope Francis became the first pontiff to visit the Arabian Peninsula, the birthplace of Islam, as part of a trip seeking to improve relations with the Muslim world.

The pope stayed three days in the Emirates, which is relatively tolerant compared to the others in the region, UAE being home to one million Christians.

UAE has millions of workers from India, the Philippines and South America who have helped fuel its growth.

But the UAE is on the side of its ally Saudi Arabia in the war in Yemen, a four-year conflict that has pushed Yemen’s small Christian communities into hiding, while creating the world’s worst humanitarian crisis and leading to the death by starvation of some 85,000 children.

Reminder, Saudi Arabia does not allow the construction of churches.

The pope’s trip went off without incident.

--The past five years have been the hottest in modern records, federal scientists said Wednesday.  According to a report by the National Aeronautics and Space Administration and the National Oceanic and Atmospheric Administration, which track annual climate trends, 2018 was the fourth-warmest, the warmest being 2016, followed by 2017 and 2015 – with 2014 following 2018 as No. 5 among the hottest years on record.

Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies in New York, said, “The impacts of long-term global warming are already being felt – in coastal flooding, heat waves, intense precipitation and ecosystem change.”

During 2018, the average temperature across global land and ocean surfaces was 1.4F above the 20th-century average*, according to NOAA’s report.  It noted record high temperatures across much of Europe and the Mediterranean Sea, the Middle East, and New Zealand and its surrounding ocean – across parts of Asia, the Atlantic Ocean and the western Pacific.

*Some stories say 1.8F but this is above the late 19th century, when humans started pumping large amounts of carbon dioxide into the atmosphere.

NOAA added that nine of the 10 warmest years have now occurred since 2005.

--Last week I talked about all the snowfall in California, a good thing, and then a few days later, the ski resorts of the Eastern Sierra and Tahoe regions were forced to close part or all operations Monday because of a blizzard that dropped as much as 9...9...feet of snow.  Another 3 feet were forecast the following 24 hours.  As my grandfather would have said, “Gee willikers.”

--Finally, for those of us in the northeast, to be truthful, this winter thus far has been a piece of cake.  Our most significant snowfall in the New York City area (upstate New York and parts of New England is a different story) was back on Nov. 15, and until the brief Polar Vortex here (really all of two days), Thanksgiving, and one other day in January, the temps have been above normal.  [December didn’t have one day here with a ‘high’ below 32.]

But we all know we’ll get a whopper of a snowstorm in March.

Meanwhile, Punxsutawney Phil emerged from his burrow in Pennsylvania, rudely woken up by humans in long waistcoats, and failed to see his shadow, signaling an early spring, i.e., golfers in the northeast may see somewhat favorable conditions as early as about March 20 (unless you like to play in mud beforehand).

But the thing is, Punxsutawney Phil’s forecast is correct only 40% of the time.

By contrast we have Staten Island Chuck...or Chuck IV, or V...New York Mayor Bill de Blasio having killed Chuck II or III back in 2015, when he “accidentally” dropped the soothsayer, Chuck dying from the trauma a week later, his family successfully suing the City for $millions.

You won’t find de Blasio anywhere near Staten Island since, at least on Feb. 2nd, but the thing is, Chuck didn’t see his shadow either (early spring) and Chuck has an 80% success ratio!  So it should be a mudders’ delight for golfers.  Personally, I’m normally late April / early May before I make my appearance on the fairways and greens.

---

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

God bless America.

---

Gold $1318
Oil $52.71

Returns for the week 2/4-2/8

Dow Jones +0.2%  [25106]
S&P 500  +0.05%  [2707]
S&P MidCap  +0.6%
Russell 2000  +0.3%
Nasdaq  +0.5%  [7298]

Returns for the period 1/1/19-2/8/19

Dow Jones  +7.6%
S&P 500  +8.0%
S&P MidCap  +11.4%
Russell 2000  +11.7%
Nasdaq  +10.0%

Bulls 48.6
Bears 20.6

Have a great week.

Dr. Bortrum posted a new column!

Happy Valentine’s Day!

Brian Trumbore